This article takes the view of the consumer, "Why do so many people pay to store items they almost never use?". But in actuality, the interesting part of this is why is there so much supply of self-storage businesses?
The answer is: cash flow. Self-storage businesses are the almost perfect solution for someone with a good size (but not enormous) bucket of money that they want to put to work generating cashflow:
1. Cheap build out (cheap land, cheap facilities)
2. Almost entirely hands-off (no employees, automated entry)
3. Low liability (low risk of customers suing you)
4. Low overhead (just pay for taxes, electricity, minimal maintenance)
5. Reliable monthly cash flow
The abundant supply of these businesses, I suspect, tends to generate demand: it's easier to pay $80/month to store your junk than spend the time and emotional labor of picking through what you want to keep and what you want to get rid of. That ends up being captive long-term revenue.
You are missing the biggest benefit of a self storage business - the appreciation of the underlying real estate. When you dig into the financials of the major self storage businesses you'll see they are essentially REITs that have better cashflow. They can pick an up-and-coming area, do a minimal build-out with low annual overhead, and then down the road when the facility would be needing overhauls and maintenance the underlying property has typically appreciated so much that it dwarfs all other associated revenue streams and makes sense to sell and raze the existing structure. Great business model if you have a long enough timeline.
This is also why some startups trying to revolutionize the self storage model had extreme headwinds - if you are renting the underlying properties and trying to make the storage business profitable you are at an extreme disadvantage to the larger players who can subsidize operating costs with portfolio appreciation.
Yeah, came here to post something similar. I used to hang around in real estate circles, and two businesses come up often: Self storage and car wash. These are two things people just can't get enough of.
(Car wash usage doesn't go down even during a recession, apparently).
There's aesthetic reasons (I'm proud of my car, I like it to look nice), and practical reasons (Leaving mud, grit, salt etc, will wear and corrode my car faster).
Where I live, summer rain doesn't really clean the car (if that's what you care about), and in the winter you are shortening your cars life by years if you don't try and get the salt off regularly.
When I bought my 8 year old car, it was from the Midwest and the mechanic I asked to check it out said "Don't buy - it's got a good amount of rust because of the salt they use". I asked whether it means the car is less safe. He said "No, just more repairs and potentially costlier repairs. I said "Over the remaining life of the car, how much extra would it cost?" In today's dollars, the answer was $2000.
I bought the car. It easily lasted another 7 years before it died in a collision.
My car prior was a purely Midwest car, and I rarely washed it. It happily lasted 16 years. I passed it on to someone else, and he used it for a few more years.
Watch the channel Auto Parts City on YouTube, I assure you it is not overblown. It's a junkyard owner. A ton of cars come through there that run fine and could otherwise be very serviceable, but the frame/body are crumbling from rust, so they have to be crushed. We're talking cars that are 10 years old. And yes, it even includes Toyotas and Hondas. (In fact they're more likely to end up crushed for that reason than another car is, since a Nissan or Hyundai's transmission and engine won't last long enough for rust to really end its life.)
From a certain perspective, maybe some people don't care if they would be getting rid of the car in like 5 years, but if you do want to keep a car 15 years and you live in "salt country" I would strongly suggest doing something about the salt regularly.
Selection bias. Cars that were not treated for salt, and didn't die, didn't end up in the junkyard for stories to be told.
My first car spent its first 15 years in the Midwest. No garage. Very irregular car washes (perhaps once a year when I owned it). It lasted about 20 years total. When I lived there, I didn't know anyone who had to give up a car due to rust. There definitely was rust, but not something that caused the car to break down.
epochbtc · · focus · HN ↗
The answer is: cash flow. Self-storage businesses are the almost perfect solution for someone with a good size (but not enormous) bucket of money that they want to put to work generating cashflow:
1. Cheap build out (cheap land, cheap facilities) 2. Almost entirely hands-off (no employees, automated entry) 3. Low liability (low risk of customers suing you) 4. Low overhead (just pay for taxes, electricity, minimal maintenance) 5. Reliable monthly cash flow
The abundant supply of these businesses, I suspect, tends to generate demand: it's easier to pay $80/month to store your junk than spend the time and emotional labor of picking through what you want to keep and what you want to get rid of. That ends up being captive long-term revenue.
jboggan · · focus · HN ↗
This is also why some startups trying to revolutionize the self storage model had extreme headwinds - if you are renting the underlying properties and trying to make the storage business profitable you are at an extreme disadvantage to the larger players who can subsidize operating costs with portfolio appreciation.
BeetleB · · focus · HN ↗
(Car wash usage doesn't go down even during a recession, apparently).
encrypted_bird · · focus · HN ↗
dghlsakjg · · focus · HN ↗
Where I live, summer rain doesn't really clean the car (if that's what you care about), and in the winter you are shortening your cars life by years if you don't try and get the salt off regularly.
BeetleB · · focus · HN ↗
I bought the car. It easily lasted another 7 years before it died in a collision.
My car prior was a purely Midwest car, and I rarely washed it. It happily lasted 16 years. I passed it on to someone else, and he used it for a few more years.
I suspect the fear is overblown.
xp84 · · focus · HN ↗
From a certain perspective, maybe some people don't care if they would be getting rid of the car in like 5 years, but if you do want to keep a car 15 years and you live in "salt country" I would strongly suggest doing something about the salt regularly.
BeetleB · · focus · HN ↗
My first car spent its first 15 years in the Midwest. No garage. Very irregular car washes (perhaps once a year when I owned it). It lasted about 20 years total. When I lived there, I didn't know anyone who had to give up a car due to rust. There definitely was rust, but not something that caused the car to break down.