What Does Self Storage Really Cost You?
May 01, 2017My husband and nine year old son have a new favorite television show: Storage Wars. They love watching the quirky, somewhat foul-mouthed cast of characters bid at auction for the contents of abandoned storage lockers. My guys focus on the contents of the lockers and discuss whether or not they are worth purchasing but not me. When I watch with them, I can’t help but think of the original owners of all those unused possessions and what prompted them to keep so many belongings in storage.
Most of the lockers featured on the show are full of everyday household items and furniture. The storage facility has taken possession of the unit when the original owner did not pay their monthly bill. Why did the owner rent the storage unit in the first place?
Common reasons for renting a storage unit include relocation, divorce, dislocation, military deployment and death – and increasingly, just having too much stuff. According to a Self Storage Association fact sheet, nearly one in ten (9.5%) American households rent a storage space, with about 1 in 3 renters saying they will rent for two years or longer. Even more surprising, 65% of renters have a garage, 47% have an attic and 33% have a basement at home. What is the true cost of renting that space to store all that extra stuff?
Let’s take a simple example: Taylor, age 35, recently redecorated her home, but isn’t sure she wants to get rid of her old furnishings. Her belongings have sentimental value, but they aren’t worth that much – about $2,000 – and aren’t expected to increase in value. She rents a 5’ x 10” unit for $85 per month and moves her furniture and some old toys and books, artwork and party ware into it. Assuming the rental cost of the unit goes up with inflation (estimated at 3% annually) and Taylor keeps the storage unit for 10 years, she’ll pay over $11,000 over the total period to hold on to her $2,000 worth of stuff for ten years.
What if Taylor had sold her old furniture online or at a garage sale but she only netted $1,000? Instead of paying storage costs, she used the proceeds to set up a Roth IRA and invested in a diversified, low fee mutual fund. Every month, Taylor had $85 transferred from her checking account into the Roth IRA and bought more shares of the mutual fund. Over a ten year period, the mutual fund’s average annual return was 6%. Her Roth IRA would be worth $15,235. If she kept doing what she was doing, by the time Taylor was 65 it the Roth would be worth $86,383.
Think about it. Which sounds better to you – paying over $1,000 a year to store your excess stuff or having an extra $86,000 in tax free money in retirement? Now that’s a storage war.
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