As popularized by television series like Storage Wars, Auction Hunters and the like, storage auctions can be a tempting way to make some extra money. While some resources may try to discourage you, and others may be light on details, buying storage units can be a lucrative business. That said, before you take the plunge and put your time and money on the line, you should take the time to explore your options and develop your own strategy. The same unit can be a total loss, break-even, or even wildly profitable depending on the buyer and their strategy. While you do not necessarily need experience to make a profit, understanding the different points of failure and opportunities for success will help poise you to squeeze the most profit possible. Use this guide to make money buying storage units.
Preparing for a Storage Auction
The first step in preparing for a storage auction is a mental one. You must be willing to walk away without buying anything. You should also be able to stick to a budget. Do not feel obligated to purchase a unit during your first auction. Once you have a budget set, you will want to determine the pricing conditions in your area and adjust your budget as necessary – more on this later. The next major step is finding an auction in your area. Auctions usually are required to be announced ahead of time as part of the due process of selling someone’s belongings. Understanding the reason units go up for auction is helpful to your success, but for now, focus on finding the auctions – I am partial to AuctionZip. Now that you have found some auctions, learn more about their structure and their direct costs.
Storage Auction Cost Structure
Storage auctions may vary in cost structure, but all are held for the same reasons: to recoup lost storage rental revenue. More properly, storage auctions are actually lien auctions – wherein a loss can be remedied by sale of the contents of a storage unit. Cost differences occur by legal jurisdiction and by auctioneer. That is, some costs can be avoided depending the storage facility and who they contact with, whereas aspects of the buying process are going to be uniform across a geographical area until you travel to an auction outside your jurisdiction. Here are the most common types of costs:
- Cleaning deposit – ensures that you remove all items from a unit within a given time frame – typically 24-72 hours after the end of the auction. Deposits are often determined by the storage facility and are hard to avoid. The good news is you’ll get your money back so long as you remove the items. Some facilities may require the unit to be broom swept or otherwise held to a higher standard of cleaning.
- Buyer’s premium – some auctioneers charge the buyer an additional fee beyond the purchase cost to be compensated for conducting the auction. This is usually a percentage amount, but can easily be avoided by attending a different auction whose auctioneer does not charge a buyer’s premium.
- Credit Card fees – many auctions do not accept credit cards, but those that do often impose a percentage fee for any payments made by credit card. You’ll always be better served by bringing cash to every auction.
- Sales tax – ordinarily, storage auctions are subject to sales tax collection unless you are considered a reseller and bring a tax exemption certificate to the storage auction. Once the facility has a certificate on file, you can return without it so long as it is kept up to date. We’ll discuss this more later. This needs to be repeated for each facility.
- Moving expenses – not a direct expense from the facility or auctioneer per se, but a very real expense you face if you need to rent a truck or pay gas to travel, especially if you are taking many smaller trips back and forth in your own vehicle.
- The purchase price – this is expected. As you can see, you cannot simply budget for this cost alone, regardless of where you are buying.
Given the costs you’ll face at an auction, there are several key points to remember. Always use cash. If you are buying multiple units, factor in the cleaning deposit. It usually applies to every unit you buy. I have attended many auctions where units sell for less than the cleaning deposit, but you’ll still have to front the combined total for each unit. I’ve even seen winning bidders forget this, go to pay for their multiple units, and then be told to pick a favorite unit until they can cover the rest of the cost. If you are subject to sales tax, know the sales tax rate in the area the auction is held.
Storage Unit Supplies
Before every storage unit, you’ll want to ensure you have supplies ready that will help both in the bidding process as well as the cleaning and moving process. While you may want to just get your feet wet and not invest much money, if you plan to be serious, put in any extra money for higher quality materials that will last and serve you well over the long term. Buy in higher quantities if you get a cheaper unit price. You’ll be cutting into your profits if you don’t plan ahead. Even when you are prepared, these materials will be a cost you’ll need to account for. I view these supplies to be an investment, however.
For the bidding process:
- Umbrella – auctions usually go on regardless of weather – rain or shine. With an umbrella at hand, you’ll have less competition and more comfort should it rain.
- Flashlight – some of your best finds will be units with items other buyers don’t notice. Get a powerful flashlight in order to level the playing field – other serious bidders will certainly have one. This is one area to not cheap out on (cheaper flashlights can be nearly useless).
- Pen/pencil and paper – picking up from the pricing discussion, you’ll want to record the prices units sell at along with any notes. This will help you gauge the prices in a given area and plan better for budgeting.
For the unit clean out:
- Garbage bags – you’ll have plenty of things to throw away, and loose items you’ll need to sort. I recommend paying more and getting bags with pull strings you can tie shut. You won’t be able to throw away items on-site at the facility, so stock up.
- A good padlock – protect your hard-earned items. You’ll likely need to leave the unit at least once, especially if you must make multiple trips to the storage facility. I don’t turn my back without locking up. Remember to get at least one lock for every unit you plan to buy. A good starter number is one or two.
- Paper towels – you’ll want to wipe off any dust or unseemly residues you encounter. While you can always clean items more thoroughly later, you’ll thank me for this one.
- Latex gloves – for protection. You have no idea where these items have been, but you do know they have been sitting in storage for months! These are imperative to buy (and discard!).
Between these items, you’ll be well-prepared to take on any auction. When it comes time to sell your items, you’ll want to beef up on the cleaning supplies to make everything presentable. I recommend a good solvent as well for any sticky residues, ranging from the unknown to simple price tag adhesive.
Storage Unit Bidding Tactics
If you have seen the televised versions of storage auctions, you probably picture drama and animosity accompanying each auction. While there isn’t some tension between bidders, most people don’t like to step on each other’s toes. Your primary tactics when bidding at a storage auction should focus on finding the right unit for you. As mentioned earlier, one unit may be profitable or a total loss depending on the person. Finding your niche can help keep the pressure with other bidders down.
Some basic tactics that should serve you well to make money buying storage units:
- Avoid the first and last units – while these are not golden rules, an inexperienced bidder should certainly not bid on the first unit of their first auction. Record item prices and at least get an idea for the pace for the day. Even seasoned bidders can benefit from this in new areas or facilities. Often the last unit of the day will get driven up in price by those who don’t want to leave empty-handed. But trust me, it is better to pass on an overpriced unit than make a habit of taking risks. Facilities will usually announce how many units are being auctioned that day. Again your pen and paper will become useful quickly!
- Only bid on what you can see – I cannot stress this enough. If conservative resale estimates on items you can plainly see do not yield your desired profit, don’t bid. Boxes often don’t contain their original items. People re-use old boxes when they cannot afford or don’t want to buy new boxes for storage.
- Don’t overpay – use your running price tally to justify bidding more on a unit, or to remember to pass and move on to the next unit.
- Don’t start drama – you don’t need to make enemies needlessly. Auctions aren’t as dramatic as they’re made out to be, and being aggressive won’t do you any favors.
- Don’t buy what you cannot sell – if the bulk of value is in items you have no idea how to sell, move on. If they are commonly found in units, research how to sell them and wait until another auction when you are better prepared. Time is money, and you don’t want to hold onto items longer than you have to.
Above all else, I think you can find profit in ordinary items that you understand well – that is the surest way to make money buying storage units. You don’t need to find treasure or anything sexy. Let other people bid up and spend their budget on items that are traditionally desirable. Try to understand the reasoning behind the unit being unpaid for. Understand how well that person took care of their items, and whether they had taste for cheaply made goods or higher quality wares.
I often hear the solid advice of paying attention to how neat and orderly a unit is. If all the items are crammed in, as if in a rush, that may be a red flag. More understandably, if a unit is dirty and disgusting, it may be full of trash or items that were not important to their owner. Either way, you’ll have to rifle through a trashed unit if you buy it.
Also note the breadth of the items – if a person’s entire home appears to be crammed into a unit, be aware of the type of items that will accompany – whether it is thrift-store worthy cheap housewares or dirty (or clean!) clothing. These people stored their items under different circumstances than someone who simply stored their valuables, their bulky items, or their seasonal belongings (think lawnmowers, snowblowers, generators, and other tools, or possibly Christmas decorations).
Depending on your niche, you may want the every day items (the housewares), but remember, tools hold their value well, though they might not be sexy to someone other than a tradesman. There is something for everyone – find what you understand, what you can sell, and what you can haul. You have to clean the unit, and you need (want) to sell its contents.
How to Sell Storage Auction Items for Profit
When you buy a storage unit containing an endless number of items, the good news is you can afford to sell many items for well under cost. A $400 unit with just 20 items can generate a 50% ROI if you sell them for $30 each on average. As the cost goes down or the number of items goes up, you can sell for even less on average. It is not hard to make money buying storage units.
That is not to say you want to sell items at low cost, but that the math works in your favor – it is easy to generate a profit if you sell items at the right price. Many items can be sold well below value and still reach your ROI goals. If you plan to purchase units at storage auctions, moving items quickly will be in your best interest, allowing you to move on to the next auction. You want to avoid having your money tied up in inventory. Moving items quickly – churn – means a high level of inventory turnover and a higher level of cash liquidity.
Preparing Your Items for Resale
As mentioned earlier, you’ll want to clean up your items – they can often be filthy. After some soap, water, or the right cleaning chemicals, most items look good as new. I recommend at least wiping items down, but for items like clothing, you’ll want to take special care to wash them thoroughly. Again, a good solvent like rubbing alcohol will be your friend (removing sicker residue and permanent marker alike). Presentation is everything. Cleaned up, the same item may fetch far more than it would straight from the storage unit.
Chances are, you may try to sell your items online to make the most money buying storage units. In this case, appearances are everything – people will form their perception of your goods from appearances alone. Take good photography using a good quality camera – ideally not your cellphone. Remember to use good framing, proper lighting, and a professional background. Clean the surroundings as needed (no dirty carpet, counters, etc). I recommend a linen tablecloth or a white bed sheet for a professional looking backdrop.
Find The Best Platform To Sell Your Items
To really make money buying storage units, finding the best platform to sell your items can be a tricky proposition – each platform has its own pros and cons. In short, you’ll face trade offs between platform reach and audience and their associated costs. For bulky items, you may need to forgo all but local markets, opting for either garage sales or craigslist. Smaller, lower value items may not be worth the time to list individually. Here are some further considerations:
- Platform fees – does the platform charge for your listing? Do they take a cut of the final sale value? Expect 10% on eBay and 15% on Amazon for most items.
- Shipping costs – if your item is large, this may eat into your profit and bring you into the red. Shipping may also make your price noncompetitive if you’re trying to maintain a certain margin. Don’t forget the cost of packing materials and shipping insurance.
Read the more in-depth discussion of amazon vs ebay vs craigslist and other platforms to sell your items and make money buying storage units.
Alternative Ways to Flip Storage Auction Items
While the most obvious way to deal with your items is to sell them, listing them individually or bunching them together at a garage sale or flea market, you’ll find other options as well.
- Gifts – you may find unique items that someone you know would appreciate. Best of all, once the item is cleaned up, the cost can be unbeatable.
- Trading – you can take an item that you won in an auction and exchange it for an item of higher value or a similar item that is in higher demand. Another option – trade for an item you’d like for yourself.
- Donations – you have a real possibility to give back to your community when you participate in storage auctions. And you have a financial incentive as well. Many loose house ware items or outdated furniture or appliances may find new life if you donate them directly to a non-profit, NGO, or another special outreach program. I recommend a smaller group where your impact will be felt more heavily and your gift will be appreciated. Thrift stores are not quite as preferable. Be sure to get a donation receipt for tax deduction purposes. My first donation was to a battered women shelter. If you flip items at thrift stores, you may also get a discount coupon for a future purchase after making a donation.
- Trash – the last resort, but unavoidable at times. Otherwise throwing away items is no way to make money buying storage units. If at all possible, recycle or “upcycle” by finding a local artist or your crafty side to reinvent items and find profit where there was otherwise none to be found.
Make Money Buying Storage Units
As a closing thought, do not be deterred by storage auctions – there is a great opportunity to make money buying storage units even if you are a beginner. But keep in mind that they require preparation and discipline. You stand to lose the most when you make rash decisions. Remember to consider the physical space that items will occupy, specially if you cannot sell them quickly. Another factor to consider is demand versus value. Just because an item is valuable does not mean it is in high demand. Lastly, keep in mind that if you plan to purchase units long term, you may wish to get a tax exemption certificate as it can make you much more competitive. Good luck, and happy flipping!