When to build storage unit vs rent mini storage?

[mousebandit]

So, first off, I know the proper answer is to sell our stuff.  :-)  I will be working on that, and working on convincing my husband of the virtues of not saving everything we've ever owned, but until we make more progress on that front, we still are shelling out $80/month for a storage unit.

Husband is frugal at heart, and wants to build a storage shed on our property to house everything.  He is also a contractor who builds nice things, and envisions about a $2000 structure.  (I'm more of a redneck and would be happy with a pole barn, or even a pallet shed, LOL!)

We are currently in a deep hole of debt, and honestly the mini storage isn't our biggest fish to fry (IMO), but it drives him nuts.  I think we need to deal with the 18-22% interest debts first and THEN build the storage building, but he is gearing up to make a case for it soon, I can tell, LOL! 

I just discovered MMM last night, and am coming up with LOTS of ideas to tackle things, but I see this as being an immediate blockade to my plans.  I'm thinking it'll take us a couple of months, maybe more, just to save the money to buy the materials.  OR worse, this will qualify as an "emergency" and then he'll want to tap the line of credit we have (which is still only about $1500 right now).

So, are there guidelines for when you fork out cash to buy an asset that will replace a monthly cost?  We are moving in 2 days and I'll do a full case study next week for some serious feedback, but I know the storage shed discussion will be high on his priority list this weekend! 

THANKS!
Mouse Bandit

[Louisville]

What are you storing in the rental facility right now?

[mousebandit]

A good portion of it is his late fathers library, which includes thousands of books and about eight very large double-bookcases.  (our home is about 800sf and can't fit our own books, 4 kids, and homeschool stuff, much less these.  We've tried and agreed we can't put them up until we build a new place).  So, of course he is very concerned about them not being damaged or messed up by the elements in a cruddy shed or barn.  There is tons of more stuff out there that is probably mine, and as soon as I'm home (moving home in 2 days) I will be ruthless in getting rid of stuff, hopefully selling it.  I've determined that I will have nothing in there.  :-)  But the books and bookcases are the bulk of it and the concern. 

[frugaliknowit]

Either store with with a friend/relative for free or get rid of them (donate or sell).

There is no magic bullet. 

[Axecleaver]

The typical way to handle this is to perform a Return on Investment analysis, or ROI. This is the same kind of analysis you would do on buying a house vs. renting, or deciding to buy a new car or keep the old one running. The ROI usually has a crossover point where the capital investment pays for itself. Then you need to decide if that amount of time is worth it, or if there is another way to use the money which would give you a better result.

In the case you cited, you're comparing a $2000 one-time cost for materials to an $80/month expense. There is also your husband's labor to price out. Let's say he needs 40 hours @ $30/h to put this together. (You can plug in your own numbers.) The addition of an unattached structure will also raise your property value when you sell and potentially raise your property taxes. Let's ignore those effects for now.

With labor, we're looking at $3200. At $80/month, it would take 40 months to reach parity. This ignores the opportunity cost, so let's add that in. You could opt to use that $3200 today, to create more income (do the labor for someone else, for example) or pay down debt instead of buying materials. So, let's apply the 18% interest rate of your current debt to this 3200. On a monthly basis, that 3200 in debt costs you $48 @18%. Over 40 months, you're looking at an additional cost of $1920 in interest payments.

Suddenly your $2000 shed is costing you $5180! Seems like it would be a better choice to keep paying the $80/m for now, sell stuff you haven't needed in the last year, and try to reduce your spending to accelerate payoff of your high-cost debt.

I sympathize, we just sold our home and moved into a rental under half the size, and we threw out over a ton of trash, sold hundreds of dollars worth of furniture and possessions, donated or sold all our books (take a look at Bookscouter app for iPhone/android), and we still have a $85/month storage facility to hold on to things we couldn't let go. We're getting better, day by day. Good luck!

[KarefulKactus15]

Okay, heres what I see,
You said the storage you build would be about 2000$ but your paying 80$ a month so it would take 25 months to pay for itself. Thats 2 years!   

You need to decide if your going to keep these books forever (longer than 2 years) or if you have a plan to eventually take them out of storage and sell them, or put them in the house or whatever. Only you guys know the answer to this, but if both of you get on the Mustachian band wagon, I think you will end up selling them, or donating to a library or something that doesn't involve spending money on storage.

Also if you build the shed, then sell the books, you will just fill the shed up with other crap lol.

I have a hunch that the built shed will actually cost more then 2000$ because little extras add up fast. A nicer one of these, a nicer one of those, maybe some electrical connections, and BAM next thing you know you got a 3500 SQ ft garage in your back yard lol.

So in conclusion, I wish I could make a good argument. But my only argument is sell those books or donate them, but it may have sentimental value to him.

[mousebandit]

They definitely do have sentimental value to him, and he plans to build us a much larger home with a library room, etc.  Of course, that can't happen until we're out of debt, so it seems to me building the shed and ditching the storage unit will just delay that further.  I don't think that he will consider selling them or getting rid of them in any way, but maybe I can use the interest and ROI numbers to at least buy some time for us to get some of these debts paid off.

Thank you guys! 

[Anomalous]

As everyone else has said, it's best to get rid of the storage unit without spending any money.

However, if you take it as a given that you can't get rid of the stuff, the only two options for storing it are the rented storage unit or the new storage shed, and the $2000 cost is accurate, then building a shed could be a good option. A one-time cost of $2000 would save you $960 a year. That's a return on investment of 48% in the first year. If you factor in Axecleaver's labor estimate, that's still a 30% return on investment in the first year.

I would carefully examine the three assumptions:
1) There's no way to get rid of the stuff that's in storage.
2) The only two storage options are the rented storage unit or a new storage shed.
3) The $2000 cost is accurate (include labor cost, cost of borrowing money for materials, etc.)

If you are certain those assumptions are correct, it may make sense to go ahead with building a storage shed.

Anecdote time: I've been renting a storage unit for two years. I knew it was a waste of money from the beginning, but rented the unit as a short-term measure to give me time to sort through and get rid of stuff. In two years I've spent $1,737 on rental fees. I would have been better off throwing out and re-buying everything that I stored, though I understand that wouldn't work for items with sentimental value. Building a shed would have been a much better use of the funds, and I'd have a useful shed to show for it instead of a smaller bank account.

[mousebandit]

UPDATE: 

So, the assumptions aren't totally accurate.  Once the rest of the junk in the storage unit is sold or disposed of, it would take a smaller unit at less than $80/mo to store the books and bookcases.  The cost of $2000 for him to build the shed he has in mind is accurate, but it would be to build a shed large enough to hold all the storage unit stuff, plus a lot of other things that need storage.  (We have a 6-1/2 acre ranch and he is a contractor, and we're homesteader-types, so there's lots of STUFF.)  However, after talking with him and pointing out the ROI figures and talking about our multiple 22%+ interest debts, he agreed that we'll slam everything we can on those debts now, and we'll move forward with another idea I had, which is to build a tiny "house" that'll be just enough big enough and complete enough to qualify our property for conventional financing and get us out from under the 10% interest private mortgage we have now.  Once the re-fi is complete, it becomes his shop. 

I did go ahead and post a full case study now.  :-) 

Thank you all!