As with all other investments, there are a whole lot of factors to put into consideration when investing. The self-storage market offers investors recession-proof investments, increased income, high profits when managing a self-storage facility.
Before looking to invest in storage units like Self Storage Investing, the concepts of self-storage and storage units have to be examined critically. Succinctly defining these concepts gives you(the reader) an insight into self-storage investments while familiarising yourself with storage units around you.
What Is Self-storage?
Self-storage, also known as “storage units,” is rented out to tenants on a short-term basis (typically month-to-month). Tenants here are either businesses or individuals. For businesses, self-storage is mainly used to store excess archives and inventories. Individuals, on the other hand, are concerned mostly with keeping household items.
To ensure consistency across the board, self-storage facilities provide locks, boxes, and packaging supplies for a fee to assist tenants, enabling them to package and secure their stored items efficiently.
Self-storage is used for the following reasons. They include:
- Home renovations
- Business storage
- College storage
- Military living
- Life transitions
With all these points, we’ll be shifting our attention to self-storage investments and their importance.
Investing in Self-storage and Its Importance
Under this subtopic, we’ll focus on why single families, multi families, and lots of other real estate investors turn towards self-storage to maximize their income and increase their wealth effectively.
Why is Self-storage Considered a Great Investment Opportunity?
Why should we invest in self-storage? What are the pros associated with it? They include:
Thrives Under Any Economic Condition
Investing in self-storage is considered a great investment opportunity because it performs well during favorable and deplorable economic conditions.
When times are favorable, people tend to buy tons of stuff from different e-commerce companies. Where do they store it? The answer’s pretty much straightforward, self-storage facilities.
In cases where the economy faces a downturn, people tend to downsize drastically. For example, during an economic meltdown, people look for new ways to cut costs. Individuals who previously resided in a four-bedroom apartment move to two-bedroom apartments to save money. Where does the overflow of household items that are not necessarily needed at that point go? Self-storage facilities!
No matter the overall economic atmosphere, self-storage investment thrives.
Unlike regular housing, investing in self-storage is sure to get you, sticky tenants. As a self-storage investor, you can now raise rents without having to worry about your tenants moving their storage elsewhere. Why? Because the process of hiring trucks and moving storage is cumbersome. Consequently, tenants are left with no choice than renting spaces with a slightly raised rent. They are therefore regarded as “sticky tenants.”
It’s a Huge Industry
With self-storage facilities numbering up to 53,000 in the US alone, investing in self-storage is, therefore, a no-brainer!
It’s pertinent to note that buying storage units businesses and not building from scratch is one way to invest in self-storage. Most storage facilities are owned by people who mainly use them as an alternate income stream. Investors are advised to make offers to buy these storage units when on sale.
By buying a self-storage facility being only one half of the investment, managing self-storage helps increase the value tremendously. To accomplish this, the investor would need to upgrade the facility, raise rents, and refinance the facility. Doing all this is sure to yield positive cash flow and income.
Inexpensive Value Additions
Unlike housing, whereby a total renovation is needed to increase rent for incoming tenants, self-storage provides investors the luxury of adding value to their facility without needing to do so much.
Investors in self-storage can offer some incentives to add value to their facility, from offering truck rentals, haulage services, and take out guarantees positive cash flow.
Alternatively, an investor can add fees like admin and rate fees to garner income from tenants.
With only 8% of total self-storage facilities being foreclosed annually compared to other asset classes, self-storage investment is low risk.
Investing in self-storage is crucial in maintaining an alternate income stream for you. In cases of retrenchment, accidents, and other unforeseen circumstances that can heavily impact your cash flow, investing in self-storage comes in handy to provide an alternate income for you until you’re stable.
Moderate Management Chores
Self-storage facilities are relatively low maintenance. For example, after a tenant vacates a space, the space is given a clean sweep, ready for the next renter. Here, the need for tenant improvements and leasing commissions is pretty much non-existent.
However, the recent economic meltdown brought about the need for effective marketing. In times past, self-storage operators rarely had to market, but nowadays, they need to know basic internet marketing techniques is non-negotiable.
To handle all these chores effectively, engaging a manager’s service is needed to ensure your self-storage facility’s smooth running.
Cost of Building Storage Units
When building a storage facility from the ground up, knowing the total cost is one question on every investor’s mind. The total cost to build storage units is dependent on a whole host of factors. They include:
- Site selection
- Self-storage Unit
- Site layout
Building self-storage aims to maximize profits, and keeping to the above factors is key to making your self-storage facility stand the test of time.
When investing in storage units, the main goal is to make a profit.
It is pertinent to note that when investing in real estate, you make money only when you buy, whereas, in self-storage investment, you make money when you buy, sell, and operate.
Since self-storage success is not likely to last forever, there has never been a better time to invest than now!