How to Find Self Storage Investment Opportunities

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drive-up self-storage facility

Finding Self Storage Investment Opportunities for Beginners

Self-storage investing is not a new concept. It has been around for decades. But it’s only lately that it has grown in significant popularity. According to Spare foot, this sector of commercial real estate already covers over 1.7 billion square feet in approximately 45,000 to 60,000 facilities all over the US. 

So, if you want to diversify your assets in the high-priced and highly competitive real estate market, you may want to grab up those self-storage investment opportunities.

Self-storage investing for beginners doesn’t have to be complicated. You just need to learn where and how to start.

What Is Self Storage Investment?

Self-storage was created for customers looking for a secure place to store their furniture, vehicles, business materials, and products, as well as anything else they need to stow away for a while. While not a new concept, these facilities have seen substantial growth over the years. In fact, 1 in 11 American households rents these storage facilities at least once a year. Guardian Self Storage boxes is the Best Self Storage Near Me.

This sector is also generating over 22 billion dollars in annual revenues. Did you know that the total self-storage rentable space is now three times the size of the island of Manhattan? This industry’s phenomenal success has attracted investors—big and small—from every part of the country. You, too, can take advantage of these self-storage investment opportunities. 

A self-storage investment business model may not be how you perceive commercial real estate. It doesn’t involve gleaming skyscrapers in posh locations. Storage facilities are often located in industrial areas on the outskirts of town. Moreover, tenants pay little to no deposit and can terminate the contract at a moment’s notice. 

However, when everything has been said and done, it’s truly a good investment vehicle. Tenant turnover may be higher, but turnaround costs are significantly less than conventional leasing—giving you higher self-storage investment returns.

It’s not the most glamorous sector of real estate investing, that’s for sure. But it’s a sound investment that has seen substantial growth in recent years. It’s also resilient enough to thrive even during the latest recession.  

Types of Self Storage Facilities

Before you invest in self-storage, you should know that there are different types of facilities that you can choose from.

Climate-controlled self storage

Climate and humidity-controlled facilities are often found in enclosed buildings. They are used for storing items that need protection against extreme cold, moisture, or heat. These include family heirlooms, wine, paintings, classic cars, documents, furniture, and other objects that need a safe, climate-controlled space. 

Security is often stricter in these facilities. Likewise, access to such a facility is limited to only authorized people to avoid interference in the storage space’s humidity and temperature. Because of these extra services, climate-controlled storage spaces are more expensive than other types of self-storage units. 

Non-climate-controlled storage

Non-climate-controlled storage units are probably the most common type of self-storage space.  They are usually open spaces inside a building. They’re less expensive than climate-controlled storage spaces because there are no extra services, such as humidity and temperature supervision. 

Drive-up storage spaces also fall into this category. These spaces often feature rows of storage spaces with roll-up doors to allow vehicles inside. These features make the storage and removal of items easier and more convenient. Such facilities can be found inside or outside buildings. 

Security measures may also vary, but most of these units have video cameras and coded gates. Larger facilities have security personnel to watch over the property. These facilities are often cheaper due to minimal maintenance and staffing costs.

Portable container storage

Portable container storage units can be used to store furniture or items when homeowners renovate their homes. Containers are delivered to the clients’ homes and are left on the premises for an agreed-upon period of time. Or, they can be filled with household items and moved to the facility for a few days or weeks. 

This type of storage solution is an excellent alternative to renting a truck when moving to a new home. It can be conveniently used to move items from one household to another.

Vehicle storage

man analyzing a self-storage investment opportunity

This type of self storage facility caters to people who are looking for storage spaces for their extra car, boat, or RV. Some vehicle storage facilities also have the same temperature and climate controls offered at other self-storage facilities. Such facilities are often located in close proximity to racetracks, airports, and harbors.

Pros and Cons of Owning a Self Storage Business

A self-storage business is an excellent investment vehicle. However, just like another type of investment, it also has pros and cons you need to consider. 

Pros

Convenience

Owning self-storage units is not just an excellent investment. It also allows you to provide convenience to consumers. By giving consumers enough space where they can store their belongings while they remodel their homes or move to a new one, you’re already providing them convenience and great service. 

Affordability

Many factors affect self storage pricing, such as location and the amount of time needed for using the space. But the monthly rental cost of storage space is still quite affordable for many households.

Ability to gradually increase rental rates

Self-storage facilities are often rented on a monthly basis. This gives you the opportunity to raise rents when there is also a price increase in the market. Most tenants won’t mind a nominal increase in rent, especially if they’re not yet ready to move their things. After all, it would be more expensive to move their stuff to another storage facility than pay the rental increase.

High demand

Self storage businesses may not be glamorous, but it’s in high demand. Some people keep buying more stuff, regardless if they have the space for it or not. That’s why many homeowners turn to storage facilities for safekeeping some of their stuff, especially extra vehicles. 

Moreover, businesses are also now starting to use self storage spaces to store their goods.

Lower expense ratio

The expense ratio is often lower in self-storage businesses than some other asset classes, such as multifamily houses. That’s because the expenses for self-storage facilities are fewer and more straightforward than conventional real estate.

Cons

Location

Finding the best location is probably one of the biggest challenges when it comes to looking for a self-storage facility to invest in. One of the reasons why many storage facilities continue to operate at a low capacity is a poor location. Finding a good area that hasn’t been fully occupied can be a real challenge. That’s why many choose to build their facilities in the periphery of town.

Variable occupancy rate

Unlike traditional real estate, most self storage tenants only use the space for a short period of time. That’s because most of them only need a temporary place to store their belongings while they renovate their homes or move to a new home. 

You also have to remember that things happen unexpectedly in life. Anything can happen that can cause the occupancy rate to vary. But with so many people looking for storage space, you’ll find another tenant in no time.

While owning a self-storage facility has its downsides, they are generally outweighed by the advantages you can enjoy. Thus, it’s truly a good investment to make.

How to Analyze a Self Storage Business and Find the Best Investment Opportunities

man analyzing a self-storage investment opportunity

To find the best self storage investment opportunities, you can use online resources, like ReMax.com or Loopnet.com. You can also hire a licensed commercial real estate broker to help you find properties that best fit your requirements. But before you start with your search, you should first determine your ideal location and price range, as well as the size and age of the property. 

You should also decide if you want to be an active or passive investor, as this will help you determine your market choice. For example, if you want to be an active investor, you may want to limit yourself to local properties. Passive investors, on the other hand, have a wide range of properties to choose from. 

You need to learn how to analyze self-storage business to ensure that you’re making the right decision. You can use self-storage investing analysis software to help you with this. 

The Bottom Line

Just like any other type of business, self-storage also has its pros and cons that you need to study and consider carefully. But one thing is for sure—the demand for self-storage is rising and will continue to rise. With a large number of Baby Boomers retiring, traveling the world, and downsizing, you can expect the need for self-storage to even skyrocket in the near future. 

We can help you take part in this prime investment opportunity. Browse our site for more interesting and helpful articles about this and other topics in real estate! Click here to learn more.