Why Make a Self-Storage Investment?
As cities and suburbs grow, you see a tightening of zoning and ordinances and lots of homeowners are not allowed to have a storage shed or allowed to store their stuff outside. Consequently, the self-storage industry is experiencing a rise in demand. This is an opportunity for you to take advantage of the fact that good things do come in a box.
The collection of ‘stuff’ that humans accumulate has to go somewhere. Particularly when their lives are in transition. The downsizing Baby Boomer and the frequent job-changes of the Millennial workforce also adds to the demand for self-storage.
In addition to a growing demand and hassle-free tenants, self-storage investments also have great cashflow in both good and bad economies. It’s a proven recession resistant investment addition to your portfolio you shouldn’t overlook!
Although we are big fans of Multi-Family housing investing, there are issues that you must deal with that do not exist in the self-storage space. One example is that your tenants are boxes of stuff and the need for lengthy eviction procedures do not exist.
Benefits of Investing in Self-Storage
- Performs well in recessions
- Hassle free tenants (boxes)
- Growing demand
- Positive cash flow
- Profitable Niche
Invest in Only the Best Locations
Whether you are currently invested in Real Estate or not, you’ve probably heard this expression. Yes. Location is extremely important. The metrics of the actual property location must provide stellar numbers that showcase a real prospect for growth.
Your best property selection will be a location where there is an increase in population and lots of local development. Look also for businesses moving into the area that will increase the number of jobs available. Review driving forces that dictate continued growth, such as types of business that are prime for increasing their employee base through a sustainable need in the future.
Location is also important from the viewpoint of competition in the area. Research the neighborhood and make certain that the opportunity for your property to grow is not likely to be swallowed up by another player. Limits such as zoning restrictions, limited additional space for development on the competition’s locations can greatly enhance the potential profitability with rate increases.
Value Add Opportunities
Not all properties are created equal. The property should have room for growth from both a sales viewpoint and preferably also offer room to add more value by further construction to meet the growing demands of a location. Adding new construction and square footage means opportunity for more rental income
Ideally, the property will also offer room to fuel growth by the ability to build on added value components. When we talk about added value components in self-storage investing, we are talking about components such as being able to provide outside storage for larger equipment such as RVs and boats; become a dealer for moving companies on site; provide packing supplies; offer tenants insurance etc.
Rent Increase Opportunities
Industry rent growth continues to show a steady increase according to industry experts. Most properties today offer the climate control factor which is duly appreciated by the consumer according to statistics published by The National Real Estate Investor: “Annual rent growth has been healthy, for non-climate controlled units more so than climate-controlled units. The table below shows annual rent growth for self-storage facilities for the two categories compared to other property types. The first quarter 2016 data shows that non-climate controlled properties saw rent growth of 3.9 percent, ahead of every other property type except apartments.”
“Self-storage facilities continued to find more new customers in the first half of 2017. For three of the five leading REITs, the percentage of occupied space was about 95 percent in the second quarter of 2017, compared to a year ago when just one of the REITs, Public Storage, was doing so well.” – Skyview Advisors
Choose the Best Management Team
With a wealth of experience in investment comes the knowledge that the right team is essential in all investment opportunities. This is a cornerstone for all investment opportunities at The Real Asset Investor. When you are considering which self-storage opportunity to put in your portfolio, it’s imperative that the property is properly managed.
Historically, the self-storage industry on average is notoriously mismanaged. This creates a tangible opportunity for the savvy investor who secures the right Management Team to run properties they have researched and found previously lacking efficient management.
When you are looking to get into a self-storage opportunity, be sure to choose a team that specializes in self-storage and does it well. Look for a proven track record of success. A good self-storage Management Team will deliver on increased sales, efficient management and they will find ways to increase revenue through retail accessories and moving vans like U-Haul etc.
We really like management teams who not only specialize in the asset class we are investing in but it is the only thing they do. For instance, we would not want a management team who manages Multi Family Apartment buildings, car washes and Self-storage. We like a team where Self-storage is their ONE THING. A team of professionals who have 10,000 hours of experience under their belt perfecting their one thing.
Following this formula for success, The Real Asset Investor works only with the top-tier self-storage property management companies who’ve demonstrated an outstanding track record. We team up only with Management Teams that we have carefully vetted. We sit down with the principals of the company and interrogate every aspect of their business and verify the truth of statements made. This is an important part of the protocol for selecting the best partners.
When you invest alongside a Management Team who invests in their own properties, you can gain more confidence that the property will make good returns on investment through careful and attentive management. At The Real Asset Investor, we invest right alongside you.
Does Self Storage Make Sense for You?
Yes. You can have the benefits of investing in a large-scale asset without the risks of having to go it alone. The lone wolf investor will most likely experience a higher risk in their portfolio regardless of what investment they make. By joining the ‘pack’ you are able to minimize your risk factor and profit from the opportunity to be part of the larger investor player’s market and gain access to bigger deals.
Joining with The Real Asset Investor can also provide diversification to your portfolio with a smaller initial investment than would be required as a lone investor. It can provide limited liability exposure and offers a passive investment with this low dollar entry point. There will also be tax benefits that allow you to reduce or eliminate your tax liability.
Self-Storage Investment Checklist
- Find the best management team
- Find ways to add value
- Find the best locations
- Find areas with strong demand