self-storage
[ self-stawr-ij, –stohr– ] adjective

nothing or pertaining to a warehouse or other facility that rents units to people by investing in storage units for storing personal possessions.
a shorthand for “self-service storage”, and also known as “mini storage”
Used in a sentence: The self-storage industry is bigger than the recording industry.

…is an industry in which storage space (such as rooms, lockers, containers, and/or outdoor space), also known as “storage units” is rented to tenants, usually on a short-term basis (often month-to-month). Self-storage tenants include businesses and individuals.

Self-storage facilities that Invest in storage units on a short-term basis rent space (often month-to-month, though options for longer-term leases are available) to individuals (usually storing household goods; nearly all jurisdictions prohibit the space from being used as a residence) or to businesses (usually storing excess inventory or archived records). Some facilities offer locks, boxes, and packaging supplies for sale to assist tenants in packing and for their goods safekeeping, and May also offer truck rentals (or may allow free use of a truck for a new tenant).

Facilities vary in size, quality, construction, materials, and surveillance measures, and added services may include:

  • 10,000 square feet to an excess of 100,000 square feet.
  • Wide range of standard sizes – 5′ x 5′ to 10′ x 30′ or larger with the average unit size being about 100 square feet (10×10).Outside parking for RV’s, boats, etc.
  • Resident Manager apartment on-site.
  • Movable module units (storage containers).
  • Automatic gates with keypad computerized access.
  • Units divided by corrugated steel panels (most widely used), chain-link fencing, plywood upon stud and drywall or stud and particle board.
  • Surveillance cameras and monitoring stations.
  • Individual door alarms.
  • Well lighted.
  • Completely fenced.
  • Paved or concrete driveways.
  • Retail merchandise available.
  • Ancillary income sources (e.g. cell towers, US Postal service, private mailboxes, Ebay, over
  • Converted buildings (old supermarkets, big box retail warehouses, etc.).
  • Single and/or multi-level facilities.

Fun Fact:

Self Storage Investing - Bekins Storage

There is evidence of some concept of self-storage dating all the way back to 2,000 years ago in Ancient China. The British refined this concept by placing contents in crates inside of stables and having watchmen secure them.

 

In 1891, brothers Martin and John Bekins, the Self storage investors founded Bekins Company in Omaha, NE. The company operated with three horse-drawn vans and 12 employees. In 1895, Martin expanded the business to Los Angeles and started using moving vans. In 1906, the Bekins Warehouse was built–the first reinforced steel and concrete building in the city. During the first half of the century, the company set up a large number of fireproof warehouses throughout southern California. After World War II, Bekins focused on four major areas of service in the moving industry: local moving and storage within communities; long distance moving of household and other valuable goods; international moving and storage for military personnel and civilians; and other related services, such as the storage of business records, records management, film storage, and office and industrial moving. The Bekins Company pioneered the modern concept of containerized storage.

How Covid-19 Has Effected Self Storage

About Self Storage Investing:

Items are generally not covered by the facility’s insurance; the lessor may be covered by his/her own insurance policy (if such policy has coverage for items stored off the premises of the insured) or may purchase insurance to cover the items (which the facility may offer as a service through a third-party carrier, and in some cases may require the lessor to purchase as a condition of rental). The leased spaces are verified by the occupant’s very own lock and key. Not at all like in a warehouse, self-storage facility employees don’t have casual access to the substance of the space (and, in this way, the facility is commonly not subject for robbery). A self-storage facility doesn’t collect or control of the substance of the space until a lien is imposed for non-payment of rent, or if the unit is not locked the facility may lock the unit until the occupant gives his/her own lock. Some storage properties offer climate controlled units, whether recently developed or redesigned structures, generally offer access from interior hallways. Multi story construction, prevalent for atmosphere control, likewise gives access through inside foyers and lifts. Generally, dollies and furniture carts for moving customer goods are provided as a client service apparatus. As Morgan Stanley notes, “Over the 1996 to 2004 period, yearly development in US individual utilization consumptions averaged 3.9% — nearly double the 2.2% pace recorded elsewhere in the so-called advanced world.” In the United States alone, the self storage industry has produced more than $22 billion in revenue in 2012. In 2007, the U.S. self-storage renting and leasing market was nearly $6.6 billion – so you can see how much it grew in just 5 years’ time.
  • The average revenue per square foot varies from facility to facility; however, here are the data for Q2 2015: $1.25 PSF for a non-climate controlled 10 x 10 unit and $1.60 PSF for a climate controlled 10 x 10 unit.
  • Of over 10,000 facilities surveyed, approximately 6,000 are single-story facilities and roughly 4,000 are multi-story facilities.
  • 31% offer truck rental according to over 10,000 facilities surveyed.
  • Of over 10,000 facilities by storage units Invest surveyed, 18.7% offer Boat / RV parking and/or storage.
  • Of the facilities surveyed, the mean facility size is 546 units and the median facility size is 517 units.
  • Indeed, about 9.5% of every single American family unit currently rent a self-storage unit (10.85 million of the 113.3 million US HHs in 2013; that has expanded from 1 in 17 US HHs (6%) in 1995 (18 years ago).

MYTH: Build it and they will come.

Before you invest in the land or buildings you will need to do some research into the market in which you desire to buy or build. I also strongly suggest you hire an industry consultant to perform a feasibility study on the project to determine if the project will fly. Even if you have experience in real estate or the self storage industry, an unbiased opinion is invaluable when considering an acquisition or development project.

Financing

The next aspect to consider is financing. Construction loans are dramatically different and at times can be a bit more difficult to navigate than other forms of permanent commercial real estate financing. Before meeting with your lender, one might want to do some phone work to learn more about the size and scope of loans they are able to make and if they make unique loans for Self Storage businesses.

Marketing

Advertising, staffing, and the day to day maintenance of your new self storage site should not be afterthoughts. In addition, a great deal of attention should be spent on developing a marketing plan. A simple listing in the yellow pages and a big sign out front won’t fill, or keep your storage units full. Decide on a marketing strategy before you build and pay close attention to altering your strategy throughout the course of the year – with continual tweaks and new messages being tried at all times.

Location, location, location.

Those three words ring true for all facets of Real Estate Investing – and Self Storage is no different. Many investors have tried to build on a piece of land they already own, or buy the lowest priced piece of land they could find in a given market – but you should never sacrifice a prime location for price. An ideal site is one that has a high traffic count and is highly visible. How Does the Competition stack up? How about the # of competitors? Could the market be somewhat saturated? If there is more than 7 s.f. of self storage per person, you may have a more difficult time stabilizing your facility.

Construction Types

So what type of building should you build? Pole barn style, all steel, split block, convert an old building? Since your storage buildings will BE the business, a great deal of planning and consulting with the general contractors should be undertaken. In addition, the unit mix and amenities of your site can have a direct correlation to the success of the site. A developer must also plan for driveway space, unit size and placement of the individual doors, lighting, percentage of temperature controlled units and security to name a few. I Strongly Recommend Choosing a builder with experience in the self storage industry who can advise you in all facets of the construction or conversion process. The right building plan will improve your occupancy rate and help you avoid costly renovations.

Management

The success of the business post construction lies in your ability to hire and maintain quality managers. Be cautious about hiring friends and family. It’s hard to treat loved ones like employees and hard for them to treat you like the boss. Also, don’t assume that you can do it all yourself. If you want your mini storage business to be a success you’ll probably need to be open a lot more hours than you’ll want to be standing behind the counter.

FAQ – How Can Self Storage Investing help you?

First of all, it’s worth noting that self storage is sold at a discount every single day all across the country, so this isn’t a “rare” situation where this would happen. An example of why a lender would sell a facility is when a borrower stops paying on their loan. This note then becomes classified as a “Non Performing Note” (NPN) or a “Delinquent Loan”. So rather than deal with the NPN themselves, lenders will very often sell these off at big discounts just to free up their money to make a new loan. In addition, there are many reasons a private seller would want to sell their facility at a fair price: Retirement, trading up to a larger facility, tax implications, health, divorce, bankruptcy…virtually any life changing event would cause a seller to sell their facility, or just because it’s time

The first place to start is by asking if the owner is interested in holding the note and receiving payments directly from the buyer, as in a traditional borrower/lender scenario. The tax advantages for the seller are huge, and so are his profits. If that is not a possibility, the next steps are to contact any banks in the market that you have a relationship with, and then a commercial mortgage broker that specializes in self storage.

The reason we see so many, is that roughly 1 in 10 households rents 1 or more units in this country. It has become a commodity that many Americans can’t live without – more space! But don’t worry, with average market occupancies approaching 90% in this country, the self storage business is far from becoming saturated any time soon.

The beauty of this business is that you don’t need a significant amount of capital or credit to start. In fact, many of our students have little to no money of their own and have still gone on to successfully own and wholesale, and invest in self storage. The fact is that there is so much money available through banks and private lenders to fund your deals that by simply deploying a few of our strategies that we teach about how to close deals will finally remove the barrier to success due to lack of money.

Can I still do this? Most of the people we train to invest are in the same position and have gone on to buy their own properties. The strategies we teach allow you to start the business in your spare time. What many people have found, or have in mind, is that as they acquire more facilities, ultimately, it would end up costing them more money to go to work due to the lost opportunity of ignoring their self storage investing business. That’s when people make the switch to becoming a full time Self storage investors.

As with any investment, of course there are risks involved. But as a responsible investor it is up to you to get the proper education and professional guidance to reduce those risks as much as possible. Without doing the proper due diligence, you could end up making a bad acquisition and end up losing money. However, it is important to note that the same risks exist even when purchasing your own house. With the right education, you can ensure you safely invest your money so there is a significantly reduced chance that your investment isn’t as profitable as anticipated.

Now, I am not an attorney so even I don’t know all the specific laws as they pertain to real estate transactions in each state. But the good news is that I don’t need to. What I do and what I teach my students to do is to work with specific attorneys in the situations where they need to, but the key is to only work with them when you need to. Knowing how to work with your team members, like attorneys, wisely and economically is an easy skill to learn and essential to your success.

Investing in self storage needn’t be complicated. It’s a matter of understanding the deal, knowing how to complete the due diligence properly, and obtaining the necessary funding to close the deal. Once you understand these 3 steps, you can successfully acquire self storage facilities anywhere in the country – not just your own backyard. And the good news is that you can do this in as little as 10 hours a week or even less. Some of my most successful students have gone on to close their first deal in a matter of weeks. Like most things in life, the more time and effort people dedicate, the more successful self storage investors they can become.