Death, taxes, and stuff.
Perhaps the three unavoidable circumstances of life.
Investors often don’t consider self-storage as a viable place to put their money. But they should, and so should you if you’re investigating new asset classes.
Because one thing is for sure: people will always have stuff, and they’ll always need a place to put it.
Perhaps you’ve heard about self-storage investing but are wary of the industry? Here’s a guide to the self-storage industry and how to find success in it.
Self-Storage Investing
By all accounts, the self-storage industry proves to be a solid investment. Consider these industry statistics:
- Annual revenue nationwide tops $30 billion
- 1.7 billion square feet of rentable storage space exists
- 9.4% of US households rent a monthly self-storage unit
- The total number of self-storage units in existence tops 40,000 nationwide
Many self-storage companies trade publicly. Major players like CubeSmart, Life Storage, and National Storage Affiliates Trust, clear several hundred million in yearly revenue. Public Storage and Extra Space Storage boast over a billion in revenue.
Add to these promising numbers the fact that self-storage construction has increased ten-fold since 2013!
A boom indeed has happened, and—inevitable industry fluctuations aside—the self-storage arena may be one of the safer investments around. Here are four key things to consider if you are thinking of self-storage investments.
1) Self-Storage Is a Real Estate Game
Whether you are building your own self-storage unit from the ground-up, or you are purchasing an existing outfit, a self-storage investment is a real-estate deal.
You must be able to deal with the fluctuations, in the storage industry as well as the real-estate climate within which you are operating.
Like any real-estate deal, the location matters and might be one of the most significant price factors when it comes time to sell it. Right now, self-storage facilities can expect leveraged returns of 5.5-8%, on average.
And you should consider what the resale value of the property will be, whether you plan on taking it to the grave or not.
2) Understanding the Competition
As a private investor, you will likely own just one to three facilities. Understand the competition around you.
Mammoth corporations like CubeSmart can outdo independent investors on things like price, facility technology, and the sheer number of facilities. However, you might be able to edge them out with customers who will choose local over corporate.
3) Consider the Expenses
While a storage facility comes with significant capital expenditures, like gates and security systems, there are relatively few surprise expenses with a self-storage facility.
Storage facilities don’t get that much day-to-day human interaction, so you won’t have to worry so much about plumbing emergencies, for example.
4) The Month-to-Month Nature
Finally, the month-to-month rent you’ll receive carries some benefits. The low commitment means people won’t hesitate to use your service on an as-needed basis. Plus, you can leverage the monthly rent to adjust prices according to what’s trending.
Know Your Investing Resources
The best thing you can do as a future self-storage investor is to educate yourself. Get started with our self-storage investing guide and embark on this promising industry today!
