Consider Self Storage as an Investment
When I was growing up there was a small single story self-storage facility which was there for decades. Within the last two years and with no room to expand, it decided to go the only way it can. UP! It’s now a brand new three story facility with all the bells and whistles.
American consumerism fuels the need for self-storage and it’s evident by all the new and expansion of self-storage facilities in my home town of Houston. As of this posting the self-storage space is hot and there isn’t signs of softening yet. Additionally, even television shows have been born like “Storage Wars” from the space.
Here are my top reasons why to consider self storage as an investment in your portfolio:
- Self storage is a recession proof asset class. Doesn’t matter where you are in the market cycle or the personal situation or demographic, people will always need to place their stuff somewhere.
- Cash-flow is king. There are a number of other income opportunities to increase net operating income. Such as, U-Haul rentals, packing supplies, admin and late fees. These small line items increase the value of the facility. Have extra space? Then use it to store large campers, boats, RVs, and etc.
- There is no dominate player in the asset class and is highly fragmented. 75-80% of the self-storage owners are independent investors or “mom & pop” owners. The opportunity is to bring more efficient processes and run it with experienced operators for which to refinance or sell and return capital & profits.
- Renters tend to stay for longer than 18-22 months and are less willing to move with even a 10% increase in their monthly rates. For example, if they are paying $20 for a unit and there is a 10% increase. Paying an extra $2 may be worth staying put as compared to spending the time to rent a truck and move it out.
- Lower maintenance and turnover costs. Payroll will be an expense but you really just need a mop, broom, bucket, and dustpan to turn a unit. However, there are new kiosk, desktop, & mobile applications on the horizon that could further reduce the payroll expense. No toilets. No trash. No Tenants.
- There are self storage facilities in primary, secondary, and tertiary markets that are Class A, B, and C properties. You can pick what you want to invest in.
Rather watch a video to get more info? Watch this video from Bigger Pockets contributor Paul Moore.