Self-storage facilities have been around for as long as we can remember. In fact, almost every one of us has experienced putting something in storage at some point. But, over the last few years, there has been an increasing interest in the self-storage industry, and self-storage industry statistics show that more people are now investing in it. Let’s take a closer look at what this industry is, how it works, and why investors are putting their money on it:
Table of Contents
- What is self-storage investing?
- How can you invest in self-storage?
What is self-storage investing?
A self-storage facility is essentially a piece of real estate that people lease to store their things in safely because they either don’t have that extra space at home or they want to keep things that they’re not using now but can’t let go of completely. There has been a constant demand for these self-storage facilities around the country. For many real estate investors, they are a very ideal asset class because they’re not as hard to sell as houses, they don’t cost as much to build, and they’re not as expensive to maintain. In fact, most of these self-storage facilities only require part-time management, which means that you’re earning more money due to lower operational costs. This explains the huge self-storage industry growth and the growing number of investors who are putting their money on these facilities.
What are the benefits of self-storage investing?
It’s not hard to love self-storage investing because it offers a lot of benefits and lower risks as per self-storage industry statistics:
Self-storage investing is recession-proof
As an investor, you don’t want a recession to wipe away everything you worked so hard for. But you also know that a recession is inevitable, especially with the pandemic that continues to hurt the world’s economy pretty bad. The good thing about self-storage investing is that it’s practically recession-proof because no matter what the state of the economy is, people will always need storage.
A Trepp report reveals that the impact of the pandemic is less likely to be felt on the delinquency rates of loans for self-storage facilities as compared to the other sectors of real estate. There is also an increasing demand for self-storage facilities during the pandemic because people have to downsize their homes and businesses that were forced to close down need a place to store their things until they can open again.
Self-storage investing favors urbanization
If you look at the self storage market report 2020, you’ll see that the market was already valued at $40.73 billion last year. That number is expected to reach %53.92 billion by 2026, with a CAGR of 4.79%, according to Mordor Intelligence. This steady growth is credited to the high rate of urbanization. With cities filling up with more people, living spaces are getting more expensive, so people are forced to rent rather than buy, and with that comes the need for self-storage facilities.
Self-storage investing requires low building costs
One of the best things about self-storage investment is that the cost of the build is relatively lower than that of a house or apartment. But both real estate assets almost have similar rental rates, which means that you get a higher return on investment. You just need a tool for self storage market analysis to see where the best opportunities are for investing.
How can you invest in self-storage?
Now that you understand the benefits of self-storage investing and you’ve done your self storage research, here are some tips that you might find handy:
Choose how you want to invest
There are two primary options for self-storage investing. If you want to take the easy route, you can buy shares in a self-storage real investment trust. Here, you don’t need to manage anything, but you’re still getting ROI through dividend returns. Active participation, on the other hand, means building your own self-storage facility or purchasing an existing facility. Building from scratch is definitely time-consuming and more expensive, but it can also give you excellent returns if done right because newly built facilities are rated A, which means that they have a higher value.
Understand the basics
While self-storage facilities don’t require a lot of maintenance, you still need to learn about the basic tasks that you’ll need to do as an investor, especially if you choose to build your own facility. This includes property insurance, real estate taxes, payroll, management fees, utilities, and credit card processing fees. As the owner of a self-storage facility, you need consistent cash flow to take care of operational expenses and make sure that the business stays afloat even during slow months.
You should also know your responsibilities as the owner of a self-storage facility. This includes marketing the property, collecting rent, finding clients, paying taxes, sending notices for late payments, handling auctions and lockouts, and maintaining the facility itself.
Do your research
To get a better understanding of how you should manage and grow your investment, you need to know the right self-storage industry statistics, and that should include reviewing current rent trends, profit and loss statements, tax returns, and income and expenses. You should also inspect your facility regularly to make sure that your clients’ belongings are safe at all times.
Spread your investment
Any seasoned investor will tell you to never put all your eggs in one basket—not even in self-storage investing that has greater benefits than risks. This is because all kinds of investments have their downsides, and you can’t afford to lose all your money if an investment fails. If you start earning from self-storage investing, try to build your portfolio so that you can earn more and grow your investments more.
Is this type of investment for you?
If done right, self-storage investment definitely has a lot of potentials to help you build a strong portfolio and earn more money than other forms of investment. You just need to do your due diligence, choose your options wisely, and work with the right people to make sure that you’re doing everything properly.
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