Self-storage investing has been around for decades, but over the past few years, this niche of commercial real estate investing has grown in popularity. Investors looking to diversify their assets in the highly competitive and high-priced market are looking to an alternative investment like storage. If you’re considering investing in self-storage, you’re in the right place!
Why invest in self-storage?
For many real estate investors, self-storage is an appealing asset class because it has large income potential with low overhead, fewer construction costs than other commercial real estate (CRE) sectors, and relatively low ongoing management. A small to mid-size self-storage business can be nearly self-sufficient, requiring only part-time management.
Since tenants do not reside on the property, there is less emotional equity and fewer building components that can go wrong. Leases are month to month, allowing owners to capture rental rate increases faster.
There is also a wide pool of established self-storage facilities to purchase, making this an easy industry to jump into. 73% of self-storage facilities were owned by small operators, which includes small investors who own one or two facilities.
As of March 2020, the average annual revenue for the self-storage industry was $39 billion, with 9.4% of all households renting a storage space. There is a demand for storage space, which will likely grow as generations transition into their next stage of life.
In summary, self-storage is an appealing asset for several reasons, including:
- Cash flow with large income potential.
- Low construction and building costs.
- Low overhead and expenses.
- Facilities can be self-sufficient, requiring only part-time management (depending on size).
- Month-to-month tenancy allows for rental rate increases sooner.
- Growing demand in this $39 billion industry.
Original Author: Liz Brumer