Amongst other real estate sectors, self-storage facilities are one of the most straightforward yet rewarding property forms. Lots of investors are becoming financially free from their passively run self-storage investments. While some passive investors allow self-storage REITs to trade on their behalf, others employ full-time managers.
The self-storage industry is tipped to worth almost fifty billion USD in a few years. Storage facilities have been steadily increasing, owing to the rising population of homes and industries. Also, there are homes or municipal areas where owners aren’t given storage permits on their residence.
One of the perks of buying storage units is its low maintenance and high ROI. Its low maintenance demands encourage passive investors who’d rather avoid having tenants. Unlike some other investments, self-storage units have relatively low risk attached to them.
Getting land for a storage facility is relatively cheaper than for other purposes. Also, self-storage facilities don’t need complex structures. Storage structures are mostly metallic without marble tiles, furniture, or concrete pillars.
The light structures of storage facilities mean that there’s the little maintenance cost. When customers don’t pay rent, storage owners can auction off customers’ goods to pay their rent.
A self-storage facility is typically between two-and-half to five acres of land area. It has up to five one-story buildings with different unit sizes.
The self-storage industry includes “mom” and “pop” storages, mid-sized facilities, and more prominent size REITs.
Are you already considering partnering with self-storage REITs in 2021? The industry’s expanding in leaps and bounds as more storage units and investors participate. Research projects that the ROI and annual industry growth will remain high in a few years.
How To Invest In Storage Units
There are two main paths to joining the self-storage industry.
One way into the industry is by setting up your self-storage facility.
The other path involves partnering with a REIT (a real estate investment trust).
We look closer into these investment pathways.
Setting Up Your Self-Storage Facility
Building your storage facility is a more active path to self-storage investment. Setting up your facility comes with more rewards plus risk. The pandemic affected a broad range of industries at different rates. However, rent prices are returning to normal.
The self-storage market retains its strength nevertheless.
Note the following if you’re considering building your storage facility.
- The location of the storage facility is essential. Industry experts have affirmed that the location of your storage facility is crucial to market success. The majority of your customers will come from within a one-to-ten kilometer radius of your facility.
Do background research of the area you’re considering for middle to high-income earners. Are there competitors in the same location as the place you’re considering? Look for sites having high traffic roads around.
- The price range of an average storage facility is above one million dollars. Storage facilities have an average of around fifty-six thousand square feet. Currently, rent on storage facilities is at an average of 0.92 USD per sq. foot.
- There are third-party management companies to help manage your storage facility. There’s a possibility that some management companies have special requirements for facility sizes they tend.
Do due diligence to research the terms and conditions of different third-party management companies. As soon as your facility attains a reasonably stable cash flow, you can begin earning passive income.
- The coronavirus situation would likely affect funds accessibility as more investors look towards the industry. There’s a possibility of getting SBA loans to get capital to set up your storage facility.
- Consult professional self-storage building services in setting up your facilities. Also, ensure to do a thorough land survey of the area you’re considering. A land survey will reveal hidden or obvious faults that pose potential dangers such as flooding.
Partnering With Real Estate Investment Trusts (REITs)
Real estate investment trusts are companies that own and manage real estate properties. These REITs are on the stock exchange, where you can buy storage units just like shares. You could purchase storage units shares from public companies through the stock exchange market. There are self-storage companies that have training platforms for prospective and existing self storage investors – Passive Storage Investing.
In dividends, REITs must pay at least ninety percent of taxable income to shareholders.
In the stock exchange market, there are five real estate investment trusts listed publicly. These real estate investment trusts deal with real estate self-storage properties. They include National Storage Affiliates (code: NSA), Life Storage (code: LSI), Public Storage (code: PSA), CubeSmart (code: CUBE); and Extra Space Storage (code: EXR).
Amongst other real estate investments, self-storage investments have outperformed others over the last ten years. However, owing to the coronavirus pandemic, rent prices on storage facilities lowered. Nevertheless, self-storage facilities showed their recession-resistant quality by remaining one of the most rewarding.
In investing with a self-storage REIT, you don’t need to know so much about the industry. REITs are usually established brands with eased online platforms to aid your investment adventures.
Then, there’s another less bogus pathway into self-storage investing.
Investing Through Online Crowdfunding Deals
You can buy storage units via crowdfunding deals.
Investors can place their funds into a crowdfunded deal. There are online crowdfunding companies that look into self-storage facilities for investment.
Different investors garner resources into a proven and available self-storage investment opportunity to get increased ROI. However, crowdfunding deals are mostly open to accredited investors.
An accredited investor’s income reaches $200,000/annum and has a net worth north of $1 million.
Tips For Beginners In The Self-Storage Industry
If it’s your first time considering buying self-storage units, the following tips can help your adventure.
Diversify Your Investment Portfolio
One of the first things to know before investing is to diversify your funds. Putting all eggs into one basket could increase the risk potential of your investment venture.
Consult Professional Consultancy Services
Particularly when you’re considering setting up your storage facility, consult professional or legal advice. There might be specific land regulations in the community you’re viewing.
Learn The Basics
Conferences and seminars are useful in garnering useful investment advice. Having a basic knowledge of the industry will help your investment adventure.