Self storage facilities offer a convenient and cost-effective way for individuals and businesses to store their belongings, making them an attractive investment opportunity for those looking to diversify their portfolio. In volatile economic times, self-storage has outperformed all other real estate investment asset classes. What is self storage? Self storage is a service that provides customers with storage space for their personal or business belongings. Self storage facilities offer a range of unit sizes, from small lockers to large rooms, and can be rented on a short-term or long-term basis. Customers can access their units at any time, making it a convenient option for those who need to store their items but still want to be able to access them when needed. Why invest in self storage?
High demand: Self storage has a consistently high demand. People always need space to store their belongings, whether they are moving, downsizing, or just need extra space. As such, self storage has been shown to have a strong occupancy rate, which can provide consistent cash flow.
Low overhead costs: Self storage facilities have relatively low overhead costs compared to other real estate investments. Maintenance costs are generally low as the units are typically little upkeep and have mild electrical land zero plumbing. Additionally, the need for on-site staff and operations is minimal, as customers can access their units at any time.
Recession-resistant: Self storage is considered a recession-resistant investment, as people tend to downsize during economic downturns, leading to an increase in demand for self storage units. This makes it an attractive investment option during uncertain economic times.
High returns: Self storage can provide investors with high returns. This can provide investors with a steady stream of income and potential for capital appreciation. According to the National Association of REIT (NAREIT) Self storage performed 4% higher than the next best real estate asset class.
What to consider before investing in self storage:
Location: The location of the self storage facility is crucial. Ideally, the facility should be situated in a high-traffic area, with good visibility and accessibility. Additionally, consider the demographics of the area, such as the population density and income levels.
Competition: It is essential to research the competition in the area before investing in a self storage facility. A market with oversupply can lead to lower occupancy rates and reduced profitability.
Size of the facility: The size of the self storage facility should be appropriate for the market it serves. A facility that is too small may not be able to generate enough revenue to cover its operating costs, while a facility that is too large may have difficulty maintaining high occupancy rates.
Financing: Financing is a crucial consideration when investing in self storage. It is important to secure financing with favorable terms, as this can have a significant impact on the profitability of the investment.
It is essential to consider risk factors before making an investment decision. As with any investment, it is important to conduct thorough research and seek advice from professionals before committing funds to a self storage investment.