"Welcome to the renaissance of self-storage"
~ Bloomberg Magazine, 2017
Why Invest in Self Storage?
Revenue from the U.S. Self Storage industry is anticipated to exceed $30 billion by the year 2018. Occupancy rates exceed 87% and rents keep rising.
The capital market for Self Storage is healthy and deep, interest rates remain low and the supply of private equity exceeds the deal flow making Self Storage a very attractive investment opportunity.
Supply & Demand: People are living in smaller homes with less room to store everything they need or want. Lifestyles are more transient and the population is growing. There are solid fundamentals behind the growing demand for Self Storage and supply is still catching up.
No tenants, toilets or trash: Real estate is an attractive asset but for many the thought of being a landlord is a deal killer. Self Storage provides the benefits of investing in real estate without many of the hassles typically associated with renting to tenants.
Multiple ways to increase value: There are many ways to drive up revenues or drive down costs in Self Storage facilities and state of the art vendor support. Small changes in net operating income can lead to exponential increases in the underlying value of the asset.
Strong cashflow: Storage generates strong and growing cashflow so investors begin to see returns on their investment early on; they don't have to wait for an exit strategy. In addition to the capital gains, the strong cashflow make Self Storage a lucrative investment opportunity in any real estate cycle.
Predictable and simple business model: Real estate is one of the best ways to increase wealth but there can be a lot of moving parts and uncertainty. Storage is more predictable and less susceptible to recessionary cycles offering investors more manageable risk and steady returns.
Investing in Self Storage is Lucrative but Challenging
Self Storage: steel buildings on concrete slab. You're renting space, how hard can it be?! Much harder than you might think and the old adage applies: if it was easy everyone would be doing it.
While it may appear less complicated than investing in other forms of real estate, there are still many hurdles to overcome.
- Extensive & expensive due diligence is typically required before purchasing or developing a facility.
- Self Storage is a very competitive market with many established players including national chains who have vast resources.
- Self Storage is not just an investment in real estate, its also an investment in an operating business with many moving parts that all have to be managed.
- Mistakes can be very costly. Often millions of dollars are being invested in a facility and ignorance, bad advice or a lack of experience can be deadly.
- It takes a lot of work to get to profitability. Yes the returns can be fantastic but they require a serious investment in time and money to get them.
- Hard for the newbies - banks, brokers and investors often require a track record before they will do business with you.