Are Storage Units a Good Investment?
Self storage units are a great investment for anyone looking for extra income. Most especially because it is always in demand and most people are always looking for extra space.
Whether you’re a business owner who needs to store inventory or documents, or you’re just looking for a place to put your holiday decorations and furniture, self storage is the perfect solution. In this blog post, we will discuss 5 reasons why self storage units are a smart investment.
Why is self storage a good investment?
Investing in a self storage facility provides a lot of advantages, such as:
An enticing return on investment
Self storage units are a good investment because they offer a good return on your investment. This means that you will get your money back plus some extra, which makes it a wise decision to invest in self storage. Since 2009, self storage has outperformed retail, office, apartment, and industrial sectors in terms of return on investment.
Low operating expenses
Self storage units are a smart investment due to their low operating and maintenance costs. Self storage facilities are generally self-contained units, which means that they don’t require much in the way of outside maintenance or repairs. This is great for self storage investors because it reduces the amount of money they need to spend on upkeep, leaving more cash available for other investments.
Significant demand
There is a lot of demand for self storage units because they are a great way to store things. People like to use self storage because it is affordable and convenient. This makes self storage a good investment because you can make money by renting out space to people who need it.
Immune to recession
Self storage facilities are always in high demand. When the economy is thriving, households take longer breaks from work and relocate, necessitating the need of self storage. People may return to school or downsize during a recession, which means they may turn to self storage when they modify their housing arrangements.
Several investment opportunities
Self storage has opened up several investment opportunities for entrepreneurs and investors alike. Self storage allows investors to diversify their portfolios and benefit from a steady income stream. Some self storage investments include self storage franchises, self storage REITs (real estate investment trusts), self service storage units, climate controlled self storage facilities, and more.
Risks of investing in self storage
Just like any other type of investment, investing in self storage has its risks. These include:
Location
Location is one of the biggest risks of investing in self storage. The self storage industry is highly localized and success is heavily dependent on the location of the self storage facility. If a self storage facility is located in an area that has low foot traffic or poor visibility, it may be difficult to attract customers and turn a profit.
Additionally, if the self storage facility is in a remote location, it may be difficult to generate enough demand to maintain the self storage unit at full capacity.
Ever-changing rental market
The changing landscape of the rental market is an ever-evolving phenomenon and has a considerable impact on both landlords and tenants. Understanding these dynamics can be key to finding success in this industry.
Marketing and occupancy hurdles
Another risk is that you need to have good marketing and make sure people know about your unit. If no one knows about it, then you might not be able to make any money from it. Moreover, some people don’t want to rent storage units anymore or can’t afford to.
Supervision
Management and supervision are common risks associated with self storage investments. Proper management and supervision of self storage facilities are key to a successful and profitable self storage operation.
Self storage investors must be sure to hire the right staff who are knowledgeable about self storage regulations, safety measures, and customer service. They should also have a good understanding of self storage technology and be able to anticipate customer needs and demands.
Demography of tenants
Tenant demographics is one of the chief risks associated with self storage investments. Different self storage facilities will attract different types of tenants, and understanding these differences can help self storage investors identify which self storage units are more desirable in the area.
Self storage operators should also research tenant demographics to determine how likely it is that these tenants will remain loyal customers in the future.
Monthly lease
Month-to-month tenancy is a risk associated with self storage investments. This is because self storage facilities are typically leased to tenants on a month-to-month basis, which means that self storage investors can be vulnerable to tenant turnover and decreased occupancy rates.
Month-to-month tenancy also leaves self storage investors exposed to higher costs associated with tenant turnover. To mitigate this risk, self storage investors should consider offering longer-term leases or developing a rewards program to encourage tenants to stay longer
Lesser NOI
The overall net operating income (NOI) for self storage is often lower than that of a multi-family complex. However, the income generated to expenses incurred ratio is substantially higher. As a result, this feature might be classified as both a benefit and a risk for investing in self storage.
How to invest in self storage units
There are three ways to invest in self storage units. These include:
1. Buy into a self storage Real Estate Investment Trust (REIT)
Self storage REITs allow investors to own self storage properties without actually having to purchase and manage the physical units themselves. The self storage REITs are run by professional managers who have expertise in self storage operations and can provide added security for self storage investors.
Iron Storage is managed by experts, has offered self storage units for over years now, and has expanded all over the country.
2. Take over an existing self storage facility
Purchasing a booming self storage facility is a viable option for investors who want to own and manage self storage units. It requires more capital than investing in self storage REITs, as self storage owners are responsible for the purchase of the self storage facility, any necessary renovations or improvements, and ongoing maintenance costs.
3. Construct a new facility
Building a self storage facility is an attractive option for self storage investors who want to control the process, from start to finish. It can be a lucrative way to enter the self storage market, as self storage investors can choose their own site and customize the design of the self storage facility.
However, self storage owners are responsible for all aspects of the project including zoning, permitting, construction, and management.
What are the most important things to look for in a self storage investment?
There are always a number of factors to consider when making an investment. For investing in a self storage facility, you should study these:
Location and accessibility
Location and accessibility are important considerations for self storage investors. Storage facilities located in highly populated areas with easy access are desirable to self storage customers, which can lead to higher occupancy rates and profits for self storage owners.
Rates of occupancy
Occupancy rates are one of the most important factors self storage investors must consider when investing in self storage facilities. A high occupancy rate is crucial to achieving a good return on self storage investments and can be an indication of how well the self storage facility is performing.
Self storage investors should research the occupancy rates of self storage units in the area to determine whether self storage investments are likely to be profitable.
Small-home or apartment communities
Self storage investors should also consider the number of small home or apartment communities in the area when assessing self storage investments. Small homes and apartments are more likely to require self storage space, which can lead to higher occupancy rates and more profits for self storage owners.
Square feet per capita
Square feet per capita is a metric self storage investors should consider when assessing self storage investments. This ratio measures the number of square feet of self storage space in an area compared to the population.
A higher square feet per capita rate indicates that there is more self storage space than people in an area, which could lead to lower occupancy rates, lower demand and fewer profits for self storage owners.
Price per square foot
Price per square foot
Price per square foot is another important metric self storage investors should consider when assessing self storage investments. This ratio measures the cost of self storage space compared to the number of self storage units in an area. A higher price per square foot indicates that self storage units are more expensive than they are in other areas, which could lead to less demand and fewer profits for self storage owners.
Climate-controlled vs non-climate controlled units
Climate-controlled storage units are more expensive than non-climate controlled self storage units, but they also generate higher demand, especially in areas with extreme climates. Self storage investors should consider the climate of their area when deciding whether to invest in self storage facilities that offer climate-controlled self storage units or not.
Invest wisely and do your research
Self storage units are a great investment for self storage investors who do their research and consider all of the factors mentioned above. Self storage investments can provide a reliable source of income for self storage owners and offer potential for long-term growth. You can also benefit from a low operating cost and high return on your investment.
However, self storage investors should conduct thorough research before investing in self storage units to ensure that self storage investments are profitable. For the best and leading storage solutions around the county, check out Iron Storage.
