BiggerPockets

I have yet to personally own them, but have analized and been in negotiations with many in several states.
There are pros and cons with every investment vehicle and this one is no different.
The pros I experienced in my research and hands on experience was that you can get higher returns, and purchase a better cap rates than apartment buildings. You also do not have the traditional tenant problems that goes along with an apartment complex. They have lower maintenance & lower OE ratios, but location is key and your competion is fierce in most areas.

Find one with a seller looking to retire, who will owner finance, one that may have had poor management (in which case you have upside to increase occupancy, increase rental rates, lower expenses) and perhaps room to add on or add trailer/boat storage space.

You need a good locatiion with good demand and limited ability to build more. They're cheap to build, so if the demand is there, someone will build another. Minimal utilities, low (in theory) expenses, no toilets. You need a full time onsite manager. If someone calls and nobody answers, they go to the next listing in the phone book. Since the tenants don't talk to each other like in apartments, you can experiment with pricing more easily. Need a good mix of units that's aligned with local demand. If a tenant doesn't pay, you overlock their unit. A month later you cut the lock and auction their stuff.

Will- I agree with all your pros. On your cons, there were none listed and I don't see many cons either, other than location.

I've been following emails from this guy on Storage Units. Here's one of his mailings.
"We continue our discussion on...

Why is self storage where you should be investing your time and resources as a real estate entrepreneur?

Here the next of the Top 10 Reasons For Self Storage;

But first consider this...

My father latched onto his first gold mine when gold was selling at $35 an ounce. Today prices for gold are more than 20 times that amount. But when you get in early, you enjoy the wealth that comes from price inflation. That's the key.

There's a similar story going on today in self storage. The demand for self storage has been rising exponentially. Roughly half of all the 23,000 self storage facilities have been built in the last 7 years. But the growth in demand is only starting its rapid climb upward. In the coming years as the Baby Boomers get set to retire, move, travel, downsize and/or buy 2nd homes, the need for self storage will absolutely skyrocket. Why? Because what do you need when you move, travel, downsize or buy 2nd homes? Storage!

Studies done by industry experts indicate that 40% of the 77 million Americans who will be retiring in the next few years, will move and 50% plan to travel. And again, what will these 77 million Americans need who plan to move and/or travel? Self storage!

Mind you, these Baby Boomer retirees have $2 Trillion in purchasing power, so don't think for a moment that they won't be buying lots of stuff and needing lots of self storage.

If you'd like to learn more about self storage, I've attached a free training audio. Just click http://www.uslandco.com/video/storage

As you'll see (when you click through to that link), to get involved and to be investing in self storage, you won't need cash, credit or pull. You can start today! You can learn how to pick up these high cash flow properties right away.

Want some more good news? It's a no toilet - no carpet - no eviction - no hassle type business. But I'll save that for one of the next installments of our Top 10 Reasons For Self Storage. For now, click http://www.uslandco.com/video/storage and pick up some more information that we have waiting just for you.

Now's the time. Don't miss out on this great window of opportunity. This could very likely be the perfect business for you.

See you at the top!

Yours for Profitable Investing,

Lee Parker
U.S. Land Company, Inc.
Cutting Edge Resources for the Real Estate Entrepreneur"

Do any of you subscribe to U.S. LAND?

Tony

Tony,
I'm a silent partner in one. Another way to do storage is onln ground for RVs of every kind. Most folks don't have room at home, and if you're in a snowbird area its' double the fun.

I didn't really break out the cons, but did mention some. Competition is the big one. These are easy and cheap to build. If there is demand, and land is available, new ones will pop up. Given there are several big, national companies in this business, you can bet every location is being scrutinized.

You have to be up to date. I remember looking at one of these (to rent a space) in 1995 that was nothing but a set of buildings out in the open on the edge of town. No office, just a number to call. The one I ended up renting was marginally better. It had a fence. But the gates were open only from 8AM to 8PM or some such. Anybody could get in during that time, no control. Nobody could get in outside those hours. That won't fly. You need fences, security systems that allow and control access, cameras and video systems to watch over the place. You need an onsite manager to deal with tenants and take phone calls.

Depending on your area, climate controlled storage may be needed. Stack boxes of books in a uncontrolled unit anywhere along the gulf coast and you won't have to worry about them after a few years. The upside is that you control the settings. Tenants don't get to crank up the heat and open the windows. And, climate controlled doesn't mean 72 degrees year round.

You'll have to advertise. People won't just come.

You'll have to deal with planning and zoning. Storage, especially any sort of open storage, can become a target when cities start doing redevelopment. That happened to the guys I work with. The city condemned their open storage and forced them to move.

As for may investments, buying a distressed, underperforming property and improving it can be very profitable. Building can be challenging, if the city doesn't want such facilities. If the city easily allows it, then you'll get competitors.

I too would love to own a storage unit property. One con that I might mention is because of the economy, situations where owners are finding people actually living in them are popping up.

Storage Unit As Shelter Not Unique, Workers Say
Girls Found in Md. Shed Spotlight Housing Woes

By Susan Kinzie and Joshua Partlow
Washington Post Staff Writers
Wednesday, November 24, 2004; Page A01

In 20 years working in commercial storage, years when she has also had to work nights waitressing at the Golden Corral to help support her children, Robin Lawrence has seen lots of people living in storage sheds.

"Sometimes they can fix them up really nice," said Lawrence, who works at Economy Storage in Waldorf. They might add insulation, carpet on the floor, a bed, a rack for their clothes, a television, a hot plate, maybe even a little grill out back. "It's just like a little efficiency, but without running water."

Rest of the article is here:
http://www.washingtonpost.com/wp-dyn/articles/A8714-2004Nov23.html

There are cpmpanies that do that now. Garage Town I believe is one , and it is in your area too.

To take this thread to the next level: what is the proper way to assess a value on a storage facility?

NOI is relatively easy to determine. How about finding out the market cap rate?