The Multifamily Sector is Overheated—So I’m Turning to THIS Profitable Niche Instead

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I have to admit, this is not an easy article to write.

(After all, I wrote a book where I extolled the virtues of investing in multifamily real estate. And I spoke about multifamily on the BiggerPockets Podcast recently.)

This isn’t easy. But it’s necessary.

My company was formed a few years ago to take advantage of the wonderful demographic shifts underlying the growth in multifamily housing. Apartments have been booming since the middle of the recession, and my partner and I dedicated our lives to making the most of this opportunity and sharing it with others.

Our last multifamily project was oversubscribed with $3.8 million from investors in a matter of days. We love multifamily, and our investors do, too.

But overall, we have failed our investors.

I love talking with investors. I continue to talk with many of them weekly, and one of the questions that I haven’t been able to answer is, “When will you have another deal for us to invest in?”

I have had to say “I don’t know” more times than I can count.

When my partners and I started our company, we made a commitment to ourselves, our families, and our investors that we would never knowingly overpay for an apartment asset just to get a deal.

We are all in our mid-50s, and we’ve made a lot of money in our careers. But we’ve lost money, too. We know what it’s like to be on both sides of the table, as a sponsor and an investor.

Thankfully, we’ve made a lot more than we’ve lost. But we never want to be in a position of apologizing to our investors, our families, and ourselves—for up to a decade—for a deal we overpaid for.

The multifamily sector is overheated and sponsors are overpaying for deals on a regular basis.

Related: How to Know if You’re Investing in the Wrong Real Estate Market

Wait—Why Would Anyone Overpay for a Multifamily Deal?

Why are other people buying deals that we are passing up?

We don’t know most of them, but here are some potential reasons:

  • They have tax-deferred 1031 exchange funds, and they would rather overpay than pay Uncle Sam.
  • They have international investors who will accept a very low return just for the perceived benefit of being in the U.S. dollar rather than their currency.
  • Institutional investors are looking at smaller deals and smaller markets, and they are willing to live with much lower steady returns.
  • Operators are ignoring low cash flow and counting on appreciation to fix everything. (Didn’t we all learn how well that didn’t work in the Great Recession?)
  • Less experienced syndicators with access to funds are mistakenly overpaying.
  • Less than scrupulous operators are doing deals to make the acquisition fees.

However, I want to be clear that not everyone who is buying apartments is overpaying, inexperienced, or unscrupulous!

I’m not saying that at all. (Some of them just have better access to off-market deals than us. But I will say that we are looking at off-market deals, too, and most of them are just as overpriced as the marketed deals.)

I am saying that we have looked at over 190 deals since January, and though we’ve made offers, we’ve come up short every time. Some of these deals sell for a few million above what we think is prudent.

So Where is My Company Going from Here?

Like I said, it’s hard for me as a multifamily syndicator to say this.

I’ve been studying Warren Buffett, and I’m writing a book on applying his wisdom to the real estate arena. One of Buffett’s keys to success is investing in great teams. He invests in top teams with a proven product in a growing market.

By fueling them with more equity, Buffett gives them wings to fly.

We still believe in multifamily. But only at the right price.

And I still believe everything I wrote in my book. But multifamily opportunities are few and far between at the time of this writing.

So our company has spent most of this year researching opportunities outside multifamily. Like Buffett, we are looking for great teams with proven track records.

We’ve located a profitable, risk-averse asset class. And we’ve vetted a team that has been operating in this asset class for decades.

We have decided to invest with a leading self-storage operator.

Why Self-Storage?

  • There are over 53,000 self-storage facilities in the U.S. (about the number of Subways, McDonalds, and Starbucks combined). But unlike professionally-run franchises, about 40,000 of these storage facilities are owned by independent operators. These (often) mom and pop owners rarely have the knowledge or team to maximize income and value. So, there are a significant number of profitable deals available for the right operator.
  • Self-storage is somewhat price resistant. If we raise the rent 6% on an $1,000 apartment, a tenant may leave for the $60 increase. But raise the rent 6% on a $100 storage unit, and most tenants will not rent a truck, gather friends, and waste a Saturday to move down the street—to save $6.
  • Self-storage did surprisingly well (like apartments) during the recession. When people downsized or lost their homes, many of them rented self-storage units. The relatively small cost to store stuff played a role here as well. Many who planned to store for a few months are still storing their stuff today. The monthly ding on their credit cards is often forgotten.

Related: How to Diversify Your Real Estate Portfolio With Self-Storage

How Did We Choose an Operator?

There are literally thousands of small operators, and only one operator in the nation (Public Storage) has over 2% of the market (they have 7%). Like I said, very fragmented.

I’ve concluded that it is not that hard to operate a mediocre self-storage facility. But it is very hard and somewhat complex to run a world class one.

We have teamed up with someone who does just that. Here’s what was important to us as we made this decision:

  • We were looking for someone with decades of experience and a strong track record.
  • We wanted an operator whose team has a lot of depth—a full accounting department, automated processes, great operations, etc.
  • The profitability of storage units is very high on average. We wanted a firm with profitability exceeding industry norms using smart leverage, value-add strategies, and online marketing.
  • I wanted the opportunity to talk with several investors who have invested with the company for a number of full cycles (buy, operate, refinance, sell).
  • I was looking for someone who had an inside track on acquisitions. With the difficulties my company has experienced in this arena, I was looking for someone with a consistent stream of deal flow, someone who knew how to buy right.
  • I wanted an operator with a program that took advantage of the various upsides available in this business—adding U-Haul, point-of-sale opportunities (like boxes and locks), selling insurance, and more.
  • I was hoping to locate a company with great debt available, in need of equity to grow their portfolio.
  • I wanted someone who shared the same values, mindset, and conservative underwriting philosophies that we hold dear.


So, What’s Next for Us?

I’ve made two visits to the CEO of a great company, and I’ve visited another one recently as well. As I write this, I’m on the way to check out a new self-storage acquisition that one of them is doing in a nearby state. (Don’t worry—my wife is driving.)

My firm just partnered with quite a few of our investors to invest almost $3 million in one of their projects

Wait… what about our multifamily investors? And my book? And my reputation?

I know that many of our investors are focused specifically on multifamily, and that’s OK. We are still looking for multifamily deals every week. We’re looking at a multifamily asset now, in fact.

But I feel that self-storage is the next step for our firm and is an intelligent response to the current state of the tight multifamily market.

If you’ve been “storing up cash” for your next investment, you may want to consider checking out self-storage, too.

We’re republishing this article to help out our newer readers.

What about you? I know that some of you are unsuccessfully chasing multifamily. Have you found other viable investment options?

Weigh in with a comment!

About Author

Paul Moore

After graduating with an engineering degree and then an MBA from Ohio State, Paul started on the management development track at Ford Motor Company in Detroit. After five years, he departed to start a staffing company with a partner. They sold it to a publicly traded firm for $2.9 million five years later. Along the way, Paul was Finalist for Ernst & Young's Michigan Entrepreneur of the Year two years straight. Paul later entered the real estate sector, where he completed 85 real estate investments and exits, appeared on an HGTV Special, rehabbed and managed dozens of rental properties, developed a waterfront subdivision, and started two successful online real estate marketing firms. Three successful developments, including assisting with development of a Hyatt hotel and a multifamily housing project, led him into the multifamily investment arena. Paul co-hosts a wealth-building podcast called How to Lose Money and is a frequent contributor to BiggerPockets, producing live video and blog content on a weekly basis. Paul is the author of The Perfect Investment—Create Enduring Wealth from the Historic Shift to Multifamily Housing (2016) and is the Managing Director of two commercial real estate funds at Wellings Capital.


    • Paul Moore


      Thanks for writing. It has always bothered me how much we all have to depend on the seller/operators’ numbers. In multifamily as well as storage. So for the initial offer, we depend on them. But in Due Diligence, we want to learn a lot more.

      So for example, when we bought a multifamily property in KY 7 months ago, we reviewed every file. Every credit score. Income verification. We walked every square foot of every unit. Reviewed bank statements. And a hundred other things. Critical to do thorough due diligence!

  1. Amber turner

    We have been wanting to move up to multi family from our single family homes, but have not been able to find anything (especially in California, where we reside). Interesting article, because we just started looking into storage units or rv parking lots. We are extremely interested and would love to know more!

  2. Ali Hashemi

    Very cool, great article Paul

    What’s industry average vacancy for self storage? I’d be curious to see what you include in your template when crunching numbers on self storage contrasted with the typical template for multi family. I imagine many expenses and revenues are similar but like you mentioned there are additional value streams such as point of sale.

  3. yonah weiss

    Paul, this is one of the best articles I’ve read on BP in a long time. I love your honesty, integrity, an agility to make such a pivotal switch. I believe your reasoning is sound, and know many others who have already taken on this strategy,
    Thanks for documenting and sharing your journey!

  4. Jenny Moore

    For years I reviewed the accounting for a small storage facility and if managed correctly, can really be profitable. Great article Paul. There are so many ways to make money in real estate , its nice to have someone share about a shift in thinking when it comes to different investment opportunities. I look forward to more articles about your journey in this arena. Thanks!

  5. Jay Strickler

    Would like your thoughts on this: Do you think one other possible reasons that multifamily prices may be jacked up (and continue to stay that way) is the application of cost segregation and the new bonus depreciation rules? An owner now has an enormous write off in year one after purchasing a multifamily if these allowances are used. If the losses can be used to offset gains, there is a great deal of incentive to keep buying new properties and paying up for them. The economic return can’t simply be determined on a property stand-alone basis; it has to be in the context of an owner’s total portfolio.

    I may be way off base but would like your thoughts on this.


    • Rob Massopust

      Typically one should never buy a property solely on tax savings, gain, avoidance etc. But Investors hate taxes so much that it skews the numbers and motivation so much that they do. But the real reason that MF is so out of whack is the fact we had zero percent interest rates for 10 years, unprecedented demand, low housing starts, low inventory and the fact that it is really hard to find any yield in anything so MF is viewed as safer so investors will take a lower cap rate just cause. It wasnt like that 20 years ago where you did not have such demand because many stock market investors were happy with the stock market but as they have searched for safety and yield they figured out MF was a decent play. Now we have this crazy valuation. I was looking at buying a 4 unit but it made no sense whatsoever. It was cheaper to buy 4 condos instead so thats what we did.

      • Paul Moore

        Those are great, insightful thoughts from both of you, Jay and Rob. I think the Cost Seg angle is something no one is talking about. I know I haven’t. I know that some sponsors sell sooner than I would, and I have heard them mention the tax benefits running out.

        Agreed, Rob, that is no good reason. I like your other thoughts as well.

        Thanks Guys.

  6. Rob Massopust

    I shifted out of multifamily for now too. Especially in the So Cal market. I am focusing on more creative ways and look for fixer condos and sfr that can be repurposed, rented and exchanged. We typically buy for equity hold and exchange in a few years not so much focusing on long term cash flow that is becoming a misnomer. CA has a new law that allows for an ADU [accessory dwelling unit] to be added to any SFR and being that $per sq ft is less on SFR now than most Multifamily properties we are looking at this as a new way to reposition for cashflow and equity.

  7. Dan D.

    Nice article however, one of Warren Buffet’s investing criteria would be “high barriers to entry”/ protected franchise operation. I was an owner operator in self storage and got burned. I would recommend CAUTION. Why? because a junky, scrappy piece of land that is either already zoned for self storage or can be changed to the appropriate zoning are available nearly everywhere except in your top 10 major metro areas. Available for cheap money. The buildings are cheap and easy to construct (thus the high returns). Our area is overbuilt as are many others as witnessed by falling occupancy levels & diminished returns. Industrial – for now would be pretty hot right now as in “Amazon”/ just in time inventory.

    • Paul Moore

      Hey Dan.

      Yes, the risk of competition on cheap land has always been my fear, and it is the reason I didn’t pull the trigger 19 years ago when I thought about it. That is another reason it is critical to invest with a great operator who vest deals carefully.

      The operator we’re partnering with is buying very strategically in places like Roswell, GA, on a main road, where there is no cheap land (with that visibility) nearby.

      Thanks for weighing in.

  8. John Nachtigall

    I think you are just jumping from 1 overvalued sector to another. Self-storage is overbuilt and revenue growth has slowed considerably because the new units are being built faster than adsorption.

    Obviously this is still subject to local variances, but in the end, it has the same issues as multifamily in terms of cap rate compression and overpaying

    If you really want a contrarian play in CRE then it is retail. There is no sector more hated and reviled. As a result, they are cheap.

    • Richard Albert

      John….I definitely agree with you. When I first started investing in CRE over 2 years ago, I mostly invested in multi-family. Then, probably in the last 6 months to a year, I have found it extremely difficult to invest in any multi-family deals, as both the costs per unit, cash flow, interest only debt for 10 years (and still not great projected cash flow). The only CRE that has made some sense lately is retail…cap rates are 50% higher than other forms of real estate, where probably 2 years ago they were only slightly higher. I won’t invest in every retail deal for sure, as I look closely at tenants, location, length of lease, sales volume at the stores, etc., but most seem to have a much better chance of success than other CRE. I have mostly stayed away from overbuilt top 10 markets.

    • Paul Moore

      Hey John.

      Thanks for your thoughtful comments. I thought about Storage way back in 1999, and I thought it was overbuilt. I was wrong.

      I agree the cap rates are trending toward compression just like in multifamily. Great point.

      Storage can be overbuilt or overheated, but like most other real estate, it is local. For example, our deal partners built a facility in Naples two years ago that had no other facilities within 3 (or 5?) miles. They built one and the investors are doing very well now.

      Use this ratio: 7 square feet per person. When you can find a location where there are less than 7 square feet per person in a 3 (or 5) mile radius, it is probably not overbuilt.

      What I love about this space is the opportunity to acquire stabilized facilities from mom and pop operators (40,000 or so out there) and take them from average to great. And by adding U-Haul and other ancillary income streams.

      Think about this… In Multifamily, only 7% of apartments over 50 units are owned by single-asset operators. 93% are owned by larger companies.

      In Self-Storage, it is very different. 76% of self storage facilities are operated by independent operators including mom-and-pops.

      This is an opportunity for many of us who can’t find apartments to jump into commercial real estate right now.

      I like your take on retail. Who knows… maybe it’s time to buy that, too!

      Thanks again.

      • John Nachtigall

        I agree it is local. My first CRE investment was self-storage. I also have multifamily, retail, and office. I invest through syndications, not directly as yourself, but the risks are all the same. And I agree, self-storage has a lot more room for standardization and professional management. One other point, technology is a big multiplier in self-storage. If it moves to apps instead of on-site management it is another big possibility for improvement.

        However, with interest rates rising cap rates have to go up, which is going to hurt all CRE investments. How much, i dont think anyone knows. But if you are buying at 4-5% cap rates, and they rise to 5-7%, even improvements in NOI are going to be swamped by those increases.

        Retail on the other hand, and office to some extent, is running at 7-10% which leaves a lot more breathing room, in my opinion.

        Regardless, good luck, you obviously have put a lot of time into this research, I wish us both luck.

        • john tan

          Hi John,

          Seems like all assets are over priced relative to historical norms due to coming of a low yield environment. I wonder if it is prudent to lighten up now and load up later. Buffet had lamented his pile of cash for several years and may be wise to join him now?

  9. Bryan Krinzman


    Your article is timely, courageous and well written. Thank you for taking the time to provide us another avenue for investing. As your article notes, and this website/community emphasizes, there are many ways to invest and this is one of the many ways including single family homes, multi-family, etc.

    I know your company takes on accredited investors to invest in these types of opportunities. Are you aware of any other firms that invest in storage units not requiring accredited investor status? My wife and I are just starting out and are not at the accredited investor status yet, but looking to diversify our portfolio.

    • Paul Moore

      Hey Bryan

      Thanks for the encouragement. I actually don’t at the moment. But if you reach out to me I can see if I can dig something up for you. Some generally accredited deals can take up to 35 non-accredited investors.

  10. Eli Rods


    I dont doubt your success and intention in this foray! I wish you the sincerest blessings in this venture.

    Just to let folks know, Paul helped me out in having my deal analyzed. I will admit, I was taken aback to see how responsive and professional he was to my requests. Most people of his caliber, who I similarly reached out to, were no way close to his class. He’s that gentleman who will assist anyone regardless of their net worth or status- for that I thank him!



    • Paul Moore

      Hey Josh.

      When I read this, I bristled for a second. Then I realized I was glad you wrote. It gives me a chance to clarify…

      1. I DO think apartments are the perfect investment (the name of my book). I lay out the case for this in several chapters of the book and on dozens of podcasts and posts. I still believe that.

      2. I think everything goes through cycles. Even Warren Buffett (ideal hold time is Forever) sells certain assets. He is reportedly selling his $7 Billion stake in a successful drywall manufacturing firm. But his “ideal” hold time is still “forever.”

      3. In an ideal world without cycles, I would just do apartments.

      4. It’s not an ideal world.

      5. We, along with hundreds of our investors, would like to invest in an asset class that is safe, stable, predictable, tax-advantaged, with great returns. With a trustworthy operator. We’d like to move from cash or stocks to commercial real estate.

      6. We have found that opportunity in self-storage.

      7. We still love apartments. But many others do, too. Which means that The Perfect Investment becomes Imperfect when there are virtually no safe acquisition opportunities.

      So that is our thinking process. Thanks again for your thoughts!

  11. Scott Stamps

    Hi Paul,
    I agree that multifamily in desirable markets has become overpriced. Not to mention how easy it is for sellers to adjust the numbers before they plan to sell -offer incentives to fill units to increase occupancy, reduce staff to show reduced expenses, etc.
    Regarding the self-storage space, it appears that your new partner company is running a well functioning business that needs investor equity to complete the capital stack. Does this mean your group is essentially becoming a passive investor?
    Regardless of the answer, what types of returns would a General partner, limited partner expect to see if the self-storage space? Thank you

    • Paul Moore

      Hi Scott.

      Yes, we are passively investing in this operator’s acquisition. While past performance is no indicator of future returns, I can tell you that cash on cash returns have been in the 8-12% range in the past, and total returns at time of refinance or sale are often above 20% annually. Sometimes in the high teens… and sometimes far in excess of 20%.

      To clarify, I am talking about the returns of several operators we have reviewed. Many are getting these returns due in part to the fractional nature of this industry. And by taking a marginal facility and turning it into a world class operation. Thank you, Scott.

    • Paul Moore

      Hi Thomas,

      Thanks for the kind words! We invested in an existing self-storage facility. We cannot share the pro forma or balance sheet publicly. I would recommend Googling around to find an example pro forma or balance sheet. If you have any deeper questions you can connect with me on BiggerPockets.

  12. Scott Krone

    Very interesting article, and two markets we have been watching for years. We left the multifamily officially this year by selling our apartment building. In 2013, we began the self storage journey. Our model is a bit different as we convert under performing large warehouse spaces into self storage and then have the REIT manage them. As a result our entry point is typically 65% – 70% of market value.

  13. Chester Lee

    when I evaluate CRE investments, I of course look at cash flow, internal rate of return (IRR) which annualizes the return, and of course risk adjusted for another market correction or market crash. I’ve read many articles on an imminent real estate market crash coming. With interest rates creeping up and some crowding in the multifamily space, I look to niches in the multifamily world to offset risk. For me, that has been student housing, and self storage. BTW, I am referring to CRE commercial real estate, 100 units and above. Otherwise, my response might not fit your definitions. As Demand, and therefore rents on multifamily is correlated and dependent on the job market, markets like Dallas Fort Worth or Huntsville Alabama are hot and growing. influx of population, new jobs, people need to live somewhere. so they rent, until they can afford to buy. But if the economy slows or a recession hits, jobs go away and subsequently renter go away. Student housing is unique in that during recessions, some job holders, now job seekers, tend to go back to school. Schools, think big universities, are expanding, and a adding more graduate programs, creating a greater demand for off campus student housing. Modern student housing is leased by the bed, not by the door or unit. A typical layout is a bedroom with attached bathroom on a single lease. Kitchen, common room is shared with 1 or 2 more bed/bath lessees in a single unit. Since students are under or not at all employed, their parents are guarantors on the lease. Self Storage also performs better during recessions as people are moving/downsizing and hanging onto their stuff. I think of self storage as multifamily, but without the people, the plumbing, the tenant issues, and the maintenance between tenants. on a construction basis, self storage is considerably cheaper on a cost per square foot basis. The initial risk is knowing when a project is viable, and there will be demand. See next post.

    • Chester Lee

      This is a boiler plate excerpt from Self Storage 101. This was part of the due diligence from a deal I invested in, not long ago.

      A comprehensive study of the market area is necessary to determine the underlying fundamentals that impact the occupancy rates and rental rates.
      The first step is to define the trade area as a radius. Generally, a suburban property will have a trade area radius of two or three miles, and a more rural property may have a trade area radius of four or five miles. Very dense areas such as Manhattan may only require a trade area of one mile or less.
      Next, a survey of all the facilities within the trade area must be taken. The most important information to be gathered includes an approximation of the net rentable area and the occupancy rate. While this information can be difficult to obtain due to its proprietary nature, estimates can be obtained from sources such as assessor’s offices, phone surveys, and other public sources. This will allow the supply per foot to be calculated.
      Demand for self-storage is difficult to quantify; however, the following three demographic variables have been shown to induce demand for self-storage: population growth, population density and average household income. Additionally, there may be further demand factors that are difficult to quantify such as a nearby university or highway. An estimate can also be compared to the average supply on the state and national level.

      • Chester Lee

        On a per-person basis, if the supply is less than the demand, the market is deemed to be undersupplied. If the supply is greater than the demand, the market is deemed to be oversupplied. As a test of reasonableness, a comparison of the conclusion to the average occupancy in the trade area can be made. Generally speaking, oversupplied markets have occupancy rates less than 80 percent and undersupplied markets have rates greater than 90 percent. A market with an average occupancy rate between 80 and 90 percent is deemed to be near equilibrium.
        Understanding the supply and demand of the trade area is a key component to analyzing and forecasting rental rates.

  14. Chester Lee

    •The self storage industry has been one of the fastest-growing sectors of the United States commercial real estate industry over the period of the last 40 years
    •There are now over 48,500 “primary” self storage facilities in the United States as of year-end 2014; another 4,000 are “secondary” facilities (“primary” means that self storage is the “primary” source of business revenue – US Census Bureau)
    •There are approximately 60,000 self storage facilities worldwide as of Q2 – 2015; there are more than 3,000 in Canada and more than 1,000 in Australia.
    •Total self storage rentable space in the US is roughly 2.5 billion square feet [more than 210 million square meters]. That figure represents more than 78 square miles of rentable self storage space, under roof – or an area well more than 3 times the size of Manhattan Island (NY)
    •U.S. self storage facilities pay a total of more than $3.25 billion in property taxes to local government jurisdictions.
    •The distribution of U.S. self storage facilities (Q2-2015) is as follows: 32% urban, 52% suburban and 16% rural.
    •The average revenue per square foot varies from facility to facility; however, here are the data for Q2 2015: $1.25 PSF for a non-climate controlled 10 x 10 unit and $1.60 PSF for a climate controlled 10 x 10 unit.
    •Occupancy rates for self storage facilities as of Q2-2015 were 90% (percentage of units rented per facility) up from 86.8% at year-end 2013.
    •In fact, about 9.5% of all American households currently rent a self storage unit (10.85 million of the 113.3 million US HHs in 2013; that has increased from 1 in 17 US HHs (6%) in 1995 (18 years ago).
    •U.S. self storage facilities employed more than 170,000 persons, or an average of 3.5 employees per facility.
    •The average (mean) size of a “primary” self storage facility in the US is approximately 56,900 square feet.
    •Of over 10,000 facilities surveyed, approximately 6,000 are single-story facilities and approximately 4,000 are multi-story facilities.
    •Of over 10,000 facilities surveyed, the mean facility size is 546 units and the median facility size is 517 units.
    •Of over 10,000 facilities surveyed, 18.7% offer Boat / RV parking and/or storage.
    •Of over 10,000 facilities surveyed, 31% offer truck rental.
    •The top-6 self storage companies, including 5 real estate investment trusts (Public Storage, Extra Space, National Storage Affiliates Trust, LifeStorage and CubeSmart) plus U-Haul (a public company / non-REIT), own, operate and/or manage some 5,800 self storage facilities, or about 12% of all US facilities. Several public companies are now offering third-party management of facilities owned by other investors.
    service area.
    •In addition to the public companies in the industry (above), there are more than 150 privately held firms that own and operate 10 or more self storage facilities. In addition, there are some 4,000 firms that own and operate from 2-9 self storage facilities. Lastly, there are more than 26,000 firms that own and operate just one facility.
    •There is a total U.S. self storage space capacity of about 21 sq. ft. per American household.
    •There is 7.3 sq. ft. of self storage space for every man, woman and child in the nation; thus, it is physically possible that every American could stand – all at the same time – under the total canopy of self storage roofing.
    •About 13% of all self storage renters say they will rent for less than 3 months; 18% for 3-6 months; 18% for 7-12 months; 22% for 1-2 years; and 30% for more than 2 years.
    •Some 68% of all self storage renters live in a single-family household; 27% live in an apartment or condo.
    •Some 65% of all self storage renters have a garage but still rent a unit; 47% have an attic in their home; and 33% have a basement.
    •Some 47% of all self storage renters have an annual household income of less than $50,000 per year; 63% have an annual household income of less than $75,000 per year.
    •More than 1.5 million self storage units nationwide are rented to military personnel (6% of all units); however, in communities adjacent to domestic US military bases, military occupancy can be from 20% to 95% of all rented units.
    •Self Storage operators value military personnel as self storage customers and traditionally extend special incentives and discounts to those with a valid military ID card, such as: 10%-30% discounts off rental rates, free months of rent, gift certificates, free use of moving truck, “one-dollar move-ins,” no rent increases while deployed overseas, waiver of security deposits, administration fees, etc.
    •It took the self storage industry more than 25 years to build its first billion square feet of space; it added the second billion square feet in just 8 years (1998-2005).
    •83.9% of all US counties (or 2,634 out of 3,141) have at least one “primary” self storage facility.

    1 Compiled from the SSA Website
    2 as of 7/1/15

      • Kevin Keithley

        I think the number of cars people keep in their garage will GREATLY decline in the coming years (thank you Uber/Lyft) and that means more storage (or rental units made from garages or ‘last mile’ delivery for on-line retailers, etc.) will bring self-storage investments down in value. Nonetheless, land banking opportunities will still avail themselves and perhaps many will be repositioned as data centers.

  15. Jerome Kaidor

    Multifamily is indeed “overheated”, at least in our ( SF Bay ) area. It’s frustrating for this cash flow investor. I keep looking and looking. Very occasionally make an offer on something, generally get beat out. Stuff goes on the market at ridiculously low cap rates, and the next thing you know – it’s in contract, then gone.

    And – about those ridiculously low cap rates. They can be bogus. Seller claims you’ll make 4%. Will you really? If they have a breakdown, you can guess. The big variable is turnover, maintenance and repair. It seems common, if there’s a breakdown at all, to minimize these. And at a low cap rate, it doesn’t take much repair to turn it into NO cap rate. Aka negative cash flow.

    • Paul Moore

      Hi Jerome, good insight. SF Bay area is crazy right now, and has been for a while. Thanks for sharing. Brokers and sellers love to over-exaggerate returns and upside. Can’t trust them on that stuff, most of the time.

    • Paul Moore

      Hi Ari, yes it is possible to do a 1031 exchange into self-storage. Which space are your talking about? If you are talking about the self-storage space then yes, there are quite a few sponsors who specialize and only do self-storage. If you have deeper questions feel free to send me a message via BiggerPockets. Thanks!

  16. Rose Walters

    Hi Paul;

    Interesting article on self-storage. Around 1999 to early 2000 my husband saw self storage as a growth area in real estate, with huge upside. He tried to get a number of investors involved, but it did not happen. We went in another direction with our company and took huge losses later. We are now doing SFRs, and think there is still some gas in the tank for multi-family, but smaller, under 100 units. I will pass your article to him, see what he thinks. Thanks and good luck!

  17. Travis Zuehls

    Another niche is RV parking.

    RV production and sales are skyrocketing over the last three years and are still trending up. One would have to check into rules, regulations and markets based on geographic location but this is very cheap as all you need is flat land, gravel surface. Essentially, people are willing to pay $150-$300 per month just to park their RV because zoning doesn’t allow people to park RV’s in certain properties or areas. If you can get 400 spots with an average of $200 per month that’s 8k per month. The only monthly expense would be for the land itself so obviously that will differ based on location. You could also have connections or sewage dump stations as well if you want but at what price are you willing to pay and how much more will you charge. You can add those later as well.

    As for the land and location. Ensure the area you’re in has a high number of RV sales and is trending up. Where I live it’s known as camper heaven and people love to snow bird as well. However, the land here in Bremerton is close to $200k per acre but drastically varies. However, just 20 miles outside the city I see flat land with no trees under $200k with 24 acres about $170k. Someone can take that flat land and turn it into gravel road, put up a fence and maybe some cheap covered areas and easily have over 1000 spots with this many acres. You could also include boats, cars and even self storage. Basically an all in one and add more things over time like pavement, hookups, etc as you expand and grow.

    Just say you start off with 8k a month consistently at 30% occupancy and then one could pay off that 170k within 3 years easily.

    It’s all about being in the right location, market, and demographics. Start off cheap and build it up as you build up your revenue streams.

  18. Deanna Opgenort

    You’ll want to distinguish between “RV Parking” (aka RV Storage) vs “RV Parks” (which is pretty much a trailer park). I HAVE seen places that are a combination of both – say 20 hook-up spaces, plus storage for a bunch of other RVs, but those are KOA & similar types of membership camping arrangements.
    Also, double-check your numbers. I think you are off by a decimal in a few places (for instance 400 x $200 is $80k, not $8k).

  19. NA Henson

    I have been looking at and analyzing Self Storage properties for almost two years now. Stabilized self storage is about 85% actual occupancy of sqft of available storage in most any US sub market. However, the UStor folks in FL and Memphis tell me most all of their SS properties run at over 100%-economic occupancy. They are all well run. Self Storage REITS try and buy them all the time. What other segment does that occupancy greater than 100%? This is due to proper management and retail sales in each self storage store.

    Note: My research tells me you break even in Self Storage with 45% actual occupancy of net sqft of rent-able space. Underutilized property is most likely less than 75% occupied. May new builds in Austin/Central Texas are underutilized today.

    However, around here Self Storage is as expensive and oversupplied as Multifamily in most large markets in Texas. Want to learn about Self Storage investing? Read Mark Helm’s book off Amazon, it was a free kindle download for me. Next watch Mark Helm’s Y-tube videos going back past two+ years. Watch the old videos and catch the most recent. Keep watching until you meet in the middle. Also buy “Three Mile Domination” book off Amazon, I paid $4.95? it is a simple quick easy read on how to run your SS business in addition to Mark Helm info.

    Mark puts out one video a week on his blog. You will learn a lot about investing in self storage. Most are 8-9 minutes long. Go to his web site and review his free materials there. It is all for free just your time. Figure out your Self Storage model. Build new, lease up and get stabilized is the best return but takes time. My model is find existing SS property that is under utilized and has room for expansion. Once stabilized you can focus on building new units or using expansion room for boat/RV storage or both. Best to find 3-5 acre tract with room for expansion.

    Mark Helm puts out a lot of free content and has pay for education as well. When you need to learn how to value a deal purchase his Self Storage analyzer software. You take the unit mix page and other financial info from seller’s market packet and input into Mark’s software and It will tell you how much you have to pay to earn the return you are seeking. You will also have to pay for a feasibility study for any project. Those are not free or cheap if they are from a good expert.

    Around here most of the Multi-Family investors are looking to other locations rather than in Austin, Central Texas, San Antonio, DFW, etc. as MF is at an oversupply and while property taxes keep going up based upon extremely high land valuations in all market segments, Single Family Residential, MF, Self Storage-Commercial. However rents are flat or are down while taxes and expenses are much higher.

    Again, Self storage is just as saturated and super expensive as MF around here there is an oversupply in Austin/Central Texas and prices are too high. I have been looking in secondary markets with a group of investors. If a property is out of your jurisdiction then you deal with re-hab and management issues. Keep that in mind. Two of my colleagues both bought self storage properties over a year ago now.

    A lesson learned is they both over paid, and have had management problems since they took ownership. One was with a group and the other on his own as he had the bandwidth to take down an existing property with room for expansion. However its not local and he spends a ton of time trying to find help from a distance.
    You may need to go work in a self storage property to figure out if you can handle it.

    Mark Helm’s rule for SSI, less than 30,000 sqft of rent-able space cannot support an onsite manager. You need a web site and a kiosk. Over 50,000 sqft you need a website, onsite manager and perhaps a kiosk when office is closed and customers do not have web access. Most phones do. What happens between 30Ksqft and 50Ksqft??

    If you are looking to get into Self Storage investing you could consider buying into the top SS-REITs they are the reason the prices have grown so high since 2009 as they bought up a lot of well managed mom and pops. SS-REITs are doing well in 2016, 2017 and so far in 2018. However, what is a newer and even better return in REITs? Data Storage Centers. If you are not looking into Data Storage Center investing you will be missing out on the future. Most are new builds and unlike MF, or Self-Storage new builds where you have a 2-3 year wait to get MF or Self-Storage stabilized, Data Storage Centers are fully leased out at capacity before they are completed. As I recall the top four, five or six Data Storage Center REITs had the highest return for all other classes of REITs in 2016 and 2017 and again are doing well in 2018. One company Switch, is not a REIT but it is a Data Storage Center company and is a good one to look at. Data Storage Center industry is huge because of everyone needs cloud storage and ability to stream data content. No legitimate experts see this going away.

    Texas is a good place for Data Center Storage investing because of relative low cost of land acquisition, stable Grid (ERCOT runs the enitre Texas Grid), low cost of electricity, Texas State Govt development opportunity zones due to the new Tax Cut and Jobs Act. Keep your investor’s eye on Data Storage Center for the future.

    Active & Passive Investor
    Asset Protection Expert
    Austin TX

  20. Victor Nava

    Hi Paul, I’m a long time real estate investor in single family, now considering moving into multi-family investing. Your article was very insightful and allows me to take time to do my due diligence before jumping in. Is your perspective about multi-family heated market nationwide or limited to a certain region? Thanks

    • Paul Moore

      Hi Victor, thanks for reaching out. I think most of the major metro areas are overheated. But you can definitely find good deals. It’s just much harder right now than it was 5 years ago. You may have better success in smaller markets, but then you get the risk of smaller markets. Typically smaller markets have a less diverse economy among other risks. But it all depends on your business plan and long term goals.

  21. Mikel Barajas Carrion

    Hi Paul,

    Thanks for sharing on the BP platform. I just listened to episode 285, and the side-point you made about learning how to write well (sales writing in particular) really strengthened your communication capacity and insight on how to work with people.

    I recently started a job writing content for private equity firms, and I could really benefit from guidance on where and what you studied in developing your copy-writing skills. Would you be willing to share a little more in-depth account of your experience?

    Thanks, again!
    Mikel Carrion

    • Paul Moore


      Thanks for writing. I originally read a book by Dan Kennedy, which helped a lot. Then I went through a video course with a real mentor by John Carlton. It was $3,000 but I think you can watch replays with no mentor for about $1,000 or so. Simple Writing System.

      After that, I was mentored by David Garfinkel, which cost $25,000 for a year of bi-weekly sessions. Very in-depth and helpful.

      One of the most powerful things I did was to get my hands on great writing (sales letters) and hand copy them. Many, many of them over and over (up to 3 times). This trained my brain to begin to write this way. It’s funny, it worked so well that it is hard to turn that off now!

      I hope this was helpful.

  22. Dave Roberts

    Hi Paul,

    I enjoyed your post. I transitioned from single family homes into self-storage a couple of years ago and one of my partners also came from apartment investing. We now own one RV storage facility in Las Vegas and we just open a fully enclosed RV facility & traditional self storage facility in Colorado Springs. Please feel free to reach out if you would like to chat about self storage and I can tell you about some of the ups and downs we’ve gone through.

  23. Jordan Solomon

    Hi Paul,

    I hope you’re still reading comments to this blog post, as I know it’s a few months old already. I think you make some very compelling arguments here, so much so that I decided to investigate further, but with limited success. I went out and bought a book on the subject, but found it somewhat lacking. Too much of it seemed like basically a plug for the author’s analysis software, and didn’t really teach the business from the ground up.

    My question, then, is if you have any ideas on what IS a good starting point for someone looking to break into self storage investing. I think, by the way, that there is a need for serious literature on this topic (in fact, I already sent BiggerPockets feedback suggesting this as a topic for the next BiggerPockets book). I know you’re already an author — maybe that’s something you’d like to consider? Just a thought!

    Thank you.

    • Paul Moore


      Thanks for your comments. I really appreciate your thought about me writing a book on Self-Storage. You never know.

      I agree that the 5-6 books out there are not what I had hoped, and I think I read about half of the book you are referencing. There is a great training program that covers about everything you may want to know about Self-Storage. It is done by Scott Myers. I think you can Google his name and Self-Storage Academy, or connect with me on BP and I will give you the email of one of his guys if you’d like to get a discount code to attend his training. He has 2 or 3 upcoming events. He is a wonderful guy and has a very thorough course.

      Let me know if I can help further.

      • Jordan Solomon

        Hi Paul,

        Great, thank you for the reply! I’ll definitely take a better look into that course you mentioned. It certainly isn’t cheap, but hopefully you get what you pay for (as is, on the other side, the case with the books like the one I mentioned). At first I was a bit intimidated by the fact that he teaches at live events (and none scheduled anywhere near me), but then I saw that he has a home study course as well.

        And, yes, it you were to undertake the challenge of writing a book on the subject, it would, I think, certainly be filling a need in the marketplace!

  24. Todd Dexheimer

    I agree with Multi-family being overheated, but I feel self storage is equally overheated. One thing that gives me pause with self-storage is as the baby boomer generation dies, their kids will get rid of the extra belongings that are in the self-storage. Younger generations have less stuff. I personally don’t have extra stuff to store and I don’t know anyone my age that does either (I’m 36).
    That said, self storage could be a good short term play, as the baby boomers sell their houses and move into an apartment.

  25. mark whittlesey

    I looked a self storage many years ago. There are definitely some advantages to multi-family. Like repairs. How much damage can a “tenant” do to a storage unit vs a multi-family. The other advantage is ease of “eviction”. I havent looked into it a lot but I would assume MUCH easier to take back a storage locker.

    The reason I didnt get into it was something you talked about tangentially (in talking about mom n pop operators). It’s a lot more like an actual 9 to 5 business than a real estate investment typically is. Although it sounded like you were going to farm out the day to day to operations? How will that affect your bottom line? I am curious what good self storage operators (who are non-owners) would take.

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