Commercial Real Estate

Why Self-Storage Investing Is Red Hot

Expertise: Personal Development, Commercial Real Estate, Real Estate News & Commentary, Landlording & Rental Properties
90 Articles Written
self-storage facility with garage door open and packed boxes stacked inside

Why are single family, multifamily, and lots of other real estate investors turning to self-storage to maximize their income and increase their wealth?

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My commercial real estate investment fund loves self-storage, so let me tell you why it’s such a great investment opportunity.

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

Why Is Self-Storage Investing so Lucrative?

  1. It performs great during good or bad economic times. During good times, people are buying lots of stuff and need a place to store it. And during downturns, people are downsizing their homes, so again, they need storage.
  2. Self-storage garners sticky tenants. People in this asset class are willing to put up with more rent increases than tenants in other classes. Let’s say an owner increases rent by 6 percent. Self-storage customers paying $100/month aren’t going to take a Saturday to rent a moving truck, get friends together to help them lift things, and relocate all their belongings elsewhere to save $6. But apartment dwellers paying $1,000/month might be motivated to move to save 6 percent.
  3. It’s a huge industry. The size of the self-storage industry is on par with Starbucks, McDonald’s, and Subway combined. But the way in which things are optimally run within the industry is shifting. The strategy now is to buy mom and pop-owned facilities, upgrade them, increase the income, increase the value, then refinance or resell it to an institutional investor.
  4. There are a lot of simple, inexpensive value adds. For example, adding truck rental can increase income a few thousand dollars on a self-storage facility. Late fees, admin fees, raising rent, and putting in a showroom are other options.
  5. You make money when you buy, operate, AND sell. In other areas of real estate, it’s said that you make money when you buy. But the self-storage value formula is buy from a mom and pop, upgrade to an institutional standard, then refinance or sell to a REIT—and money’s being made the whole time.
  6. Value isn’t limited by comps. For residential owners and investors, value is limited by comparable properties in the area. This isn't the case in commercial real estate. The value is calculated by dividing the net operating income by the rate of return (or cap rate). So, if you can increase the numerator and compress the denominator, you can dramatically increase the value of your asset.

Watch my video above where I go into far more detail and provide an example of the impressive appreciation potential of self-storage facilities.

Questions for me? Would you ever invest in self-storage? Why or why not? 

Comment below. 

After graduating with an engineering degree and then an MBA from Ohio State, Paul entered the management development track at Ford Motor Company in Detroit. After five years, he departed to start a...
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    Mike Barry from Plainfield, Illinois
    Replied over 1 year ago
    Great points Paul, I run a Self Storage facility and can vouch for all the above!
    Paul Moore Investor from Lynchburg, VA
    Replied over 1 year ago
    Thank you, Mike! How has the storage facility worked out for you?
    Jessica Wilkie
    Replied over 1 year ago
    Great and informative! I’ve been wondering about self storage because many investor types seem to like them. What are your thoughts on trailer parks?
    Paul Moore Investor from Lynchburg, VA
    Replied over 1 year ago
    Hi Jessica, I really like mobile home parks as well. Overall, they are quite stable through all economic cycles. We invest in mobile home parks through our Income Fund.
    Matt N. Investor from Washington, District of Columbia
    Replied over 1 year ago
    Very insightful stuff. Thanks Paul. At first sight it seems a very competitive market and many barriers to entry. I really like to get involved in this. I did read your advice on finding suitable locations from number of travels on roads. Where can I find the data for number of travels by roads in Maryland-Virginia-Washington DC?
    Paul Moore Investor from Lynchburg, VA
    Replied 11 months ago
    Hi Matt, I think there are statistics online about traffic. I don't know where, but I think you could start with the state Dept of Transportation.
    Erik Peddle Investor from Marietta, Georgia
    Replied over 1 year ago
    Great video Paul! Also loved your recent podcast on the same topic: http://howtolosemoney.com/ Curious what underwriting tools you use for self-storage? Did you develop your own spreadsheets?
    Paul Moore Investor from Lynchburg, VA
    Replied 11 months ago
    Radius Plus is the most important tool to use for this type of analysis. Thanks Erik!
    Joe Schmitt Investor from Saint Paul, MN
    Replied 11 months ago
    I love this asset class. I invest a lot in vacant land and I am very interested in using my land skills to find storage facilities with expansion potential. I also have some very solid technical and marketing skills. Interested in connecting with you and Wellings Captial Paul.
    Paul Moore Investor from Lynchburg, VA
    Replied 11 months ago
    Hi Joe, My son is a real estate investor and he invests in vacant land as well. We should certainly compare notes. Please reach out to me at my profile page or at wellingscapital.com and schedule a conversation. Thank you.
    Chris Desarro Investor from East Liverpool, Ohio
    Replied 24 days ago
    I have some commercial warehouse space that i rent out seasonally to boaters (6Months) and I have a piece of ground within the fenced in parameter. I have been seriously thinking of building a strip of rental units, I have got one bid , I have space for 17 10x18 units, any advice??