I have money for Self Storage - What state to buy in?

Question

I've decided to get us out of residential property. Its just not going to get us where we want to be in the next 10 years. We have about 600-700k ready in cash for a storage unit facility and would consider buying anything under 2M with that cash.  I see units for sale and understand the number of units and price per square foot vary tremendously across the country. I have multiple opinions for JLL's best brokers and Colliers about wha to do but its all over the board about getting in now or waiting.

I think the market for a small guy like me is to find ( some state) and look for class C or B properties under rented and use new technology to get it more operational and leased up + strong SEO marketing to drive traffic.  Im going to got to Scott Meyers could in January and I've talked to the Storage Authority Franchise.

But the question remains --> What state to buy in?

George Fitz · Answer

I don't think it's so much about the state, as it's about the city. I would buy something within a 6-8 hour drive if I were you. Professional management is great, but no one cares about your investment as much as you and you will want to do site visits on a regular basis. If you are doing large capital improvement it is a pain in the butt jumping on a plane to manage those. Not to mention, if you ever decide to self-manage then you need to be within proximity. The southeast has some great small to mid-sized towns that are growing.

Todd Dexheimer · Answer

Look for cities with low vacancy rates in storage. Also look for cities that have job growth, population growth, good city planning, high cap rates and low amount of permits pulled in self storage. Cities that have a high renter base are solid. You may want to look for cities that have struggled in the past 5-10 years and are now in recovery mode.

Account Closed · Answer

@Cody Campbell can you explain your question in more detail?

Account Closed · Answer

Do you need acreage? Would you consider building self storage @Thomas D. in FLA?

Thomas D. · Answer

Good article. I was in Dallas a few weeks ago and you could throw a rock in the air and it would most likely come down and hit a self storage business.  Lots of them everywhere.

Sushil Sureka · Answer

From reading Public Storage's earning report, I would say stay away from Texas. Here is a snippet from their earning report (I have bolded relevant piece) . Just a disclaimer I have NO EXPERIENCE investing in self storage.

https://seekingalpha.com/article/4091526-public-st...

Thanks, I guess good morning out there. I was just wondering if you and John could maybe talk a little bit about street rate growth and maybe how that street rate growth is trended in some of the markets that have had more supply like New York and some of the major Texas markets like Houston, Dallas and Austin?

John Reyes

Steve this is John. Right now I'll tell you that our street rates are up about 2%, but that's going to change probably pretty - today it will change. We are going to start reducing the rates significantly in some of our major markets. During the - Houston for example is a market that we were down during the quarter about 15% in rates we will probably take those down a lot more. Overall our same-stores on the movement rates the take rates that are coming in were down about 4% during the quarter and we had about flat moving volume.

With respect to our other major markets, I would say most of them are down to flat with few exceptions such as like Los Angeles and Seattle, but I would say most of them are fairly flat.

Steve Sakwa

So John is it fair to say that Houston is kind of the market where things are the worse in terms of decline?

John Reyes

Well I mean that's in terms of decline it's our worse performing market in terms of year-over-year growth, but it's not necessarily our worse performing market in terms of the deceleration. There is other markets like Ron pointed out Atlanta that is decelerating I think worse than Houston is.

PSA stock is down 20% and despite market being all time high, it continues to stay at that price. Sure, LA and few other market still has lot of pricing power, but be very cautious as you will see throughout the script, the tone is very cautious.  And these guys have firepower like monthly free promotion, national advertising etc that we guys don't.

Jennifer Slaughter · Answer

@Dan Wallace that totally makes sense with the high appreciation that is going on here.  With the influx in population plus families who are growing but can't afford to buy a larger property, storage seems like a solution in Colorado.

Dan Wallace · Answer

Just this morning I received a copy of a feasibility study for a ground up self-storage project in one of the resort communities here in Colorado that I have a great deal of experience with. I was amazed to see the vacancy factor was below 1.8% with a number of the competing facilities with waiting lists. Just goes to show you how market economics can influence everything.

With a booming economy and huge growth, my vote is for Colorado.

I have money for Self Storage - What state to buy in?

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