Real Estate Investor · Delaware · Member since 2008 · 158 posts · 10 votes
I've heard that investing in Self-Storage is a great idea. I agree! It seems like a great business. I was wondering if anyone has had any experience in this area?
It's like any other real estate investment, you just need to look at it on a deal-by-deal basis.
Look at past operating numbers for the facility, or find out what you can about other self-storage facilities in the area. (or better yet, both)
If it looks like your probable income will cover all expenses and debt service, you probably have a winner. There's more to look at than just the cash flow, but it is a good place to start. If you know there will be a major negative cash flow, you'd better have a really good reason for getting into the property.
There's money in any kind of rental real estate, though.
Investor · Charleston, SC · Member since 2008 · 7 posts · 1 vote
20y
It seems to me that if you were not going to run it, you would have to pay someone a wage instead of a percentage of rent. Is that accurate or does it work just like other property management?
Investor · Charleston, SC · Member since 2008 · 7 posts · 1 vote
20y
I was saying that because I know of someone that has one that has an office and pays someone to be there running the place. Now that I thinki of it, that may not be necessary, just a perference they have. Does anyone have experience with this?
I think someone being in an office onsite is key for these types of places. Doesn't have to be 7 days a week or even 8 hrs a day but some sort of set schedule so new people can sign up for units. I guess the alternative is a phone number they can call and you can meet them down there with contracts and keys but I would imagine people would just go down the street to the next guy where they can get immediate service.
I have experience in owning 3 storage facilities. The properties are around 80 units each and we have a manager that lives on two of the properties. Build prices today depend on who your builder is and where your building is including real estate prices etc. Our properties are built by Morton Buildings The cost averaged about $1800 per unit + land costs. But this was around 1998 - 2000. I dont think the current prices will be very much higher. Our returns are decent with returns around 9.0%, 9.5%, and 11% per property.
For someone just starting out in this businesses I would recomend finding an existing property for sale that already has clients in place so you know what your returns are going to be. Then once your up and running if you have the opportunity to build additional units do so once you know the business. It can provide some decent money with little work.
Thank you for the response hhinc. Do you own the land that the storage unit is on? When you say "finding an existing property that already has clients in place" is that property a storage unit? Thank you for your time.
Yes we do own the land but you could find land to lease also. And yes on finding existing property that already has clients. What I would do is do a search online or check with a local realtor or buiness broker to find a property in your area. A great online source that we use is www.loopnet.com. It's free to use. Once you find the property you can compare them against others and view there financials and that way you can find a property that is offering the type of return and in the area your looking for.
You should look for a property that has a minimum of 85% occupancy and has a cap rate of 7% or above. Location is also a key factor. The benefits of finding a property that is already built is they already have the clients in place and most likely management. You just take over the property and in many cases the owner may even finance the property to you if you have 20 - 30% down payment.
Mini-Storage has been a great businesses for us it consistantly gives a solid return. As for new construction costs im a little bit out of the loop because Im more focused on the hotel businesses now, but either way you can find an existing property with good returns or talk to a builder like Morton Buildings and discuss new construction prices.
Flipper/Rehabber · Temple, TX · Member since 2008 · 168 posts · 46 votes
19y
The information here about mini storages is very helpful. I have considered and like all the detail.
How does the local property tax indentity determine property type and value? Is there depreciation figured? Can this used in a 1031 exchange? How long should hold this investment.
Sorry for so many questions but the forum is a reat place for these questions. Live answers.
Fort Wayne, IN · Member since 2008 · 17 posts · 12 votes
19y
Originally posted by "biffula":
I used to manage storage units. They are one of the best types of real estate investment because there are no toilets,water or pets.
And if they don't pay you can cut their lock off and put a new one on... in order to get their stuff out they HAVE to pay you!
I've looked into this in my area, but they've been overbuilt in the past few years... too many units, not enough customers.
Another idea is storage condo's.
Usually larger spaces, and a nicer facility. The units in my area are temp controlled year round and have running water in them. Mostly car collectors, people with large RV's ( read Custom Bus)., or people with boats and jet ski's that need stored in the winter.
You know what, I accually have drawings of one that I drew up.. I was thinking of this some time ago, simply because it's cash flow.. I even mentioned this to my business partner the other day..
One question, can I build on industy zoned property? I can get a pretty good chuck of land, about 40 acres of industial zoned land, in my city.. And it's perfect location, not a storage joint for some distance..
For additional information. analysis package, and an information DVD, you might check out http://www.betcoinc.com/index.html who we researched for one of our clients, along with Morton that was mentioned by someone else in one of their posts.
Where are you located? My husband and I have ran this storage facility of 650 units for 15 months and are 100% full. we also have boat and RV parking at another location which is almost full. We have 2 1/2 years experience in the business.
Commercial Real Estate Broker · El Dorado Hills, CA · Member since 2011 · 2 posts · 6 votes
15y
I've been a self-storage broker for over 14 years - specializing primarily in California and Nevada. Cap rates generally range from 7% to 9.5% in this current market. There is a clear bifurcation in Cap rates between infill, stabilized assets (7%) to properties that are located in tertiary markets or those assets that are still in a lease-up (<70% physical occupancy).
There has been a great shift away from YP advertising as owners are moving more towards SEO programs and the Internet for advertising. Also, many clients are going to a 1-man office staff that is supplemented with a kiosk.
Appraiser · Memphis, TN · Member since 2011 · 10 posts · 2 votes
15y
As to building on industrially zoned property, the local zoning regulations will dictate this answer under the allowable uses. If it's not a right granted by the industrial zoning classification, maybe it's allowable under issuance if a special permit. If you call someone from your local government (land use control board, planning, etc) they should either direct you to a website that has the published information or you could pick up a copy if the info isn't "flown" on the web.
Most storage units I've appraised have been taxed as one parcel with the majority of properties being owned in fee simple. I agree with the previous advice regarding hiring on-site management. If your looking at existing properties, pay close attention to the OER along with current and historical occupancy rates. Good luck!Â
Commercial Lender · Miami, FL · Member since 2011 · 19 posts · 4 votes
15y
This is a great topic as Storage Facilities are great investments. As any investment, it comes down to the numbers. What is the property generating a year (NOI). I would suggest you purchase a property that has been in business atleast the past two years so you can see the income stream and expenses. You would have a much easier time to finance a property that can easily debt service.
Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
13y
I know this an old link so rather than offer my insights relative to the questions already posed, I thought I would bump the link and offer to answer any questions that remain or resurface. I am passionate about storage as it is the investment vehicle that set me free from the J-O-B and I love discussing it with anyone who's got an interest. Fundamentally speaking it is a phenomenal investment with numbers to die for. More specifically, it requires (like all REI) a solid understanding of the operational expenses and local market. It also, to a greater extent than many other types of REI, requires well thought out and highly scrutinized marketing campaigns. Cost per lead and cost per conversion are very important to this business. Its not mailbox money but if you are willing to do the work there are plenty of markets that are under-served (despite the myth that the whole industry is overbuilt: bear in mind that this business is one that markets to a 3-5 mile radius so a market that is overbuilt could be as little as 10-20 miles from a market that is grossly under-served). Look forward to re-igniting this conversation.
Investor · Waconia, MN · Member since 2014 · 238 posts · 104 votes
12y
Just wanted to bring this thread back to life. @Michael Wagner would you mind elaborating on your experiences? Primarily how did you get into your first storage facility and was is the most difficult parts about this area of real estate? I feel that this area is very "hands on" still? By this I mean having to meet people to get them in and out of the units, sign contracts, etc. Is this something you can do remotely or even higher property managers for? I feel this would be a much higher cost due to the high level of labor needed.
You are right that there is some degree of hands on required to succeed in self storage but that is true of any investment. For the first two years after buying my facility, I ran it myself by commuting 60 miles each way 4-5 days per week. This was somewhat do to my OCD/type A personality but the facility was quite neglected when I took it over so it really needed some attention. I also added 10,000 sq. feet during that time so that required my attendance as well. That being said, for the last year, I have had a manger who works just 16 hours per week in the office plus 1-2 hours for appts. Total cost is less than $1000 per month including WC and disability etc....Small price to pay given that total revenue is $15,000 per month and I now visit the property 1-2 per month spending less than 20 hours per month "managing" this investment. I do move people in remotely when my manager is not available. I use Logmein.com and email paperwork to them, take payment over the phone and have locks hidden onsite so they can buy those too! Super easy. CHeck out my blog at the link below for a summary of my experience (if you havent already). Im happy to answer any other questions that havent been addressed yet.
Sorry for the delayed response...not sure how I missed this. My Storage facility is actually in Syracuse, I am only there a couple times per month but Id be happy to show you around if your schedule allows when I am there.