Buying storage units

Member since 2019 · 25 posts · 5 votes

Hey I wanted to know if anyone has invested in storage units? If so what can you tell me about it. I think this would be a great small step to build passive income. I would love to hear your story

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Paul MoorePro Member

Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes

@Greg Moore John Fortes has an awesome podcast called "The Passive Investor Show." I really enjoyed being on his show yesterday. It should be published soon.

Podcast Guest on Show #533

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Andrea Weule
Investor · Member since 2020 · 324 posts · 278 votes
6y
Storage Units are great - especially in the right areas. The biggest issue is it's a pricy endeavor. Additionally, unless they are already built, it's a long process with most city/county governments to get approval. If they are already there, they are very expensive unless they are value add - ie, need a lot of improvements which usually translates to money.
We've invested via Syndication with a few groups in them. This way we have to only come up with a smaller portion of the funds and we share in the profits but completely passive.
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Scott KronePro Member
Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
6y
@Joshua McClam . @Paul Moore is coming out with a Bigger Pockets published book about self storage. He was kind enough to dedicate a portion of book towards how we implement our model. There are many ways to get involved in self storage. Buying an existing smaller "mom and pop" facility (aka Class C or First Generation). These are the traditional more rural facilities that are non climate controlled, garage style in a row facilities.

Class B or Second Generation is similar to Class C but climate controlled. Third Generation or Class A are fully climate controlled in urban areas either new construction or renovated. We acquire under utilized buildings in urban downtown areas and convert them into self storage. The last two we acquired have both been in OZ's and came with existing entitlements. The one we are currently working on the contract to acquire is also in an OZ and has the required zoning. It is currently not a self storage facility. We will renovate the building, and bring it up to Class A standards.

As @Andrea Weule stated there are many ways to get involved. If you seek to acquire one by your self, than a smaller "mom and pop" facility is where most new self storage owners begin in order to learn the business. Investing with companies that specialize in it is another way. Like MF investments, they can range in price from a few hundred thousand to +$20.0mm. Most of the larger facilities are managed, if not owned, by the larger self storage REITS.
Our web site offers information about self storage as well as podcasts I have been asked to speak about self storage, etc, if you would like to hear our story, and how we got into self storage.
www.codamg.com
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Joshua McClam
OP
Member since 2019 · 25 posts · 5 votes
6y
@Andrea Weule Thank you so much for sharing. That is great news. How do you find a syndication in order to put money in towards a storage unit if you don’t have a lot of cash up front?
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Joshua McClam
OP
Member since 2019 · 25 posts · 5 votes
6y
@Scott Krone Thank you so much for sharing. I really appreciate it. I will definitely take a look at the website and when the book comes out, I am pretty certain that I will buy the book so I can learn more about it. Thanks again.
Josh McClam
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Andrea Weule
Investor · Member since 2020 · 324 posts · 278 votes
6y
There are many investment companies out there. I'd be happy to introduce you (shoot me a PM). However, most require you to be an accredited investor (learn more about that here: https://www.biggerpockets.com/...) Additionally, they all usually require $25k minimum investment, some are up to $100k minimum.
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John FortesPro Member
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
Just interviewed Paul Moore (for some reason its not allowing me to tag him) on my podcast today about self storage. Man is a wizard with it. Reach out to him and connect for some insight.
Happy investing!
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Joseph CacciapagliaBusiness Member
Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
6y
One problem new investors encounter when buying storage units, is that they are buying an operating business, not just real estate (unless it's net leased to an operator). I've managed one self storage facility where I was able to increase the occupancy by over 20% in just a few months, just by being a good manager. This was with no additional marketing budget from the previous manager, and no real change in marketing strategy. It was almost entirely based on answering the phone when it rang, offering good customer service, keeping the place cleaner, and actually selling units when people came in to rent them.
If you don't have good systems in place and some operating experience, you are just as likely to tank the business as you are to add value. Although there are some decent third party managers out there, none of them are fantastic in my experience. All that being said, investing passively with a great sponsor could be a good option. I would suggest you mystery shop some of their locations before committing to invest with any of them though. If their on site manager/sales people don't impress you, then your returns probably won't either.
[email protected]979-218-2286
Joseph Cacciapaglia powered by Morty
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Michael Wagner
Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
6y
Originally posted by @Joshua McClam:
Hey I wanted to know if anyone has invested in storage units? If so what can you tell me about it. I think this would be a great small step to build passive income. I would love to hear your story

You might find some value in this little blog I host here on BP:
https://www.biggerpockets.com/...

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Greg Moore
Rental Property Investor · Tampa, FL · Member since 2019 · 128 posts · 166 votes
6y
@John Fortes
What is the name of your podcast?
1 Reply
Paul MoorePro Member
Commercial Real Estate Fund Manager · Lynchburg, VA · Member since 2015 · 1k+ posts · 1k+ votes
6y
@Greg Moore John Fortes has an awesome podcast called "The Passive Investor Show." I really enjoyed being on his show yesterday. It should be published soon.

Podcast Guest on Show #533
4 Reply
John FortesPro Member
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
Thanks @Paul Moore for not only coming on the show but also answer @Greg Moore question.
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Greg Moore
Rental Property Investor · Tampa, FL · Member since 2019 · 128 posts · 166 votes
6y
@John Fortes I just subscribed. Looking forward to listening.
PS #3 in your profile is true for me, too! I’ll PM you.
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Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
I think storage facilities are far from passive income. They're really labor intensive. Either you are running it as your business or you're an employer to someone who is on site managing it or you're paying fees to a management company that you really need to manage, to be sure they aren't ripping you off.

I considered investing in these for about a minute. They require more time than a residential rental by far, and if you're an employer, that's another pain in workers comp insurance, labor laws, on and on.

At any rate, they're definitely not for me and definitely not passive income, in my opinion. They can be a lucrative business, though, if you're into running one full-time.
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Scott KronePro Member
Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
6y
@Account Closed I have owned both MF and self storage. I have found self storage to be far less "labor intensive" than MF. Can you expound on why you feel they are more labor intensive.
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John FortesPro Member
Multi-Family Syndicator · Abington, MA · Member since 2017 · 603 posts · 347 votes
6y
@Greg Moore appreciate you and thank you. That means the world to me. 🙏🏽
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Michael Wagner
Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
6y
Originally posted by @Scott Krone:
@Account Closed I have owned both MF and self storage. I have found self storage to be far less "labor intensive" than MF. Can you expound on why you feel they are more labor intensive.

AGREE 100%!!!
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Ronak Shah
Northern NJ · Member since 2018 · 128 posts · 39 votes
6y
@Scott Krone yes I am surprised at people keep floating this idea that self storage is business and labor-intensive when it is probably farthest from truth! But hey, it's good that not everyone is trying to crowd in the same area!
Originally posted by @Scott Krone
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Account Closed
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
Originally posted by @Scott Krone:
@Account Closed I have owned both MF and self storage. I have found self storage to be far less "labor intensive" than MF. Can you expound on why you feel they are more labor intensive.

Sure. Anytime I have rented a storage unit, there is an employee in an office with regular business hours. If you have rentals, you don't need regular business hours. You can be on call. And if you screen well, they should rarely call you and you should rarely have any turnover. You can self manage without regular hours either in-person or available by phone. Storage units need someone around for security. You have people coming and going and wanting to buy locks or rent U-Hauls, people ending contracts, people asking about available units, signing contracts, calling about available units, questions, or whatever. It's really obvious to me.

Compare number of storage units vs number of apartment units, and in my opinion storage units will require a lot more labor, plus you're responsible for security. You can self-manage rentals much, much easier, without having to also become an employer and all that entails.
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Zach Quick
Investor · Bentonville, AR · Member since 2014 · 759 posts · 379 votes
6y
@Ronak Shah Self storage is 1000% business. And more business than real estate to pretty much every asset class.
It has all the ‘real estate' benefits no doubt, but you have to treat it way more like a business than say a small apartment complex, portfolio of homes, NNN investment, office building, etc.
I try and buy self storage from people who think it’s strictly passive real estate everyday :)
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Michael Wagner
Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
6y
Originally posted by @Zach Quick:
@Ronak Shah Self storage is 1000% business. And more business than real estate to pretty much every asset class.
It has all the ‘real estate' benefits no doubt, but you have to treat it way more like a business than say a small apartment complex, portfolio of homes, NNN investment, office building, etc.
I try and buy self storage from people who think it’s strictly passive real estate everyday :)

I have to disagree here. I'm not suggesting that Storage should not be run as a business but am instead suggesting that ALL real estate investing should be treated as a business. Storage is simply renting out space that you own to others at a price that exceeds your cost to own and operate. In that regard it is no different than renting a duplex. Of course their are industry nuances that need to be understood but I spend FAR less time running my storage business than I ever did running my real estate business. The big fallacy at hand here is really the one around passive income! There's no such thing as free lunch! Residual income, YES....Passive, no such thing! Even those investments that feel "passive" are really residual in nature. For example, many folks tout NNN leases as passive...but unless the investor is throwing a dart at a board to select the investment, its more residual than it is passive.

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Scott KronePro Member
Investor · Northbrook, IL · Member since 2017 · 352 posts · 295 votes
6y
@Zach Quick - Agree it is a business. It is a unique real estate asset class due to the retail business component. That being said, it is by far the lowest volume retail business due to the repetitive automatic sales cycle.

@Account Closed - I believe it is also important to consider like type asset classes. I have many business friends who own First Gen facilities that are fully automated, and act much like a SF rental. I do not know one operator who has someone living on site. Like larger MF rental developments that require a staff, the Third Gen facilities with 600 to 1000 units typically do require 1 to 2 people to manage, and sell additional products: insurance, boxes, packing material, truck rental, etc.
So, I think it is important to understand ones goals before they enter into the market to best align their aspirations as well as business management expectations.
1 Reply
Eric Bergin
Investor · Sherman, TX · Member since 2016 · 20 posts · 1 vote
6y
@Joshua McClam Please do your diligence (physical and financial) before investing. Having a financial model built/purchased is key to analyzing deals quickly and feeling better about the numbers.
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Joshua McClam
OP
Member since 2019 · 25 posts · 5 votes
6y
@Eric Bergin thanks so much for the reply. I greatly appreciate it. I will see what I can find out there that makes the most sense for me.
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Eric Bergin
Investor · Sherman, TX · Member since 2016 · 20 posts · 1 vote
6y
@Joshua McClam let me know how it goes. On the model side, I bought a storage model from tsmfinancialmodels.com and it’s awesome. Came with an hour of consultation too which was great.
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