Apartment buildings or storage units?

Question

I am planning to jump from SFH investing to apartment buildings or storage units. I just can’t decide which one to go for. Once a decision is made I plan to educate myself extensively moving forward. Any advice or recommendations? Anyone invest in both and like one better then the other?

Scott Meyers · Answer

@Natalie Lindsey - I was exactly where you are now, just two decades ago. I had about 400-odd units and the challenges of successfully running and managing them all nearly broke me. I've been in Self Storage since then and the difference and quality of life has been night and day. I can honestly say that neither me nor any one of my staff has ever fielded a call from the lawn mowers in unit 106 about the noise the classic car in unit 107 is making.

It's the best move I've made and I encourage you to learn more about Self Storage as an investment!

Michael Wagner · Answer

Here's a second vote for Storage.  I started in residential multi-family (small scale) but quickly learned that dealing with tenants wasn't for me.  I transitioned to storage back in 2011 and haven't looked back.  When Scott says the difference is night and day...he could not be MORE right! I share some of my experiences and what I've learned in a little blog here on BP that you might find interesting: https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage

Hope that helps some!

Terry Campbell · Answer

@Natalie Lindsey another vote here for self storage. Low overhead, low maintenance, very few, if any employees. I’ve been in this this business for 25 years and I’d never do anything that involved residents.

Alina Trigub · Answer

@Natalie Lindsey

I think it is a matter of personal preference. Mainly you need to decide whether dealing with people is a challenge/problem for you if you plan to self-manage  your multifamily. Where in storage it is a lot more business and marketing driven. Also, consider the locations you chose to invest for one asset class versus the other. I'm pretty sure, you will get a ton of opinions, but it's just that. The asset class as a business has to be aligned with your personal goals and what you plan to make of it at the end of the day.

Here's my opinion on multifamily investing: https://www.biggerpockets.com/member-blogs/10850/74895-five-reasons-why-i-chose-to-invest-in-multifamily

Joshua Watts · Answer

Here is my 2 cents. I like self storage much better than apartments and SFH. With that being said I did not have a large enough downpayment for a multi million dollar self storage facility. What I did (years ago) just keep buying SFH and smaller apartments complexes until I was able to get some of my SFH paid off and ended using them as my down payment for selfstorage facilities. We still own our SFH and apartments but as for a percentage of our overall portfolio we are around 80% self storage and 20% apartments and SFH but we have not sold anything. I like having a more diversified portfolio.

Michael Wagner · Answer

Hi Lynette,

I run several storage properties around the country and we do not screen our tenants.  Unfortunately I think you are dealing with the "you get what you tolerate phenomenon" meaning that the previous owner tolerated delinquency etc and so that is what your customers know they can get away with.  Do you have standard collection procedures (late letter and fees, lock out enforcement, lien law notification etc)? I think you will find consistent enforcement of these practices will minimize your frustrations around non-payment.  Generally speaking, our 30+ days accounts receivables run between 1-3% of gross annual rents. Meaning if our facility could bring in $100 K in rents our aging receivables will be somewhere between $1000 and $3000 depending on how soon our next auction is.  In most states you can auction between 70-90 days past due.  As such, it is quite conceivable to collect most of what's owed to you at an auction.  If you wait until 8 months, I agree that it would be hard to recoup your losses.  I hope this helps some.  Best of luck!

Zach Quick · Answer

You'll figure it out in no time, get a system going and the tenants that you don't want will start falling off and you'll start attracting better tenants.

Chris Salerno · Answer

Yes, I agree! I would invest in apartments before storage. Multi-Family is a necessity. After you have built up a great portfolio then I would diversify. Just my opinion. I wish you the highest success! Looking forward to hearing about your success in the future.

Chris Salerno · Answer

Natalie, In my opinion. Everyone needs a place to live. I would first invest in Multi-Family then invest in storage once you have built a strong portfolio. I hope this helps. Let me know if you need any advice in the Multi-Family space.

Lynnette E. · Answer

Thanks,  I just got possession of these units this month, and am trying to figure this out.  Scammer who was operating the storage facility after it was foreclosed said that was why he did not evict them.  Guess I should not believe him!  He likely was just too lazy, as he was for everything else....except for see in the opportunity to make some $ off something a far away bank owned.

Apartment buildings or storage units?

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