Is it TRUE that self storage investment better returns than rental or multifamily

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Is it TRUE that self storage investment better returns than rental or multifamily

Rajesh KasturiPro Member
Member since 2021 · 19 posts · 15 votes

Right now I am a fix and flip and buy and hold investor thinking to buy below 4 units. 

someone told me self storage gives better money than fix and flip, buy and hold, multi family or so.. 

What are your thoughts on self storage investments. 

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y

@Rajesh Kasturi

The only way to look at this is to take properties of similar quality in a specific area. So let's take a class A office, multifamily, NNN lease and self storage

Now self storage may provide the greater return but is it going to be worth the risk? Would I rather get 1% less with a 30 year lease from Bank of America on a NNN lease ? Would I take less on a MF asset that in long term is a better asset?

These are the questions you have to ask yourself.

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  • Kyle Reighard
    Real Estate Agent · Northeast Corridor · Member since 2020 · 6 posts · 1 vote
    2y
    Quote from @Rajesh Kasturi:

    Right now I am a fix and flip and buy and hold investor thinking to buy below 4 units. 

    someone told me self storage gives better money than fix and flip, buy and hold, multi family or so.. 

    What are your thoughts on self storage investments. 

    Hi Rajesh- your question is multilayered and very deal specific. With the right construction, location and land costs returns can be very substantial in self storage. I have underwritten deals owners were doing 20-30% ROI on total cost year 1, this is rare. Standard deals on market existing asset through a brokerage will be a 6-7% cap rate in today’s market. I think the other methods you mentioned can be just as if not more profitable as storage again depending on strategy, deal and execution. 
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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y

    @Rajesh Kasturi

    The only way to look at this is to take properties of similar quality in a specific area. So let's take a class A office, multifamily, NNN lease and self storage

    Now self storage may provide the greater return but is it going to be worth the risk? Would I rather get 1% less with a 30 year lease from Bank of America on a NNN lease ? Would I take less on a MF asset that in long term is a better asset?

    These are the questions you have to ask yourself.

    7e investments53 Reviews
    WebsiteView Page
    1Reply
  • Michael Margarella
    Investor · New York City · Member since 2020 · 164 posts · 75 votes
    2y

    Hi Rajesh, we operate self storage facilities and this is true. Commercial real estate values, particularly in sector like self-storage is less prone to economic volatility, offering a more secure investment option.
    In fact, certain real estate classes like self-storage outperformed during the Great Recession. From 2008 to 2012, the major publicly traded self-storage companies - CubeSmart, Public Storage, Extra Space Storage, and Life Storage - saw a brief share price decline in 2008 before soaring the following three years. Not only did commercial real estate assets like self-storage outperform the market during the Great Recession, they increased in value dramatically.

    Now we syndicate self-storage projects. Even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions.

    And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.

    These syndication can provide an 8%+ cash-on-cash return - providing you monthly cash flow - and a 15-20% IRR over the length of the project. Feel free to reach out

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