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Posted over 2 years ago

Why Invest in Storage

With money flooding into the residential real estate space and cap rates compressing, more investors are turning their focus to self storage facilities. Self storage is commonly referred to by investors as “cash cows” and, aside from the generous returns, there are other reasons to consider investing in storage.

1. Recession resistant

    While some incorrectly refer to storage as “recession proof,” storage is more recession resistant than most asset classes. Storage was, in fact, the best performing asset class during the Great Recession. Generally speaking, during a recession, when households are downsizing, they need space to store their belongings. As the economy improves, households move, requiring storage, or buy more goods that must be stored.

    2. Evictions

      Unlike residential real estate, there are no (or at least virtually no) eviction moratoriums. In storage, if a tenant does not pay, the owner can usually overlock that unit in thirty days, and then start the auction process. That full turnover can take as little as sixty days, and requires much less heartache than evicting someone from their home.

      3. Low Maintenance Costs

        Storage facilities are far less maintenance than residential real estate. There are no toilets to overflow, air conditioners that break in the summer, or infestation issues. In fact, many facilities don’t have any electricity or utilities at all! Even if there is an issue at a storage facility, it usually is not emergent, at least not in the same way that it would be if it occurred in the tenant’s home.

        4. Mom and Pop

          Storage facilities are the asset class that is most owned by mom and pop operators, meaning more opportunity for investors to purchase value add storage facilities. Wheil REITs are starting to find their way into the industry, there is still ample opportunity for investors to market direct to owners. We do this by cold calling, sending direct mail, and even driving for storage. For example, we recently closed on a storage facility that was sourced through a cold call to an individual out-of-state owner!

          5. Accessible Financing

            Banks like to finance self storage. Self storage has the lowest default rate of any asset class, and also produces strong gross income to support the collateral. The SBA is offering up to 90% leverage on storage facilities, exemplifying this.

            These are just a few of the top reasons to invest in self storage, outside of the strong returns. Feel free to chime in with additional benefits to investing in self storage!