Posted over 6 years ago

6 Major Benefits of Investing in Self-Storage

Self-storage is a hidden gem. No one ever really talks about it. Why? It’s because it’s a “boring” investment. Self-storage properties aren’t exciting to look at. When you open them up, there’s just a bunch of old stuff in there. No one drives around town and looks at their “dream” self-storage property. It just doesn’t happen.

Self-storage may be boring, but it’s an excellent investment. In fact, I find it to be one of the best investments in the market today. Here are 6 major benefits of investing in self-storage properties.

1. Minimal management required

Managing a self-storage property is extremely easy. No tenants, toilets, plumbing leaks, or other common maintenance issues make it much easier to manage than other real estate. You don’t even need anyone to be there to look over the property. You can just install cameras and other security tools to watch the property for you.

2. Recession-resistant

When a recession hits, people often downsize their homes and move into smaller ones. What do they do with all of the stuff they have that can’t fit in their smaller home? They usually put it in a storage unit. Recessions also force some people to have to sell their homes and start renting. This benefits self-storage because renters, on average, move three times as often as people who own their homes. Self-storage units are a convenient place to store items when you are moving frequently.

3. No evictions

If you’ve ever gone through the eviction process for a tenant, you know how much of a nightmare this can be. With self-storage, you don’t have this problem. Delinquent payment processes are a lot simpler to execute because there are no evictions. It’s also much easier to get the unit ready for the next renter when someone leaves.

4. Lack of supply

Currently, self-storage is significantly underdeveloped and there is an increasing demand for self-storage units. It’s going to take years for construction to catch up to this rising demand. This lack of supply has resulted in record-low vacancies in many markets. Savvy owners have seen this as an opportunity to push rents higher and increase their profits.

5. Highest ROI of any asset class

Over the last 40 years, self-storage has the highest long-term return rates of all the major real estate asset classes. This includes shopping centers, apartment buildings, offices, and industrial. Self-storage properties also have a multitude of ways to increase value. Adding boat/RV storage, solar panels, or cell towers are all ways that you can add value to the property.

6. Less competition

As I mentioned earlier, self-storage is boring. This means there is less competition in the market. Most people are more interested in flipping houses or trying to find the next get-rich-quick scheme. This, along with the increase in demand for self-storage units, makes it much easier to find good deals.

The self-storage industry is continuing to grow, and I doubt that it will stay a secret much longer. Now is the time to take action and enjoy all of the benefits of owning self-storage!

Comments (7)

  1. I really love that my self storage units are pretty much stable already - that means I have a lot of long term renters who are timely with their payments and hopefully will continue to be for a long time to come! For units like these, there's next to management required and you can really just sit back and let the money roll in without too much effort on your part!

  2. @Matt Schuberg All great reasons to invest in self storage. Although, management can get intense with larger facilities without the proper systems in place. The best part is how you can add value to the facilities. I've noticed that a lot of the big companies  add value in a few similar adding administrative fees on move-ins, implement a more aggressive and expensive late fee policy, force insurance from a 3rd party company (they give you a % of what you sell), and truck rentals. Are you still actively buying facilities?

    1. Agreed @Mike Carr, systems are vital for larger facilities. Those are all great ways to add value to the property. Yes, we are still actively buying facilities. In fact, we're in the process of acquiring a new property in Texas as we speak.

  3. What are common Liabilities of a storage business?  Do renters provide their own insurance for damage to their property while stored on premise?

    1. There aren't many liabilities when it comes to running a self-storage business since you don't have anyone living on the property like you would with other asset classes. Yes, renters provide their own insurance for their unit, although their renters insurance or homeowners insurance will usually provide coverage for it.

  4. Interesting!  Do you own a self-storage place?  I've heard a lot about people who retire and live (and run) the self-storage unit.  If you did need to hire someone to manage it, is it difficult?

    1. Yes, we currently own 2 self-storage properties. Self-storage properties are very easy to manage. In fact, you can have technology handle almost everything. They can be great passive investments.