Real estate investments involve the acquiring of landed properties for profitable rental, re-selling, or leasing purposes. But doing any of the above affects a whole lot. For instance, when renting a property, there are tenants to face. Similar situations apply to re-selling or leasing homes.
Investing in storage units differs slightly from real estate, especially for its relative simplicity.
What Is Self Storage?
Self-storage means what it reads, “storage facilities.” These facilities could be containers or specific warehouse compartments. Just like your garage, you can outsource self-storage facilities from storage companies for a fee. The storage company bears the full responsibility of keeping storage units for an agreed duration.
Self Storage Investment
Self-storage storage investing is a low start-up fund real estate variety. Investing in self-storage is an excellent way to generate cash flow regularly. It involves investing in storage units given profit over some time.
Self-storage indeed spares you the headaches of hiring plumbers and electricians. It offers alternative routes to more competitive investment opportunities.
Below are things that you’d need to know if you’re interested in self-storage investment opportunities.
Why Self Storage Units?
Investing in storage units is fascinating to investors for its potential to generate much income. It also offers lesser masonry requirements and fewer overhead expenses. You could manage self-storage businesses that are small/medium size on a part-time basis.
The fact that storage rental spaces are not residential absolves owners from emotional burdens. There are also fewer building parts that may get damaged over time.
There are also a large number of self-storage investment opportunities. The large market makes the investment easy to penetrate. You could always find self-storage facilities for sale in many different places. There is also a great demand for storage space as growing households and business owners increase.
Here are various reasons to invest in self-storage units:
i. The thirty-nine billion-dollar industry is still in increasing demand.
ii. It doesn’t take much time to manage storage facilities. They require minimal management, which could be done part-time.
iii. Storage units pose low building expenses.
iv. Investing in storage units could generate cash flow regularly.
v. Monthly rent payment. The monthly payment platform makes rent increment easier.
vi. Self-storage facilities aren’t affected by an economic recession.
vii. Little expenses in managing facilities.
How Do I Invest in Self-Storage Units?
Before you invest in storage units, you need to ask yourself what path of investment you want to take.
There are at least three paths to investing in storage units. The first, which requires little active involvement, involves buying shares from investment trusts holding self-storage units. The second path is more dynamic and consists of investing in your self-storage units.
Investing with Self-Storage Investment Trusts
The least complicated way to invest in storage units is by taking advantage of self-storage investment opportunities. There are investment firms that have self-storage shares to sell. You could partner with them in other storage facilities. Some self-storage investment trusts also have educational platforms where they educate people on how to invest.
Participating Directly in Self-Storage Units
The other option involves you being directly involved in the running of your storage units. This option involves two sub-divisions:
– Buying your storage facility
– Building a self-storage facility from scratch.
Buying Your Storage Facility
To buy your storage units, the first thing to do is to seek sellers. An online search would help in finding storage rental spaces for sale. You can also contact commercial brokers to assist in finding a storage facility to buy.
Note, however, that self-storage units are sold depending on their NOI. NOI refers to the facility’s net operating income. The NOI suggests the profitability of the facility by deducting expenses from total revenue. A higher capitalization rate (which gives us the NOI) means higher facility value.
Generally, ensure to do a proper facility profitability analysis, using the following parameters:
i. Computer software needs
ii. Internet or mobile phone necessity
iii. Necessary repairs and maintenance
iv. Marketing costs
v. Tax burden
vii. Bin service
viii. Other miscellaneous expenses
Whatever storage rental space you intend to buy should be able to generate enough cash flow. Ensure that your storage facility has been well maintained and is appealing to potential customers. Improving the outlook of your facility could justify increased rent or lease prices.
See that your facility:
- Is in an excellent looking container or building (check its lawn, paint, etc.)
- Has an efficient drainage system to prevent the possibility of flooding
- Is in a vantage geographical location with appropriate signboards
- Has an efficient security system
- Has an online site that showcases storage rental spaces for potential customers.
You could also give others self-storage investment opportunities with your facility through the website.
The requirements for different storage units differ from one to another. Some locations require conscious climate structures, while others do not.
After conducting a proper cash flow analysis, you may then proceed to negotiate its price. Ensure to make negotiations based on the most recent performance of the facility. You could order a survey on the facility or review their current annual balance sheets.
Building Your Storage Facility from the Scratch
This option is the most trying of the alternatives. However, some investors would prefer to take this route. It could be very financially rewarding if well done.
Building your storage facility from scratch requires a lot of experience. You could hire experienced personnel in building and designing the facilities.
The first thing to do is to identify a landed property to sit your storage rental space. It’ll do you good to also cross-check with the local government agencies. Do they have any regulations, permits, or levies to consider especially? The lesser amount of money it costs in getting building the storage site, the better.
Once you’ve finished construction, you could then put them up for lease or rent. You may also want to make your storage facilities for sale to interested buyers. Only ensure you have a bankable business plan.
In a Nutshell
Remember that storage units generally have a higher demand than supply. You could always find self-storage investment opportunities to take. Self-storage facilities for sale are also available, depending on your preference.
In all, you might want to consider this less-expensive real estate investment in addition to your investment portfolio.