Why Invest In A Self Storage Facility?

Storage is a huge industry in the United States, with more storage space utilized here than in the entire rest of the world combined. So why would you want to invest in the self-storage industry? There are several reasons.

Easy Operations

Storage is an industry that has no moving parts and virtually no day-to-day activities. Your customer places their property in their locker, and stops by only occasionally to add or remove items. So you may not even see a certain customer for a week or month at a time. Because of this, customer problems – or even interaction – are very minor.

Virtually No Repair and Maintenance Issues

Self-storage facilities have no toilets to fix, no black mold to remediate, no kitchen appliances to break. Basically, the only items that can break are the light bulb in the ceiling, the lock on the door, and the roll-up door itself. And those last two items are made of solid steel and are virtually indestructible.

Superior Collections

Unlike most forms of real estate, you really have your customer over a barrel. If they do not pay their rent you can, based on the appropriate laws, open their unit and sell the contents to satisfy the deficiency. This is a huge advantage over typical landlord collection options.

Attractive Return Rates

Self-storage facilities are bought and sold at around 8% to 10% cap rates, and featuring 12% to 20%+ cash-on-cash returns. These are much higher than may other real estate niches, such as office, retail and apartments. The Ability to Buy From Moms & Pops Since the majority of self-storage facilities in the U.S. were built after around 1970, the original builders are often still the owners. These “Moms & Pops” are able to offer more attractive pricing and offer seller financing since they own the properties free and clear and can do whatever they like with them.

A Liquid Asset Type

There are several public companies that own and operate self-storage facilities – the largest of which is Public Storage – as well as a number of larger privately-owned concerns. There is a very liquid market to sell self-storage facilities when you decide that it is time to sell.

Conclusion

Self-storage facilities are an extremely attractive investment niche. They offer high returns, low maintenance, and a solid track record of financing and liquidity.

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