If you’re a potential investor in real estate looking for investment opportunities that are low risk with lots of profit potential; consider investing in self-storage facilities. These facilities are less affected by the recession, especially as the current situation of COVID-19 is on the rise and recurrent.
If you’d like to take the bold step, this post will guide you on Self storage investment opportunities, why this is a big market to go into, and the best ways to start investing in this real estate area.
Self Storage Market
Self-storage was born out of the need to find a safe place to store items like business materials, clothing, vehicles, household utilities, and valuable items that are not currently or no longer in use. Since they’ll still serve a future purpose, there’s a need to temporarily safeguard these items.
Cities and towns are continually increasing in their numbers, and so residents no longer have sheds or free spaces to keep belongings that have accumulated over the years. Any available space is used to build an apartment or skyscrapers either for commercial or residential use. It’s another primary reason the self-storage industry is experiencing a skyrocketing demand.
Interestingly in self-storage facilities, you won’t have to worry about tenants and their attendant problems since your tenants, in this case, will be boxes of stuff, properties, and clothing.
These facilities have become big business; nearly 1 in 10 American households uses one of about 60,000 self-storage facilities. The sector has generated more than $35 billion in annual U.S. revenue as its market share. This statistics imply that this market is still largely untapped and has lots of room for growth, judging by the currently downsized economy.
However, this creates a high cash flow for you as an investor thinking of self-storage investment opportunities. It means you’re always in the market with or without a recession. You get to spend little on maintenance and management of facilities, also excluding the emotional stress your tenants, if they were humans, will put you through. Additionally, getting the funds for this investment is somehow easier since there are numerous loans you can access if you don’t want to opt for the other option classified as owner financing for homes.
The increasing demands for self-storage facilities have created a high rate at which self-storage investors go into business. You can build the storage facility right from the start or convert warehouses, rooms, and free spaces into storage facilities.
Whichever method you choose to use, your facility, which could be a single storey or multiple storey self-storage, can be classified as:
This self-storage type is the most common storage unit. You can think of it as a lease space or department you can drive up to and unload items.
Usually customized since some items may be affected by climatic conditions, climate-controlled storage spaces can also be included in other types of self-storage facilities.
You may like people to know your storage facility as a place to store just a specific or category of item. Here, you wish to focus on a particular storage class.
This storage facility type incorporates an office for small businesses where your customers can store office items, not in use at their residential homes.
Ways to Invest in Self Storage Facilities
You can only use one of these self-storage styles once you know the best way to start up the investment process. Your driving factor as to how lucrative self-storage investment opportunities can appear is by examining your net square rentable feet ( NSRF). It’ll determine how much you’ll earn upon investment.
- You can invest in the self-storage market either through becoming a shareholder and receiving dividends with REIT (Real Estate Investment Trusts). A REIT is a company that invests mainly in real estate assets, derives its income majorly from real estate, and distributes to its shareholders.
- You can invest in self-storage by owning shares in public self-storage companies.
- You can also invest in self-storage as an independent owner by looking out for self-storage facilities for sale from existing facility owners. Self-storage for sale in Florida yields a lot of profit since there’s a high rate of unmet self-storage needs.
- Lastly, you invest as an independent owner by building a self-storage facility. This option is the most profitable, though with lots of risks since it requires expertise and knowledge. For the finance, you can either carry out owner financing with personal funds or look out for loans to help cover the project.
What to Consider Before Investing in Storage Facilities
When investing in self storage for sale under owner financing, consider how lucrative your option as an independent owner will be. Also, check if you have sufficient funds or whether to apply for loans. While on this, think of the threats that may stand as blocks but aren’t enough if you know what you want to make out of the business. Here are a few more factors to consider before investing in storage facilities.
As a big business with many prospects, more people are trooping into this business line daily. As such, you may need to carry out due diligence; this will help you evaluate your net operating income to the profit you’ll make out of the business.
The Risk Involved in Financing
You also need to take a closer look at financing the project. If you’re hoping to invest in REITs; you’ll need to remember that REITs majorly use borrowed money to fund the growth of their storage facilities; they can run into debts and might not fulfill their interest obligations to shareholders and may have to cut dividends to pay off debts.
Self-storage is an area in real estate that offers you an investment opportunity of generating cash flow; also, you don’t need to worry about recession and economic changes.
This real estate investment option is growing massively and still shows lots of growth opportunities. However, it’s vital to evaluate its good and bad sides to be properly guided on how best to invest in this form of real estate business.