Investing in Self Storage for Beginners: A Quintessential Guide

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No one probably predicted it, but the self-storage market is now valued at over $40.73 billion, with a forecasted growth of over $53.92 billion by 2026. 

With more people in need of storage due to smaller living spaces and more expensive prices per square footage, investing in self storage has now become such a huge trend all over the world. In fact, it has been considered one of the best forms of investment for both new and seasoned investors.

Now, if you are thinking about taking this route, here’s everything you need to know to get the most out of your investment:

Why it pays to invest in self-storage

Investing in self-storage is very lucrative to a lot of investors, mainly because it has huge income potential and lower overhead costs. But this type of investment is also ideal because of so many other reasons. Here are a few.

  • It will always be a need. 

Unlike most investment types, the self-storage market is rarely affected by any changes in the economy. Demand can even increase if the economy is down because more people will look to downgrade their living spaces where they would need self-storage to keep their things while they live in a condo unit or apartment. 

According to a report, baby boomers are even looking to shift to living in condo units as they prepare to retire, which means that we could expect a higher demand for self-storage over the next few years. So, if there is a better time to set up a self storage investment fund, it’s now.

  • It doesn’t take a lot of upkeep. 

One of the best things about investing in self storage is that you don’t need to put in a lot of money in buying self-storage facilities and maintaining them. A small to medium-sized self-storage facility would only require part-time management while it can continuously give you good returns for a long time since most clients are on long-term contracts for these spaces.

  • It offers a lot of opportunity for growth.

If you’re a first-time investor, you don’t need to be overwhelmed with the amount of money you should invest in self-storage because you can always start small. A majority of self-storage facility owners are small operators who work day jobs. You can also start small, and once you start earning, you can slowly grow your facility and invest bigger money with self storage investment firms. 

  • It guarantees a good income.

Since there’s a strong demand for self-storage facilities today, you can almost guarantee that you’ll be earning well if you invest in self-storage. These facilities also run on the month-to-month tenancy to guarantee regular payments, and you can increase rental rates to keep up with the market whenever you need to. 

Tips for investing in self-storage

If you’re ready to learn more about investing in self storage, here are some tips to help you get started:

Think about location.

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Although there’s a huge demand for self-storage facilities everywhere, you still need to be strategic about location. Figure out where the competition is and where the other investors are planning to be if possible. This will help you decide on the best area for your facility; one that’s ideally more accessible than the competitors so that you can keep your occupancy consistent.

Think about financing.

Financing is a very important part of your investment, and you need to understand your options before jumping on a financing package. Make sure that the financing you choose is aligned with your goals and plans for your investment, so it’s easier for you to manage your finances and not get into debt. 

You should also expect lenders to give you a more stringent underwriting since this is an extremely competitive market. Make sure that you read terms very carefully and prepare for any requirements to get you approved for a loan. For instance, most lenders will require you to maintain a cash reserve for maintenance costs.

Think about the property.

When choosing self storage facilities for sale, you need to examine the structure carefully before you buy anything. A facility may be well-priced, but if it has been poorly managed, you would need to spend a lot on renovations and maintenance in the future. 

So, it’s best to put your money where you can get the most value. Look for facilities that require the least improvement so you can invest in marketing and get your investment up and running.

Think about economic occupancy.

When investing in self storage, you need to determine the difference between physical occupancy and economic occupancy. Ideally, you’d want 100% physical occupancy, but 85% is already good as long as you have the proper rates for your tenants. 

As an investor, you should be able to create a balance between physical and economic occupancy. Even if you’re not at full capacity if you’re not giving deep discounts and other favours on rents, you’re still going to get good potential gross income.

Think about management.

Self-storage facilities may require minimal upkeep, but that doesn’t mean that you’re going to be lenient on management. Since there’s a huge demand for these facilities, there’s also competition among investors in the market. 

So, if you want your facility to maintain consistent cash flow, it’s very important to build a team that could handle marketing, management and customer service for you. This will help you ensure that the word is out there for your business, that someone will answer queries and concerns consistently and that you have a manager to make sure that your facility is managed properly.

The bottomline

If done right, self-storage investment can reap good profits without a lot of upkeep and management. This is when it also matters to work with experts who can help you manage your investment and maximize your returns without doing all the legwork yourself. A firm will make things easier for you, and their expertise will allow you to get the most out of your investment.

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