Self Storage Investments
Lives in Los Angeles
, Self Storage Investment Adviser at StartupCarroll.com
6 Reasons to Invest in Self Storage
Self storage is one of the fastest growing sectors of real estate in the United States. In fact, over the past several years, it has been the highest performing sector of the Real Estate Investments Trusts (REITs). Are you interested in investing in a storage facility? If so, here are some reasons why you should be interested!
1). Less Tenant Head Aches - Unlike most real estate income properties, there are not the typical tenant problems associated with repairs, maintenance, and tenant improvements. With self storage, all you have is steel walls and concrete floors. And if the tenant does not pay their rent, you can lock them out of their storage unit and sell/auction their stuff to recover any lost rent.
2). Self Storage is Fairly Recession Proof - In a recession, people and businesses are downsizing, so they need a place to store their extra items until things turn back around. And better yet, during a good economy, people buy more items and need to rent a storage unit to handle their extra belongings. Additionally, because self storage rental contracts are on a month to month basis, a good economy allows self storage landlords the ability to increase their rents.
3). Financing is Easier to Find Compared to Other Real Estate Asset Classes - Self storage has the lowest loan-default rate in any form of commercial real estate, around 6 to 7 percent - versus 50% for apartments, which means that banks favor lending money to self storage operators.
4). Self Storage is Simple to Operate and Manage – Unlike other businesses that generate thousands of dollars each year, Self storage facilities typically employ no more than 2 full time employees and 1 part time employee.
5). High Demand for Self Storage Space - Storage is one of the best new businesses to invest in today, with over 50,000 self storage facilities in the USA and almost 1 in 10 households renting a storage unit. Demand continues to rise for extra storage space, either from our insatiable American appetite to acquire more items and store them elsewhere or from economic conditions that causes companies and families to look for additional storage space.
6). High Returns on Investment - Self-storage has higher returns than any other form of commercial real estate over the past 5 years (2008 -2012). The next closest investment is apartments at 8.8% compared to the national average of 34.5% for self-storage.
Current Market Conditions –
In 2013, Self storage facilities are selling at an “all time high”. Cap Rates for quality properties are now as low as 5%. Additionally, shares of publicly traded REITs have also seen historic highs. Low interest rates, lack of new development (due to poor lending conditions and governmental regulations), and demand to purchase existing facilities by the REITs have pushed prices up. It should be noted that in the 4th quarter of 2013, share prices for REITs have come down a bit. Future fears of higher interest rates in 2014 and profit taking by investors are cited as some of the reasons. However, the over-all fundamentals of existing self storage companies remain strong. In fact, most publicly held self storage companies expect to increase rental prices and occupancies in 2014.
Whether you decide to purchase a self storage facility or buy shares from a Self Storage Real Estate Investment Trust, self storage is a conservative real estate investment that has stood the test of time as one of the most successful real estate investments. If you are a real estate investor, self storage investments should be strongly considered as part of your real estate investment portfolio.
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