While the trend of investing in self-storage units has come and gone with the waning popularity of TV shows where people purchase units and discover treasure within, the popularity of self-storage facilities as investment vehicles has actually grown. There are a number of reasons why investing in self-storage facilities is actually a positive investment strategy, including their cost to maintain, their profitability and their relevance in any market conditions. If you’re looking for a positive investment vehicle, here are the reasons why the LCI Realty team can say that self-storage facilities are a positive investment.
As opposed to all the high cost maintenance associated with owning other forms of commercial real estate, self-storage facilities tend to be low-maintenance investments. If you own a multi-family structure, you have the cost of staff members, repairs, willful damage and costly defaults to absorb, along with a larger insurance cost, upkeep and improvements to afford and a host of smaller costs that add up. Self-storage facilities require little more than temperature control, lighting and security, making them low cost for owners.
High Storage Profit
Storage isn’t cheap, especially if it’s only for a short term. While your costs are low when owning self-storage facilities, the returns can be massive, garnishing anywhere from 13 to 17% return annually. With this in mind, you can see why even the most low-cost facilities tend to remain profitable. In addition, most tenants at self-storage facilities are not typically price sensitive unless they are renting a large amount of space. If you have a 10×10 unit rented at $100 and you raise the rent by 6%, it’s unlikely that tenants will end their contract over a $6 increase. However, if you have 100 units, a 6% increase is a tidy profit increase.
Less Reliance On Single Tenants
In multi-family buildings, too many defaults can be detrimental to your financial well being. Your tenant pool in a multi-family unit tends to be much smaller and that exposes investors to a lot of risk. However, self-storage facilities have a larger tenant pool, often renting different size spaces for different purposes. Their wear and tear on the property tends to be minimal as well. This means less risk for you and more profit to garner.
Lowered Recession Risk
As the economy begins to down turn, you can also look to self-storage facilities as a lowered risk during a recession. This is because one of the many ways that people attempt to save money during a recession is to move to small accommodations. This leads to a need for storage facilities to retain assets and personal property. Therefore, during a recession, you will find more people turning to self-storage facilities, not less.
Self-storage opportunities are not usually the first opportunity that new investors think of when they decide to join the commercial real estate game, but it can be extremely profitable. It should be noted that many self-storage facilities are owned by REITs, but the right real estate team can help you strategize with your investment to make the most profit. Contact the LCI Realty team now to get started on your investment path today. Call 480-565-8981.