Have you heard of the dangers involved in self storage investing? Too much competition. You have to build a new facility to make money. Financing is difficult to find. While one should never enter a serious investment on a whim, we suspect that much of this type of propaganda is circulated by people already making nice money in the industry, and who would say anything to keep others from taking a slice of the quite lucrative pie. We know real estate investing is history’s best bet. The numbers prove that fact. Self storage investing, though, might be the best of the best, so don’t pay attention when the naysayers drop one of the following lines on you.
Too much competition: It’s true that, over the past two decades, the self storage industry has grown from a lazy little pastime into a billion dollar industry. With over 45,000 facilities nationwide, there is six feet of storage space for every citizen in the United States. That’s a bunch. Overbuilt? Maybe. Too much competition? Not even close. The truth is that a large number of facilities are ineffectively run and poorly marketed. Even a little effort to create a better business can be rewarded exponentially by increased occupancy. The ones claiming too much competition are those afraid to really work their business. Don’t listen to this myth!
You need a new facility to make money: Even though building a new self storage investing facility could be considered cheaper than a traditional commercial undertaking, it’s still not inexpensive or quick. Far better, and likely more profitable, it would be to find a facility that has been poorly managed and perhaps is in need of minor repairs. Owners like this are usually itching unload what has been an under-performing asset, in their eyes.
Financing is hard to find: The truth is that self storage financing has the lowest default rate of any commercial loan type. Lenders are fighting to loan this kind of money, with many offering 90% financing. That’s right, you put up only 10% of the total purchase cost. While you’re going to have to pay more than if you bought a rental house, self storage facilities are not as expensive as you might think. A 30,000 square foot complex, twenty years old, can be had for less than it would cost to buy a single family home in California.
Before we go, let’s consider some quite feasible numbers associated with self storage investing. Assume you own 300 units, 90% occupancy, each renting for $50 monthly. You’re grossing $13,500 every 30 days. Take out loan service and minimal maintenance. No wonder other self storage investors want to keep you out.
The Commercial Investing Team
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