With so many things in life, the harder you try, the harder it gets to find success. Such is the case with many self storage investors who took a headlong dive into the commercial real estate investment market a few years back, paying no attention to the terms of the loan, but rather plunging forward with a “damn the torpedoes” attitude to get into a self storage investment no matter the cost.
Well, it’s a few years later and a problem is becoming apparent to those investors who grabbed any deal they could while the industry was at an all time high. Self storage is still an amazing investment choice for those who only bought if the deal made financial sense the day they closed. For the rest, who strapped on their rubber band bungee boots and took a screaming dive into oblivion, victims of ignorance and fool’s hope, sorry ’bout that.
Every storage facility and location is not created equal. One might be an overflowing ATM machine while another just manages to positive cash flow nicely. Both can be a great investment if the terms of the financing are right. But if they’re not – ouch.
This was a convoluted way to say let the market come to you. It’s the idea of waiting for a good buying opportunity rather than diving in at the top of the market and hoping it stays that way forever. While it is, for all practical purposes, impossible to pick an absolute market high, you should be aware that it runs in cycles, and any price wave that hits an all time high is going to be followed by a correction. You don’t have to be able to perfectly pick tops and bottoms, but need the wherewithal to know, relatively speaking, where the market stands at any particular time.
When prices have broken through a top and are running, it’s time to wait for a correction. No matter how enticingly priced a facility is, no matter how great the deal seems, if the timing isn’t right – well, the timing isn’t right. There is always another deal waiting around the corner. Part of deciding whether it is, in fact, a good deal or not, is to look at the broader local market. If it doesn’t line up, not much else matters. Play it calm. Play it cool. Wait for the deal to come to you.
The Commercial Investing Center Team
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