You may have heard of the boom in self-storage demand recently. With lower up-front costs and less management demand than traditional property ownership, self-storage units can be a great way to begin your investment career. Below are some of the top benefits of investing in a self-storage facility.
Recession Resistance
Hearing the word “recession” on the news or in casual conversation can be scary, especially when you’re thinking of starting your own business. Recessions usually prompt large-scale change and transition.
One way to not fear recessions so much is to invest in an industry that will most likely remain profitable when there’s a housing correction or recession. Using self storage as investment is one of the ways that you can start a business in uncertain times and potentially profit when the economy is in limbo.
This is because self-storage units are in high demand in periods of transition, and recessions can prompt transition as people shift their family living situations or change careers. These people need somewhere to store their belongings for anywhere from a few months to multiple years as they figure out this shift in their lives. A good example of this is if people need to downsize to save more money—they may rent out a storage unit to hold their excess belongings while moving to a smaller place.
Comparatively, retail or office space landlords will struggle to find new tenants in a recession since people do not have as much financial security and may opt to institute work-from-home policies or other methods to cut down on office space expenses.
Automated Management
Self-storage investment can be great for someone looking for a relatively low maintenance and secure venture. You can manage your self-storage facility while you’re not physically present via storage unit software.
For example, you could consider installing no-key electronic entry, such as mobile entry that allows tenants to use their phones as keys to access their unit. That way, you don’t need to hire an extensive on-site security team and don’t need to worry about tenants losing their keys or forgetting their combination codes. You can also install smart accessories like door controllers and smart padlocks, all tools that will make it easy to manage your self-storage facility without the demanding day-to-day responsibilities.
Do the proper research to figure out what kind of software works best for your business. Whatever hardware you choose is likely to come with its own connected software platform that you would be able to monitor, so make sure that the company you choose offers the level of security and access that you want.
High Demand
The COVID-19 pandemic actually increased demand in self-storage units as people had more time to clean out garages, attics, and other cluttered parts of their home. The leftover items they found in those spaces needed a home, and self-storage units offered exactly that.
Also, the extremely high housing prices in many areas prompt people to buy smaller houses, limiting their available storage space. This leads to a high demand for cheap and convenient storage solutions. Take advantage of this opportunity by investing in your own self-storage facility—this industry is growing fast and doesn’t seem to be slowing down any time soon.
Lower Start-Up Costs
If you want to invest in real estate but feel like you don’t have enough capital to do so, it’s a good idea to investigate self-storage units. Compared to other properties like single family homes or apartment complexes, the start-up costs associated with a self-storage facility are more attractive.
You have two options when looking into self-storage investment: you can either build a facility or buy an existing one.
If you’re looking into building a self storage unitfacility, your average investment will most likely be lower than someone building another type of real estate property. However, if you’re planning on offering climate control, multiple stories, and a lot of square footage, your upfront investment may be higher. It’s also important to consider the price of steel at the time that you’re looking to build, since this will also have an effect on your initial construction cost.
Purchasing an existing facility will cost the average investor around $2 million, but this investment could vary anywhere from $1 to $10 million. Again, this number depends on how complex your facility will be.
Conclusion
After reading through these tips, hopefully you have a better grasp on the benefits of self storage investment opportunities. You should still conduct further research and consider the potential costs of this venture, but investing in a self-storage facility is a great way to get started in real estate investing.
