The self-storage sector is one of the fastest growing parts of the real estate market, continuing a trend that has been running for decades. Though low on glamour, self-storage has emerged as a real profit machine.
Fast growth and dependable profit
Nothing is slowing its growth—in fact COVID-19 disruptions may be adding fuel to an already hot market. From a pre-COVID market size of $87.65 billion in 2019, the self-storage sector is forecasted to see compound annual growth of 134.79% between 2021 and 2026, according to the latest self-storage market data from Mordor Intelligence Research. The sector is relatively recession-proof, with economic disruption tending to increase demand, as people move, downsize, even start businesses and side hustles. In a time of inflation, owning real property is a hedge that protects the real value of your wealth.
Investors have a new way to profit from this growth
Your investment options once were limited to buying stock in self-storage companies like Public Storage (PSA), Amerco (UHAL), which owns the U-Haul brand, or CubeSmart (CUBE). Investing directly in self-storage real estate, however, may be a better way to participate in this market. New business models have put direct ownership of self-storage real estate well within the reach of the average person.
No longer must you have the financial and operational wherewithal to buy land, build a facility, and hire staff. A handful of new companies have made it possible to buy a single unit—or several—that you can then rent out for profit. These turn-key facilities take care of overhead, operations, and marketing your unit to renters. You enjoy an asset that is appreciating in value, brings you the tax benefits of owning an investment property, and generates a steady passive income stream from rents.
Options for Buying a Self-Storage Unit as an Investment
The idea of selling storage lockers instead of just renting them got its start in the mountain west. The four innovators in this space are building sites across these states. The idea has not yet spread west of the Mississippi, where the rentals-only model still holds. With their rapid expansion, however, these are the companies to watch:
Toy Barn offers direct ownership of luxury garages, catering to owners of vehicles and collectible cars. Though units can be used for general storage, the facility is designed for car hobbyists and includes amenities like a club house, custom unit layouts, and fixtures for car maintenance and care. It was founded in 2010 and now has six locations in Arizona.
Garage Town bills itself as “not your dad’s storage unit.” It sells condo garages for RVs, boats, motorcycles, and cars. It offers features that vehicle owners can appreciate like places for RV cleanouts, electrical hookups, and car lifts. The company offers a community for like-minded vehicle owners and includes private clubrooms on the property. Garage Town is expanding, and now operates in seven states, plus British Columbia.
Falcon Storage Condos is a newer company that currently has a small footprint, but with plans to grow. They currently have one location in Boise with another planned, plus two other sites identified in Arizona and Utah. Like the above two competitors, they specialize in garage-like spaces for vehicles, from RVs to classic cars, not general storage.
LuxeLocker is a relative newcomer in this space. They cater to vehicle owners, but are disrupting the market with innovations like an on-phone app that allows owners to open and close the property gate and the door to their unit, assign access to friends, family, or service providers, and lease and manage their units. LuxeLocker supports investors with financing, facilitated subleases, and help setting up structures like self-directed IRAs for passive rental income. In addition to serving vehicle owners, they reach an expanded rental market with standard storage units for people needing to store extra belongings, keep household goods between moves, or work as a warehouse or equipment depot for small businesses.
Factors to Consider when Investing in Self Storage
If you are considering buying a self-storage unit as an investment, you’ll need to do your due diligence in making a choice where to put your money. Capital requirements and operating costs are low, while demand is high and steady. The average return on investment is about 13.4%. You can increase that number considerably with some wise decisions. Consider these factors:
- Invest in a facility that is near a high-use population. For vehicle storage units, locations near interstates, recreational areas, campgrounds, and lakes are ideal. For standard storage, locations near universities, large companies, and new developments tend to have high demand.
- Look for site that offer high visibility and high traffic. They should attract attention and be easy to access. For vehicle storage, you need to consider practical details such as the width of ramps and driveways that make maneuvering a large vehicle, boat or trailer easier.
- Invest in areas that are expanding economically. New jobs and new homes create situations where storage is needed and wanted.
- Distance from competition helps. You want to be the only game in town if you can, not one storage facility lost in a sea of competitors. You don’t want to be holding property in an overbuilt area.
- Check historic occupancy rates. The number to beat is the national average of 84%. It’s a matter of supply and demand. You want tight supply and high demand to command the highest rates and to ensure that your unit is occupied with rent coming in.
- Factor in the cost of insurance, financing, and any tax advantages you may enjoy in order to get an accurate and complete picture of your upfront and operating costs. From there you can calculate your rental profit and track the value growth of your investment.
- Look for a company that invests in its property, offering security, a well-trained staff, state-of-the art amenities, and facilities maintenance.
- Some companies go out of their way to help you rent your unit and offer exceptional services to your tenants. The best ones take care of all of the operational details like physical maintenance and dealing with renters. They collect payment and keep detailed financial records for you.
It is no wonder the self-storage sector is so attractive to investors. The innovations of condo units and direct unit ownership offer you options and benefits above and beyond owning stock in storage companies. In a time of economic disruption, demand for storage increases, making self-storage investing recession-proof. And owning real property in inflationary times protects your wealth.
Company Name: LuxeLocker
Contact Email: email@example.com
Contact Number: 833-333-5893