13 Feb 2019
The year was 2016, and I was a newly minted Director of Acquisitions tasked with finding multifamily properties to buy. It was a rough year. I underwrote deal after deal, but I couldn’t make the numbers work to match our investment strategy. After some internal discussion, we decided to focus our attention on a different asset class: self storage.
At the time, I knew nothing about self storage, but after underwriting multiple deals and closing on five in nine months, I realized self storage is one of the best real estate investments a small, private investor can make – even better than multifamily. Based on my experience, I want to share five pros and a few drawbacks of self storage investing that every investor should keep in mind.
Approximately three-quarters of self storage owners own just one or two facilities. The remaining owners are sophisticated or institutional investors who own roughly three or more. What does this mean for potential storage investors? It presents an opportunity to acquire facilities from local owners...
Self storage has a roughly 35 to 40% expense ratio, meaning that for every dollar in revenue...
People store all kinds of goods...
When someone rents a unit, they sign a month-to-month rental rate agreement...
Self storage is the only real estate asset class that the Small Business Administration...
Now for the cons.
Last year, my car was in the shop for repairs. Naturally, I took an Uber...
Just as the month-to-month nature of storage allows for rental rate increases, the opposite is true...
Let’s say a 10x10...
With lower operating costs, fewer headaches, and alternative financing options, I have no doubt investor demand for self storage will continue.
