Self-storage investing is a type of commercial real estate investing in which funds are invested in self-storage facilities and units are rented out to renters. Self-storage units are small areas that can be rented for short or long terms.
For instance, if a family has too many things and nowhere to put them, they may rent a storage unit. Self-storage units can also be used temporarily when transferring from one site to another.
Is it good to invest in a storage unit?
Investing in self-storage can provide numerous advantages, including the following:
Demand for self-storage has increased.
Storage spaces are in high demand, particularly in densely populated locations with limited space. High demand for storage can lead to high occupancy rates, steady cash flow from rent, and good profits over the long term. These are all important factors to consider when investing in real estate.
There are few overhead costs.
Investing in self-storage facilities is also a good idea because their overhead costs are often low. Obviously, the overhead expenses are directly proportional to the unit and its characteristics. Some units, for example, are stripped down and do not have electricity. These simple structures are commonly made of concrete or brick and feature a roof and a sliding metal door.
Landlords who own self-storage spaces are improving them by adding electricity and heating, ventilation, and air conditioning (HVAC) systems to control the temperature. People who want to keep costly furniture, artwork, and textiles that can be harmed by severe temperatures and humidity may find this interesting. These facilities are more expensive, but landlords can ask for a higher rent in exchange.
Landlords can get away with little upkeep in general as long as buildings are structurally intact and renters can access units safely. Plumbing or electrical problems, which are common in homes and stores, are not likely to happen.
The less upkeep required, the better. Because of its low overhead and administrative costs, self-storage investing could be a source of passive income.
How To Invest In Self Storage
Here’s how to get started if you are ready to reap the many benefits of self-storage real estate investment:
1. REITs (Real Estate Investment Trusts)
The most straightforward way to invest in self-storage is through REITs, which are traded similarly to stocks. REITs are corporations that invest in publicly traded real estate and sell stock to investors. The best thing about investing in a self-storage REIT is that you don’t have to do anything.
Investors do not need to be landlords or run a thriving business. Instead, consumers might participate in real estate investment trusts (REITs) that hold self-storage facilities and profit from capital gains and dividend payouts.
Of course, reading the prospectus for each REIT is essential in order to understand the unique properties of each fund as well as any potential costs or restrictions. It is also critical to examine the REIT growth pattern to understand where it is headed in the long run. Real estate investment trusts are often long-term investments.
2. Invest in a self-storage facility.
One of the most popular ways to invest in self-storage is to buy an existing facility and create your own small business.
The benefit of buying an existing facility is that you may avoid buying land, getting local approval, and going through the time-consuming and expensive building and marketing processes. Simultaneously, you will inherit a customer base, removing the need to start from scratch. The majority of facilities charge based on total square footage and facility quality.
The only bad thing about buying self-storage buildings is that you could end up with a negative rate of return if you buy a failed business, one with structural problems, or one with low customer reviews. So, it is very important to carry out research and figure out the net operating income (NOI) and possible long-term growth.
If you want to buy an existing self-storage facility, start by talking to lenders and making sure your finances are in order. Then, find an experienced commercial real estate agent and start exploring opportunities.
3. Build a self-storage facility.
The hardest thing to do is buy a piece of land and build your own storage unit. You could even convert an existing business into a self-storage facility.
This plan costs a lot more money and time because it requires finding the right amount of land to start a business.
Then, before buying a building that local buyers will like, think about demand and the building’s needs. Conduct extensive research before beginning this type of endeavour. You might also consider working on a project with professionals in construction and business development. You may find yourself in over your head if you have no prior experience in these fields.
Is there an ETF for self-storage?
There are a number of self-storage EFTs available, including:
- Public Storage
- Extra Space Storage
- Cube Smart
- Life Storage
Are self-storage units a good investment in Australia?
Self-storage REITs have historically been solid assets. Over the past five years, Australian businesses and consumers have been a steady source of demand for self-storage. This demand is expected to grow over the next five years as more people use e-commerce and more people move into cities.
Self-storage REITs make money because they have a good mix of low prices, high demand, and short-term leases. This helps the sector steadily increase its earnings. This has helped the company earn above-average overall returns over the years. Self-storage REITs are attractive to real estate investors because they can make a lot of money.
Because of this, there are two types of people who rent storage units: businesses and regular people. Because of this, there are two types of people who rent storage units: businesses and regular people. This is an interesting, if slightly unusual, option for smart investors who are looking for a safe alternative to buying a house as an investment.