Self storage investing is a type of real estate investment that involves purchasing and managing self storage facilities. These facilities, or units, can range from small lockers to large shipping containers and can be rented out to individuals or businesses.
This guide will explain the logic behind self storage investing for beginners and why rookie investors should try it.
Why Self Storage Investing?
Self storage units are in high demand. Anyone from businesses to individuals requires extra storage, creating a demand for small, medium, and large storage units.
Beginners can invest in self storage units for a few reasons, including:
High Demand
Beginner Friendly
Potential for High Returns
Less Expensive
High Occupancy Rate
Recession Resilient
These reasons are more than simple to understand the logic behind this commercial real estate investment. But let’s explain them in more detail to give you the full picture.
Self Storage Is In High Demand
Storage is always in demand. As businesses expand and new businesses enter their respective industries, the need for these companies to store items, materials, and cargo becomes a top priority.
Moreover, there’s no particular size that is more in demand than the next. This means businesses will require containers and units of all sizes, including small, medium, and large. The high demand for self storage units creates a favorable market for investing in self storage and other, similar types of commercial real estate investment.
Self Storage Investing Is Beginner Friendly
Self storage investing is simple to understand, making it an excellent option for beginners to try self storage investment. In addition, self storage investment is the opposite of traditional commercial real estate investment, as these units or containers do not require extensive maintenance or renovations when first starting. Therefore, a beginner can manage self storage units much easier than real estate properties.
The beginner-friendly aspect makes self storage investment a popular option for beginners, as the relatively low costs present an opportunity to generate a steady income with minimal maintenance.
Self Storage Investing Has Potential For High Returns
The potential for a high return on your investment makes self storage investing one of the most popular types of commercial real estate investing.
According to recent growths and trends projections, the self storage industry will likely register a CAGR of 5.76% by 2028. Therefore, the industry’s potential growth will present new opportunities for investors. Moreover, The high demand creates the potential for high returns. This makes investing in self-storage units more desirable for some investors than other types, such as single-family homes or apartment buildings.
Self Storage Investing Is Less Expensive
Buying self storage units is less expensive than other types of real estate. Although investors shouldn’t expect monthly returns like other real estate types, it’s easier for a beginner with less capital to try self-storage investing.
Self Storage Units Have High Occupancy Rate
Self storage units have a high occupancy rate, which means they are less likely to be vacant and not generate income. This is the ideal scenario for any beginner real estate investor, as the high occupancy rate means investors will spend less time marketing and advertising the containers and units.
Self Storage Investment Is Recession Resilient
In a time when investors are looking for recession-resilient investing methods, self storage investment stands out. Simple real estate market economics tells us that when a recession hits, people downside and sell large properties for smaller ones or move in with roommates. Evictions are also common when the economy is in recession.
But that’s not the case with self storage. Namely, there will always be a demand for storage, regardless of who the customer is. So investors can expect self storage investment to be recession resilient.
Should You Invest In Self Storage Units Right Away?
Before settling on self-storage as an investment, it’s essential to do your research and understand the market conditions. This includes understanding the demand for self storage units in your area and researching the competition, which includes other self storage operators and businesses.
Additionally, it’s important to understand the costs associated with owning and operating a self storage facility, such as property taxes, insurance, and maintenance costs.
Self Storage Investing for Beginners – How to Invest In Self Storage?
Investing in self-storage can be done in a few ways, including purchasing an existing facility or building a new one and investing in self storage REITs. Let’s explain all three.
Purchase a Self Storage Facility
Purchasing an existing facility can be a good option for beginners because it allows you to take advantage of an established customer base and management team.
When purchasing an existing self-storage facility, it’s important to look for one that is well-maintained and has a good occupancy rate. Additionally, it’s important to understand the lease terms and the facility’s financial performance, including income and expenses.
Before you purchase a self-storage facility, do your due diligence and conduct a thorough market analysis to determine the demand for self storage units in your area. This includes understanding the area’s population growth, demographics, and economic conditions.
Build a Self Storage Facility
Building a new facility can also be a good option. But for that to work, there must be a high demand for self storage units in your area and no existing facilities to meet that demand. Building a self-storage facility can be an excellent investment opportunity if these two check out on your list and you have the finances.
But most importantly, you must understand the costs associated with building a new facility, including land acquisition, construction costs, and financing options.
Invest in Self Storage REITs
Self storage investing can also be done through REITs (Real Estate Investment Trusts), companies that own and operate self-storage facilities, and other types of commercial real estate.
REITs allow investors to buy shares in the trust and receive a portion of the income generated by the properties. Investing in REITs is a good option for beginner investors who want to put their money into self-storage but want to avoid the hassle of managing the properties themselves.
Conclusion
Self storage investing for beginners is an excellent option for rookie investors to get into real estate. Self storage investing is simple to understand, is in high demand, is beginner friendly, has the potential for high returns, is less expensive than other forms of real estate, has a high occupancy rate, and is recession resilient.
These factors make self storage investing a great way to build wealth over time, even for a beginner. However, it’s important to research and understand the market conditions before investing, including the demand for self storage units in your area, the competition, and the costs associated with owning and operating these facilities.
With proper research and planning, self storage investing is a great way for beginners to enter the world of real estate investing.
FAQs
How Do I Start Investing In Self Storage as a Beginner?
To begin investing in self storage as a beginner, you must choose between purchasing a self storage facility or building one yourself. Additionally, you can invest in self-storage REITs (real estate investment trusts) that take away the hassle of managing self-storage units and facilities.
Is Self Storage A Good Investment?
Self-storage investing is considered a good investment as it is less risky than traditional real estate. With self-storage investing, beginner investors can enter an industry that is simple to understand, high in demand, beginner-friendly, has potential for high returns, has a high occupancy rate, and is recession resilient.
How Does Self Storage Investing Work?
Self storage investing works by investing in self-storage facilities and leasing self-storage units to renters. Renters are businesses and individuals in need of storage space. Self-Storage units can be small, medium-sized, or large containers and can be rented for short or long periods of time.
