Self-storage facilities can be easy to manage, easy to maintain, and are a great way to start in the commercial realm of real estate investing!
9 reasons to invest in self-storage
- Whether the economy is good or bad, people will always need storage
- 1 out of every 10 people in the US use self-storage
- There are 50,000 self-storage facilities in the US
- The self-storage business is a $220 Billion industry
- 80% Are owned by “mom and pop” operators
- Provides cash-flow
- The average stay in a self-storage facility is 1-3 years
- Lower turnover costs
- No toilets, no trash, no tenants
3 Main types of self-storage facilities
We’ve all driven past that run-down storage place…the concrete is cracked, the doors are banged up, there are weeds popping up everywhere, and it just makes you want to drive faster to get away from it. It doesn’t look like a very good investment, does it? When considering self-storage, you need to take into account the time and money you’ll want to invest. To help you find the perfect fit, there are 3 classes when it comes to a smart investment for your experience level!
Class A: 2000 or newer builds in ideal neighborhoods
Class B: Built in the 80s or 90s, owned by “mom and pop” operators, with stable numbers
Class C: Much older builds, more maintenance issues, often in poor neighborhoods, risky
2 Main types of deal scenarios:
Depending on your budget, comfortability, and commitment, you can invest in turnkey storage facilities (highly recommended for beginning investors), or you can dive head first into a distressed deal and get the satisfaction of breathing new life into a facility.
- Class A and B Deals
- You buy, own, and get cash flow
- Easier to get financing
- Good location
- Turnaround deal to resell
- Poor or no management
- Poor location
- Lots of work will need to be done
- Needs to be turned around
Things to look for when you’ve decided to invest:
When you’ve decided that you want to buy a self-storage facility, there are a few key things to look for:
- You’ll probably need 30-40,000 square feet to be able to afford a full time manager
- If self-managing, you can start smaller. Just know your numbers
- Have a mixture of sizes of storage units
- You’ll need variation to offer your customer base options.
- 90% Of your customer base will live within a 1-5 mile radius of your facility
- Do research on the radius area to make sure there is potential
- Is the area growing or shrinking?
- Is the city expanding in the area, or away from the area?
- Know your competition
With these things in mind, you can get better financing based on the amount of information you and your broker gather, as well as the information you can get from the seller.
Banks require 3 things for any income-producing commercial real estate loans:
- Property’s income and expenses, and what is left over
- Property’s condition and location
- Borrower’s credit and financial situation
The more paperwork, the better, as long as it’s concise and organized! Your broker and financial officer can help you make sure you have all the correct paperwork from the seller, and all of the paperwork you’ll need to get the best financing possible.
Ready to buy your first or next self-storage facility? Contact us today for a free consultation, or check out our for sale facilities here: https://areanw.com/self-storage/