Investing in public storage facilities offers a great way to expand one’s portfolio and build wealth, often without the problems associated with managing other types of real estate investments. Self-storage properties provide customers with a safe place for storing household items, business files, jewelry, vehicles, and other valuables they want to keep safe.
Self-storage is the fastest-growing arm of the real estate sector. People continue to acquire things they can’t consume or aren’t yet ready to use. Others who already use storage facilities are often unable to let go of the items they’ve stored, thereby increasing demand for more storage space.
There are currently over 50,000 self-storage facilities in the US. The self-storage sector generates $22 billion annually, with one in ten American households regularly using self-storage facilities. Consider investing in storage facilities if you’re looking to diversify into real estate at a relatively low cost or just seeking another source of passive income.
What Is Public Storage?
Public Storage is a US self-storage company operated as a Real Estate Investment Trust (REIT). REITs are companies that own and run real estate businesses. Also, REITs can help real estate investors finance their projects. They can be registered and publicly traded on stock exchanges, and they pay up to 90 percent of their income as self-storage investment returns.
Public Storage is the largest provider of storage facilities for personal and business needs. The company has thousands of storage units all over the US. It also provides other services like insurance and packing products, but most of its revenue comes from its self-storage arm. The company stocks get traded publicly as PSA on the New York Stock Exchange, and the Public Storage Investor Relations page provides a real-time update on the price of Public Storage stock.
Types of Storage Facilities
Public Storage and other storage companies in the US offer different types of storage facilities, such as:
Outdoor/Drive-Ups
Most storage facilities are outdoor/drive-ups built as rows of buildings with easy access for storage and removal of items. Outdoor/drive-ups are generally low-maintenance and quite affordable. These facilities often have cameras, electronic gates, and other security measures. Large facilities may also have guards or teams of guards.
Indoor Storage
Indoor storage facilities will require you to enter a building and navigate some security. These facilities could be narrow closets or large rooms. Members of staff or equipment may be available to help you move your items to and from the facility. Some indoor facilities may offer climate-control technology.
Vehicle Storage
Vehicle storage centers exist for storing cars, trucks, RVs, boats, and other vehicles for which the owners need extra space. They’re often erected close to harbors, racetracks, airports, and other places where the carriers are mainly required.
Climate-Controlled Storage
Climate-controlled storage facilities are designed to hold items that might get damaged by moisture, heat, cold, or other harsh climatic conditions. Items could be documents, heirlooms, furniture, or classic vehicles. These facilities are usually more expensive than the rest of the storage facilities.
Mobile Storage
Mobile storage units are used by people moving or renovating to hold items temporarily. Storage companies usually deliver mobile storage pods to the homes of customers.
Mixed-Use Storage
Mixed-use facilities are storage units combined with some other type of business like a convenience retail outlet. This type of facility offers an opportunity for investors to boost their customer base and increase income.
Reason to Invest in Self-Storage
There are several reasons for potential investors to consider self-storage investments.
Market Adaptability
Unlike regular real estate investments, self-storage facilities are short-term rentals that have the unique ability to adapt to various market conditions. Self-storage investments aren’t significantly affected by recessions or economic downturns. People need to store their stuff whether in a good or bad economy.
Stable Cash Flow
Customers use self-storage for various reasons and are often reluctant to leave a storage facility once they’ve rented. Hence, turnover isn’t as frequent as one might expect from short-term tenancies.
Low Maintenance
There are no tenants, toilets, or trash in self-storage facilities, so you don’t have to pay tenant improvement costs. Marketing expenses are also low since location is what primarily attracts customers.
Low Barrier to Entry
Small, non-institutional investors control the majority of self-storage properties. Any interested investor can break in and succeed in the self-storage sector.
How to Invest in Self-Storage
There are two ways to invest in self-storage. The first is by buying public self-storage shares through a Real Estate Investment Trust (REIT). You can cultivate a relationship with stockbrokers that receives storage unit listings or engage the services of those who specialize in trading self-storage shares.
The other way to invest in public storage is to acquire or build a facility as an owner-investor. You’ll have to analyze your intended investments’ prospects and determine your investment level in the management of your facilities.
The following tips should guide you when you want to invest in storage facilities:
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Assess the Geography
Most of your patrons will be those living within a one to five-mile radius of your facility, so you want to be sure that your location is viable. It’d be best to consider the competition within your vicinity and what they’re doing.
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Get Professional Help
Consider employing the services of an estate broker who knows a thing or two about self-storage. An experienced stockbroker might be the difference between a good and a bad investment.
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Do a Thorough Cash Flow Analysis
Cash flow is the driver of self-storage investments. You must analyze cash flow trends and find out the reasons for the trend. Your analysis will determine whether to go all out and make a purchase or exercise more discretion.
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Inspect the Property
Watch out for molds, leaky roofs, and other issues that might affect your business in the long run.
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Consider Your Financing Options
If you’re not buying outright, there are several self-storage financing options you can consider.
Conclusion
Self-storage facilities provide viable investment opportunities due to their almost guaranteed appreciation, stable cash flow, and relative resistance to economic upheavals. The market offers a low barrier to entry. Even though prominent players are starting to take an interest in self-storage, there’s still room for interested investors to add self-storage to their portfolio.