Self-storage investments are a great way to diversify your portfolio and generate additional income. Storage units can be rented out to individuals and businesses, and they are in high demand in most markets. This blog post will discuss the basics of self-storage investing and provide tips for getting started.
Let’s get started.
Self-storage, as an investment opportunity, has been skyrocketing. While the recession of 2009 put a temporary damper on the real estate market and hurt companies like Public Storage (NYSE: PSA), self-storage is now more popular than ever before. A good example of this popularity is that more facilities are being built today to handle storage needs now and into the future.
And it’s not just independent storage owners starting up facilities – many institutional investors are now looking for ways to capitalize on this growing industry. If you don’t have enough funds, it would be best to start trading on the Bitcoin Loophole to get higher returns in the future.
Active Participation in Self-Storage
When most people think of ‘self-storage,’ they usually associate it with dead space, junk piles and extra furniture. While these thoughts give this unique industry a bad rap, most self-storage facilities are operated as highly optimized businesses which require hands-on management to operate at their highest potential. This is why investing in a self-storage facility is one of the best forms of passive income out there today.
One major reason that self-storage has become a popular investment vehicle is the high level of appreciation that many investors realize when acquiring a storage property. Roy Samaan, founder and CEO of Samaan Capital Group, noted that “In Los Angeles County, for example ,over the past 10 years, the value of self-storage facilities has increased over 300 percent.
There are currently 12 buildings selling in the L.A. County market for between $20 million to $30 million each.” When it comes to properties that offer high appreciation rates, storage units are second to none.
Financing for self-storage investing
Self-storage has a lower cost of entry than any other real estate investment because it is so easy to get financing for. All you need is a little bit of cash and some creativity on structuring the deal with your bank, and you got yourself some equity for nothing. Most banks will offer you a 1st lien position (i.e., first mortgage) at about an 80% loan to value ratio (LTV), meaning that your bank will finance 80% of the purchase price of the self-storage facility, and you must put in the remaining 20%.
For example, if you are buying a $1,000,000 property for cash, this is an easy deal. However, most people do not have $100,000 laying around to invest in real estate, so speaking with your banker about structuring other options is necessary.
The Bottom Line
To invest in self-storage, one must make sure they can secure a property and the financing. Securing the property is done by searching through free classifieds or looking for landlords that want to sign a management contract. Most storage facilities need managers, and once the facility is built and running smoothly, it will be time for investors to seek out banks and other lenders to help finance expansion plans.
It is also possible for those with bad credit or lacking financial history to find partners who have good credit so they can build their business together as joint venturers.