Business Model
Self Storage
Self-storage is one of the oldest niches of real estate, beginning thousands of years ago in China. However, the U.S. derivative has only been around since roughly the 1960s. But it has taken off at a huge rate of speed in this country, with more self-storage space in the U.S. today than all the other countries in the world combined – 1.9 billion square feet spread out over nearly 48,000 properties. These can be found in all 50 states and in both metropolitan and rural areas alike.
Self-storage is an extremely simple business model. The owner rents out effectively a metal-walled space with typically a roll-up door and a concrete floor for a set amount per month. The tenant can place whatever they want in this space and access it whenever they please. The owner’s responsibilities include keeping the facility maintained, the roads free of potholes, the security process in effect, and providing a quality manager that writes leases and even sells boxes (based on the size of the facility). One unique feature of self-storage is the collections process – if the tenant does not pay, you can sell their items to the highest bidder to pay the unpaid rent (subject to state and local laws). This is the theme of the popular cable show “Storage Wars”.
Rent Land
Marketing
Re-Investment
Business Model
Self Storage
Self-storage is one of the oldest niches of real estate, beginning thousands of years ago in China. However, the U.S. derivative has only been around since roughly the 1960s. But it has taken off at a huge rate of speed in this country, with more self-storage space in the U.S. today than all the other countries in the world combined – 1.9 billion square feet spread out over nearly 48,000 properties. These can be found in all 50 states and in both metropolitan and rural areas alike.
Self-storage is an extremely simple business model. The owner rents out effectively a metal-walled space with typically a roll-up door and a concrete floor for a set amount per month. The tenant can place whatever they want in this space and access it whenever they please. The owner’s responsibilities include keeping the facility maintained, the roads free of potholes, the security process in effect, and providing a quality manager that writes leases and even sells boxes (based on the size of the facility). One unique feature of self-storage is the collections process – if the tenant does not pay, you can sell their items to the highest bidder to pay the unpaid rent (subject to state and local laws). This is the theme of the popular cable show “Storage Wars”.
Rent Land
Marketing
Re-Investment
Pros
Solid demand in both booms and recessions
High yields
Stable tenant base
Solid collections because of the ability to auction unpaid units
Easy financing because self-storage has the lowest default rate in the U.S.
Simple business model
Low capital expense risk following purchase due to simple, metal construction
Liquidity
Cons
Overbuilding in some markets threatens occupancy
Huge penalties if you auction the wrong unit for non-payment
Rent level weakness in certain markets
Managers need consistent supervision as they are relatively low-paid
Market Research
Articles & Reports
HOW TO DO A PROPER CAP-X BUDGET ON A SELF-STORAGE FACILITY
Every storage facility is different, and has its own unique attributes. And one of those is the appropriate capital expenditure (also called “cap-x”) budget to know how much you have to save for each year to properly maintain all the structures and systems in the...
THE MOST POWERFUL SENTENCE IN BUYING A STORAGE FACILITY – AND WHY
When buying a self-storage facility, there is one sentence that is more powerful than any other you can tell the seller: “What would I have to do to get you to sell me this property?” Why is this so successful for the buyer? There are multiple reasons. There’s no way...
WHY MANY STORAGE BUYERS MISS THE BOAT
Successfully buying a self-storage facility is based on making good choices established through proper research and due diligence. Yet, despite the roadmap being publicly available, many buyers screw things up for no reason. Here are what some buyers do to destroy...
updates
Forums & Deals
Learning about and committing to investing in self storage is only half the battle. The real challenge is finding the right deal to invest in. These resources will help you find the right deal to give a diligence focus and potentially buy. Remember that finding the right self storage is all about volume, so the more potential deals you look at the better your odds of finding the right one. Don’t just look at a few options, look at as many as you can find. Success in self storage investment revolves around making as many offers as possible.
Education
Books & Courses
Before you risk any capital, your first step is to learn everything you can about how to profitably invest in this niche. To accomplish that, there are both free resources as well as books and courses to aid in your quest for mastery of this real estate sector. We recommend that you take advantage of every opportunity to learn as much as possible before you invest your time and money. The most important trait of a successful investor is being able to quickly separate deals into a “might be an opportunity” stack versus a “not an opportunity”, as well as know the steps to conducting superior due diligence. In niche investing, knowledge is power – so get as much of it as you can.
Providers
Brokers & Lenders
No buyer can succeed without assistance from those who can source deals, as well as finance them.
Brokers are an important part of finding properties to buy. This is their specialty, and they typically have listings that are both “public” as well as “private” (those that they are not allowed to reveal to the public due to restrictions from the seller). Successful buyers contact all of the brokers in their niche to see what listings they may have, as well as to get set up in their email database for announcements of new listings. For a complete list of these brokers click the Learn More button below.
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