Self Storage Investment Opportunities Versus Other Forms of Real Estate
Self Storage shares the same attractive qualities as residential rentals, apartments, retail strip centers, office buildings, and industrial properties. These include leverage (borrowed money), tax advantages, passive income, personal control, and appreciation. However, Self Storage offers a number of benefits that we feel make it a superior investment. These include the following:
1. We are becoming a more transient society, moving around more and creating a greater need to store our stuff, thus the demand for Self Storage is increasing.
2. Canadians tend to accumulate a great deal of possessions, and we don’t want to “weed out” those things we don’t use, are sentimental about, or have nostalgic value, which in turn, creates more demand.
3. Most new communities will not allow us to store our boats, jet skis, RV’s, or even multiple cars on the street or in front of our homes.
4. Many retirees downsize their homes, requiring additional storage space that their smaller homes don’t provide.
5. Many businesses will downsize and operate out of smaller offices, necessitating a need for storage space.
6. Many small distributors will utilize Self Storage to operate their businesses from.
7. Other home based businesses are also creating demand for off-site storage.
8. Lower Development costs – Self-Storage facility development costs are often 30% - 50% less than office, retail, and apartment buildings.
9. Lower Operating Costs – Operating costs for Self-Storage facilities are substantially less than office, retail, and apartment buildings. As a result, Self Storage owners are more isolated from large increases in utility and other variable costs that occur in the open market.
10. Lower development and operating costs make break-even occupancy ranges lower than other forms of Real Estate.
11. Occupancy is generally more stable, and therefore predictable, as there are typically a greater number of units in which to “spread the risk” than in other forms of Real Estate.
12. Month-to-month leases mean that rental rates can be adjusted easily. When occupancy increases, we adjust rates to compensate for the demand.
13. Demand for Self-Storage is not dependent upon the economy. When the economy is good, people buy more and store more. When the economy slows, people downsize, and require a cheaper alternative to store their extra belongings.
14. A well-run, stabilized Self Storage in a good location is very desirable to other investors and institutions, making Self Storage a very liquid investment.
15. It’s no wonder Self Storage has the lowest loan default rate of all commercial Real Estate property types.