Self storage or what is commonly known as mini storage can be a good property and financial investment for a long term owner. The investor has to look at a self storage investment as a business AND a real estate play. The property itself may be in an appreciating area, and the business portion of the storage facility may be a good cash flow vehicle.
The self storage business is a very management intensive business. You can hear stories of an idyllic life of leisure as a mini storage owner, but the reality is there is upkeep and paperwork just like any business. Competition has increased over the years in many regions as more units have been built so this is a factor to look at if you are evaluating a property. A good facility in a good traffic location though is rarely empty in good and bad times.
A mini storage facility has a number of advantages over other forms of real estate investment. The properties themselves are usually fairly simple construction and maintenance, and the tenant mix can be extremely varied which means your risk is spread over several hundred units as opposed to fewer units in a multifamily investment. In addition, evictions for non payment are usually more straightforward than if you are dealing with someone’s home or apartment. Office buildings can be devastated by a major tenant moving out or contractions in the economy.
The downside is that you are a commodity in the consumer’s eyes and location and service are going to make the difference. Pricing plays a role, and most mini storage consumers are very adept at figuring out the amenities of site. Security, and lots of it, is a must have for a storage facility. Additionally, you will need to invest in good management software to track the comings and goings of your tenant base. The key to a good mini storage experience is management and systemization of procedures and routines.
The self storage industry is a tricky one to navigate and due to this I would strongly recommend you find a good commercial broker that knows the industry and the ins and outs of financing a property. Banks are willing to loan on a self storage property but they will need a great deal of documentation and items like a business plan. Our office has dealt in this sector of the real estate market so if you have questions please call us.