Self-Storage as a Real Estate Investment: Who is the typical self-storage investor?
Self-storage is not a glamourous industry. Uninteresting warehouse-type buildings, filled with cubicles that are overflowing with people’s belongings, do not have the sex appeal of a glitzy shopping mall or a sophisticated designer furniture store. Locations on noisy roads or the outskirts of town are standard. These facilities, however, have become big business and are a fast growing sector that can turn out to be a solid investment.
The self-storage business model is unusual for commercial real estate. Tenants pay minimal or no deposit and can leave at a moment’s notice. Nevertheless, this sector has seen strong performance and growth for two primary reasons.
- People continue to acquire things that can’t be consumed: furniture, toys, and electronics, to name a few. For countless reasons, they are averse to disposing of these items. Even if people are forced to downsize due to economic reasons, they still need to use self-storage for the overflow.
- Secondly, most people are reluctant to ultimately deal with disposing of things they’ve placed in storage. One-third of storage space is full of items that have remained there for approximately three years.
Who are the typical investors in this industry?
There is not a typical investor. Any individual looking at asset class diversification through real estate investments is a potential investor. Investing in commercial real estate offers an alternate asset class beyond stocks and bonds.
In a volatile stock market, self-storage investment provides a more stable cash flow. Turnover in these facilities is less of an issue than the short-term lease contracts might predict, and the large number of rentable spaces give owners less vulnerability to substantial swings in vacancy rate. Realistically, the short-term nature of rentals allows owners to react quickly to market conditions.
Let’s look at some of the professions that are representative of the self-storage industry investor.
- Construction company owners
- Family trusts
- Private family offices
- 1031 exchange investorsSelf
- Banking executives
- Bank officer
- Bitcoin investors
- Cost segregation consultants
- Self-Directed IRA investors
- Wealth managers
- Bariatric surgeon in private practice
- Neurological surgeon at a university hospital
- Orthopedic surgeon for high profile professional sports team
- Medical equipment sales professionals
- Retired military officer (West Point graduate)
- City public works managers
- General business owners
Oil and Gas
- Oil and gas executives
- Oil and gas owners
Self-Storage and Real Estate
- Commercial developers
- Commercial property appraisers
- Current self-storage owners
- Licensed real estate professionals
- Multi-family investors
- Past self-storage owners
- RV park owners
- Single family rental owners
- Self-Storage industry vendor owners and executives
- C-level software company executives
- IT professionals
- Internet based business owner
- Tech industry executives
These investors are professionals, families, and individuals who recognize the potential in commercial real estate, particularly the self-storage model. They recognize the recurring cash flow, appreciation potential, and lower correlation with the public markets. They recognize a solid investment.
It’s never been easier to access individual real estate transactions.