Why Investors are Taking a Hard Look at the Self Storage Industry
While the need for extra space isn’t anything new, it is likely to continue. The events of the past two years have caused people to reevaluate their living situations for a number of reasons. The first is the popularity of remote work. People who can do their jobs from anywhere are taking this opportunity to move from city to city in the quest for the perfect place. For many people, the economy and the residual effect of unnecessary lockdowns and mandates during the pandemic are forcing them to move to less expensive areas of the country.
At Pinnacle Storage Properties, we buy under-managed, under-enhanced, and under-developed self storage facilities; upgrade them to institutional standards; and, based on the new higher value, refinance or sell to a REIT. Stable cash flow enables you to make money through the entire process and reap excellent returns.
In any case, investors are ready to capitalize on the tremendous need for self storage. Adding self storage to your investment portfolio is a smart move and one of the best investment opportunities in the current market.
Why Investors Continue to Enjoy Success with Self Storage
Attractive Return on Investment (ROI)
ROI and compound annual growth rate for the self storage industry are forecasted to increase over the next five years. Self storage ROI has been outperforming retail, office, apartment, and industrial spaces since 2009. According to Green Street Advisors, even during the pandemic, self storage was down only 16% compared to strip mall (down 24%) and multi-family (down 23%) investments.
Over 10% of households in the U.S. currently use a self storage unit. According to the Self Storage Association, the majority of these tenants live in single-family homes with a garage, and 33% of them also have a basement. Yet, they still need the extra space that a self storage unit provides. Most self-storage customers rent long-term, with 52% of those surveyed reporting that they’ve kept their storage unit for one year or more. Only about 16% of customers rent storage for less than a year.
Self storage doesn’t have the typical peaks and valleys of occupancy that are common with retail or office space. In the unlikely event of large-scale move-outs, the advantage is that rate management can be used to increase occupancy. Once occupancy is stable, street rates can be raised. Another point to remember is the long-term self storage tenants who are reluctant to dispose of their stored items.
Moving to more conservative investments like self-storage offers investors more stability than traditional investments in stocks. In a booming economy, people are purchasing goods and growing their businesses, which means they need a place to store the overflow. When the economy is impacted negatively, self-storage is historically recession-resistant because people are forced to downsize their homes or businesses. They need a place to store household goods and business inventory until the economy picks up.
Minimal Maintenance Costs
Today’s self storage facilities don’t need excessive amounts of maintenance or management. Advancements in technology like management software, kiosks, remote sign-in, online rental, and surveillance systems have reduced the need for extra staff and even on-site visits. As long as you keep your units clean and updated, there are fewer recurring costs than in other commercial real estate sectors. Maintenance costs are low, leading to higher earning opportunities for investors.
Passive Income and Tax Benefits
Self storage is a great source of supplementary income. As a passive investor, you don’t have to put any time or energy into understanding self storage operations. You can relax, collect passive income, and reap additional tax benefits stemming from real estate investment. Consult a professional tax advisor to get more information on the potential tax advantages.
Investing in the self storage industry is low risk, provides an attractive ROI, and is recession-resistant. If you’re looking for a stable addition to your portfolio, consider the booming self storage market. Contact Pinnacle Storage Properties for more information.