When most individuals begin looking for investment property, they tend to gravitate towards office space and rentals. While these are good options, self storage is an often overlooked alternative that has great returns.
The Benefits of Self Storage
Whether downsizing or moving locations, the average individual will choose self storage over parting with personal property. As a result, self storage properties continue to be a thriving business, yielding a positive cash flow and often producing returns, as high as, 19 – 29% regardless of economic fluctuations.
Turnover rates are low as renters usually keep units 1 to 3 years on average.
Upon vacating a unit, there are no extensive upfitting costs like with other investment opportunities. A quick sweeping will prepare the unit for the next customer.
80% of owners in this multibillion dollar industry are non-corporations, meaning the management of these properties are relatively easy compared to the alternatives.
Self Storage Class Types
- Class A – These buildings are brand new or were constructed after the year 2000. They are ideally located within 1 to 5 miles from thriving communities. They tend to be larger than the average self storage buildings with multiple levels and a brick exterior. These are typically owned by larger corporations.
- Class B – These buildings were constructed between the 90s and 2000s. They are located in good areas with stable communities within 1 to 5 miles. These are the most sought after locations for individual investors.
- Class C – These buildings were constructed before the 90s and are located in areas where business and commerce have since moved away. They are classified as distressed property in need of renovation. It takes 3 times as long to rehabilitate these properties compared to others and are not recommended for first time investors.
7 Things to Look For with Self Storage
- Location – 90% of self storage business comes from a 1 to 5 mile radius. To ensure greater cash flow, check to see if the local neighbors are growing and prosperous.
- Facility – How large is the property and how many units are available? If you are planning on hiring a full-time manager the facility needs to be 30K to 40K square feet with at least 200 units.
- Unit Size – Units need to range from small to large to accommodate all customer needs.
- Traffic – Research the level of traffic by the property. The higher the traffic, the more business you will see as a result.
- Signage – Know the municipal signage laws and make sure all signs to the property are visible and easy to read for passing traffic.
- Management – Learn how the property is currently managed and decide whether you want to continue this type of management or opt for something else.
- Due Diligence – Due to the nature of the business, does the property have proper drainage in the event of heavy rains or flash flooding? Are there faults in any individual unit? Do you have a system in place to promote positive cash flow, marketing, management, and maintenance? Extensive preparation beforehand will save you time and money in the future.
Are you ready to invest, but are unsure of what to look for or how to proceed? Craft Commercial’s extensive real estate knowledge can help turn your investment dreams into a reality. Contact us today at email@example.com.