When it comes to investing, there are numerous options to choose from, from real estate, laundromat business, ATM businesses, and blogging, to vending machines. But have you ever thought of investing in self-storage? Yes, you heard it right.
Self-storage is one of the fastest-growing sectors in the real estate market. In 2022, the global self storage market size was estimated to be about USD 58279.16 million, and it is expected to reach USD 89940.75 million by 2028 at a CAGR of 7.5% (Source: GlobeNewswire). And over the years, it has proven to be a stable and profitable investment option.
Self-storage facilities have become increasingly popular in recent years for good reason. Read on to find out why is self storage a good investment and how you can benefit from investing in self storage. I also encourage you to check out this article if you wonder real estate is also a good investment.
1- High Demand for Storage Space
Self-storage facilities are in high demand because of various reasons. On the one hand, people are downsizing their living spaces, moving to new cities, or needing additional space to store their belongings. On the other hand, people often look for additional space during moves, renovations, or decluttering of their homes.
The good news is that demand for storage space is not dependent on economic factors, making it a recession-proof investment. For example, in 2020, the global self-storage market was $48.02 billion, and it is anticipated to reach a value of $64.71 billion by 2026, with a compound annual growth rate of 5.45% between 2021 to 2026 (Source: Statista)
Moreover, businesses also need extra space for storing their goods, equipment, or documents, which makes the self-storage industry more resilient than other real estate sectors.
2- Low Maintenance And Operating Costs
Compared to other real estate investments, self-storage facilities have lower maintenance and operating costs, requiring fewer staff, less maintenance, and lower utility bills.
Also, the tenants usually take care of the cleaning costs of their units, which means that you can enjoy higher returns as the expenses are less.
Additionally, most self-storage facilities are unmanned, which means that the owner doesn’t have to be present at the site to manage the property.
3- Steady Cash Flow
Self-storage facilities tend to have a consistently high occupancy rate, providing steady cash flow. You can lease out individual units or the entire facility to a single tenant.
Moreover, you can adjust the rent prices to keep up with inflation, allowing you to increase profits. In some places, the rents can be increased by as much as 5%-7% annually. I recommend you speak to a lawyer, as some states prohibit increasing your price by more than 10 percent (Source: Inside Self Storage)
4- Lower Risk of Tenant Turnover
Unlike residential or commercial properties, self-storage facilities tend to have lower tenant turnover, particularly because of the nature of the business.
The truth is that people typically use storage units for longer periods of time compared to renting a living or office space.
5- Diverse Tenant Base
Self-storage facilities attract a wide range of tenants, including homeowners, renters, and businesses, which diversifies the tenant base and reduces the risk of relying on a single tenant.
Moreover, the flexibility and potential for capital appreciation make self-storage investments more attractive than other real estate investments.
6- Operational Flexibility
Self-storage facilities offer operational flexibility to people who are looking for ways to invest, as they can buy an existing facility and start earning from day one.
Depending on your needs and budget, you can also choose the size and type of units, accessibility options, and security measures, allowing you flexibility in investments.
7- Potential For Capital Appreciation
Apart from a steady income, self-storage investments also have the potential for capital appreciation. As the demand for self-storage facilities grows, the prices of existing facilities also increase.
The self-storage industry’s annual revenue is $29 billion (Source: SpareFoot); as people continue to adopt new lifestyles and retire, the self-storage industry’s revenue will only grow, paying dividends for those who invest.
And if you choose the right location and invest in good-quality facilities, you can reap the benefits of capital appreciation. Furthermore, investing in self-storage facilities can reduce the overall risk in your portfolio, as it is less volatile and more defensive.
What to read next:
- Top 9 Best Real Estate Investing Books For Beginners.
- 7 Creative Ways to Create Wealth with Real Estate Investment.
Wrapping Up
Self-storage is an excellent investment opportunity due to its high demand for storage space, low maintenance costs, steady cash flow, lower risk of tenant turnover, and diverse tenant base.
If you’re looking for a profitable and recession-proof investment opportunity, self-storage should be on your list of considerations.