How Do I Get Started in Self Storage Investing?
Self storage is not glamorous or fascinating, it isn’t a money-making machine, and it isn’t recession proof (but it is recession resistant). Unattractive warehouse-type buildings, filled with cubicles that are crowded with people’s possessions do not have the sex appeal of a high-end shopping mall or a boutique hotel. Nevertheless, these uninspiring facilities have become big business and are a fast growing sector that more often than not turns out to be a sound investment.
Why Self Storage?
The reason behind this phenomenon is that self storage investment offers a stable cash flow and an alternate asset class beyond the stock market. Turnover in these facilities is less of an issue than short-term lease contracts might predict. Because of the large number of rentable spaces, owners are less vulnerable to sizable fluctuations in vacancy rate. These factors protect against the peaks and valleys so often evident in the stock market. If self storage does have a negative year during a recession, history shows a strong comeback.
Self-storage investing is not only for the wealthy. It’s attracting single-family, multifamily, and commercial real estate investors – people from all walks of life who are looking for an alternate vehicle to increase their wealth. It’s easy to get started in self storage investing, but there are a few things that you need to consider before taking the plunge.
Getting Started with Self Storage Investing
As a digital marketing agency owner, whose niche is the self storage industry, I decided to jump into self storage investment. Owning self storage properties enables me to support my clients with not only marketing expertise but also operational knowledge. I understand their pain points and can provide them with more pragmatic advice and solutions.
If you’ve ever thought about investment in self storage, the following guidelines might be helpful.
Guidelines to Help You Make the Right Self Storage Investing Decisions
When you invest in something, you put your money to work so that you can make more money. That’s a simple concept. But remember that investments involve risk, and you don’t have a crystal ball or a set of tarot cards to help you eliminate that risk. You do, however, have plain old common sense. Use it.
You can lessen the risk by educating yourself, performing your due diligence, and trusting the people that you trust with your money. Following are a few fundamental tips to help you make the right decision when you decide to dive into self storage as a method to build wealth.
- Understand the self storage industry and what makes it a good investment. Don’t invest your hard-earned money into something that you don’t understand. It’s true that self storage investing can quickly compound your wealth and grow your net worth. But you have to invest in the right property with the right people. For guidance through the investment process, you can trust Pinnacle Storage Properties. Their formula is to buy under-managed, under-enhanced, and under-developed facilities, upgrade to institutional standards, then refinance or sell to a REIT. Cash flow is stable, and you’re making money through the entire process. It’s not as easy as it sounds, and all of the parts and pieces of the self storage machine have to work together. But, with the right people and plans in place, your investment will pay off. For more information, read Why Investing in Self Storage is Red Hot.
- Don’t let your emotions blur your judgment. Looking for an investment can be exciting, and finding what looks to be the right investment can be an emotional rush. Control your enthusiasm so that you can make a sound investment. Look at the property and run the numbers. Perform due diligence and base your decision on sound business principles.
- Perform your due diligence. Read investor materials to understand how the market, the financials, and the physical property work together to obtain the best outcome. Simply put, due diligence is the confirmation of the underwriting product. You want to be assured that the operators can build enough value into the facility to make money, repay lenders, and give investors a competitive return. Read Underwriting Self Storage Properties for additional information.
- Be assured that you don’t have to be wealthy to make money in this industry. Self-Storage investment requires very little capital outlay as compared to other types of commercial real estate. You don’t have to be wealthy and you don’t have to actually understand how to operate a storage property. Pinnacle Storage Properties partners with small investors, but there is no “typical” investor. A variety of individuals, from all walks of life, recognize the potential in commercial real estate, particularly the self-storage model. They recognize the recurring cash flow, appreciation potential, tax benefits, and lower correlation with the public markets.
- Avoid unqualified and untrustworthy people. The reality is that people make poor investment decisions every day. When you do decide to invest in self storage, work with people that make you comfortable. You want a level of trust that allows you to ask questions and be honest about your concerns. The people that you choose to invest with should be able to explain associated risks, demonstrate a history of successful projects, and provide a competitive return on your investment.
Investing in self storage offers a stable cash flow, an alternative to the stock market, and an opportunity to grow wealth with little capital outlay. If you think this is an investment strategy that would work for you, be sure to learn about the self storage industry, and connect with people who want to help you achieve your financial goals.