WHAT IS SELF STORAGE?
self-storage [self-stawr-ij, -stohr-] adjective, Self-Storages
1. noting or pertaining to a warehouse or other facility that rents units to people for storing personal possessions.
2. a shorthand for self-service storage, and also known as mini storage)
…is an industry in which storage space (such as rooms, lockers, containers, and/or outdoor space), also known as “storage units” are rented to tenants. They are usually rented on a short-term basis (most often month-to-month). Self-storage tenants include businesses and individuals.
Who are they good for?
Though usually a short-term basis, options for longer-term leases are usually available to individuals. A person would use these units for storing household goods. Nearly all authorities ban the space from being used as a residence. Businesses use them to store excess inventory or archived records. Some facilities offer boxes, locks, and packaging supplies for sale to assist tenants in packing and safekeeping their goods. They may also offer truck rentals (or may allow free use of a truck for a new tenant).
Facilities vary in size, quality, construction, materials, and surveillance measures, and added services may include:
10,000 square feet to an excess of 100,000 square feet.
Wide range of standard sizes – 5′ x 5′ to 10′ x 30′ or larger with the average unit size being about 100 square feet (10×10). Outside parking for RV’s, boats, etc.
Single and/or multi-level facilities.
Resident Manager apartment on-site.
Converted buildings (old supermarkets, big box retail warehouses, etc.).
Units divided by corrugated steel panels (most widely used), chain-link fencing, plywood upon stud and drywall or stud and particle board.
Movable module units (storage containers).
Automatic gates with keypad computerized access.
Surveillance cameras and monitoring stations.
Individual door alarms.
Paved or concrete driveways.
Retail merchandise available.
Ancillary income sources (e.g. cell towers, US Postal service, private mailboxes, EBay, overnight shipping, business centers, utility payments, etc.).
About Self Storage Investing:
Items are generally not covered by the facility’s insurance. The lessor would need to be covered by his/her own insurance policy. They can also purchase insurance to cover the items through a third party. Some facilities offer this as an additional service.
Security and other offered services
Tenant’s secure the rented spaces with their own lock and key. Unlike in a warehouse, self-storage facility employees do not have casual access to the contents of the space (and, thus, the facility is generally not liable for theft). A self-storage facility does not take possession or control of the contents of the space unless a lien is imposed for non-payment of rent. The facility would lock the unit is if it is left unlocked. It would remain this way until the tenant provided his or her own lock.
Some storage properties offer climate controlled units, whether newly constructed or renovated buildings, usually offer access from interior hallways. Multi story construction, popular for climate control, also provides access through interior hallways and elevators. Usually, dollies and furniture carts for moving customer goods are provided as a customer service tool.
Growth in the self-storage market
As Morgan Stanley notes, “Over the 1996 to 2004 period, annual growth in US personal consumption expenditures averaged 3.9% — nearly double the 2.2% pace recorded elsewhere in the so-called advanced world.” In the United States alone, the self storage industry has generated more than $22 billion in revenue in 2012. In 2007, the U.S. self-storage renting and leasing market was nearly $6.6 billion. You can clearly see how much it grew in just 5 years’ time!
The average revenue per square foot varies from facility to facility. Here the data for Q2 2015: $1.25 PSF for a non-climate controlled 10 x 10 unit and $1.60 PSF for a climate controlled 10 x 10 unit.
About 9.5% of all American households currently rent a self-storage unit (10.85 million of the 113.3 million US HHs in 2013; that has increased from 1 in 17 US HHs (6%) in 1995 (18 years ago).
Approximately 6,000 are single-story facilities and approximately 4,000 are multi-story facilities, out of over 10,000 facilities surveyed.
The mean facility size is 546 units and the median facility size is 517 units out of over 10,000 facilities surveyed.
18.7% offer Boat / RV parking and/or storage out of over 10,000 facilities surveyed.
31% offer truck rental out of over 10,000 facilities surveyed.
About 13% of all self storage renters say they will rent for less than 3 months; 18% for 3-6 months; 18% for 7-12 months; 22% for 1-2 years; and 30% for more than 2 years.
FAQ - How Can Self Storage Investing help you?
First of all, it’s worth noting that every day, storage facility owners sell at a discount all over the country. It isn’t a “rare” situation where this would happen. An example of why a lender would sell a facility is when a borrower stops paying on their loan. This note then becomes classified as a “Non Performing Note” (NPN) or a “Delinquent Loan”. So, rather than deal with the NPN themselves, lenders will very often sell these off at big discounts. This will easily free up their money to make a new loan. In addition, there are many reasons a private seller would want to sell their facility at a fair price. Retirement, trading up to a larger facility, tax implications, health, divorce, bankruptcy…virtually any life changing event would cause a seller to sell their facility. Or it just simply may be time for a change.
The first place to start is by asking if the owner is interested in holding the note and receiving payments directly from the buyer, as in a traditional borrower/lender scenario. The tax advantages for the seller are huge, and so are his profits. If that is not a possibility, the next steps are to contact any banks in the market that you have a relationship with, and then a commercial mortgage broker that specializes in self storage.
The reason we see so many, is that roughly 1 in 10 households rents 1 or more units in this country. It has become a commodity that many Americans can’t live without – more space! But don’t worry, with average market occupancies approaching 90% in this country, the self storage business is far from becoming saturated any time soon.
The beauty of this business is that you don’t need a significant amount of capital or credit to start. In fact, many of our students have little to no money of their own. They have still gone on to successfully own and wholesale self storage facilities. The fact is, there is so much money available through banks and private lenders to fund your deals that, by simply deploying a few of our strategies that we teach about, how to close deals will finally remove the barrier to success due to lack of money.
Most of the people we train to invest are in the same position. They have then gone on to buy their own properties. The strategies we teach allows you to start the business in your spare time. Many people have found that as they acquire more facilities it ends up costing them more money to go to secular work. This would be due to the lost opportunity of ignoring their self storage investing business. That’s when people make the switch to becoming a full time self storage investor.
As with any investment, of course there are risks involved. But, as a responsible investor, it is up to you to get the proper education and professional guidance. This will reduce those risks as much as possible. Without doing the proper due diligence, you could end up making a bad acquisition and end up losing money. However, it is important to note that the same risks exist even when purchasing your own house. With the right education, you can ensure you safely invest your money. There is a significantly reduced chance that your investment isn’t as profitable as anticipated.
Now, I am not an attorney so even I don’t know all the specific laws as they pertain to real estate transactions in each state. But the good news is that I don’t need to. What I do, and what I teach my students to do, is to work with specific attorneys when necessary. The key is to only work with them when you absolutely need to. Knowing how to work with your team members, like attorneys, wisely and economically is an easy skill to learn and essential to your success.
Investing in self storage doesn’t need to be complicated. It’s a matter of understanding the deal, knowing how to complete the due diligence properly, then obtaining the necessary funding to close the deal. Once you understand these 3 steps, you can successfully acquire self storage facilities anywhere in the country. You don’t have to just look in your own backyard. The best part? You can do this in as little as 10 hours a week or even less! Some of my most successful students have gone on to close their first deal in a matter of weeks. Like most things in life, the more time and effort you dedicate, the more successful you can become.