Self-storage is a rapidly growing business. The global industry is estimated to grow to nearly $65 billion by 2026. There are many benefits to self-storage investing, and there are plenty of opportunities in the market.
Continue reading if you would like to learn if it the right investment for you.
What to Look For When Investing in Self-Storage
Self-storage facilities come in all shapes and sizes. However, there are three main classes of facilities that can generate an income.
Class A consists of facilities built in the last 20 years and ideal locations.
Class B are older buildings and are often independently family-owned businesses.
Class C requires a lot of maintenance to generate a steady income and is often located in poor neighborhoods.
Size is essential while looking for self-storage investments. Larger storage facilities do not necessarily generate more revenue, but they require much more maintenance and management than a smaller building.
We all know that variation is the spice of life, and this is especially true in unit sizes. For example, a college student returning home for the summer does not need a large area, so that a 5X10 will do the trick. In contrast, a business owner might want to store the inventory of their growing business and require a larger unit.
It is crucial to pick the right location for your investment. A typical customer base radius spans from 1-5 miles. Researching the area and the city of the facility is a great asset and can help with future planning. Questions you should ask are:
- Who is my competition?
- Is it a growing city?
- What are my customer’s looking for?
These questions can help you pinpoint the needs of your customer base and cater to them.
We touched on this briefly before, but a storage facility requires some management. Depending on the size of the facility, it might even need full-time management. Are you outsourcing your management needs or hiring a manager yourself?
Additionally, you will need to look at the proper software to organize your clients and units.
Funding Your Self-Storage Investment
Lenders and banks usually consider self-storage investing a low-risk loan, which is excellent news if you cannot fund the investment yourself.
The lenders do have minimal requirements and generally look at the business performance, the value of the property, and the competition.
The minimal requirements are typically a minimum downpayment of 10%, a credit score of at least 680, and two years of experience in the field.
Is Self-Storage Investing Right for You?
Self-storage is a lucrative business with an excellent return on investment. The initial research can take some time, but it can provide a high passive income with minimal responsibilities down the road.
The industry is expanding fast, with more demand each year. Is self-storage investing the right investment? We believe it is. Contact us today to learn more about self-storage investment!