CREATE RECESSION RESISTANT CASH FLOW._FREE MASTER CLASS.

Live July 23rd with Scott Meyers

The Long-Term Investment Strategies of Self Storage Investing

June 19, 2024

Investing in self storage real estate has gained significant traction among savvy investors seeking steady returns and minimal hassle. Unlike other forms of real estate investment, self storage offers unique benefits that make it a compelling choice for those looking to build wealth over the long term. This blog explores why holding onto land with self storage units can mean low maintenance costs, higher returns on reselling the property, and other long-term benefits.

1. Low Maintenance Costs

One of the primary attractions of self storage investing is the relatively low maintenance costs compared to other real estate investments. Here are a few reasons why:

  • Minimal Structural Requirements: Self storage units are typically simple structures, consisting of metal buildings with roll-up doors. They do not require the same level of intricate design, finishes, and systems (e.g., plumbing, electrical) that residential or commercial properties might.
  • Reduced Wear and Tear: Unlike residential or office buildings, self storage units experience less wear and tear because they are not occupied daily by tenants. This reduces the need for frequent repairs and renovations.
  • Automated Management: Many modern self storage facilities employ automated systems for security, access, and payment, reducing the need for on-site staff and ongoing management costs.

2. High Demand and Consistent Occupancy

Self storage is a demand-driven business, often unaffected by economic downturns. People always need storage for various reasons, such as moving, downsizing, or decluttering. The following factors contribute to high demand and consistent occupancy rates:

  • Urbanization and Downsizing: As more people move to urban areas and opt for smaller living spaces, the need for additional storage increases.
  • Business Storage Needs: Many businesses use self storage units to store inventory, documents, and equipment, ensuring a steady stream of commercial clients.
  • Economic Resilience: During economic downturns, people may downsize their homes or businesses may reduce their office spaces, increasing the demand for storage.

3. Higher Returns on Reselling the Property

Holding onto self storage real estate can lead to significant appreciation in property value, leading to higher returns when you decide to sell. Here’s why:

  • Increased Land Value: Over time, the value of land generally appreciates, especially in growing urban or suburban areas. Self storage facilities often occupy prime real estate that becomes more valuable as surrounding areas develop.
  • Improved Facility Reputation: A well-maintained and consistently occupied self storage facility builds a reputation in the market, making it more attractive to potential buyers.
  • Stable Income Stream: Potential buyers are often attracted to the steady cash flow generated by a well-managed self storage facility, making it easier to command a higher sale price.

4. Scalability and Flexibility

Investing in self storage offers scalability and flexibility that other real estate investments might lack:

  • Expansion Potential: If you own additional land, expanding your self storage facility is relatively straightforward compared to other types of real estate. This allows you to grow your investment incrementally.
  • Diversification: Self storage facilities can cater to various customer segments, from individuals to businesses, providing a diversified income stream that can mitigate risks.
  • Adaptability: Self storage units can be easily reconfigured to meet changing market demands, such as creating climate-controlled units for more sensitive items or adjusting unit sizes based on customer preferences.

5. Tax Benefits

Like other real estate investments, self storage properties come with tax benefits that can enhance long-term returns:

  • Depreciation: Investors can take advantage of depreciation deductions on the buildings, which can significantly reduce taxable income.
  • Cost Segregation: This tax strategy allows investors to reclassify certain components of the property for accelerated depreciation, further reducing tax liability.

Conclusion

Self storage investing offers a compelling combination of low maintenance costs, high demand, scalability, and tax benefits, making it an attractive long-term investment strategy. By holding onto land with self storage units, investors can enjoy steady income, property appreciation, and higher returns when reselling the property. As urbanization continues and the need for storage grows, self storage remains a resilient and lucrative investment choice.

Investing in self storage is not just about capitalizing on current demand but also about securing a stable, low-risk, and high-reward asset for the future. With the right approach and management, self storage facilities can provide investors with reliable returns and a valuable addition to their real estate portfolios.

Interested in taking the next step? You may be considering financing a loan. Check out our latest podcast about financing options and how to present strong loan requests to banks