Many self-storage owners also own other businesses or rental property. Investing in storage can provide relatively stable, predictable income by itself, or can complement an existing portfolio of residential or commercial rental property.
Residential property managers can attest that plumbing (especially toilets) are the root of many headaches. Heating and cooling, electrical, and dealing with late payments and the eviction process are other topics that owners of apartments must be prepared to address.
While owning a self-storage business is not entirely without hassles, it is probably the easiest real estate investment to manage. Most facilities have little to no plumbing unless the site has an office or manager’s apartment. Most rental units do not have electricity. In most cases, the buildings are not climate controlled, but even when they are, the tenants do not have access to a thermostat. In cases where tenants fail to pay rent, the eviction/auction process is much easier than it is with apartments.
Finally, occupancy has a tendency to be more predictable with self-storage. While a modest investment may purchase a fourplex or duplex apartment, that same investment in self-storage could potentially have 50 or more storage units. Lose one residential tenant, and you could lose half or a quarter of your rental income. The larger number of tenants in self-storage provides stability.
While self-storage property usually has lower per square foot rental rates, the development and operating cost is disproportionally lower. Your investment works harder for you with self-storage.
As is the case with residential, self-storage investments can often provide a more stable return by generating income from a larger pool of tenants.
Storage businesses are themselves a retail business in many ways. Visibility is important, and locations in high traffic areas do well. Locations with full time managers often operate a small retail area selling locks and packing supplies.
So what sets self-storage apart? Storage businesses can make use of odd sized properties, which other retail operations don’t want. Storage generates very little traffic and needs very little parking. Properties with a slope that might make them unattractive for other uses are great candidates for “two story into a hill” construction; where multiple levels can offer ground level access and double your rentable square footage.
Call them dark stores, empty boxes, or anything else… if it’s sitting vacant someone is losing money on it. Many of these vacant stores are ideal candidates for self-storage conversion. The longer they sit vacant, the more likely the owner will agree to a rock bottom lease rate or sale price. Retail properties lend themselves to self-storage conversion for a few reasons. To start, they are climate-controlled already. They usually have wide open spaces plus an office. They usually have great visibility. Loading docks for merchandise deliveries can be converted to loading/unloading bays for storage customers.
When the sale/lease price drops low enough, empty big box stores become a great opportunity for the self-storage investor. Want to learn more about building a self storage conversion? Check out this video following a grocery store conversion.
If you are considering purchasing investment property, you owe it to yourself to investigate the self-storage industry. View our videos, sign up for our free seminars, or contact Trachte’s helpful sales staff to discuss your ideas. Run your numbers on our investment calculators to determine if a site works for storage. At Trachte, we aim to provide you with the information and know-how to build a successful business.