If you are an investor with a diverse portfolio and are looking for a secondary income stream to generate cash flow with a high ROI, then consider joining the self-storage industry. Over the last ten years, self-storage has become a hot investment due to the high demand for storage units and facilities. As society shifts towards tiny homes and the increased popularity of the digital nomad lifestyle, people are seeking out self-storage units across the country. The self-storage industry has experienced tremendous growth in the last few years and is projected to continue with this upward trend. Self-storage facilities offer a high ROI and a compound annual growth rate. In addition, The Small Business Association is offering loans to investors, which makes entering the market more attractive.
Why Self Storage?
What makes investing in self-storage facilities sound? Statistics show that 9.4% of households rent a self-storage unit, with a national average cost of $89.00 per month. Self-storage projects an aggregate growth rate of 134.79% through 2025. The self-storage industry has averaged a yearly ROI of 16.9% between 2009 – 2018. This was higher than rentals in any other sector, including office space, commercial real estate, or residential tenant-occupied spaces.
Where to Start?
The first step to becoming a self-storage investor is to ensure you have proper financing in place. Financing has become more accessible due to the SBA loans that are currently available. SBA 504 loans have helped to transform self-storage investment opportunities. The SBA now allows buyers to put down 10% and finance the balance of their projects. This enables first-time investors to get their foot in the door. Standard loans like this typically have a set interest rate for the initial 25 years, which is also competitive with market rates. This keeps the payments low, allowing people to realize the value of their investment earlier rather than later. An added advantage of investing in self-storage is you don’t have to go about it alone. Many times, groups of people pool their funds together with investment groups. These funds are then used to purchase more significant commercial properties, such as self-storage facilities.
The best part of self-storage facilities as far as investments go is they require less hands-on maintenance than other forms of real estate investments. Modern facilities can practically run themselves with software that can entirely run the day-to-day operations, so there is less manpower required. Modern facilities also come equipped with kiosks and surveillance equipment, making you more hands-off and less on-site. Try to hire people familiar with the industry so they can be responsible for the day-to-day operations, and they’ll be knowledgeable in how to deal with unique situations that may arise in the self-storage industry.
The Upsell Opportunity
Another unique advantage to owning a self-storage facility is the option to offer ancillary services and products that coincide with your facility. Ancillary products are products or services that are add on’s to the original service or product you are providing. These would be storage containers, moving boxes, locks, and other transportation-related items. Other great ideas for add-ons’ could be furniture covers, sliders, trailer lock kits, hitch kits, and even wireless cameras for the inside of the unit. These items would provide additional reliable income when partnered with a storage facility. The more services or products you offer, the more likely your facility will be the one customers choose over nearby competitors.
If you’re an investor looking for your next investment opportunity, this is a great time to consider the self-storage industry. At The Tymac Group, we build state-of-the-art facilities with the latest technology to meet all your self-storage needs.