When I entered the commercial real estate investing scenery, I didn’t know where to start but I did know that focus was going to be very important. In addition, it had to align with my short term and long term goals. Therefore, I did research on the different types of commercial estate and Multifamily stood out to me.
Self-storage brings many of the advantages of MFR (Multi-family) properties and even less of the headaches, since there are no tenants living on site. According to the National Association of REIT, the average annual return for self-storage was 17.43% over a 25-year period (1994-2017); this puts self-storage well above any other real estate sector performance-wise. Also consider the fact that, in 2019, the market was valued at almost $40 billion (a 3.6% increase from 2018, and 50% increase from 2010) – two more reasons you should definitely consider self-storage investments.
Let’s take a look at some of the advantages of self-storage:
· Cash flow and rental increases – like MFR, self-storage provides multiple streams of income consolidated under one roof. Even better, the fact that leases are almost always month-to-month means you have significant latitude in how you handle rent-setting and increases. Since tenants rarely talk to or know one another, you don’t have to be uniform in how you price the various units. Also, upping a tenant’s monthly fee a modest amount (say, from $150 to $159, or 6%), is not going to be enough of a motivating factor to get them to move their belongings out.
· Economic versatility – self-storage thrives off both up and down economies for these simple reasons: when times are good, people buy more and need more storage space; when times are bad, people still find it difficult to downsize their possessions, and may even cling more tightly to them if they’re feeling loss in other areas. They may even need storage more urgently if they have to downsize living space, such as going from a house to an apartment. When you account for the fact that almost one in 10 US households (9.4% to be exact) rents self-storage, you can see where the economic resilience is based.
· Psychology – it takes significant effort to empty out a storage unit and relocate it, with the hassle of renting a moving van, hiring movers or convincing friends to assist. It’s just easier to pay the monthly rent than deal with the exertion of relocation.
· Low expenses – overhead costs are minimal. On-site management for customer service need can be minimal, and utility costs such as air conditioning can actually be turned into a selling point to customers as protection for their belongings.
· Part-time management – depending on the scope of your self-storage property, you may not need much staff in place and can even go for periods of time where no one is on site, such as overnight and on weekends.
· Negotiation leverage and exit strategy – since most self-storage properties are still owned by small, individual owners (though institutions are catching on), you have more leverage in dealing with and negotiating directly with those owners. Once you’ve acquired a few of them, unloading them to a large buyer should not be difficult at all.
Reynaldo Santana, a 10 year business development tech guru in the emerging tech sector now looks to create a bigger impact by using his entrepreneur experiences and knowledge to help rebuild this economy with those interested in partnering and building it together. Santana is now actively involved now in identifying, assessing, analyzing, sourcing and acquiring properties. His specialty is in the commercial sector, where he brings focused expertise under the direction of his personal coach Peter Harris. A leading expert in the field of commercial real estate investing in United States, Peter Harris is author of the best selling Commercial Real Estate book of all time, Commercial Real Estate Investing for Dummies. He also co-authored with Donald Trump the audio program Three Master Secrets of Real Estate Success. His latest release, Commercial Real Estate for Beginners is a #1 best seller on Amazon.
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