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Self-storage is a $38 billion industry. As Americans constantly flock to the latest gadget sale, their need for space grows exponentially each year.
Investing in storage units is a great way to diversify your portfolio and grow your money. Take a look at this overview of why investing in storage units is worth the effort.
Should I Invest in Storage Units?
Real estate investors understand the high risk that comes with most commercial properties. But self-storage is an attractive investment because there’s lots of income potential without all the typical overhead costs that come with real estate.
Self-storage requires less construction than any other type of commercial real estate are few ongoing management requirements. You can invest in a small to midsize self-storage property and have it be self-sufficient with only part-time employees.
Another big difference between investing in storage units versus other types of real estate is the opportunity to avoid leasing to tenants. Yes, you lease units to individuals, but you don’t house anyone physically on the property.
There’s no need to make constant improvements to keep occupants happy because the occupants are items. Self-storage unit leases run from month to month so investment income can be tracked easier.
Many commercial real estate investors think first of new construction with self-storage units, but there’s a lot of opportunity with existing real estate. Most units are owned by small operators that own only a few locations.
Investing in Storage Units
There’s a constantly growing demand for storage units. Almost 10 percent of American households rent or lease a storage unit.
How can you invest in storage units to take advantage of this opportunity? Here are a few ways you can start investing in storage units.
Who says you have to buy or build your own storage units in order to make a profit? Self-storage real estate investment trusts (REITs) are traded publicly on the stock market.
This is a passive investment opportunity that works well for anyone with a low-risk tolerance. If you can’t stomach the idea of raising millions of dollars to own a storage facility, you might opt for REITs instead.
REITs pay a dividend, or income, while the storage unit investment makes money. Storage REITs are liquid which means you can buy and sell them whenever you want if your cash reserves get low.
Storage Unit Developer
Some investors love the idea of getting their hands dirty when it comes to launching a new venture. If you prefer active investments, look for opportunities to pool your money with other investors through real estate syndication.
You might target a syndicator, or sponsor, that raises money for the self-storage facility to be built. Or, you can serve as the sponsor and check it out yourself.
Pooling together money with other investors gives you more flexibility in how you operate your facility. By bypassing the bank, you have complete control over your investment terms.
Keep in mind that there are rules for raising money for investment ventures. The Security and Exchange Commission (SEC) requires that you look for accredited investors when raising money from the public.
The only exception is if you’re using funds from friends with experience in other real estate investments. With the money you raise, you can build a self-storage facility from the ground up or buy an existing property.
Self Storage for Sale
Investing in storage units is lucrative no matter how you choose to approach it. But there are ups and downs with any investment.
Make sure you’re financially prepared for being a developer if you choose to run your own business. All business has the potential for loss which can be devastating if you don’t plan accordingly.
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