Over the last few years, self-storage facilities have established themselves as among the most profitable real estate investments. They are not only lucrative, but they are relatively risk-free.
Apart from that, self-storage is considered by many investors as recession-resistant as it provides them with a stable cash flow even during crises, like the one brought about by the COVID-19 pandemic. As businesses downsize and people move to other places to search for new job opportunities or find a better way of life, the demand for storage spaces is still high. So, you too can engage in this business to establish a source of primary or passive income.
But as a new investor in this type of property, you are probably curious about passive investing and how it works. Read on to learn why self-storage business is a great investment option for you.
Benefits of Passive Investing
A massive number of families are living paycheck to paycheck. If you are one of these individuals who are looking for more financial freedom, you should find some ways to earn passive income. Starting a self-storage business lets you build on capital appreciation with less work, making it one of the best real estate investment strategies you can have.
Passive investing with self-storage provides you with several benefits, such as the following:
- It may take some time to see full returns, but you can just sit back and watch your investment grow once you have established the business.
- It gives you more time to spend on what you enjoy, like being with your loved ones, pursuing some hobbies, or chasing other financial goals.
- It provides you access to other real estate investment opportunities to grow your business.
- It helps make sure you are still financially stable in case your primary source of income stops.
When done right, passive investing has the potential to bring you higher returns than active types of real estate investment options. Plus, there are plenty of self-storage investment opportunities to choose from, making the next phase of your investment journey exciting.
However, committing money to anything for gain also carries some risk. So, you need to carry out a thorough assessment of any potential venture. The goal is to gain a profit, but this will not occur overnight. It would be detrimental to get into any type of business with a get-rich-quick mindset.
Instead, consider passive investing as a tool that helps you build wealth thanks to the appreciation of steady and potential profits. This is because it will take time for such investments to yield a consistent income with a steady increase in value.
Getting Into the Self-Storage Industry
The first thing you need to decide is the type of self-storage facilities you would like to invest in. Some of the most popular choices are:
- Drive-up facilities – These are usually located at road fronts and provide maximal accessibility. They are profitable real estate investments to make if you target customers who require frequent access to their storage units.
- Climate-controlled facilities – These hold specialized items that require temperature regulation.
- Non-climate controlled units – They are popular among businesses and individuals who want to store their valuables.
- Vehicle storage facilities – These are used to house vehicles, such as cars, trucks, bikes, boats, and jet skis.
- Mobile storage units – These are containers that can be transported to a customer’s location.
Finding Passive Self-Storage Investment Opportunities
There are two major ways to get into the self-storage market.
Buying real estate investment trusts
These are companies that own and operate income-producing properties. And, you can invest in these companies in the form of real estate investment trusts (REITs), just like you invest in stocks. A major benefit of purchasing REITs is that they pay a minimum of 90 percent of the taxable income to shareholders as dividends.
Publicly traded REITs in self-storage come from well-known brands and have low capital requirements, making them one of the best performers in the real estate industry. You also get a chance to buy into an investment with inexpensive tenant turnover costs, with tenants moving in and never leaving!
Purchasing or building a self-storage facility
Developing a self-storage unit business is suitable for those looking to take an active role in their investments. This mode has more risks, but better rewards.
However, make sure that the location of the facility is close to a population center. Plus, hire a third-party management company to handle the daily operations. Once the unit achieves a stable cash flow, it should offer you a steady source of passive income for years.
If you prefer buying a previously owned self-storage facility, here are some things you need to do:
- Choose a facility that contains various unit sizes at different rates.
- Make sure the property has an adequate drainage system to prevent freezing and flooding.
- Check if there is automatic gate access, a security system with CCTV cameras, and a sufficient lighting system for added safety and convenience for your customers.
- Assess if the building is well maintained.
Unfortunately, not all facilities have all the items above. Nonetheless, installing them after you purchase the facility can significantly increase its value for future investors.
Maximizing Income from Passive Self-storage Investments
As the most profitable REI – passive storage investing provides you with lots of free time that you can spend to increase your venture’s potential or invest in other ventures.
However, you should properly use the information you gather from your current customers to determine areas for improvement. You can use it to adjust your marketing campaigns to a language that’s easily palatable to your target customer base. The reviews you receive are also handy in knowing what new amenities you should install to maximize your profit and grow your business.
Get Started Today
Passive storage investing can be confusing for new entrants. However, it provides an excellent way to build your wealth. For the budding entrepreneur looking for profitable real estate investments, the self-storage industry always has great opportunities for you. This option only requires less capital to start, and it is highly resistant to economic downturns.
Are you looking for more ways to get into the world of real estate? Browse our site for more informative articles!
