Are you tired of hearing about market volatility and seeing your stock portfolio swing from one end of the spectrum to the other in spectacular fashion almost daily?
Are you worried about inflationary pressures impacting almost every single product and service you purchase or use?
Do you wonder how to diversify your portfolio to maintain and grow your nest egg for the next generation in a market froth with speculation and uncertainty?
At Safe Storage Investors, we’d like to introduce you to the self-storage industry – a tried and true investment asset class that has not only survived the test of time but might likely be the most attractive investment going into this challenging inflationary environment.
Let us explain.
What is Self-Storage?
Self-storage is an asset class – like multifamily – whereby tenants pay a flat rate monthly fee to rent out storage space.
In today’s heavily consumer-focused lifestyle, people simply do not have enough room for their items.
Extra televisions, old computers, a second couch, or even an extra car are all examples of items that people have but might not necessarily want in their homes.
Additionally, e-commerce brands such as Amazon and Wayfair have spearheaded a massive movement of how individuals consume retail experiences. Companies require huge amounts of warehouse space and storage to house their for-sale products. And, on the flipside, consumers, now with access to a plethora of goods at their fingertips, need places to put these e-commerce products.
That is where self-storage facilities come in handy.
For as low as $50 a month (or sometimes even lower depending on the market), people can store their cherished goods that might not be able to fit in their apartments or houses. Having the flexibility to store items in a safe, temperature-controlled, environment gives people the necessary piece of mind in knowing their items are safe, protected, and in good hands.
So where does that leave you, the aspiring self-storage investor?
Why Invest in Self-Storage?
Over the years, for a handful of reasons, self-storage facilities have proven to be a tremendously resilient asset class.
First, the nominal value of a storage space is only a small percentage of the consumer’s overall monthly bill.
Well, when rent and mortgage payments are $2,500 – $4,000 a month (if not more), cable $80 a month, utilities $150 – $200 a month, and electricity and streaming services another $250 per month, adding on a $100 monthly storage bill doesn’t seem too daunting.
Realistically, if one is paying $100 per month to rent a 100 square foot unit, it is likely that the mere headache of removing the unit’s contents, selling them, or squeezing them into a home just isn’t worth the time, cost, and effort.
Simply, once people have a storage unit, they are likely to keep it for many years down the road.
Second, self-storage units offer compelling unit economics due to the low-cost basis and ability to raise rents.
Multifamily apartment buildings in major cities can typically cost renters $3,000 – $4,000 for a one-bedroom apartment.
Given the high monthly basis, owners generally can’t raise rents more than 3% – 5% without driving the tenant out of the space. However, since the basis for self-storage is relatively low at $50-$150 per unit, raising the rents by $10 – $15 per unit – or close to 20% – is not only possible, but it is quite customary in the industry.
Being able to increase income by over 10% a year without increasing tenant turnovers can prove to be tremendously lucrative for investors – especially during recessionary times.
Okay, so self-storage is a strong asset class – what are some ways to invest?
How to Invest in Self Storage
Active investing is a great way to get involved in the self-storage industry. However, it does not come without its many challenges.
Active investing includes sifting through brokerage sites, cold calling facility owners, crunching the numbers, accessing bank financing, raising equity, and executing on the investment plan. Not only will it take many hours of work, skill, and patience, it can be devastating if done incorrectly.
However, if done right, the profits can be substantial.
Here, at Safe Storage Investors, we have the financial backing, industry experience, and economies of scale to develop a next-level self-storage facility flywheel.
We vet every deal that comes our way and only dive deeper into the ones that have strong downside protection, a high probability of success, and good unit economics.
And, even then, we’ll still pass on over 75% of the submissions.
To be successful in this industry, you must be tremendously scrupulous in underwriting and on-going cost and cash management.
We put our money on the line and treat all equity partners as equal to ensure everyone receives a transparent process throughout.
Which leaves the next, more attractive form of self-storage investing: Passive investing.
Passive investing can be done in two main ways – through REITs and through partnerships.
REITs – or Real Estate Investment Trusts – are publicly traded securities that represent an ownership stake in a pool of real estate properties.
There are thousands of REITs that cover different asset classes, geographies, and management styles. If you’d like, you can sift through any number of REITs and invest in real estate via purchasing one of their shares. Or if, instead of broad real estate exposure, you’d like specific self-storage exposure, you can search directly for that and exclusively buy self-storage REITs.
However, REIT investing does not come without its drawbacks.
First and foremost, REITs have large fees.
Public companies are subject to more rigorous auditing and regulation. With more regulation comes more expenses. Something you might not want to be a part of.
Second, REITs tend to take large equity packages and salaries for managing these larger portfolios. Less of your money will go to work because some of it is going straight into the managers’ pockets.
Third, REITs are subject to broader stock market volatility. Although some of the underlying assets might be strong and performing well, broader market jitters can cause a material mark down in your security’s pricing.
To avoid the drawbacks of REITs, we recommend investing in a real estate partnership instead.
Real Estate Partnerships
Real estate partnerships are pooled investment vehicles whereby a managing partner facilitates the investment and operation of real estate on behalf of the passive investors.
There are many benefits associated with investing in a partnership.
Given that partnerships are typically structured in an LLC on a deal-by-deal basis, they offer many tax benefits. As a pass-through entity, owners aren’t taxed twice like REITs.
Partnerships also offer investors greater flexibility and access to managing members. It is very challenging to get ahold of REIT managers. Partnerships, on the other hand, will happily give you access to its managers to provide added transparency throughout the investment cycle.
And, most importantly, real estate partnerships typically offer an above average return on investment and stable monthly dividends in the form of preferred equity distributions. Having piece of mind knowing your money is working for you will allow you to have more freedom to spend time with family and do other tasks.
Safe Storage Investors has always structured each deal as a partnership to provide investors with the attractive tax benefits of being a pass-through entity as well as providing investors with an open line of communication throughout the entire process.
So, why invest with us? A few reasons.
Why Invest with Safe Storage Investors?
Safe Storage Investors has been in the self-storage industry for well over 3 years now. And, along the way, not only has the company turned decrepit facilities into money-making fully occupied locations, it has also provided investors with a transparent and seamless investing process along the way.
Investors want access to the self-storage market.
Investors want to passively invest without having to worry about operational excellence and downside exposure.
Investors want as much of their money working for them and in the actual deal rather than paying REIT manager fees.
Safe Storage Investors provides just that – and at a grand scale.
We have invested in many facilities and have a track record of success.
Not only have we purchased these facilities, but we have also stabilized, increased rents, reduced vacancies, added ancillary fees, and have sold a handful of properties to provide exit liquidity and an asymmetrical return to our investors.
In a recent property, we achieved a 5x equity multiple on invested capital for our investors.
The time to invest in self-storage is now.