Understanding Market Risks: The Stock Market, Residential Real Estate, and Self-Storage Investing

Follow our social media

Understanding Market Risks:

The Stock Market, Residential Real Estate, and Self-Storage Investing

As an investor – whether a beginner or seasoned professional – one needs to always manage downside exposure. When analyzing an investment in any field or industry, risk is the name of the game. If you see an opportunity to make 10%, 15%, or 20% on your money, should you make an investment? The answer, and the key to ultimate success, lies in understanding how much risk is at stake.

What do I mean?

If you scan the stock market and find an attractive company you’d like to invest in, what is the likelihood you’ll lose money? Does the company have a competitive edge and the ability to raise prices alongside its input costs? Can the company withstand macro challenges that have appeared from wars, inflation, and higher interest rates?

What if you buy an individual home to rent out to a tenant – is your potential reward greater than your potential risk? What happens if the tenant vacates, and your investment is now generating $0 of income? What happens if you have a flood and suddenly need to make major repairs just to stay afloat?

These questions and many more need to be addressed when assessing an investment’s viability. And, when all is said and done, you’ll come to realize that self-storage offers the best risk-adjusted reward in the marketplace, the only such reward you should think about.

Let’s dig a little deeper.

What is Self-Storage?

Self-Storage is a type of real estate asset class.

Over the years, as consumers have collected excess goods and products, there has been an increasing demand for extra space and storage. That is where self-storage comes in.

Self-storage facilities are offsite buildings that charge tenants a monthly rate to store their possessions. Someone with an extra couch, T.V., bedding, or a car might consider spending a little bit extra to store their products in a self-storage facility. And, as you might imagine, due to the increased demand for this asset class, the investors who own and manage the facilities have reaped – and continue to reap – tremendous profits.

Why is Self-Storage a Good Investment?

As mentioned earlier, the goal when evaluating an investment is to determine if you are being compensated for the inherent risk involved in the transaction. In any real estate transaction, you’ll come across two main drivers of risk: financial risk and operational risk.

Financial risk is the risk associated with your bank loan, rising interest rates, and the cost to find equity partner for your deals. Operational risk, on the other hand, is risk associated with operating the property efficiently, ensuring tenants are paying on time and are happy throughout their stay, and driving the costs down without impacting the property’s income potential.
Self-storage facilities offer compelling upside potential while mitigating both financial and operational risks. First, self-storage facilities generally have hundreds of units. If one tenant decides to leave, the owner has 99+ other units that are still generating income. The diversification effect can help drive wealth growth over the long-term despite the risks of a vacating tenant. Additionally, if a unit gets damaged, broken into, or dismantled, the owner still has many other paying tenants that can support expenses.

Second, self-storage facilities have proven to be recession-proof. Generally, monthly rents for self-storage range from $50-$150 per month. Since the actual dollar amount is relatively small relative to a typical person’s other yearly expenses, when a tenant thinks to cut back during a recession, he or she opts to cut back larger ticket expenses before cutting back their self-storage expense. Furthermore, during a recession, many people elect to downsize their apartments and homes to save money. Historically, when people downsize, they look for out-of-home space (such as self-storage) to store their extra furniture and goods.

So, self-storage is a great, consistent, recession-proof investment, but why is it better than owning residential real estate or investing in the stock market?

Downsides of Residential Real Estate

Over the years, investing in residential real estate has always been a good investment. Housing is generally in demand, it’s an affordable asset class, and the government has always incentivized homeownership through various lending programs – so, what’s the catch?

Ever since the onset of Covid, the market has begun to realize how fragile the housing market truly is. Investors hoping to raise rents on their tenants, refinance their debt, or experience appreciation on their home are being met with a rude awakening. In order to combat inflation, the government has raised interest rates rapidly and that has caused a precipitous drop in housing prices and soaring financing costs. And, as a single-tenant asset class, a residential home is an inflexible asset. Meaning, an owner is locked into a long-term lease without much optionality to raise rents.

Self-storage is just the opposite.

As a self-storage investor, you’ll manage hundreds of units – each with varying lease expirations. As the market changes, self-storage asset owners have a tremendous amount of flexibility to raise rents and ensure supply and demand are always optimized for maximum profit potential. All while minimizing downside risk.

Downside of the Stock Market

Just like residential real estate, the stock market is not without its challenges. Although many believe the stock market is relatively efficient – always pricing assets based on their fair value – that isn’t always the case. Recently, as macro challenges have impacted supply chain efficiency and higher interest rates have hampered consumer behavior, stocks have taken an absolute beating – sometimes falling 20% in a day.
Meta (formally Face Book), Shopify, Carvana, Netflix, Snap, Amazon, and many other once high, in-demand companies are now down well over 50% on the year. The mere fact that stocks are so liquid give rise to a tremendous amount of groupthink and lead to massive gut-wrenching sell offs. While the NASDAQ, S&P 500, and Dow Jones Industrial Average are down 25% on the year, self-storage rental rates continue to rise – very, very fast.
As you think about preserving your wealth and outpacing inflation and living expenses, it’s time to consider self-storage investing. At Safe Storage Investors, we always scrupulously evaluate every deal before putting investor’s capital (and our own capital) to work. We target 15% IRRs and at least 2.0x Multiple on Invested Capital returns. We currently own five properties and are in the market to deploy over $20,000,000 over the next 12-24 months. Feel free to reach out to learn more.

Leave a Reply

Your email address will not be published. Required fields are marked *

10 Reasons To Invest In Self Storage Today

Find Us On LinkedIn
🇺🇸 +1
  • 🇦🇨
    Ascension Island +247
  • 🇦🇩
    Andorra +376
  • 🇦🇪
    United Arab Emirates +971
  • 🇦🇫
    Afghanistan +93
  • 🇦🇬
    Antigua And Barbuda +1
  • 🇦🇮
    Anguilla +1
  • 🇦🇱
    Albania +355
  • 🇦🇲
    Armenia +374
  • 🇦🇴
    Angola +244
  • 🇦🇷
    Argentina +54
  • 🇦🇸
    American Samoa +1
  • 🇦🇹
    Austria +43
  • 🇦🇺
    Australia +61
  • 🇦🇼
    Aruba +297
  • 🇦🇽
    Åland Islands +358
  • 🇦🇿
    Azerbaijan +994
  • 🇧🇦
    Bosnia And Herzegovina +387
  • 🇧🇧
    Barbados +1
  • 🇧🇩
    Bangladesh +880
  • 🇧🇪
    Belgium +32
  • 🇧🇫
    Burkina Faso +226
  • 🇧🇬
    Bulgaria +359
  • 🇧🇭
    Bahrain +973
  • 🇧🇮
    Burundi +257
  • 🇧🇯
    Benin +229
  • 🇧🇱
    Saint Barthélemy +590
  • 🇧🇲
    Bermuda +1
  • 🇧🇳
    Brunei Darussalam +673
  • 🇧🇴
    Bolivia +591
  • 🇧🇶
    Bonaire, Sint Eustatius And Saba +599
  • 🇧🇷
    Brazil +55
  • 🇧🇸
    Bahamas +1
  • 🇧🇹
    Bhutan +975
  • 🇧🇼
    Botswana +267
  • 🇧🇾
    Belarus +375
  • 🇧🇿
    Belize +501
  • 🇨🇦
    Canada +1
  • 🇨🇨
    Cocos (keeling) Islands +61
  • 🇨🇩
    Congo, The Democratic Republic Of The +243
  • 🇨🇫
    Central African Republic +236
  • 🇨🇬
    Congo +242
  • 🇨🇭
    Switzerland +41
  • 🇨🇮
    Cote D'ivoire +225
  • 🇨🇰
    Cook Islands +682
  • 🇨🇱
    Chile +56
  • 🇨🇲
    Cameroon +237
  • 🇨🇳
    China +86
  • 🇨🇴
    Colombia +57
  • 🇨🇷
    Costa Rica +506
  • 🇨🇺
    Cuba +53
  • 🇨🇻
    Cape Verde +238
  • 🇨🇼
    Curaçao +599
  • 🇨🇽
    Christmas Island +61
  • 🇨🇾
    Cyprus +357
  • 🇨🇿
    Czech Republic +420
  • 🇩🇪
    Germany +49
  • 🇩🇯
    Djibouti +253
  • 🇩🇰
    Denmark +45
  • 🇩🇲
    Dominica +1
  • 🇩🇴
    Dominican Republic +1
  • 🇩🇿
    Algeria +213
  • 🇪🇨
    Ecuador +593
  • 🇪🇪
    Estonia +372
  • 🇪🇬
    Egypt +20
  • 🇪🇭
    Western Sahara +212
  • 🇪🇷
    Eritrea +291
  • 🇪🇸
    Spain +34
  • 🇪🇹
    Ethiopia +251
  • 🇫🇮
    Finland +358
  • 🇫🇯
    Fiji +679
  • 🇫🇰
    Falkland Islands (malvinas) +500
  • 🇫🇲
    Micronesia, Federated States Of +691
  • 🇫🇴
    Faroe Islands +298
  • 🇫🇷
    France +33
  • 🇬🇦
    Gabon +241
  • 🇬🇧
    United Kingdom +44
  • 🇬🇩
    Grenada +1
  • 🇬🇪
    Georgia +995
  • 🇬🇫
    French Guiana +594
  • 🇬🇬
    Guernsey +44
  • 🇬🇭
    Ghana +233
  • 🇬🇮
    Gibraltar +350
  • 🇬🇱
    Greenland +299
  • 🇬🇲
    Gambia +220
  • 🇬🇳
    Guinea +224
  • 🇬🇵
    Guadeloupe +590
  • 🇬🇶
    Equatorial Guinea +240
  • 🇬🇷
    Greece +30
  • 🇬🇹
    Guatemala +502
  • 🇬🇺
    Guam +1
  • 🇬🇼
    Guinea-bissau +245
  • 🇬🇾
    Guyana +592
  • 🇭🇰
    Hong Kong +852
  • 🇭🇳
    Honduras +504
  • 🇭🇷
    Croatia +385
  • 🇭🇹
    Haiti +509
  • 🇭🇺
    Hungary +36
  • 🇮🇩
    Indonesia +62
  • 🇮🇪
    Ireland +353
  • 🇮🇱
    Israel +972
  • 🇮🇲
    Isle Of Man +44
  • 🇮🇳
    India +91
  • 🇮🇴
    British Indian Ocean Territory +246
  • 🇮🇶
    Iraq +964
  • 🇮🇷
    Iran, Islamic Republic Of +98
  • 🇮🇸
    Iceland +354
  • 🇮🇹
    Italy +39
  • 🇯🇪
    Jersey +44
  • 🇯🇲
    Jamaica +1
  • 🇯🇴
    Jordan +962
  • Japan +81
  • 🇰🇪
    Kenya +254
  • 🇰🇬
    Kyrgyzstan +996
  • 🇰🇭
    Cambodia +855
  • 🇰🇮
    Kiribati +686
  • 🇰🇲
    Comoros +269
  • 🇰🇳
    Saint Kitts And Nevis +1
  • 🇰🇵
    North Korea +850
  • 🇰🇷
    South Korea +82
  • 🇰🇼
    Kuwait +965
  • 🇰🇾
    Cayman Islands +1
  • 🇰🇿
    Kazakhstan +7
  • 🇱🇦
    Lao People's Democratic Republic +856
  • 🇱🇧
    Lebanon +961
  • 🇱🇨
    Saint Lucia +1
  • 🇱🇮
    Liechtenstein +423
  • 🇱🇰
    Sri Lanka +94
  • 🇱🇷
    Liberia +231
  • 🇱🇸
    Lesotho +266
  • 🇱🇹
    Lithuania +370
  • 🇱🇺
    Luxembourg +352
  • 🇱🇻
    Latvia +371
  • 🇱🇾
    Libya +218
  • 🇲🇦
    Morocco +212
  • 🇲🇨
    Monaco +377
  • 🇲🇩
    Moldova, Republic Of +373
  • 🇲🇪
    Montenegro +382
  • 🇲🇫
    Saint Martin (french Part) +590
  • 🇲🇬
    Madagascar +261
  • 🇲🇭
    Marshall Islands +692
  • 🇲🇰
    North Macedonia, Republic Of +389
  • 🇲🇱
    Mali +223
  • 🇲🇲
    Myanmar +95
  • 🇲🇳
    Mongolia +976
  • 🇲🇴
    Macao +853
  • 🇲🇵
    Northern Mariana Islands +1
  • 🇲🇶
    Martinique +596
  • 🇲🇷
    Mauritania +222
  • 🇲🇸
    Montserrat +1
  • 🇲🇹
    Malta +356
  • 🇲🇺
    Mauritius +230
  • 🇲🇻
    Maldives +960
  • 🇲🇼
    Malawi +265
  • 🇲🇽
    Mexico +52
  • 🇲🇾
    Malaysia +60
  • 🇲🇿
    Mozambique +258
  • 🇳🇦
    Namibia +264
  • 🇳🇨
    New Caledonia +687
  • 🇳🇪
    Niger +227
  • 🇳🇫
    Norfolk Island +672
  • 🇳🇬
    Nigeria +234
  • 🇳🇮
    Nicaragua +505
  • 🇳🇱
    Netherlands +31
  • 🇳🇴
    Norway +47
  • 🇳🇵
    Nepal +977
  • 🇳🇷
    Nauru +674
  • 🇳🇺
    Niue +683
  • 🇳🇿
    New Zealand +64
  • 🇴🇲
    Oman +968
  • 🇵🇦
    Panama +507
  • 🇵🇪
    Peru +51
  • 🇵🇫
    French Polynesia +689
  • 🇵🇬
    Papua New Guinea +675
  • 🇵🇭
    Philippines +63
  • 🇵🇰
    Pakistan +92
  • 🇵🇱
    Poland +48
  • 🇵🇲
    Saint Pierre And Miquelon +508
  • 🇵🇷
    Puerto Rico +1
  • 🇵🇸
    Palestinian Territory, Occupied +970
  • 🇵🇹
    Portugal +351
  • 🇵🇼
    Palau +680
  • 🇵🇾
    Paraguay +595
  • 🇶🇦
    Qatar +974
  • 🇷🇪
    Reunion +262
  • 🇷🇴
    Romania +40
  • 🇷🇸
    Serbia +381
  • 🇷🇺
    Russian Federation +7
  • 🇷🇼
    Rwanda +250
  • 🇸🇦
    Saudi Arabia +966
  • 🇸🇧
    Solomon Islands +677
  • 🇸🇨
    Seychelles +248
  • 🇸🇩
    Sudan +249
  • 🇸🇪
    Sweden +46
  • 🇸🇬
    Singapore +65
  • 🇸🇭
    Saint Helena +290
  • 🇸🇮
    Slovenia +386
  • 🇸🇯
    Svalbard And Jan Mayen +47
  • 🇸🇰
    Slovakia +421
  • 🇸🇱
    Sierra Leone +232
  • 🇸🇲
    San Marino +378
  • 🇸🇳
    Senegal +221
  • 🇸🇴
    Somalia +252
  • 🇸🇷
    Suriname +597
  • 🇸🇸
    South Sudan +211
  • 🇸🇹
    Sao Tome And Principe +239
  • 🇸🇻
    El Salvador +503
  • 🇸🇽
    Sint Maarten (dutch Part) +1
  • 🇸🇾
    Syrian Arab Republic +963
  • 🇸🇿
    Eswatini +268
  • 🇹🇦
    Saint Helena +290
  • 🇹🇨
    Turks And Caicos Islands +1
  • 🇹🇩
    Chad +235
  • 🇹🇬
    Togo +228
  • 🇹🇭
    Thailand +66
  • 🇹🇯
    Tajikistan +992
  • 🇹🇰
    Tokelau +690
  • 🇹🇱
    Timor-leste +670
  • 🇹🇲
    Turkmenistan +993
  • 🇹🇳
    Tunisia +216
  • 🇹🇴
    Tonga +676
  • 🇹🇷
    Turkey +90
  • 🇹🇹
    Trinidad And Tobago +1
  • 🇹🇻
    Tuvalu +688
  • 🇹🇼
    Taiwan +886
  • 🇹🇿
    Tanzania, United Republic Of +255
  • 🇺🇦
    Ukraine +380
  • 🇺🇬
    Uganda +256
  • 🇺🇸
    United States Of America +1
  • 🇺🇾
    Uruguay +598
  • 🇺🇿
    Uzbekistan +998
  • 🇻🇦
    Holy See (vatican City State) +39
  • 🇻🇨
    Saint Vincent And The Grenadines +1
  • 🇻🇪
    Venezuela +58
  • 🇻🇬
    Virgin Islands, British +1
  • 🇻🇮
    Virgin Islands, U.s. +1
  • 🇻🇳
    Vietnam +84
  • 🇻🇺
    Vanuatu +678
  • 🇼🇫
    Wallis And Futuna +681
  • 🇼🇸
    Samoa +685
  • 🇽🇰
    Kosovo +383
  • 🇾🇪
    Yemen +967
  • 🇾🇹
    Mayotte +262
  • 🇿🇦
    South Africa +27
  • 🇿🇲
    Zambia +260
  • 🇿🇼
    Zimbabwe +263
Choose file
Uploading… (0%)

Oops. This file type isn’t allowed.

This file size is too big.

0/1 Files uploaded