Accompanying the entrance of the new decade is the growth of the self-storage industry. The appeal to a variety of older and younger demographics and the tendency to stay afloat during varied economic climates makes self-storage an appealing method of diversification. Essentially, with self-storage, you can take advantage of the need to accumulate material possessions, a tendency that certainly isn’t likely to go away anytime soon.
Even in the midst of an economic downturn, the fluctuation of self-storage appeals to those who do and don’t accumulate material possessions. Millennials tend to store their belongings in self-storage units to make for easier and more frequent moves. Baby boomers are staying in their homes, but have a difficult time letting go of possessions, thus presenting the need to store them elsewhere.
Benefits of Self-Storage
Self-storage is typically a strong industry, even during economic slumps. In a stronger economic period, self-storage units might be used for innovative ways, such as storing pharmaceutical products in the short-term or small businesses that need storage space. During a downturn, self-storage customers might be downsizing and setting aside important or large items in order to live in a smaller space. The expenses are low, as are the insurance costs, which helps to preserve cash flow during a slower economic period.
How should I invest in self-storage?
Depending on your knowledge of the industry and whether or not you’d like to play a direct or indirect role in your investment, there are hands-on and hands-off options.
REITs: With a REIT, an investor earns income from shares in a self-storage company’s stock and pays income tax on dividends paid to shareholders. This hands-off approach also includes lower entry costs, though not as high returns as a real estate syndication.
Real estate syndications: This hands-on approach requires experience and knowledge about the self-storage industry to succeed. This might mean an in-office, on-site role, or more behind the scenes.
Read more about the differences between REITs and real estate syndications.
What are the risks of self-storage?
As with any investment, there are always risks. There is always the potential for saturation in a newly trending market, which can prevent you from raising rent or meeting occupancy goals. Depending on your experience, you’ll want to carefully weigh your goals against your access to resources and available time for management. If you do decide to take a more hands-on role, you’ll want to carefully study the market in your area and do your homework.
What kind of investor do you want to be?
A new decade calls for wider diversification and more unique investment methods. Ultimately, self-storage rent can potentially grow as much as office or retail.
If you’re curious about how you can shift from being an active to a passive investor, check out these resources in our library.
We’ve also recently finished a resource called the Wealth Strategy Playbook. With these tips at your arsenal, you’ll be ready to enter the decade with a wealth of information to rev up your investment potential.
If you’re ready to move from active investing to unique passive investment opportunities, get in touch.