Investing in Self-Storage Facilities
Identifying ways to create passive income is one of the most important steps towards wealth building. Many beginner investors look towards the normal stocks and bonds that they are normally told about but rarely dig deeper into income producing industries like storage units. Self-Storage units are a popular tool used for many reasons, we see evictions, foreclosures, and people relocating to new places through jobs, school or circumstances seemingly every week of the year. This makes self-storage an effective way to create passive income. There are multiple ways to invest in self-storage units, many of which are overlooked by the novice investor. Two main types of self-storage investments are Turn-key investments and turnaround investments.
Turn-Key self-storage Investments offer lower risk and usually provide you with the amenities to be successful. Turn-key investments have an easier time finding financing, they usually reside in a great location, and most importantly, once you buy, you own and reap benefits of its cash flow.
The turn-around self-storage investment approach takes more strategic planning to reap a high ROI (Return on Investment). Turn-around investments typically are a result of a distressed or failing deal, they have/had poor management, poor location or needs renovation in order to maximize its return capabilities. These projects are riskier but a well turned around self-storage unit will bring high revenue and once a property is properly managed the earning potential increases.
What should you know about investments in self-storage?
When looking into self-storage investments there are several important factors you should consider to help you make a sound business decision.
Have an accurate measurement of storage unit size in total and per unit.
In order to afford full-time management, it is estimated that a 30,00-40,000 sq ft facility is required.
Be precise with your numbers no matter the size of your storage facility.
Have a mix in unit size, this provides options for customers.
Analyze the location and the surrounding area.
Is there traffic or do you need more signs to direct traffic?
These aspects are important when scouting a potential self-storage investment, Self-storage units can typically survive downtime due to lack of volatility within the industry. It is one of the rare industry that despite economic fluctuations it remains a necessity to many people across the world.
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