Intro to Self Storage

What It Is and Why We Like It

Author

John Mason
July 26, 2024

Mason Equity Partners seeks to provide attractive risk-adjusted returns through investments in Commercial Real Estate. In this article, we'll explore what self-storage is and why it could be a smart choice for your investment portfolio.

John Mason has been investing in self-storage since 1996, first with his prior partner Gray Cardiff at Sound Advice and now with a $4bn Institutional Private Equity Fund.

What is Self Storage?

Simply put, a self-storage facility is a property divided into individual units that can be rented out to tenants for storing their belongings. These units can range in size from small lockers to large spaces capable of holding the contents of an entire house. People use self-storage for a variety of reasons, including moving, downsizing, storing business inventory, or just needing extra space for personal items.

Why Consider Investing in Self-Storage?

High Demand: The demand for self-storage continues to grow as people accumulate more possessions and seek convenient storage solutions. Major life events such as moving, renovating, or experiencing a change in family size often create a need for additional storage space. Businesses also rely on self-storage to manage excess inventory, documents, and equipment.

Recession-Resilient: Self-storage is known for its resilience during economic downturns. When the economy is booming, people buy more goods and need space to store them. During recessions, people downsize their living spaces or move in with family, which also drives demand for storage. This dual demand ensures a steady stream of customers regardless of the economic climate.

Low Maintenance Costs: Compared to other real estate investments, self-storage facilities have relatively low maintenance costs. The units are simple structures that require minimal upkeep, and tenants are responsible for their own spaces. This means you can enjoy a steady income without the hassle of frequent repairs or renovations.

Flexibility and Scalability: Self-storage offers flexibility in terms of unit sizes and rental durations. Most leases are month-to-month, allowing for quick adjustments to rental rates based on market demand. Additionally, self-storage facilities can be easily scaled, whether through expansion or acquiring additional properties.

Attractive Returns: Self-storage investments can yield attractive returns. Rental income is steady, and the potential for property value appreciation adds to the overall profitability. Many investors find that self-storage outperforms other types of real estate, particularly in terms of consistent cash flow and capital gains.

How to Get Started

Research the Market: Before diving into self-storage investment, it's crucial to research the market. Look for areas with high demand for storage but limited supply. Consider factors such as population growth, local economy, and competition. Understanding the market dynamics will help you make informed decisions and maximize your returns.

Choose the Right Location: Location is key to the success of a self-storage facility. Urban areas with high population density, limited living space, and a transient population often provide the best opportunities. However, suburban and rural areas can also be lucrative if they have a strong demand for storage.

Evaluate the Property: When evaluating a potential property, consider factors such as visibility, accessibility, and security. A well-located and secure facility will attract more tenants and retain them longer. Additionally, look for properties that allow for future expansion or improvements to increase value over time.

Understand the Financials: Analyze the financials of the self-storage facility, including acquisition costs, operating expenses, and potential revenue. Ensure that the numbers align with your investment goals and that the property can generate a positive cash flow. Consulting with a financial advisor or real estate expert can provide valuable insights.

Develop a Management Plan: Effective management is essential for the success of a self-storage facility. Decide whether you will manage the property yourself or hire a professional management company. A good management plan should include marketing strategies, tenant communication, and maintenance schedules to keep the facility running smoothly.

Conclusion

Investing in self-storage can be a rewarding venture that offers stability, growth, and attractive returns. By understanding the basics of self-storage and conducting thorough research, you can make informed decisions that align with your investment goals. As you explore this exciting asset class, you'll discover why self-storage continues to be a popular choice for investors looking to diversify their portfolios and secure long-term financial success.

Self-storage, like any other real estate investment, requires active management and substantial capital to succeed. Mason Equity Partners professionally manages and invests in self-storage facilities in the United States. If you are interested in investing in self storage, but lack the time and/or the capital to purchase a facility on your own, passive investing with a professional operator could be the right solution for you.

Best,