Mason Equity Partners seeks to provide attractive risk-adjusted returns through investments in Commercial Real Estate. In this article, we'll explore why Self Storage could be a safe 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 4 billion dollar Institutional Private Equity Fund.

Self-Storage - a Safe Investment

When it comes to investing, safety and stability are key considerations. Self-storage stands out as a particularly safe investment due to steady demand, restrictions on supply, and low maintenance and operating costs. In this article, we'll dig deeper into each of these reasons to show how self-storage can provide stable and consistent returns, even in uncertain economic times.

Steady Demand, Even During Recessions

One of the primary reasons self-storage is a safe investment is the steady and growing demand for storage space. The key drivers for storage demand are life events. Death, divorce, and downsizing are events that happen regardless of whatever is happening in the economy.

In fact, the demand for storage tends to grow during economic downturns. During recessions, people tend to downsize their homes or move in with family to save money and need a cheap, flexible space to store their belongings.

Many job seekers find it cheaper to rent a storage unit and move in with others while they look for work, than to keep paying for their own place. Most self-storage leases are month-to-month, providing tenants with flexibility that is appealing during uncertain times.

Limited Supply, Especially in Urban Markets

The risk of overbuilding is low in urban areas where land is scarce and zoning regulations are stringent. These two factors help to limit the supply of new facilities in urban areas, leading to higher occupancy rates and rental prices for operators who are able to buy or build in these high barrier to entry markets.

Low Maintenance and Operating Costs

Self-storage facilities are relatively low maintenance compared to other types of real estate investments. Here’s what makes them cost-effective:

1. Simple Structures: Storage units are essentially simple, empty spaces that require minimal upkeep. There are no complex systems like HVAC or plumbing to maintain, reducing overall maintenance costs.

2. Tenant Responsibility: Tenants are responsible for their own units, including keeping them clean and in good condition. This reduces the burden on the facility owner and lowers maintenance expenses.

3. Minimal Staffing: Self-storage facilities do not require a large staff to operate. Often, a single manager can oversee the entire facility, and technology can further reduce the need for on-site personnel through automated gates, security systems, and online rental management.

Stable Cashflow

Self Storage facilities typically enjoy steady cashflow once stabilized. There are no major lease renewals or capital expenditures that can hurt the cashflow. Here’s how this stability is achieved:

1. High Tenant Retention: Tenants often keep their units for extended periods, especially if they are storing valuable or sentimental items. No one likes to move, so tenants tend to stay in their spaces for a very long time.

2. Regular Rent Increases: Small, incremental rent increases are common in the self-storage industry and are usually accepted by tenants without much resistance. Given the choice, tenants prefer paying a little more rent if it means they don’t have to spend the time dealing with their stuff. These increases contribute to steady revenue growth over time.

3. Easy Turnover: When tenants do vacate their units, the process of turning over the unit for the next tenant is quick and inexpensive. Unlike residential properties, there’s no need for significant renovations or heavy cleaning.

Conclusion

Investing in self-storage is a safe and stable choice for those looking to diversify their portfolio and secure consistent returns. The industry’s resilience during economic downturns, combined with steady demand, constrained supply, low operating costs, and steady cashflow, makes it an attractive investment option. As you consider where to allocate your investment dollars, remember that self-storage offers a unique blend of safety, stability, and profitability, making it a smart addition to many investor’s portfolios.

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,

John & Shane Mason

408 590 8577
www.masonequitypartners.com
[email protected]