Self Storage Investment Articles

There’s an old saying that you can’t escape from death and taxes. And one of those taxes is “property tax” which is the amount you will pay annually for your storage facility. While the concept of property tax may seem complicated, it’s pretty simple when you understand the format. So here’s a quick review of self-storage property tax from A to Z.

Traditionally, larger buyers of self-storage facilities always viewed themselves as having an edge when it came to lending and negotiating. They thought they could get lower interest rates and better terms than smaller buyers and use that as a weapon against them. However, the Covid-19 changes to the self-storage industry have rendered a new era in which the big companies have no advantage over the small.

The Covid-19 pandemic has not been kind to urban self-storage investing. In fact, it’s a downright disaster. Here’s what the New York Times had to say: What once seemed like one of the few recession-proof parts of commercial real estate looks as vulnerable as many other businesses. And then backs that up with the facts: Monthly rent for new customers before one-time discounts for a 10-by-10 unit without air-conditioning and heat, for example, declined 4.3 percent nationwide on an annualized basis, according to the research site Yardi Matrix. For the same unit with climate control, rent fell 6.7 percent. You can read the entire article here.. So what happened and are their any bright spots?

A common question for most investors is whether it’s more profitable to build a self-storage facility from scratch or to buy an existing one. There are many issues to consider on this topic, but here is a basic explanation of the good and bad aspects to both.

Some self-storage facility owners – particularly those that deal in raising capital in syndications – are trying to proclaim that the Covid-19 pandemic has created a “strong buying opportunity” in storage properties. However, this is simply not the case. Instead, Covid-19 has brought a valuable lesson learned to the storage industry as well as a prediction for the future.

So you’re looking at a self-storage property with huge vacancy – let’s say 70% of the space is unrented. That’s a huge issue on many fronts. So how can an investor make a successful transaction out of a property like that? Is it even possible?

Regardless of how much you spend in advertising, there’s no purpose to any of it unless the customer signs the rental agreement. It’s kind of like football, getting to one inch of the goal line is of no value unless you score the touch down. So what are some tips to get the customer to sign that agreement and score one more occupied unit?

Real estate is all about leverage and self-storage is no different. You need to be able to obtain a loan to by a property, and the banker is an integral team member that makes the whole deal possible. But an easy way to make an end-run around traditional banking is to have the seller carry the financing. Not only does seller financing eliminate the stress and effort to find a bank, but it also saves you money on third-party reports, interest rates, and is typically non-recourse. So how can you get it?

Covid-19 has exposed many weaknesses in certain markets that self-storage facilities serve. But much of this weakness began years earlier when investors practiced the standard behavior of moving with a “herd” mentality. Why is a “herd” mentality dangerous in self-storage investing?

There are few skills as important in buying a self-storage facility – or less understood – than the correct way to negotiate. Those who have this skill do well and those that don’t never end up with a deal at all, or they end up overpaying for the asset. So how do you become a pro at negotiating a storage property?

Self-storage has long been known for its superior collections rate formed through the ability to auction off unit contents if rent is not received. However, this process has new hurdles created by the national Covid-19 pandemic, and every storage owner needs to be aware of potential changes in policy.

When you go to college, there are certain items you must have obtained to graduate – such as successful completion of certain classes and attendance of a certain number of units. And buying a self-storage facility includes these same necessities, although in the form of third-party reports. But these reports are expensive and time-consuming to obtain. So which reports do you really need and which are optional?

You may have the seen the articles declaring that the riches person in Kentucky is Tamara Gustavson. Who is she? The daughter of B. Wayne Hughes, the founder of Public Storage, the largest owner of self-storage facilities in the world. Her 11% stake is now worth around $5.7 billion and growing. That also makes here the 144th richest person in the U.S.

If I was on a game show and I had to choose just six words that I could use to build a successful self-storage facility portfolio, here’s what I would select: “What Do I Have To Do …” So why are these six words so powerful in buying and operating storage properties? How can they give you the edge in being successful? There are many reasons.

The last time we had a major recession in the U.S. was the same year that the Toyota Corolla was the top-selling car and “Umbrella” was the top song: 2007. That was 13 years ago. Since that time, many investors became complacent and spoiled by an economy that was always going up. Then came the Covid-19 pandemic and everything changed.

Self-storage REITs (the backbone of passive investment in the storage sector) have been taking major hits recently due to faulty strategies and overzealous building. The disappointments will continue forward for the foreseeable future.

Webster’s Dictionary defines “negotiation” as “to obtain or bring about by discussion”. That’s one way to describe it, as a frank discussion between buyer and seller in which they give their opinions on value and search for an appropriate middle ground. But there is also a strategy involved by the buyer that helps to make that successful ending possible.

While most storage investors buy existing properties, there is another breed that additionally builds storage properties from scratch. This type of approach requires a specialty type of financing and then transferring this debt to permanent status. So how do you bridge the gap between construction and final financing?

Many people would have you believe that population alone is the determining factor in self-storage success. They claim that the only markets worth investing in are those that are large and growing daily. But the truth is that this is far from the key factor to success. In fact, many of these “hot” markets are lacking in a more important trait: profitability. But why?

There are roughly 5,300 colleges and universities in the U.S., and they’re spread out over all 50 states. There is a huge following with these establishments of higher learning for football and other sports, but there’s also a following among smart storage owners. College towns have always been good locations for self-storage facilities. But why is that?

Sometimes a photo can tall a thousand words. But sometimes none of those words are what you really want to say. That’s why developers have long used renderings when presenting ideas to city government and the public. But why not simply use photo mock-ups?

What is a self-storage manager? Well, more than just someone who exchanges a lease for a check. In fact, your manager is your ambassador, mayor, chief marketing officer all rolled into one. So how can you help to make your storage manager more effective in your duties?

We’re all big kids – we love to see roadside attractions. Perhaps it’s because it breaks the monotony of the American road, or maybe it’s because we enjoy the humor and splendor of these unique creations. But would it be a good idea to add some unusual sparkle to your self-storage facility?

Your roll-up door broke off. The electric is flickering in a unit. There’s a roof leak. All of these events require hiring a contractor to make the needed repairs. But how do you do that? Here’s how to properly engage a contractor in a storage facility.

When you look at most listings for storage facilities, you will note that a common term used to describe them is their “cap rate”. So what is a “cap rate” and how do you know when it’s too high or too low?