Top 10 Tips for Smart Self-Storage Investments

As a savvy investor, you're always on the lookout for profitable opportunities. One such opportunity that has been gaining traction in recent years is investing in self-storage facilities. With more and more people needing extra storage space, this industry has become an attractive option for those seeking solid returns.

We've put together a list of the top 10 things to keep in mind when considering an investment in a self-storage facility. Let's dive in!

Location, Location, Location 📍

  1. The success of any real estate investment relies heavily on its location. Ensure that the facility is situated in a high-traffic, visible area with strong demographics, a growing population, and easy accessibility.

 Market Demand 📈

  1. Before investing, conduct thorough research on the local self-storage market. Is there an adequate demand for storage units? Investigate the competition in the area, and pay attention to occupancy rates, rental rates, and market saturation.

 Facility Size and Unit Mix 📏

  1. The size of the facility and the variety of unit types play a significant role in the property's performance. Choose a facility that offers a mix of small, medium, and large units to cater to different storage needs and ensure consistent demand.

 Condition and Maintenance 🛠️

  1. A well-maintained facility is essential to attracting and retaining customers. Usually, a facility built after 1980 will have low repairs and maintenance expenses. Assess the physical condition of the property and identify any repairs or upgrades that may be required. Factor in maintenance and repair costs when calculating your investment returns.

 Security Features 🔒

  1. Customers prioritize the safety of their belongings, so make sure the facility has adequate security measures in place. Look for facilities with features such as 24-hour surveillance, access controls, and well-lit premises.

 Operational Efficiency 💼

  1. Analyze the facility's operating expenses, such as payroll, utilities, marketing, and property taxes. An efficiently managed property will have lower operating costs, leading to higher net operating income (NOI) and better returns on investment.

 Growth Potential 🚀

  1. Is there room for expansion or the addition of new services (e.g., climate-controlled units or vehicle storage) to increase revenue? Assess the potential for growth and consider properties that allow for scalability and increased cash flow.

 Management Team 🤝

  1. A competent, experienced management team is crucial for the smooth operation of any self-storage facility. If you're not planning to manage the property yourself, vet the existing management team or consider hiring a professional third-party management company.

 Financial Analysis 💰

  1. Perform a comprehensive financial analysis, including calculating the capitalization rate, cash-on-cash returns, and internal rate of return (IRR). Ensure that the investment aligns with your financial goals and risk tolerance.

 Due Diligence 📚

  1. Last but not least, conduct thorough due diligence before finalizing any purchase. This includes reviewing leases, financial statements, zoning regulations, and obtaining a property appraisal and environmental assessment.

By keeping these top 10 factors in mind, you'll be well on your way to making a smart, informed decision when investing in a self-storage facility. If you're interested in learning more about self-storage investments, don't hesitate to reach out to us or check out our course, "The Self-Storage Boot Camp."

Frank Rolfe has been an active self-storage investor for around two decades, with self-storage units in many states throughout the U.S. His nuts and bolts knowledge of what makes for a successful self-storage facility has led to a three-decade career without a single failed property.