JOIN OTHER SAVVY SELF-STORAGE INVESTORS LIKE BILL GATES
If you’re among those considering investing in the quickly emerging trend of luxury storage units, you‘re not alone. In fact, savvy investors like Bill Gates are seeking opportunities in the recession-resistant self-storage unit industry, projected to have a CAGR (Compound Annual Growth Rate) of 134.79% between 2020 and 2025. Even more, the global self-storage market was valued at USD 48.02 billion in 2020 and is expected to reach a value of USD 64.71 billion by 2026.
These shrewd investors are not looking for the traditional industrial park-style storage unit facilities of the past. They’re investing in luxury storage units customized for everything from storing rare and classic vehicles, world-class works of art, and other treasures, to creating extra entertainment spaces away from home. And these luxury spaces are popping up right now everywhere across the country for a variety of reasons, both professional and personal; some stemming from COVID-19.
The global pandemic has led multiple business owners to opt for self-storage. And working from home for most of 2020 drove up the demand for self-storage to cut out the cost of rental spaces for work. Now that more and more companies have decided to permanently shift toward a remote work model, the need for office space is decreasing. Especially in metropolitan cities, where office space can be extremely expensive.
Our nation’s improved economic outlook, combined with that of Europe and Asia is positively augmenting the market evolution too. People are buying more stuff, which means they need places to store their purchases.
The global pandemic is also a driving factor when it comes to renting storage for personal use. Unemployment levels in the United States during the COVID-19 crisis resulted in jobless tenants unable to pay rent, which obviously affects them and their landlords too. As these tenants moved back home with their family or explored other house-sharing options (and still do), downsizing their residential space created opportunities for the self-storage sector.
Self-storage popularity is also driven by families who need more room, combined with the downsizing of baby boomers. The increasing rate of urbanization is another significant factor driving the market growth. The increasing urban population means smaller and increasingly expensive living spaces in cities with more renters who move around frequently. These urban dwellers need more space to entertain.
Steady Demand and Accessible Financing
Rarely do you find an investment that offers such unwavering demand along with accessible financing. Let’s start with the demand first. Because of the reasons outlined above, many investors are seeking opportunities in self-storage. Demand for these units is steady, with 9.4% of households currently renting self-storage units. The national average cost for these units is $87.89 per month and the opportunity for investment is endless as even the hallways of these facilities are being rented out like the photo above illustrates.
And the industry has a strong track record when it comes to an investor’s ROI. From the years 2009 to 2018, the average self-storage facility offered an annual ROI of 16.9%, a number higher than office, industrial, retail or apartments during the same time.
Then there is the fact that getting financing to invest in the storage space is easier than ever thanks to SBA 504 loans. In fact, some experts say these loans have revolutionized financing for self-storage facilities along with other passive investing opportunities like dividend stocks, CD Ladders, Annuities, and my personal favorite, rental properties, to name a few.
Thanks to SBA 504, buyers only need to put down as little as 10% toward their passive investment projects. This makes it much easier for investors who are just getting started to enter the market. And the terms of these loans are even better news for these investors who won’t have to refinance every five to seven years like before. That makes the interest rate very competitive to market rates, which helps keep payments low.
How To Get Started
The emerging popularity of luxury storage units, combined with their excellent return investment probably has you wondering how to get started. A great place to begin is by visiting the Self Storage Association, the paramount resource for industry information, education, research, and technical expertise. There, you will find important information regarding your two options:
- Storage REITs
The easiest way to invest in self-storage is by purchasing shares in a self-storage real estate investment trust (REIT). This is the most passive investment option that requires the least amount of time while still receiving a return on investment through dividend returns.
- Active Participation
If you would prefer to actively participate in self-storage, you can invest in your own self-storage facility. There are two options when it comes to actively investing in self-storage: developing a self-storage facility from the ground up or purchasing an existing facility.
While investing in luxury storage units may be an excellent way to create your own passive income, as I mentioned above, residential rental property is another fantastic way to bring in a passive income every month. Plus, you can outsource the running of your property to a management company to make this a truly passive alternative.
There are a lot of ways you can invest in rental properties depending on your goals and interests. You can be a limited partner in a large residential or commercial property, or you can purchase individual residential properties for use as vacation homes. If you want to investigate the possibilities, just call me at (805) 886-9378 or email me at Cristal@montecito-estate.com. With more than three decades of luxury real estate experience in Santa Barbara, Montecito, and Hope Ranch, I have my finger on the pulse of the local market.