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Why should you get started with self-storage investing? The self-storage market has created solid real estate investment opportunities with an average annual ROI of 16.9% since 2009, according to Forbes. And, it’s maintaining strong industry growth despite the pandemic’s economic shake-up.
How do you get started in self-storage investing? There are only three ways to invest in self-storage facilities: buy stock in public self-storage companies, invest with a private equity firm that specializes in self-storage investing, or buy a physical self-storage facility and operate it yourself.
You can buy stock for as little as $10 to $100. You can invest with a private equity firm for around $25,000 to $100,000, depending on their minimum investment amount. Or, you can buy a self-storage facility for between $1 million to $3 million.
What are the benefits of self-storage investing? Along with flexible investment opportunities, there are many other perks that can make your money work for you.
Here are the top seven benefits of self-storage investing.
1. Large Self Storage Operators Are Acquiring Smaller Ones
When large companies buy small businesses, it creates more investment opportunities. Smart investors follow big business interests, including the market areas they inject with big money.
Blackstone recently bought Simply Self Storage for $1.2 billion, while Public Storage acquired ezStorage for $1.8 billion, according to the New York Times. And Edison Properties is reportedly looking to sell their Manhattan Mini Storage division for $3 billion.
These large investments are heating up the market for self-storage. REITs are now focused on snatching up these opportunities into their investment portfolios before someone else does.
As you can see at this website, smaller self storage operators exist all over the country who are building up portfolios in their local cities and regions. When these self storage portfolios reach critical mass, they can become a target for acquisition.
2. Stock Price of Public Storage Operators is Skyrocketing
When analyzing long-term stock trends, you can see steady upward growth since the early 2000s. There was only a slight dip during the pandemic’s height before stock prices shot up to current all-time highs.
Public Storage (PSA) is the largest brand of self-storage services and was only $22 per share in 2000. On Nov. 2, 2021, it reached an all-time high of $337. The company also has a $58.2 billion market cap.
Other stock valuations experiencing record highs include:
- Extra Space Storage (EXR): $13 in Jan. 2005, current high of $203
- CubeSmart (CUBE): $16 in Jan. 2005, current high of $54
- Life Storage (LSI): $26 in Jan. 2005, current high of $133
With the most accessible investing through stock, this represents prime investment opportunities for small investors. You can also diversify your portfolio by adding self-storage for real estate investing.
3. U.S. Self Storage Industry is Booming
The modern self-storage model began in the 1960s, with a small family-owned business in Odessa, Texas. With a current $39.5 billion in annual revenue, the self-storage industry today is nationwide and flourishing.
The booming self-storage market is uniquely American as well. The U.S. boasts over 58,000 self-storage facilities, according to Self Storages University. But only 12,000 exist globally apart from that.
Self-storage facilities in the U.S. also total more than Starbucks (15,209), Subway (21,240), and McDonald’s (13,683) combined. However many Starbucks and McDonald’s that appear to be everywhere, there are even more self-storage units being low-key.
4. More Financing Opportunities for Investors
Self-storage is currently a fragmented market. More than 30,000 owners run the 55,000+ storage facilities, according to the New York Times.
Fragmented markets can cause unstable stock prices and investor upset. But the self-storage market’s steady growth has counteracted this effect.
A fragmented market is a boon to investors who want to buy self-storage facilities. There are lower barriers to entry and higher opportunities for strategic disruptors.
There are also prime financing options. The SBA 405 loan has transformed the self-storage market through more accessible financing, according to Forbes.
A 405 loan offers up to $5 million with only 10% down. The SBA approved over $8 billion for 9,600 loans in fiscal 2021.
5. Self-Storage Market Remains High During Economic Lows
Some of the hardest-hit industries are still reeling from the pandemic. The energy and industrial sectors had some of the worst stock market dips from February to April 2020. Even real estate stock performance took a dive.
The self-storage market weathered the economic storm, however. Self-storage REITs still reached a record 95.3% occupancy rate and 12.91% ROI in 2020.
The need for self-storage units remains steady due to the nature of the industry. Although the reasons may differ between economic highs and lows, the demand doesn’t dip.
Demand drivers during tough economic times include:
- Moving from job loss
- House downsizing
- Family loss
- Divorce
- Displacement
Demand drivers during a strong economy include:
- Moving through job opportunity
- Remodeling a house
- Selling homes
- Combining households
- Consumer buying
Unbelievably, over 10% (13.5 million) of U.S. households are renting a self-storage unit. And the compound annual growth rate (CAGR) is currently projected to be 134.79% between 2020 and 2025, according to Forbes.
6. Diverse U.S. Customer Base Mitigates Risks
Just like diverse demand, a diverse customer base helps keep industry growth steady. When businesses mostly rely on one segment of a population, they’re more vulnerable to the upsets of that population.
Over 35% of self-storage renters live in single homes, according to StorageCafe. Surprisingly, a significant chunk of these homes has a garage (66%), an attic (50%), and/or a basement (33%).
Baby Boomers and GenXers currently dominate the self-storage renter demographic. But Millennials still make up 39% of storage demand, which means they aren’t likely going to be many articles about how Millennials killed the self-storage industry.
7. Americans Have a Clutter Problem
Shopping has always been an American pastime. The rise of Amazon and other online retail markets has driven consumer buying to new heights. U.S. households buy a whopping $1.2 trillion’s worth of unneeded items a year, according to WSJ.
America’s clutter problem has resulted in 300,000 items for the average American home. This empowered buyer overflow has spilled into self-storage. And all this stuff has negative effects on people and their relationships, according to research.
But as clutter grows, the demand for self-storage grows with it. Large and prosperous households need self-storage as much as families in adverse conditions.
Ready to Start Your Self-Storage Investing Journey?
Self-storage investing can be a powerful investment opportunity for anyone, from small investors to small business owners. Americans love stuff, and investors love industries that can remain strong during weak economic conditions.