Today, the U.S. self storage market is an exploding industry valued at $22 billion. There are many reasons for the rise of self-storage investing, but consumer and demographic shifts are the major drivers. According to a recent survey by the online marketplace Mercari, “Americans collectively have more than 5 billion items sitting at home that they no longer use.” That figure is mind-blowing.
According to a recent article by CNBC, the average U.S. home now contains 300,000 items, meaning “America has a clutter problem.”
Self-storage investing is also recession-resistant and experiencing aggressive year-over-year growth, with a compounded annual growth rate (CAGR) of 134.79% projected for 2020 through 2025.
Given the surging demand for self storage services, how can you get in on a cut of the action?
How to Invest in the Self-Storage Market
At the present time, there are only three ways that you can invest in the self storage market. The first way is to buy stock in self storage companies that are public companies. The second way is to buy a self storage facility and operate it yourself. The third way is to invest with a private equity firm that specializes in self storage facilities.
Let’s dive deeper into each of these options below.
1. Investing in Public Self Storage Companies
The first and most accessible way to invest in the self storage market is to buy the stock in one or more of the large self storage operators within the U.S.
You can easily do this because several of them are public companies, such as:
- Public Storage (NYSE: PSA)
- ExtraSpace Storage (NYSE: EXR)
- CubeSmart (NYSE: CUBE)
- Life Storage (NYSE: LSI)
- And others
If you don’t know where to start, Public Storage (NYSE:PSA) is the largest brand of self-storage services in the United States. In 2000, its stock was worth $22 per share. Today, its stock is worth $332 per share and the company has an astounding $58.2 billion dollar market cap. Frankly, that’s incredible.
The downside of this approach is that you are investing in a paper asset (company stock), not into a real asset (such as a self-storage facility). As such, you will not get to benefit from monthly cash flow, tax write-offs, or leverage, all which you could access if you either bought a self storage facility or directly invested into one.
If you’re seeking those benefits, then the next two options might be more your speed.
2. Acquire a Self Storage Facility
Your next approach to profiting from the self storage market is to buy a physical self storage facility. If you’re looking to acquire a facility that is in good condition, this approach will typically cost you $1-3 million dollars.
To explore this option, here is a list of self storage facilities that are currently are for sale within the U.S. LoopNet is an online marketplace for commercial property where you can see current self storage inventory that is for sale.
Of course, you can also buy self-storage facilities directly from a seller or through a commercial real estate broker.
With this this approach, you are buying a business so you had better be prepared to either operate it yourself or be ready to hire an experienced manager who can manage it for you.
3. Invest with a Private Equity Firm
Your third and final option is to invest with a private equity firm that specializes in self-storage investing. An example of this is Patriot Holdings, a company I am affiliated with as an Advisor. Patriot Holdings is run by, Jeremiah Boucher, a skilled investor who has 20 years of experience in buying alternative types of commercial real estate, including self storage facilities. Patriot Holdings currently has an investment fund, Patriot Fund II, that can accept investments from accredited investors.
Given the compelling state of the self-storage market, Patriot Holdings is strategically acquiring a portfolio of storage assets, including self-storage, industrial, and warehouse assets. Each self-storage asset that it acquires is immediately rebranded under the Patriot brand, All Purpose Storage.
The reason for this is that Patriot’s aim is to sell its entire portfolio of self-storage assets at premium to a REIT or public company within the next 5-10 years.
FreeUp Storage, which is operated by Spartan Investment Group, and ZRP Storage, which is operated by Ziff Real Estate Partners, are other companies who are involved with self storage investing. They also have investment funds open to accredited investors.
At this time, you must be an accredited investor to invest with private equity firms that specialize in self storage. To qualify as an accredited investor, you need to earn over $200,000/year if you are single or over $300,000/year if you are married. You can also qualify as an accredited investor by having a net worth over $1 million, excluding the value of your home.
If you qualify, partnering with a private equity firm is a powerful way to own equity stakes in recession-resistant assets, while benefiting from monthly cash flow, tax advantages, leverage, price appreciation, and surging institutional demand for these asset classes.
Typically, you can invest in these self storage funds for as little as $25,000 to $50,000.
What’s in Store for Self Storage?
Today, an incredible 9.4% of U.S. households (1-in-10) rent a storage unit and this rate is rising each year. What is more shocking is that 50% of self-storage revenue comes from single family homeowners with garages and attics and 39% of storage demand comes from millennials.
Clearly, self storage is a trend that is here to stay. Now, the only question is, will you be profiting from this trend?
If you have questions about the booming self storage market, ask them in comments below.
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*Disclaimer: Nothing on this site should be construed as financial advice. Before making any financial decisions, you should consult with professional adviser, such as a financial planner or CPA.
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