Mini Storage Investing

Comparative Advantages of Mini Storage to other real estate assets.

Low Overhead Costs:
The operating expense ratio is typically lower than alternative, ranging from 30% to 40% of total revenue.

Low customer concentration:
Self-storage typically has much lower cost per unit to purchase and to manage. One vacant unit therefore has less impact on overall occupancy and owner return.

Low Impact Due to Non-Paying Tenants:

Bad debt expense from non-paying tenants has a lower impact due to a large tenant base and the lower expense to turnover units when evicting tenants.

Rental Rate Adjustment Frequency:
Tenant leases can be adjusted more frequent due to shorter lease periods.

Nareit Sector Graph.PNG

Relative Resistance to Recession:
Tenants have a greater need for storing their personal items and recreational vehicles and therefore the ups and downs of the economy may not cause them to seek alternatives.

Self-storage garners sticky tenants:

Due to the lower rents, changes in rent are not noticed as much by tenants, thus reducing turnover.  

There are a lot of simple, inexpensive value adds:
Self-storage can be inexpensively upgraded by climatizing units, adding solar technology which currently enjoys significant tax benefits and can improve the “green” image of the property, and repainting the property.  

You make money when you buy, operate, AND sell:

Returns for self-storage enjoy good cash flow and appreciation, with total returns exceeding alternative real estate choices as can be seen in the chart above.

Rent growth and positive NOI:
Because a higher percentage increase results in smaller changes in rent compared to alternative real estate options, owners can increase rents more quickly and still see less impact on occupancy.  

Fragmented market:
73% of the market is owned and managed as “mom and pop” operations and are therefore are often undermanaged, creating a good opportunity to buy these properties at a lower price and reposition rents to improve NOI.