One small group of real-estate investors is making a fortune by serving the American public and their propensity to store junk. These people are unlikely to be found at local REIA seminars or meetings. They are most likely to be found on the course, or on a cruiseship. They are enjoying quiet cash-flow growth and increasing their net worth by investing in access self storage. This is what keeps common real estate investors from joining this exclusive club.
The reality is often distorted by perceptions, and self storage is no exception. There are many false perceptions in the real estate community that keep investors from getting into self storage. You can test your knowledge about self-storage by taking a quiz.
Myth #1 – There’s a self storage facility at every corner. With all that competition, I won’t be able to make money.
It is true that self storage has expanded from small garages in the industrial areas to multi-use facilities. The past 20 years have seen a boom in self storage, all of which are geared towards building and development. Over 45,000 facilities exist in the United States, providing over 6 cubic feet of storage space for each citizen. Even in highly populated markets, investors can make amazing returns. The key to achieving great returns is to buy an existing facility for the right price based upon actual income. Also, you need to increase cash flow through the operation of the business effectively.
I bought my first facility in Florida’s overbuilt market. Each facility was operating within the 75 percent occupancy range. After just 18 months, the occupancy rate was at 92 per cent with a monthly increase in cash flow to almost $6,000. My competitors were still at 70-80 percent occupancy. Do not allow anyone to convince you that today’s market isn’t profitable.
Myth #2 – I must either build a new facility, or purchase a more recent one in order to make money.
Self storage buildings are often thought to be very affordable because they are just simple metal buildings with doors. While they may be more affordable than commercial buildings, there is more to building and developing self storage buildings than meets the eye. Most cases it is a lengthy process that can take several months to complete. You will then have an empty facility with a large amount of debt. This can take years and is certainly not a quick way to financial success.
The smart investors will buy old, poorly maintained facilities that require minor repairs. These properties aren’t on the radar of big companies and can often be bought at high prices. These facilities can often be purchased with positive cash flow. Once the repairs are completed and the property is occupied professionally, the money will really start rolling in.