Self Storage Unit Investing for Beginners: The pros and cons?

Question

Paul Moore explained how storage units were great during good economic times and downturns. People need a place to store stuff that they buy from Amazon or Walmart. This also holds true when people want to downsize their homes. Self-storage units seem to weather the economic storms and keep its tenants. Additionally, there is a new 58-unit apartment development (valued a $6 million) under construction in the vicinity of where I would like to add these units.

I am a newbie to Bigger Pockets, participate in the weekly webinars, and listen to the Podcast. Self-storage units haven't been a topic covered since I have been a member. I am from a small town in Indiana and wanted to ask the group for pros, cons, and how to get started?

Thanks in advance!

V/R

James O'Neal

Mike Ball · Answer

James, I am a newbie to self storage as well and am not the best person to answer your questions but can give you some good resources that can help educate. I am a big fan of Mike Wagner and his Storage Rebellion. Check out his website. Also, I listen to AJ Osborne. He has 2 different podcasts. One is strictly about self storage. Finally, Scott Meyer has a lot of free material on his website as well to learn more about it. Best of luck to you! The more I learn about it, the more I am excited about investing in it and am doing my best to absorb as much as I can.

Mike Ball

Michael Wagner · Answer

THanks for the kind words Mike Ball!

New investors might appreciate the blog I host here on BP: https://www.biggerpockets.com/member-blogs/3915-all-things-self-storageHappy to answer any follow up questions as you walk this path!

Tracy Selfridge · Answer

Hey James, Mike gave some great info. I'll add that the best way as a beginner to mitigate risk (there is always risk in any asset) is to educate yourself and look for downsides. One downside that I've seen is there are a bunch of markets that are over saturated with storage units.

Also check out @Kris Bennett as he has a youtube channel for beginners.

James ONeal · Answer

Wow, it looks like I am going to be busy! Thanks, @Tracy Selfridge. @Kris Bennett has 33 videos and I just subscribed to his channel. Thanks, for the post @Michael Wagner. I will definitely check out the blog https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage . My wife thinks I have completely lost it as I have been up until about 4 A.M. the last 3 nights researching, listening, and watching all things self-storage. Thanks to the current events I have more time than I know what to do with. Pumped to self-educate and plan for the future. Thanks for ALL the replies!

Kris Bennett · Answer

@James ONeal if you want to learn more about self-storage, I'd recommend Mike Wagner's YouTube channel and his website. Scott Meyer's is another great teacher, and so is Mark Helm. Mark also has a YouTube channel with excellent content.

You can pick up the Self Storage Almanac...yes, literally an almanac about the self-storage industry! It will tell you everything about the market, the key firms, the markets, and so on.

There are a lot more resources, but I hope that helps get you started!

Scott Krone · Answer

@James ONeal - First, thank you for your service.  Second, I agree with your first two points.  However, storage units like all real estate is an investment AND a business.  Does it require hands on involvement - depends on the situation.  I have friends who operate their facilities with very little on site staff.  That being said, they have developed systems to insure smooth operations.  Are facilities are much larger, and new so they require staffing.  That being said, it does not require me to be on site on a daily basis.

There is a significant difference between buying an existing facility, and constructing a new one.  Significant differences are obtaining entitlements (zoning if required), financing, and reserves for the lease up period.  As with most real estate, there is greater profit potential with development.  However, with greater profit comes greater risk.

So, there are strategies to minimize those risks as much as possible during the construction and lease up period.  Most facilities take 2 - 3 years for stabilization, just the same as new apartments.  Most first time operators do not build new, they purchase existing facilities unless they have previous real estate development experience and understand the risks.

With regard to vacant land that you control.  I would first suggest you review the zoning and comprehensive plan for the municipality to determine what is allowable and what they desire.  Whatever the zoning, you can either look to sell it with the entitlements (zoning) or rezone it.  If you rezone it, you can sell it "Pre-Developed".  Another alternative is to JV on the deal where you contribute the property for a given "value" into the deal.  This could allow you to gain some development experience and see the whole process while being on active duty.

James ONeal · Answer

@Kris Bennett, thanks for the info. I found the Self Storage Almanacs (2009, 2010,2012), and it looks like 2015 is the latest version. There is a plethora of information out there. I appreciate all the feedback to help steer me in the right direction. Thanks again!

Michael Wagner · Answer

The Almanac gets published every year... Here's a link:

https://www.ministoragemesseng...

I have no affilliation with mini storage messenger and make no money of the sale of this item...just sharing:) and including this disclaimer in hopes that this link remains here long enough to be of value.

Scott Meyers · Answer

Thanks for the Shout out Mike, and welcome to BP James.   We have over 2,000,000 sf of self-storage and 12,600 doors nationwide.

As for the almanac - I used to buy it, but we created our own internal tool that we use and teach people how to do this on their own with a little more accuracy on a per deal and per market basis.  The almanac uses numbers mostly from the REITS (REal Estate Investment Trusts) and isn't as accurate for the investors like you and me.

Good luck and happy to help.

James ONeal · Answer

@Scott Krone - Solid advice, thanks! I really appreciate it and will keep you posted on the progress...

Self Storage Unit Investing for Beginners: The pros and cons?

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