Is Self Storage Investment Better than Multifamily?

Is self-storage a good investment and is it as good as or better than multifamily?

The short answer to the first part of that question is yes, but if you want the reasons for that, read the rest of this newsletter.

Here are the reasons why I like self-storage:

IT'S LARGELY RECESSION-PROOF.

This makes it profitable not only during the good times, but also during the rough times. During the Great Recession of ‘08, self-storage was among the only real estate classes that produced positive returns.

THERE’S CONTINUED AND RISING DEMAND FOR SELF-STORAGE.

This is true, especially in areas experiencing increasing populations or high unemployment rates. The reason for this is as people move, they need a place to store their belongings. High unemployment rates could potentially be good. Since people can’t afford their rents, they may be forced to move in with friends or family. Now they don’t have space for all their stuff, which leads them to searching for a place to store it.

THE EVICTION PROCESS IS SIMPLE

When someone stops payment, it’s a clear procedure that’s laid out in the contract. For example, if you’re 30 days late, on day 31 they’ll send you a letter. And if you haven’t responded by then they’ll start the eviction process. The whole thing is a very simple, well-defined process.

THE VALUE-ADD COMPONENT IS COMPELLING.

The application of self-service technology increases revenue, and at the same time, simplifies management. If all you have is the “guy in the chair” who answers the phones and talks with all the clients, then when he’s gone you can’t lease any units and your business goes stagnant. The more self-service it can be, from sign-in or access, is something that the clients want and are willing to pay for.

WHY I DON’T LIKE SELF-STORAGE

SELF-MANAGEMENT IS A MUST IN SELF-STORAGE

One of the biggest reasons is that it’s difficult to outsource management to professional management companies. The people I know who’ve tried haven’t gotten very good or consistent results. There just aren’t that many people who specialize in outsourced, professional management of self-storage units. As a result, most successful self-storage operators self-manage. The secret to being successful in self-storage is self-managing.

MY TIME AND EFFORT IS IN MULTIFAMILY

Another point for me when comparing multifamily and self-storage is there is a matter of focus. I want to focus on one thing, and get really really good at it before looking elsewhere.   I want to focus on multifamily and build my portfolio, so that I get repeatable, consistent results. I want to get to the point where we have systems set up so the whole process can fly on autopilot.

SO THERE YOU HAVE IT: SELF-STORAGE VERSUS MULTIFAMILY.

Is self storage as good as multifamily?”.

No, not for me.

That being said, it’s still a solid choice for investing because of its recession proof nature and the fact that it’s increasing in demand in growing areas. The self-service automation part of it is really compelling and is what makes this asset class so appealing to me.