When it comes to investing in self-storage, there are many myths and misconceptions. With more and more people looking to become investors in recent years, there have been even more misconceptions than before that are keeping people from trying it out or going too big. It’s important to not let these get in the way of what could be a successful investment. Here some busted myths about self-storage investing:
It’s Easy Business
Many will try to sell you on the myth that self-storage investments are easy and effortless. On the contrary, investing in self-storage requires many operational responsibilities. If you’re looking to be successful, it takes excellent management. Responsibilities of an investor include increasing rent prices to compete with nearby competitors, keep the facility and grounds maintained, having detailed and organized financial records, and most importantly maintaining legal requirements.
Bigger is Better
In self-storage investments, bigger down not always mean better––or more profits. A common myth is that if a facility is large, then it’s worth more. This is usually untrue and many factors such as property valuation, cash flow, operating revenue, and occupancy will determine the pricing of a facility for sale. Although there is some added value in larger numbers of units and square footage, its the high occupancy rates and positive financials that will determine value.
Location Doesn’t Matter
Much like more traditional real estate, when it comes to self-storage, location is everything. The value of the investment heavily depends on location. For example, if a facility is located in has low residential and employment turnover rates, then they are less likely to perform well than those in proximity to areas with people moving in and out. Great areas will have university dormitories, military-housing developments, or multi-family apartments. It’s also important to consider the visibility and accessibility of the location.
Self-storage Investments Aren’t Risky
This is the biggest myth that can get people in over their heads. While self-storage is a great investment, there is a lot of risk going into it. In the early days, there wasn’t much risk. Today, the industry has more competition and is growing, so investors should enter the industry more carefully. There need to be multiple analyses to determine if a new development or acquisition is a good investment. It’s essential to do thorough research and examination before making your investment.