While you constantly hear about things like tepid wage growth, economic uncertainty, and most of the nation’s households living paycheck to paycheck, the fact of the matter is, not everyone is living like this. In fact, quite a few families and individuals not only have money saved up, they’re pretty well-covered in terms of emergency reserve funds and getting ready for retirement. That means that they actually have extra money and are wondering what to do with it past ‘traditional’ or common investment choices. That leaves some wondering if storage units are a good investment or not.
Investing in storage units has its ups and downs, so it depends largely on what you’re looking for in terms of results from your investing, but also how you specifically invest into them. The most common way of investing in storage units is to do it individually, where you do not actually own the unit itself but instead participate in auctions of abandoned units where you win the goods that are contained within them. An entire genre of television shows centers around this, and the rise of Internet sales of used consumer goods through places like Amazon and eBay certainly has many constantly looking through these auctions, yard sales, and estate sales for anything they can flip for a buck. However, this kind of thing takes a lot of time and work, and can leave you with a lot of unsold possessions and material on your hands. You also have to clean every locker you buy within a set period of time or pay a fee. Some do it well enough to make a living, but it’s not really a typical investment vehicle.
A more common investing mindset would be to actually invest in owning the properties that house storage units. Depending on how much money you have to put it into it, it can actually be a tremendous opportunity to make money. Every single unit that is rented on a property is a stream of income, even if not much per month, but they also add up. That level of broad diversification comes with serious stability. Consider someone that has an apartment in their basement; if they have a tenant that falls behind on rent or they have empty months, they have no income. Likewise, a strip mall owner that rents three out of five of their storefronts has multiple streams of income without having to rely on ‘perfect weather’ to have income coming in.
If you buy a storage unit property that has two hundred units, you can have a 75 percent occupancy rate and be getting a hundred and fifty payments coming every month. Of course you hope for full occupancy, but that will rarely happen. You also get those payments for as long as you own the property, which means that once it recoups the money you invest into it, you’ll have ‘free’ profit for as long as you own it.
Of course it’s not always a bed of roses. You’ll have to pay for maintenance and upkeep, and you might decide to hire a property manager if you don’t want to handle all the details and office hours yourself. Someone has to arrange the auctions for abandoned units after all, which sit until there’s enough for an auction.
There are ‘hands off’ ways to invest in storage units though, if you want the profit but not the burdens. Consider joining an investment group for partial ownership. You can also look into dedicated real estate investment trusts or even just buy stock in storage unit companies that are publicly traded. Of course one advantage of being a sole property owner is the possibility of selling the place after you upgrade it or when the property value goes high enough over time.
Roy Hiscock is a certified builder and purpose built his Gold Coast Storage Max facility in the industrial section of Molendinar.