Why is Self-Storage the Most Desirable Form of Commercial Real Estate?

Why is self-storage more desirable than other types of commercial real estate? No toilets. The fact that there are no clogged toilets to deal with pushes self-storage to the front of the pack when it comes to real estate investing. The fact that there is little to no plumbing at all is a huge asset. There are no plumbing issues that you must deal with and no water bills to maintain unless you need a fire suppression system. Whether or not you need a fire suppression system depends on the type of storage you are offering. If you just have a typical storage unit that states in the contract that tenants cannot store more than a certain value in each unit, you may not be required to have a sprinkler system. Some of this will depend on your city zoning requirements as well. Either way, self-storage is a very basic building that requires very little maintenance.

As discussed in prior blogs, another reason that self-storage is so desirable is that self-storage is very stable; it is not affected by large market changes. When the market is affected by positive or negative changes, self-storage manages to stay profitable. When the market is down, people tend to downsize and as a result, they need somewhere to store their belongings. When the market is up, people need a place to store their belongings while they are transitioning. Either way, self-storage benefits.

Another huge asset to self-storage is that the expenses associated with self-storage are lower on a national average. “Normal operating expenses generally range from $2.75 to $3.25 per gross square foot of the development. This variance in expenses is due to the variable cost in different markets, such as property taxes, manager salaries, and utility costs.”i According to the Parham Group, Self-Storage rents for $6.50 to $12 per square foot. At minimum that is as 50% profit margin. Self-storage is also one of the cheapest types of commercial real estate property to develop, according to the Parham Group, with self-storage costs between $34 and $42 a square foot to develop. This makes self-storage an incredibly affordable and profitable form of commercial real estate.

Another benefit to self-storage is the ease of management. Self-storage is very easy to manage and is still easy to maintain even during the social distancing requirements of Covid19. Tenants can lease a unit online and then enter the building or facility with a code. There is very little interaction between tenants. Because of online self-storage programs, tenants can pay their rents online and managers are able to remind tenants that rent is due through online programs as well. While one property manager is typically needed for every 42 units in multifamily properties, with self-storage you can have one manager for very large properties with hundreds of units.

Self-storage is a very profitable and easy to manage asset. Because of this, it is also very desirable. There are a lot of people who are interested in purchasing self-storage and often there are not a lot of sellers who are willing to give up their amazing asset. Check out our next few blogs on how to convert other types of properties into self-storage. If you are interested in getting more information on how to start your own self-storage empire, check out our website for helpful tips and free information.

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