Category Archives: Passive Residual Income

Investors…Consider The Uncomplicated Self-Storage

 Issue 85 – Uncomplicated Self-Storage

Introduction...The uncomplicated world of self-storage recently became the most desirable way to invest in commercial real estate.

Two examples...

  1. One Fort Worth owner had is property 95% leased when a buyer came along and asked if he’d sell.  The owner estimated his property value to be $4,000,000.  When the offer arrived at $5,500,000 the owner said, “SOLD!”
  2. Another owner had accumulated 20 smaller properties in Texas and New Mexico. He was very happy with the management and the cash flow.  Until a California investor wanted to jump into the market and offered $25,000,000.  Again, this owner “SOLD!”

Why so much interest in self-storage…In the past apartments were considered the most desired way to invest in real estate.  However, there are many good reasons to branch out.

Self-storage has proven to be recession proof.  During boom times we buy more stuff to store.  During contraction when we are downsizing, we tend to store our extra stuff rather than sell it.

In a recent issue of the Self-Storage Insider, we reported…The Commercial Mortgage Backed Securities (CMBS) self-storage loans funded over the past 10 years have the lowest default rate of all property types at less than 1 percent.

In conclusion…Do you have self-storage in your portfolio?  If not, let us give you more insider information by contacting us at bill@billmoist.net.

Self-Storage Boom Driven By ‘Four Ds’

Issue 70- Self-Storage Demand Driven By Four Ds

Introduction...Self-Storage is booming.  Seventy-five per cent of all self-storage in the world is in the United States.  There are over 50,000 storage facilities in the U.S. and the rest of the world has 15,000.

Demand…Demand for self-storage is driven by four major life events the industry calls “the four Ds”

  1. divorce
  2. death
  3. downsizing
  4. dislocation (e.g. job loss)

“The big driver is change,” said Brad Schwer of Morningstar Equity Research.  “In one way or another, people are looking for stability.”  That may be why they hang onto stuff that may not have a future value to them.

The U.S. has an estimated 2.6 billion square feet of storage, according to the Self-Storage Association.  That’s about 8.1 square feet per person, which is growing.

Experts are not sure how much longer this growth curve will last.  However, storage is very local.  Typically, our trade area is a 3-mile diameter.  So, one area that could be over built, may not impact another area where demand exceeds supply.

Click here to watch the rest of the video.

I recently visited a property in a town west of Fort Worth. This C Class property was charging higher rents than an A Class property one mile away.

I asked the owner how she could charge higher rents than a nicer A Class property.  She said, “I don’t worry about what my competition charges.  I just give the best personal service in town, so price is secondary.”

Why tenants stay...Most people rent storage much longer than they expect and over value the sentimental item inside.  Rarely do they shop for better pricing once their belongings have been stored.

The physiology of storage is opposite that of other commercial real estate.  Generally, we want longer term leases for commercial property of 3 to 5 years.  With storage, our leases are generally, month to month.  If they had a term lease, they would be inclined to move out at the end of the term.  With a month to month lease, they can move out at the end of the next month.  Then the next month.  Then the next month.  Five years later, they still haven’t moved.

In conclusion…Self-storage is a good business to be in.  The reason its a good business is that you can raise rents on existing customers by 5 to 10 per cent every eight to ten months and they will stay.  Most customers are on auto payment so the small incremental increases typically don’t spark a move out.

Online Auction Part 2

 Issue 69 – Online Auction Part 2

Introduction…In the last issue No. 68 of Self-Storage Insider, we discussed how Governor Greg Abbot signed Senate Bill 952 into law May 28, 2017.  Self-storage online auctions rules are now clarified. The Texas Self-Storage Association (TSSA) promoted this bill so that online auctions could be codified into Texas Property Statute so there is no question they are allowed.

Why this change is significant…For those who love collectibles and antiques, the TSSA has a listing of upcoming online auctions where  you can participate.  Here’s the link www.txssa.org/auctions. On this link are listed 366 storage units’ content that is up for auction.  The property managers are discovering they are getting a better price for items sold and it takes less time as a third-party auctioneer handles the sale.

Where are the storage units’ content being sold?… This us the cool part of the auction process.  From the comforts of your home, you could bid on storage units located in the following Texas cities:

  • Arlington       Houston     Garland    Frisco     Galveston   Dallas
  • New Braunfels    Carrollton    Fort Worth     Austin    Round Rock
  • Temple   Tyler    Waco   McKinney   Kilgore  San Antonio   Katy
  • El Pasco   Spring   Tomball   College Station   Copperas Cove
  • Mansfield   Lewisville  Bryan  McKinney   Little Elm  Georgetown
  • Kyle  La Feria  Harlingen  San Benito  Mission  Pharr  Edinburg
  • McAllen  Mission  Desoto  Temple  Texarkana  Prosper

In conclusion…One self-storage owner said he auctioned off the items in one storage unit that belonged to an older lady who passed.  The purchaser found four original Republic of Texas Notes that he sold for $2,400.  Who knows what treasures may lie in these auctioned storage units’ content.  But, at least now everyone has a chance to participate.

To “Get 9 Little Known Secrets For Steady Real Estate Income-FREE. click here.