Category Archives: Buying self-storage now

Desire Investment Alternative…Consider Self-Storage

 Issue 94 – Investment Alternative

Introduction…”The bottom line is that if we go into a bad housing market, people have to put their stuff somewhere,” says Mednick, who is also president of the Orange County Real Estate Forum investors club. “When the economy is good and people buy too much stuff they have to put it in storage. You’re winning as the market goes down, and winning as the market goes up.”

A “safe” investment… For those investors looking for an alternative to being a landlord, self-storage is considered a relatively safe real estate alternative.

Self-storage is monthly rentals of interior spaces made up of concrete floors with steel or concrete walls.  That’s it.  Once a renter moves out, the manager can just blow out space and rent again.  Our make ready is a leaf blower.

If the renter fails to pay rent, then the property can be sold at auction to recoup all or part of the lost rental income including late fees.  In fact, this last Texas legislative session codified online auction as an allowable sale method.

The secret…It is a contrarian approach to the commercial real estate, but generally, our leases are month to month.   If we had a term lease, like most commercial real estate, then at the end of the term renters would be planning to move out.  With the month to month leases, there is no rush to move out.  They can always move out next.  And maybe five or ten years later, they will still be moving out next month.

In summary…Self-storage is a simple, but elegant alternative to other more complicated residential or commercial real estate.  To learn more and “Get 9 Little Know Secrets For Steady Real Estate income FREE” subscribe above right.

Source:  Joel Cone, “Self-Storage Is An Investment Alternative,” U.S. News Money, 11 Jan 2018

Where Can You Store Your Boat & RV?

Issue 92 – RV & Boat Storage…Where?

Introduction…In the United States, 11,870,000 recreational boating vessels need storage.  Add to that number 8.900,000 recreation vehicles need storage. That totals 20,770,000 recreational items that need to be stored for the off-season.

RV And Boat Sales Growing Self-Storage Demand…RV The research, conducted by Dr. Richard Curtin, RV industry analyst, and director of consumer surveys at the University of Michigan, reveals the number of RV-owning households has grown to a new peak of 8.9 million households, up from 7.9 million in 2005. According to the report, 8.5% of U.S. households now own RVs, up from 8.0% in 2005.  Annual U.S. recreational boat sales have averaged 550,000 per year since 1990.

So, where do the 20,770,000  households store their recreational vehicles and boats?  Most of the larger motorhomes, larger travel trailers, and boats can’t be stored in city residential areas.

The self-storage industry has recognized and met this demand.  Many properties have built larger storage units to accommodate the largest motor-coach.

What’s next… We have purchased a 64,000 square foot boat storage facility.  You can find it at www.wylieboatrvstorage.com.  We will have three units available at the end of January after we auction the abandoned property in those units.  Other than that, we are 100% leased,  This experience has been better than expected, so we are looking for another similar facility.

Drop me a note if you want to get on our potential future owner’s list.  bill@billmoist.net

Creating Wealth Through Self-Storage

Issue 86 – Why Use Self-Storage To Create Wealth

Introduction...The self-storage industry has experienced amazing growth.  Currently, 1 in 11 families, up from 1 of 8 families in 1990, use self-storage.  That means the number of families using self-storage has increased by 2,200,000 in a ten-year time frame.

Current owners…Property owners with just one property make up 63% of the total. These mom an pop’s normally rarely if ever raise rents and rarely make capital improvements that would allow further rent increases. This gives subsequent professional owners room for significant value add…or total revenue increase.

Owners with 10 or more facilities make up only 12% of the market. The rest, 25%, own 2 to 9 facilities.

The real estate investment trusts normally do not buy properties that are less than 50,000 square feet.  If we can add some additional space to get the mom and pop’s over 50,000 square feet, we may be able to sell to the REITs who generally buy at the lowest cap rates (highest purchase price.)

Who are the customers?…Generally, 80% of our customers are residential an 20% are commercial.  As a rule, 75% of our renters are within 3 miles radius of the property and another 15% drive from 3 to 5 miles to the property.

Conclusion…Self-storage is a growth industry.  Not only are the number of U.S. households increasing, but the percentage of households using storage is increasing.  And for the local buyers, like us, there is significant opportunity to raise rental income when we purchase properties owned by mom and pop’s

Source:  Review of Creating Wealth Through Self-Storage by Mark Helm.

Do The REITs Control The Self-Storage Market?

 Issue 81 –  Public Storage opened this 12-story facility in the Bronx, NY in 2013.

Introduction...If you live in an urban area, you’ve probably noticed the 200,000 square foot to 300,000 square foot gigantic storage properties being built by one of the self-storage Real Estate Investment Trusts (REITs). You might even believe the REITs are taking over the self-storage market.

The market…Actually, the REITs account for just 13% of the 41,879 storage properties in the U.S. according to the 2017 Self-Storage Almanac.  The remaining top 100 owners account for another 11%.  This means 76% of the storage properties are held by smaller owners with the vast majority, mom & pops, owning only one.

What prevents the REITs from taking over the market?  The REITs business model based on their capitalization and high overhead costs mean they look for properties that are at least 80,000 square feet in urbanized area with a minimum population of 50,000.  The U.S. Census Bureau reports show that there are fewer than 500 of these markets in the U.S.  Many of these markets don’t have enough density to support the larger properties required to be economical.

However, there are 18,571 towns and villages with populations under 50,000 according to 2015 statista.com   These markets are not suitable for the REITs, but the smaller operators with lower overhead thrive there.

In summary…These smaller secondary and tertiary population centers are where we target to both buy and build self-storage properties.  You might think that these markets are not profitable enough to meet our investment goals.  Not so!  Our goal is to accumulate at least 20 of these properties that could later be sold in bulk to a highly capitalized buyer.  One such owner I know did just that.

Another group that specialized in buying and building self-storage in these secondary and tertiary markets recently sold out for $200,000,000.  That should be enough.

If you are intrigued by this model, drop me a note at bill@billmoist.net for more details.

Why Self-storage is Safer Than Other Real Estate

Issue 80 – What Safety Means To Investors

Introduction… 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.

This compares favorably to the 4.5 percent average delinquency rate for all commercial real estate and 3.9% delinquency rate for multi-family.

Why…why is self-storage 4.5 times better than other real estate?

This is counter-intuitive.

Click here to find out why…why is self-storage 4.5 times better than other real estate

If this intrigues you, how may I help you?  Bill@billmoist.net

Why We Love Self-Storage More Then McDonald’s

 Issue 79 – Storage is better than Big-Macs

Introduction…Turns out the only thing Americans may love more than Big Macs is hoarding.

There are more self-storage facilities in America than there are McDonald’s restaurants, according to a recent report from the commercial real estate publication REJournals. The U.S. has more than 4 times the number of self-storage facilities than McDonald’s. There are 58,000 self-storage facilities in America compared to only 14,146 McDonald’s restaurants at the end of 2016.

Finding a place for extra scrapbooks, holiday decorations, office records, boats and RVs isn’t exactly cheap either. The average American household is using about 18 square feet of storage at an average rental rate of $1.42 per square foot per month.

The industry makes more than $24 billion in revenue annually. Plus, state and property taxes get to scoop up about $3.25 billion.

Here are 4 reasons Why We Love Self-Storage More Than McDonald’s:

  1. We are a hyper-consumer nation consuming more than $14 billion in goods and services, much of which ends up in storage

  2. The psychology of self-storage is we have month to month leases with no end date so the renter thinks he will move out next month that never comes

  3. We are a nation on the move with 12% of the population moving each year

  4. When the economy is improving, we buy more stuff – when the economy is downsizing we store more stuff

Conclusion: So why are we building more storage facilities?  The population and the economy are growing.  But, more importantly, the trade area for storage is only 3-mile circle.  Take 18 square foot per household in an area and you can see the demand is great and growing.  And we have more room to grow as only 10% of the American households have discovered the joy of self-storage.

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Massive Demand For Self-Storage After Harvey

 Issue 76 – Massive Storage Demand

Introduction…Hurricane Harvey is causing self-storage properties to fill up as displaced people seek a place for belongings as they rebuild or prepare to move.

The supply has also been significantly reduced because many storage facilities have suffered flood damage.

Supply before the storm…”Before the storm, there just wasn’t much product on the self to begin with,” said Aaron Sweden, vice chairman with Newmark Knight Frank.

Conclusion...The rush of demand could last beyond the normal 3 to 8 months burst in business that generally follows natural disasters.  With as many as 40,000 homes destroyed  from Harvey, it could take people much longer to fix their homes or downsize to apartments resulting in long-term  storage.

How To Make Money Off Our Junk

 Issue 74 – Safestore UK

Introduction…Investors in London’s premium real estate know their tenants are among the world’s wealthiest and most stable.  Schroder Plc has $3 billion worth of property with these most stable tenants.

But, in the era of Brexit, the market can change.  That’s one reason Schroder is the largest self-storage company in UK with 109 stores in 45 cities.

Demographic logic…What storage lacks in cachet, it makes up in demographic logic. Downsizing retirees and growing ranks of home renters in London are creating what Schroders and other real estate investors see as a Brexit-proof and recession-proof opportunity.

In the U.S., growth has been pretty amazing.  Today there are 54,000 self-storage facilities in the United States, which is 90% of the global storage industry.  Those sites hold 2.63 billion square feet.

Storage beats Hollywood…All that space is sold in small increments generating $32.7 billion in revenues.  Last year that was three times Hollywood’s box office gross.  In most cases, self-storage is far more profitable than other conventional real estate. As an example, in 2016 self-storage rented for 97 cents per square foot in Phoenix which was similar to the average one-bedroom apartment.  In larger cities, storage can rent for two to three times higher rates.

Growth factors…Americans are relentlesss at accumulating consumer goods.  From 1967 to 2017, expenditures for durable goods – like furniture, bikes, electronics, clothes, books – increased almost 20 times.  As a result, Americans have run out of room for their stuff.

The industry also thrives on disruption to our lives.  It serves as a temporary resting place for stuff of the dead, divorced, downsizes, and dislocated.

In conclusion..These trends are driving investments in a sector that most real-estate investors barely notice.  And in uncertain times, self-storage looks like a place to stash money.

The near term opportunities in self-storage are exciting.  Be sure to stay tuned.  If you are not a subscriber to this newsletter, do so in the upper right of this page or go to self-storageinsider.com for your FREE subscription.

Benefits Of Buying Self-Storage Now

 Issue 73 – Buying Self Storage Now

Introduction...Self-storage publicly real estate investment trusts (REITs) have been the best performing public asset class over the last 22 years. Investors have poured billions of dollars of new investment capital into storage REITs. The result has been a building and buying spree pushing storage property prices to historical levels.  That has changes and now you can benefit.

What’s the change? Property purchases are down by an annualized 70 percent for the top five self-storage REITs.  That compares to a high of $5 billion in purchases last year according to a second-quarter report by MJ Partners, a Chicago-based real estate brokerage and investment banking company.

The major acquisition drop-off is attributed to the surge of newly built self-storage facilities coming online across the company.

The buying spree of existing properties by the REITs have pushed up acquisition prices on all classes of properties.  While we don’t compete with them directly, their buying has given our sellers unrealistic pricing expectations.

The benefits of buying self-storage now

  • Now that the REITs have scaled back their acquisitions, the private equity companies will be the primary buyers, that’s us
  • The pull back of the flood of money from the REITs should dampen pricing of acquisitions
  • Some of the exuberance will go out of the market and we will go to more sustainable pricing
  • Many of our potential sellers will realize that their pricing expectations have been too high

In conclusion…We have been watching some nice self-storage properties that have been for sale over a year now.  it is our belief that many of these properties will be re-priced at levels that are more profitable to the buyers.  The near term opportunities will be exciting.  Be sure to stay tuned.  If you are not a subscriber to this newsletter, do so in the upper right of this page or go to self-storageinsider.com.

Source: Alexander Harris, “U.S. self-storage industry statistics,” SquareFoot Storage Beat, 15 August 2017