Issue 65- Boat RV Storage
Introduction… It seems were ever we go we find self-storage properties in large cities or small towns. Self-storage units also represent an untapped lending niche for credit unions looking to expand their business lending portfolios. And credit units represent a new source of self-storage lending.
Why should any lender, including Credit Unions, consider self-storage. Here is few stastics that tell us why we’d want to own or why a lender would want to lend:
- The self-storage industry represents $37 billion in annual revenue
- $16.1 billion in profit or a 43% profit margin
- Self-storage businesses grew at a rate of 7.7% from 2012-2017
- 3.6% future growth is projected in the near-term (2017-2022)
- There are total of 58,000+ self-storage businesses in the country (roughly 85% of operators are mom-and-pop local operations as opposed to larger corporate or franchised outfits)
In addition, self-storage presents the following benefits to lenders and owners:
- Low fixed and variable costs
- Low break-even occupancy, generally around 50% with an average occupancy at 85%
- Among the lowest default rates of any type of real estate
- Not susceptible to economic down turns
In conclusion...The relative safety of owning or lending purchase money are why some lenders will make loans with 25-year terms as apposed to balloon notes as is generally available for commercial lending.