When thinking of owning the perfect business, thoughts of reinventing the wheel are difficult to resist. While you might have a truly original start-up idea, sometimes it’s smarter to avoid the risk and consider an industry with a history of success. Self-storage facilities and warehouses may not have the glamour and sex appeal of a tech start-up or a new food concept, but they’re a far cry from a passing trend. Yet, do self-storage facilities and warehouses make great business investments and is now the time to find one for sale?
Self-storage originated in Texas around the mid 1960’s when the storage industry was faced with rising cost of warehouses and land. As the popularity of self-storage took off, facilities quickly spread throughout the United States, Canada and Europe. According to the Self-Storage Association, there are now more than 60,000 self-storage facilities worldwide and the average occupancy rate is 90%.
Here are 5 Reasons to Consider Buying a Self-Storage Facility or Warehouse:
- They’re virtually recession resistant. According to the NAREIT (National Association of Real Estate Investment Trusts), self-storage was the only REIT sector in 2008 to post a positive total return of 5%, including dividends. The explanation for this is simple: regardless of how good or bad the economy performs, there’s always a demand for renters looking to store their goods. Countless Americans need to store their stuff – anything from old furniture and personal belongings, to tax returns and other important documents, or even excess retail inventory. In 2015, even when stock performance was relatively flat, self-storage surged a whopping 40% in annual returns.
- They provide a steady stream of recurring revenue. One of the best ways to run a business is through generating predictable revenue that can be expected to continue into the future. Similar to gym memberships, self-storage facilities and warehouses bill their customers on a monthly basis, generating a steady stream of revenue. A business with established recurring revenue has a higher resale value compared to a business with no predictable cash flow. Furthermore, self-storage facilities don’t require much to turn a profit. According to The Appraisal Journal, the breakeven occupancy rate for a self-storage facility is roughly 40-45%.
- They have low capital expenditures. Self-storage facilities and warehouses require very little upkeep. When tenants vacate, there’s usually no need for any sort of repairs to be made for the new tenant. Just a little sweeping out is all that’s required – while a typical apartment building requires plumbing, appliances, landscaping, and a variety of other maintenance concerns. Self-storage facilities are also relatively inexpensive to operate and may only require one or two employees. According to the Self-Storage Association, operating costs can be as low as 25% up to as high as 40%.
- They are real property tangible investments. Self-storage facilities are a class of real estate that’s built to generate income right from the start. Furthermore, in many parts of the country self-storage facilities are both scarce and in demand, making them great long term investments. While demand for self-storage continues to grow, new construction has difficulty gaining approval. This is because many local governments consider storage facilities to be unattractive and tacky in residential neighborhoods. They also don’t serve as a job spurs or pay huge property taxes. As steady income drivers, buyers are often willing to pay top dollar for existing facilities.
- They’re evolving to serve a wider market. Compared to the basic concrete slab warehouses found along the interstate of the 60’s, the newer generation of self-storage facilities can be found in retail locations, light commercial and multi-family residential neighborhoods. These well-developed, safe, secure facilities are characterized by aesthetically pleasing construction to blend in with their surroundings. Many offer features such as loading docks, climate control units, packing and moving supplies, as well as full time staff and security guards. Rather than just a place to store personal possessions, these new self-storage facilities serve a variety of business purposes, including start-up incubators.
Self-storage facilities and warehouses may not be the most exciting business to own, but they can be very wise investments. Not only are they relatively simple and inexpensive to operate, they’ll never go out of style. In both good times and bad, there will always be a need for people to store their “stuff”. Take a look at these self-storage facility businesses for sale that you can buy right.
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