Active vs passive investing in self-storage
Investing in self-storage can be a great idea. Especially during the pandemic, businesses such as self-storage still provide opportunities for investors as the occupancies are still high at stabilized facilities. If you are situated in the right market and have the necessary funding, you can easily make a decent amount of money from a self-storage investment. But, once you get to research it a bit, you will see that there are different kinds of investments: active and passive. So, which one should you opt for, and which one is going to pay off? Well, that is what we are here to explore.
Active investing in self-storage is when you invest in and run a storage facility. This means that you bring up the necessary funding, set up your facility and staff, and handle the everyday problems. For people with experience, this can be a terrific way to make money, as there is rarely a lack of need for safe storage. But, to actually make your active investment worthwhile, there are a couple of things you'll need to understand.
- Studying the market
Self-storage is a business, and just like any business, it has its own market. If you decide to open a storage facility that doesn't fit your local market, you shouldn't expect to yield much of an investment. Therefore, if you want to participate in your investment actively, you need to study the local storage market. While certain types of storage can be more lucrative, the market dictates which actually are. Running an industrial warehouse doesn't make much sense if you are near a college campus. So try to understand and ideally predict the market needs. By doing so, you will know how to run, promote, and orient your facility.
Tip: The local market dictates whether a storage facility will be successful or not.
- Funding plan
One of the things that beginners often fail to realize is that storage facilities can be quite expensive. Even a modest storage facility requires land, utilities, units, safety equipment, vehicles, tools, etc. Not to mention the staff you will have to train and pay. Therefore, unless you have a fortune at hand, you will have to figure out your funding plan. To do this right, you need first to figure out exactly how much money you need. Carefully consider what kind of a storage facility you are going to run and which services you will offer. Then, research them. If you plan on providing transportation, find out how much do movers cost and then add that to your calculations. If you plan on offering packing, try to include both packing services and the necessary supplies.
Tip: Our advice is to add at least 20% to your final sum, as there will always be unforeseen circumstances to deal with.
The second thing to do is to pick the right funding plan. The best finance providers are your local banks and the Small Business Administration. There are other options, but you should look into them carefully before making any arrangements. Know that you are setting yourself up here for a long-term financial plan. So, make sure that you have everything planned out properly.
Tip: Always consult with a lawyer and a financial consultant before signing any substantial funding contracts.
- Organizing a storage facility
The good thing about organizing a storage facility is that doing so is relatively straightforward. After all, the everyday workings of storage facilities are reasonably similar, and you can learn a lot by talking to experienced business consultants. The bad thing is that even though it is straightforward, it is fairly difficult to tackle, from training to the organization, technology implementation, and overall safety of the storage facility. There will be a lot for you to deal with and not much time to do so. Therefore, do your best to find experienced people to help you out.
Passive investing in self-storage is essentially paying another person to run a storage facility. As we mentioned, storage facilities can be somewhat expensive. Therefore, almost all storage owners look for funding. If you don't have the necessary experience or knowledge to run your own facility, yet you have some funds to invest and think that the local market is lucrative, you can look for passive investment. Just put your finds into an upcoming storage facility.
- Finding the right partners
The main thing here is finding the right people to invest in. With the proper setup and the right people running the facility, your investment will quickly pay off. But, making this happen is easier said than done, so our advice is to look carefully and thoroughly. The more information you can gather on your partners, the better — things like previous experience, reputation, financial status, etc. Every bit will help you determine whether your investment will be a sound one.
Tip: Keep in mind that no questions are off-limits when it comes to investments of this magnitude.
- Long-term plans
The second thing to note is the contract you sign. Similar to funding, the contract will be one of the most significant factors in determining how lucrative your investment is. Therefore, you want to avoid signing something that you will end up regretting. Ensure that you understand what you are singing perfectly and that you are legally covered.
The final verdict on investing in self-storage
Few sectors have been impacted by the coronavirus pandemic, unlike self-storage, which has remained strong and even enjoyed some benefit. In our mind, deciding between active or passive investing in self-storage boils down to how much effort you want to invest in it. As a general rule of thumb, if you have no prior experience, we suggest that you start with a more passive approach. In time, you will learn what storage is all about. And, if the right opportunity to either acquire or build a facility arises, you will be able to use your knowledge to make the most out of a decent market.