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What are the average self storage investment returns?

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What are the average self storage investment returns?

Self storage units consistently outperform other real-estate investments, such as multifamily dwellings, office buildings, and private homes.

The chief reason behind this success is that, no matter how poor the economy is, people are still going to move, inherit stuff they can’t use, and downsize. These people are going to need someplace to store their stuff safely and cost-effectively. Look at this infographic with historical data on the self storage industry within the US;

self storage info

It’s clear that over approximately 15 years, the self storage industry in the united states increased by more than 60% with the majority of people who are renting these unit’s actually owning a garage or shed.

Investing in a mid-sized self storage facility has, over the past two decades, provided a 29.6 percent return on investment, which is the driving force behind the industry’s growth during that time.

Most savvy owners, even if they have incurred a sizable debt by taking out loans to purchase their self storage facilities, will be able to take in $96.88 per square metre as annual gross earnings. At the same time, their annual operating costs will be $34.98 per square metre, which makes their basic net income $230,027.93 on a 3,716 square metre facility. That’s not chump change.

The above numbers consider 90-percent occupancy of the facility, and the costs of vacancy and having to collect outstanding rents are simply part of the costs of investing. The break-even point varies between 60 and 72 percent, depending on the tax structure of the municipality where the investor’s property is located, and the average in Australia is 65 percent.

This point is significantly lower than that of other real-estate ventures, and that’s yet another factor in the popularity of self storage locations.

The lower-than-average break-even point also allows the investor to be flexible in response to the market. Savvy investors will study trends and will raise prices gradually over a period of months to “fill the kitty,” so to speak.

Then, such investors can offer a “sale price” on units that’s less than the raised prices.

For example, raising the cost of each square metre by $0.10 cumulatively per month over six months and then offering a discount of $0.20 per month for four months will put nearly $180,000 gross income “in the kitty” to help cover a downward swing to only 65 percent occupancy at the base rate of $8.07 per square metre monthly.

When occupancy rises to 90 percent again, or higher, the investor can offer another discount to remain attractive to tenants.

Properly maintained self storage units provide investors with a lucrative income and, if run effectively and smartly, can be sold at a later date for a sizable profit.