eight percent are owned by the next 100 largest operators. This leaves 74 percent of self-storage facilities in the United States owned by “mom and pop” operators. While the supply of self-storage facilities is far less than other real estate asset classes, posing a difficulty of sourcing viable investment opportunities, the nature of the supply is advantageous for sophisticated operators to identify value-add opportunities amongst existing facilities. There is a large amount of new inventory coming on the market due to new construction mainly in primary markets. This obstacle can be avoided with proper due diligence and targeted investing, but that is the topic for another article. EASY EVICTIONS Self-storage is governed by lien (property) law as opposed to eviction (tenant) law, which means that fewer days are lost to renter default than any other asset class that physically has people in it. Lien law means that the second a renter is late on their payment; their gate passcode is deactivated or their unit is over- locked. In the case of a delinquent
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HIGH BANKABILITY From 2011 to 2018, self-storage had the lowest default rate versus any other REIT asset class. When those rare few properties did default, the banks only lost an average of 1.52 percent per default. LOW MANAGEMENT COSTS: Many smaller facilities are unmanned or automated. Units can be rented and paid for from a phone without the need to do a “showing.” With the human-to-human nature of real estate posing difficulties in the rising cost of wages and potential health risks from COVID-19, the benefits of “easy management” goes beyond simplicity in processes and balance sheets. Asset classes such as multifamily or hotels now face a liability in the form of their management requirements. Even REIT grade self-storage facilities can be managed remotely in conjunction with one or two onsite personnel.
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HEREARE THE TOP 10 REASONSWHYWE DECIDED TO DEDICATE OUR INVESTING TO SELF-STORAGE: HIGHEST RETURN versus any other real estate asset class. Using REIT data, from 1994 – 2017, self-storage returned an annual average of 17.43 percent. Based on that annual average, $100,000 invested in 1994 would be $4,026,413 today.
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RECESSION RESILIENCE From 2007 to 2009, self-storage REITS dropped an average of 3.8 percent versus the S&P drop of 22 percent. This was the smallest drop of any other REIT asset class.
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Of the roughly
HIGH FRAGMENTATION
70,000 storage facilities in the United States, only 18 percent are owned by the six large REITS, and
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