How to get an ROI out of your storage unit
How to get an ROI out of your storage unit is the first concern of investors in this sector of real estate. The ability to earn a return on investment is self-storage is what attracts investors to properties like Luxelocker. It is a real estate sector packed with solid opportunity.
The first benefit of investing in self-storage units is that they do relatively well in economic downturns like the one caused by COVID-19. People may be relocating to smaller homes or may be between homes for several months. They need a place to keep their possessions.
Getting an ROI from any investment partly depends on the costs going in. One of the reasons why self-storage investment returns are so high is that building storage structures is less expensive that office buildings, hotels, hospitals, and homes.
The average office property costs $100 per square foot to build, compared to a self-storage cost of build of $40 per square foot. Higher-end operators like Luxelocker invest more into quality building and offer extras such as climate control, but these costs are offset by the higher lease rates they can command.
The second factor that influences ROI in real estate are the costs to operate. Hotels require huge staffs. Offices require security, lighting, cleaning and electricity to keep them humming. And operating a hospital property is as complex as it is expensive. That isn’t so for self-storage. Even a high-customer service company like Luxelocker has low operating costs compared to these other kinds of commercial properties.
Low capital requirements with low operating costs combined with steady high demand, have led to an average ROI for self-storage investments of about 13.4%. That is an eye-opening number, but many people do even better than that. Above-average ROI is possible when you buy in a facility run by a company that has done its homework, building the facility based on knowledge about:
- Location near a high-use population
- Sites with high visibility and high traffic
- Growth corridors where economic expansion is under way
- Distance from competing storage facilities
- Historic and projected occupancy rates, looking to beat that national average of 84%
- Market trending rental rate prices
A few more factors to consider are high occupancy rates, low-cost insurance, tax advantages, and low barriers to entry in terms of size of investment in cash plus financing.
Self-storage real estate investing is low on glamour. You don’t run into too many people bragging about how many storage units they own. It’s hard to fall in love with a storage unit development like some do with office towers or residential developments. It doesn’t glitter, but it can bring you gold.
Investing in self-storage is a true business decision and a sound one. Buy a storage unit built and managed by a solid company. Give careful consideration to the ROI you can get out of your storage unit investment. And then, without your judgement being clouded by glamour, you won’t make a mistake with an emotional decision and overpay. As a by-the-numbers, rational investment, storage units are a great way to get an exceptional real estate ROI.