This week I opened registration for my new online master class, “Insider’s Strategies for Buying Self Storage in Today’s Crazy Market .” (You can register HERE)
And it is indeed a very crazy market out there.
My philosophy is let the big boys fight it out on the battlefield of 5% and 6% CAP rates. The larger, stabilized self storage facilities with good cash flow is the ground these guys are focused on.
What we, as smaller investors, have to do today to start or grow our business is way more than what I had to do when I first got started; before self storage was so hot.
Back then it was a “specialty use” product and there were far fewer transactions going on.
But today, because everyone now sees the benefits of self storage as an investment, it’s a hot, expensive asset to buy. We now have to be very savvy and almost always find value-add situations.
Many newcomers to the self storage industry are building from the ground up as their way of entering the market. It’s a great way to get in or expand, but it does have more inherent risk involved.
However, real insiders know the safest way to get in and grow the business today is to do either:
- an expansion of a smaller facility, or
- a conversion of a warehouse, or other type of building, into self storage.
For most of us, the expansion option is a better way to go. During the online master class I will go into detail about how to do this but as a teaser, I’m going to show you some of what will be covered:
The advantages of an expansion or conversion are:
- The bigger players are beating themselves up fighting for the larger facilities. They are not really focused on the 20,000 or 30,000 square foot facilities that are, most likely, not well managed and are a mom and pop operation.
- You will have to pay more than you want to buy the existing cash flow in a small facility, BUT you will also be buying expansion ground.
- Site work costs tend to be less on expansions than new builds. The hard part was usually done before you purchased it.
- You can add the necessary value to a facility to get a decent return by building expansion. If you can double the size, you’ve taken a project that was too expensive for it’s existing income and turned it into a decent project with an above market return.
- The majority of this type of facility are owned and run by complacent owners, they are leaving a lot of money on the table, and in most cases I’ve seen, are below market value.
- You get cash flow from day one as well as the ability to create upside.
Now it’s not all sunshine and unicorns.
There are more risks.
You have now got to develop a lot more skill sets and have more courage than ever before to get in or grow this business as a smaller investor.
- You’ve got to learn and develop some construction skills and/or knowledge to develop self storage today. You can’t just hire it out and manage in absentia. You will lose a lot of money that way and likely not get the return you need to justify the risk.
- Any time there is construction involved in a project, there are more moving parts and, therefore, more risk. Especially if this is your first project, it requires a level of courage I never needed when I first got in the business. Yes, it always takes certain strengths to buy a million dollar or more (sometimes much more) project, but it takes a LOT of courage when you realize you’re paying $60, $70, or $80 per square foot for the existing facility and hoping everything works out to get it down to the $50’s or $60’s when everything is complete.
So yes, it takes a lot more effort to get in or grow a self storage business in today’s crazy market, but you know what? We all have what it takes.
The good news is that self storage will remain a hot commodity and the percentage of the public using self storage continues to grow, creating ever-stronger demand.
Self storage has a bright future. So figure out what you need to do to get in the business, and do it.
Your action steps for this week are:
- Register for and attend the online master class ‘Insider’s Strategy For Buying Self Storage In This Crazy Market”. ( Register HERE).
- Read last week’s blog and complete that work if you haven’t already. It was written to help you design your Business Strategy. (The work you will accomplish in the Master Class will be very different if you working with your specific business strategy.)
- Be on time to the class you register for and be prepared to interact with me and other small investors facing the same issues you are in today’s market.
As always, reach out with any questions and be sure to share your success and struggles with me and with other small investors on my Facebook page. Come join us share something about yourself!
