I used to always tell someone new in the self storage business that they should purchase an existing facility first.
Get your feet wet, learn the business, then if you really like it, build your second or third facility.
I don’t say that anymore.
Not today. Not with today’s prices for existing facilities.
Yes, building is inherently more risky.
Yes, building has way more moving parts, and takes longer, requires more up-front money potentially, and it takes more time for you to start making money.
But in many ways today, until the market levels off and sanity returns, it’s the safest way to enter the market.
Now that doesn’t mean you have to build from the ground up.
One of our favorite projects is to buy an existing facility that we can expand.
You gets cash flow from the start, albeit expensive cash flow today. But add the value, and later the cash flow from the expansion, and you get a good deal – much like one could purchase a few years ago.
Look for extra land or lots of outdoor parking that can be converted to self storage.
Now the big thing to watch for is over-building. Always get a feasibility report to make sure there is true demand in the area where you’re considering building or expanding. Never, never build without getting one.
Too risky. Too much money at stake. Do not be one of the many people who has built a self storage facility where one never should have been built.
But also don’t let the fact you have never built anything be the barrier. Or at least I didn’t.
There are resources and support you can get for every aspect of the process.
Shameless plug, but my website has them, the Self Storage QuickStart Academy has them, Inside Self Storage has them, the Self Storage Association has them, and even the self storage systems fabricators have them.
If you want to get in this business, you can do it. It may take some stretching, learning something new, putting money at risk, but I am here to tell you it is the best business to be in.
There is no other real estate asset that offers what self storage does. Primarily a low risk (yes, once you are rented and stabilized, it is a lower risk affair than any other real estate) way to get steady, predictable income. I even wrote a book about it.
Now here is the key in my opinion: don’t try to make the first one, the second one, or even the third facility you put into service a home run, killer deal. Just try to do a good deal. If you do enough good deals, you will have financial freedom and true wealth.
Every “home run” deal I have ever done, in reality, didn’t look like a home run going in – I was just trying to do a good deal. Perhaps I am not as smart as most people. The good news is I don’t have to be. I just learned that to create real wealth you need to find something that works and repeat it.
Don’t diversify.
Double, triple down on what you know works. You do that, you will have all you are seeking by entering this business.
One can still find existing facilities to purchase, but it’s very hard. Let the big boys battle it out on the battle field of 5, 6 and 7% CAP rates.
Lets us slide in a little smoother today by considering building or expanding a facility so that we can create true wealth and a fulfilling career.
