Ever feel like you’re working your tail off, only to see your investments barely budge? Or maybe you’re sitting on a pile of cash, nervous about where to put it in this crazy economy.
I get it, and while there’s a ton of hype and misinformation out there about the “fastest ways to make money” and “get rich quick” programs. Yeah, we’re a little more savvy these days.
Putting those aside, one of the better ways to invest your money is in a long, sustainable way. One that gives solid returns that may not be overnight-crypto-massive, but are consistent and reliable over long periods of time.
Opportunities like self-storage might not sound glamorous, but they can yield returns of as much as 20% a year, outperforming many other investment segments.
To showcase just what it has to offer, and, ultimately whether it’s the right choice for you, we’re showcasing ten of the best reasons why the self-storage industry could be your next smart money move.
Let’s get started.
#1: Self-Storage is an Unshakeable Investment
According to Forbes, between 2001 and 2023, the average return of the self-storage industry was 20.87%. From 2006 to 2021, it was 18.76%.
For comparison, the real estate average returns look like this:
- 1-Year Return: -7%
- 3-Year Return: 4.92%
- 5-Year Return: 4.20%
SPDR Gold Shares (from 2010 to 2022) averaged about 5.47% a year, and from 1825 to 2019, the average annual return of the US Stock Exchange was roughly 9.56%.
However, while these figures speak for themselves off the bat, you’ve got to remember how each of these economies were rocked. Billions were lost during the recession of 2008. Billions shifted more during the craziness of the pandemic.
When the economy takes a nosedive, most investments go with it. But self-storage? It’s like a rock in a storm. In fact, during the Great Recession, self-storage was one of the few real estate sectors that actually grew.
Why?
Because life happens, even when times are tough. People downsize, they move, they have unexpected life changes – and all of that stuff needs a place to go.
Plus, businesses often need temporary storage when they’re scaling back or pivoting. This creates a steady demand for self-storage, no matter what the economy is doing. It’s like having a built-in safety net for your investment.
Think of it this way: when people are tightening their belts, they’re not going to stop needing a place to store their belongings. In fact, they might need it even more as they make tough choices about what to keep and what to let go.
This makes self-storage an incredibly resilient investment, giving you peace of mind even when the financial world feels shaky.
#2: High Demand, Low Supply
A 2023 study found that 21% of American households have a self-storage unit, and nearly 40% have used self-storage, are using it, or plan to use it in the future. That’s over 140 million people using a service.
Here’s a simple truth about investing: if you want to make money, find something people need – and make sure there’s not enough of it. That’s the sweet spot where demand outstrips supply, and that’s exactly what’s happening in the self-storage world.
Think about it: our homes are getting smaller, we’re moving more often, and we’re buying more stuff online.
That means we’re all accumulating more belongings than ever before, but we’ve got less space to store them. Add to that the fact that land for new facilities is limited, and you’ve got a recipe for skyrocketing demand.
Here are some eye-opening stats to chew on:
- 90% of self-storage facilities in the US are occupied. That means there’s barely any room for new customers, and existing facilities can charge premium prices. (2015 data)
- The self-storage market is expected to grow by 5.3% between 2022 and 2030. That’s a massive growth rate, and it shows no signs of slowing down.
- Millennials are the fastest-growing demographic of self-storage users. This generation is known for valuing experiences over possessions, but they still need a place to store their stuff when not using it.
So, what does this mean for you? It means that investing in self-storage is like buying a ticket to ride a giant wave of demand.
There’s a huge pool of potential customers who are actively looking for storage solutions, and that demand is only going to increase in the years to come.
#3: Passive Income Done Right
Why Owning Real Estate Is NOT Passive Income
While true passive income is rare, self-storage comes close. Here’s how it generates hassle-free cash flow:
- Simple Operations: Forget major repairs, landscaping, or pest control—just collect rent.
- Minimal Tenant Turnover: People rent for long periods (averaging 14 months), ensuring a predictable income stream.
- Scalability: Start small and expand gradually, even diversifying across locations.
- Hands-Off Potential: Investing in established brands or franchises minimizes your workload.
Unlike other real estate, self-storage lets you sit back and enjoy a steady income with minimal effort.
#4: Strong Returns: Where Your Money Works Smarter, Not Harder
Let’s talk returns. Self-storage consistently outperforms other real estate investments, and here’s why:
- Low Operating Costs: Unlike other property types, self-storage facilities require minimal upkeep. No fancy amenities, just functional spaces people will pay for.
- High Occupancy Rates: 90% of US self-storage facilities are occupied, ensuring consistent income generation.
- Increasing Rental Rates: Demand continues to outpace supply, allowing you to charge premium rates.
- 8-12% Average ROI: This significantly surpasses residential (4-5%) and commercial (6-8%) real estate returns.
Beyond the numbers, self-storage investments offer:
- Low Risk: Consistent demand, low operating costs, and a steady stream of potential tenants.
- Minimal Hassle: A reliable, high-performing asset that delivers impressive returns without the stress.
If you want an investment that works smarter, not harder, self-storage is a strong contender.
#5: A Diverse Portfolio of Income
Self-storage stands out for its diverse tenant base, including:
- Individuals & Families: Storing furniture, seasonal items, or excess belongings.
- Businesses: Utilizing space for inventory, equipment, documents, or archiving.
- Students: Needing storage during summer break or while studying abroad.
- Military Personnel: Finding solutions for frequent relocations.
- E-commerce Businesses: Storing inventory for fulfillment due to the rise of online shopping.
This diversity offers several advantages:
- Spread Risk: Your income isn’t tied to a single industry or demographic.
- Stable Income: Even if one segment declines, others can compensate.
- Versatile Asset: Appeals to a wide range of customers, increasing long-term success potential.
If you seek portfolio diversification, self-storage is a smart choice. Its broad appeal reduces risk while maximizing income potential.
#6: Self Storage Allows You to Start Start Small & Dream Big
Self-storage investing stands out for its flexibility and scalability. Unlike other real estate ventures requiring substantial upfront capital, self-storage allows you to begin with smaller investments in facilities or individual units.
This approach lets you learn the ropes, gain experience, and build confidence before gradually expanding.
As you see those steady returns rolling in, you can reinvest profits to acquire more units, additional facilities, or even partner on larger projects. The beauty of self-storage is that it’s not an all-or-nothing game.
You can customize your investment strategy to perfectly align with your budget, risk tolerance, and long-term goals, ensuring a personalized path to success in this lucrative market.
Here are a few examples of how investors can scale their self-storage portfolios:
- Start with a few units: Invest in a few individual units within an existing facility to test the waters and get a feel for the market.
- Partner with other investors: Pool your resources with other investors to purchase a larger facility or multiple facilities.
- Utilize leverage: Secure financing to purchase a larger facility than you could afford with cash alone.
- Invest in a self-storage REIT: These real estate investment trusts allow you to invest in a diversified portfolio of self-storage facilities without the hassle of direct ownership.
#7: Low-Maintenance Investment Options
Unlike traditional rental properties with endless repairs and tenant issues, self-storage facilities are the low-maintenance champions of real estate. Their simple design—essentially four walls and a door—means fewer moving parts to break down and minimal upkeep.
Forget about landscaping crews, pest control, or late-night emergency calls. Self-storage facilities practically take care of themselves, leaving more profit in your pocket.
Even management is a breeze. With online rentals, automated billing, and smart locks, you can run your facility remotely, freeing you to focus on other investments or simply enjoy life.
If you’re seeking passive income without the hassle of constant maintenance and repairs, self-storage is the dream investment.
#8: Self Storage is a Business That Appreciates
Self-storage facilities are not only a source of monthly income but also a long-term wealth builder. As cities grow and land becomes scarcer, the value of well-located self-storage facilities, often situated near residential areas and businesses tends to appreciate significantly.
This means you could potentially sell your facility in the future for a considerable profit in addition to the steady rental income you’ve collected over time.
While appreciation isn’t guaranteed (no investment is), self-storage facilities have historically shown a strong track record, making them an attractive option for building long-term wealth.
#9: You Can Enjoy Beneficial Tax Breaks
Self-storage investing comes with potential tax advantages that can significantly enhance your returns. These benefits can put more money back in your pocket and make this investment even more lucrative.
Here are some key tax breaks you might be eligible for:
- Depreciation: The IRS allows you to deduct a portion of your property’s value each year as it depreciates. This depreciation deduction can substantially lower your taxable income, effectively increasing your cash flow.
- Deductible Expenses: Many expenses related to operating a self-storage facility, such as insurance premiums, property taxes, and repair costs, can be deducted from your income. This further reduces your tax burden and boosts your overall profitability.
- Pass-Through Deduction: If you own your self-storage facility through a pass-through entity like a Limited Liability Company (LLC) or S-corporation, you might qualify for a 20% deduction on your qualified business income. This deduction can be a game-changer, significantly impacting your bottom line.
While these tax benefits can be substantial, it’s important to remember that tax laws are complex and subject to change.
To maximize your deductions and ensure full compliance with regulations, it’s crucial to consult with a qualified tax professional who can guide you through the process and tailor a strategy to your specific situation.
By taking advantage of these tax benefits, self-storage investing becomes even more appealing. It’s a smart way to grow your wealth while minimizing your tax liability, making it a win-win situation for both your portfolio and your peace of mind.
#10: It’s Backed By a Progressive Tech Scene
Self-storage may not seem like the most tech-forward industry, but it’s undergoing a digital transformation.
Technology is being leveraged to streamline operations, enhance security, and improve the customer experience, ultimately making self-storage even more profitable for investors.
Here’s how technology is revolutionizing self-storage:
- Online Rentals: Tenants can browse, compare, and sign leases online, saving time and attracting a wider audience.
- Smart Locks: Smartphone access enhances security and convenience for tenants.
- Automated Billing: Streamlines payments, freeing up your time and ensuring consistent cash flow.
- Data Analytics: Tracks occupancy rates, trends, and customer behavior for data-driven decision-making.
- Virtual Tours: Allow potential tenants to “walk through” your facility virtually, increasing visibility.
By investing in tech-savvy self-storage, you’re not just buying an asset; you’re investing in the future of the industry, ensuring your investment remains competitive and profitable for years to come.
Conclusion
Self-storage isn’t just a trend; it’s a resilient, high-yielding asset class with proven potential. From recession resistance and impressive ROI to low maintenance and tech-driven operations, self-storage is a strategic addition to any portfolio.
Looking for more information or advice?
Get in touch with our experts here at CRE Insights, and we’ll help you understand the keys to building long-term wealth in this thriving market.
It’s time to pave your way to a more secure financial future.
