Self-storage facilities are a type of commercial real estate that provide individuals and businesses with a place to store their belongings. They have been gaining popularity in recent years as an attractive investment opportunity, due to a number of factors such as:
High demand: The self-storage industry is a growing market, driven by an increasing population, consumerism, and a lack of space in homes and businesses. This high demand for self-storage units can lead to stable and consistent cash flow for investors.
Low vacancy rates: Self-storage facilities have historically had low vacancy rates compared to other types of commercial real estate. This is because people will always need a place to store their belongings, regardless of the state of the economy.
Resilience to economic downturns: Self-storage facilities are considered to be a non-cyclical industry, meaning that they are less affected by economic downturns. People will still need to store their belongings during a recession, whereas demand for other types of commercial real estate, such as office or retail space, may decrease.
Low maintenance costs: Self-storage facilities require less maintenance than other types of commercial real estate, such as multi-family properties. The units are typically just concrete or metal structures with minimal finishes, and there are no common areas to maintain.
Potential for value-add: Many self-storage facilities are older properties that can be purchased at a lower cost and then updated or expanded to increase their value. This can lead to higher returns for investors.
On the other hand, investing in multi-family properties has its own set of advantages such as:
Potential for steady cash flow: Multi-family properties can provide a steady stream of rental income, making them a popular choice for investors looking for regular cash flow.
Potential for appreciation: Multi-family properties can appreciate in value over time, which can lead to significant returns for investors.
Tax benefits: Owning multi-family properties can provide investors with significant tax benefits, including deductions for depreciation, mortgage interest, and operating expenses.
Diversification: Investing in multi-family properties can help diversify an investment portfolio, reducing risk and increasing the potential for returns.
Easier to finance: Multi-family properties are considered to be safer investments by lenders, making it easier to secure financing for them. Ultimately, the choice between self-storage and multi-family properties as an investment will depend on an individual’s investment goals, risk tolerance, and market conditions. Both types of properties have their own set of advantages and disadvantages and should be evaluated based on the investor’s specific needs and circumstances.