There are many things that draw investors into the idea of investing in self-storage facilities. This investment strategy involves low overhead costs, high-income potential and little experience in the field to get started. But not all self-storage facilities are created equal, and serious buyers are looking for a few key qualities to help them choose the right space for their investment.

Here are the four things that make self-storage facilities attractive to buyers:

The Physical Features

One of the first things buyers look for in a profitable self-storage unit is the physical characteristics.

● How big is it?

● How many units does it have?

● How easy is it to get from one area to the next?

● Is there space for a leasing office?

● Are roads/driveways in good condition?

All of these things will help a buyer visualize how they will be able to effectively manage the property.

Another thing buyers will pay close attention to is the amount of work a facility needs to be operational. What upgrades or maintenance does the property need before they can start renting it out and making money? Are the units in good condition? Are lights and electrical systems working? Is there a security system in place?

The less work that needs to be done to a self-storage facility, the easier it will be to maximize the ROI and start making a profit sooner.

The Location

The location of a self-storage unit plays a major part in whether the property is attractive to investors. Buyers are looking for facilities in an area that has a high need for self-storage and low supply. The physical location of the property should be close to major highways, located in a safe area, and easily accessible from major cities and surrounding towns. Self-storage facilities are most attractive to buyers when they are centrally located to the areas they serve.

The majority of people that purchase or rent a storage unit do so because they see advertisements while driving by. This means the location needs to be close to major highways that see a decent amount of traffic daily. A self-storage facility will be attractive to buyers if it is in a high-traffic area where there are plenty of opportunities for eye-catching advertising.

Just because a self-storage facility is in a location that sees a lot of traffic doesn't mean it's the right kind of traffic. If the self-storage facility is located in a low-income area, the chances of the majority of the population having extra money to spend on self-storage are relatively low. This can be a red flag for many investors. A profitable self-storage facility will be located in an area where people have extra money to spend on things like self-storage.

Operational Performance

A self-storage can look great and be located in a highly desirable area, but if it has a history of underperforming, it could be a red flag for buyers. Serious buyers will investigate the economic history of a self-storage facility to see how much money it has made in the past and patterns of profitability. They’ll be looking for an investment opportunity that shows revenue trending up and expense reports that stay consistent. Buyers will want to know everything there is to know about how the property performed in the past to make predictions about how it will perform in the future.

Just like with any investment, the numbers have to make sense. According to a US News report, on average:

● A healthy self-storage market brings in about $1 for every square foot of storage space.

● The average expenses for a mid-size self-storage unit are between $2.50- $3.75 per square foot.

● Average annual return on investment is 17.43%

● The national average for units per facility is about 540 units

● 9.3% of U.S households rent a self-storage unit.

● Average tenant turnover is between 7-8% per month

Serious buyers know these statistics and a property that checks all of the boxes will appear more attractive to investors than properties who don’t come close to these averages.

Competition

Starting a new business can be a challenge, but it can be even harder for buyers trying to compete with similar businesses who have made a name for themselves in the community. Most big cities have successful self-storage facilities, so adding another one to the market may not be appealing for buyers. Instead, serious buyers will be looking to invest in an area where there is a high demand for self-storage based on the local economy and the most popular industries.

One thing buyers are looking for when investing in self-storage is the chance to dominate the market. A facility will attract serious buyers if it is located in an area where there aren’t a few other businesses already established.

The Next Step

Over the last 40 years, self-storage facilities have proven to be a steady investment strategy that can have low overhead expenses and high-income potential. You don’t need a lot of experience to get started, and when you know what to look for, you can make an informed and confident decision about the property you buy.

To learn more about how to take this next step (and the latest market trends) sign up for our newsletter here. You can also search for self-storage facilities in your market or read other articles about this kind of investing.