April 24th, 2008 by Johnny Cashflow
In order to get to my financial freedom, I too started with investing in real estate, just as you might have heard from many other investors.Â My story is similar in which I acquired my first piece of real estate as a home and investment and from there I went on to purchase several properties that allowed me to become free of the corporate world.Â
So the question is why Self Storage?Â
After having to deal with my many issues related to owning residential real estate.Â And I am certain that you all know of the head aches related to dealing with tenants and all related issues.Â We have had nightmare stories from, our tenants turning the neighbourhood into gang infested areas, to prostitution to the final straw of drug dealing.
You might ask why did we let these people into our apartments to begin with.Â Well first off, we did not let these people into our apartments and secondly, I am not sure how they have one side to them when applying for tenancy and another once they have moved in.Â Anyhow, this article is not about my woes in owning apartment buildings.
This article is more about how to use your experience in investing to analyze other possible investments.Â The one in particular I am going to talk about today is Self Storage.Â It turns out that there are probably 4 or 5 big Real Estate Investment Trusts (REIT’s) that are fundamentally in the Self Storage Business.Â Their names are Public Storage, Extra Space, Uncle Bobs, Shurguard and U-Store-It.Â All these REIT’s are in this business for one reason and one reason only… to make money, and they make lots of it.Â If you get a chance, look them up as they are public and you will see how well they operate and the dividends they provide to their investors.
So why Self Storage?Â The answer is quite simple… no plumbing issues!Â You see all Self Storage Buildings are composed of is walls and a tin roof.Â This warehouse space is then broken down into multiple units of varying sizes that are rent-able to the general public for a nominal fee.Â The clients are people who live in the area and sometimes small businesses as well who typically need the extra space to put away their so called junk or store their product in the interim.Â These clients are typically recurring and once you have a facility filled, then it is just a matter of operating the business effectively to give you a maximum cash flow.Â This is done by raising the rents when necessary to meet demands to cutting operating costs by using less utilities and maintaining the building.
How would one go about investing in Self Storage?Â The answer to this one is not so simple as it takes money to make money and unfortunately these self storage properties sell for quite a hefty sum.Â So if you do not have your cash stashed away or are not doing a 1031 exchange from an existing property to one in the self storage arena, you are out of luck.
There is always the option of buying shares of one of the REIT’s above, however there is one other option if you fall under the category of an Accredited Investor who is someone is quite well to do to begin with.Â This is how the rich get richer!Â The other option is to partake of a syndication where there is a known investment company that puts together several Accredited Investors into a pool of investment dollars to go out and purchase one of these Self Storage Businesses with its underlying land.
I will share with you more on what an accredited investor is and how it is classified under the Securities Act. This will be a separate article at another time.
In the mean time all the best with your investments and I look forward to meeting you in the fast lane to freedom.
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This entry was posted on Thursday, April 24th, 2008 at 3:49 pm and is filed under Business, Investing, Real Estate, Self or Mini Storage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.