Having a tough time throwing away all your extra junk... sorry treasures?
You are not alone. Everyone else has this problem too. This is one of the reasons that the trend in self storage investing has been experiencing a great run over the past 25 years, outperforming many other real estate sectors. Are you investing in self storage units?
Kris Benson discusses what you are missing out with self storage investing and why you have not heard of these interesting trends in this space. Join us this week to learn why you should consider this sector.
3 Reasons Every Investor Should Consider Self-Storage Investing as Part of Their Alternative Investment Portfolio
We talk with a lot of investors everyday who ask us a simple question. “Why should I invest in self-storage?” Obviously, as a self-storage operator we are bias but there are three data points that we believe make this a fantastic asset class for investors to evaluate for their own portfolios.
Wait a minute, self-storage is a legitimate asset class? Some statistics on the self-storage industry that may surprise you. Here are some numbers on the industry as of 1st quarter of 2019
- Number of Self-Storage Facilities in the U.S. 48,000-52,000
- That’s more than the number of McDonalds and Starbucks in the US combined!
- 9.4% of Americans rent a storage unit
- Average annual industry revenues of $38,000,000,000
The self-storage industry has definitely come of age in the past 10 years. I remember when a self-storage facility was in a very rural area on a gravel pad and to rent a unit you had to go into the house to talk with the owner. Now facilities are being built on prime real estate on the corner of main and main with 3 story glass and brick retail offices rivaling the very nicest Starbucks location!
Why has there been such interest in the asset class? I think that brings us back to the three reasons we are bullish on storage.
The first thing that every investor should look at is historical performance. According to the National Association of REIT (NAREIT)* the Self-Storage asset class has achieved an average annual return of 16.85% over the past 25 years. Self-Storage has outperformed Apartments (12.93%), Retail (12.04%), Office (12.15%), and the S&P 500 (7.06%) over that same time period.
I am a big believer that history repeats itself so I am always interested in the performance of an asset class in an economic downturn. According to that same NAREIT database, looking back at the last recession in 2007-2009, Self-Storage lost -3.86% in value versus Apartments which lost (-6.72%,) Retail (-12.32%), Office (8.16%), and the S&P 500 (-21.10%) Even when downsizing, Americans do not seem to lose their appetite for storage.
Market Consolidation Opportunity
Finally, investors should understand what the long-term runway may be in a particular asset class. According to the 2019 Self-Storage Almanac the publicly traded companies own less than 25% of the Self-Storage market. There is a consolidation opportunity for self-storage operators to acquire facilities owned by mom and pop operators and generate revenue enhancements by deploying a professional management strategy.
The performance, protection, and opportunity offered in the Self-Storage asset class make it a very attractive addition to any investor’s portfolio!
That doesn’t mean that the asset class comes without risk. The biggest risk right now is on the supply side. We have seen a major development cycle in storage with many developers jumping in to maximize their returns. As you can see in the chart below from the US Census Bureau the self-storage industry has kept the construction industry very busy over the last few years. Does this mean it’s too late to invest and garner a strong return?
We don’t think so. Just because the 50 top MSA (Metropolitan Statistical Areas) have seen a bunch of new developments doesn’t mean there are not any opportunities to be had to create value.
Reliant has typically operated in the secondary and tertiary markets in the southeast where typically there is less competition and more “mom and pop” operators. Keep in mind that storage is a micro market business. What really matters is the 1, 3, 5-mile radius around your facility because consumers will not travel for storage. Typically, we see 70%+ of our tenants within that 5-mile radius. It needs to be convenient to work or home for them to use the facility. Unlike multifamily where a consumer may travel for the right school district or amenity, storage is an air-conditioned garage so location is key.
Our acquisition team is looking at things like population growth, average income, job growth, rental rate growth in those rings are what tell the story around demand for storage. Even if a market like Atlanta has seen a bunch of development and may be oversupplied that doesn’t mean there isn’t a 5-mile radius in the suburbs that has opportunity. It’s definitely a sharp shooters game right now in storage.
If you are interested in learning more about Reliant and our track record in the industry you can check out www.reliantinvestments.com . If you are interested in learning more about real estate investing, we built www.krisbenson.com that has a video series giving you the high level knowledge you need to evaluate real estate.
Kris Benson is the Chief Investment Officer of Reliant Real Estate Management. Reliant Real Estate headquartered in Roswell; GA is a vertically integrated commercial self-storage operator. Currently, Reliant is the 25th largest self-storage operator in the US with 53 properties owned across 8 states with just over 35,000 units and 4.5MM rentable square feet. Reliant has sold another 21 properties and have achieved an average project level IRR net of fees of 45% with an average hold time of just over 3 years.
Reliant Real Estate is currently raising a $50MM equity fund focused on stabilized and value-add self-storage properties across the Southeast. Reliant is seeking long term equity partnerships with investors/groups that align with our long-term goals.
Subscribe & Download
Never miss out on a new episode! Subscribe using your favorite podcast app.
Sign up to be one of our Money Tree Ultimate Insiders. You will have instant access to new episodes, automatically have access to our monthly giveaways, and the potential to be a guest panelist on our show
Looking for a better way to invest?
It doesn’t cost much to start, and you get access to a portfolio built around your risk tolerance and your goals. Using Modern Portfolio Theory, pioneered by a Nobel laureate, Betterment can help you build wealth without getting caught up in the noise of the market.
Today's Guest: Kris Benson
Kris Benson is the chief investment officer for Reliant Investments, a subsidiary of a Reliant Real Estate Management and one of the top 30 commercial self storage operators in the U.S in 2018. Kris is part of the investment committee and develops institutional quality self storage investment opportunities for accredited investors.
In the last 12 months the Reliant team has invested over $100MM in self-storage
projects and raised over $50MM from investors. Self-Storage provides a unique
opportunity to invest in one of the most successful asset classes in the past 5
years and take advantage of the institutional interest moving forward. Reliant is
currently raising equity for a $50MM equity fund focusing on value add and
stabilized self-storage assets.
Kris's investing goals have always been about changing the paradigm of trading time for money in order to have time for more of the things we love to do. Likewise, investing in real estate has been Kris' steadfast path to passive income and he is passionate about inspiring others to change their mindset around investing for their future.
Kris graduated from the state University of Binghamton and currently lives just outside Saratoga Springs NY with his wife Jenn and two sons Noah and Luke. He is an outdoor enthusiast with a passion for the ski mountain, the lake and his mountain bike!
Kris' Online Presence