Thought about self-storage as an alternative real estate investment?
From high returns to recession-resistant assets, Deni & Brian break down why you should consider storage facilities over residental real estate investing.
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Brian: Hey, guys! Brian Davis and Deni Supplee here from Spark Rental.
Deni: Hi, everyone! How are you?
Brian: Happy Tuesday! As always, super excited to be with you. Last week we interviewed Dandan Zhu about how she retired from her day job at 28 with real estate investments. I love those kinds of episodes. Get a glimpse into real people’s lives and how they actually achieve this. Before that, we interviewed a guy who reached $1 million net worth at the age of 31, again through real estate. And he was only earning like $55,000…
Deni: He was working for a movie theater.
Brian: Yeah! You know, it’s not like he was earning 300 grand a year in an average income and reached $1,000,000 net worth at 31. So it goes to show you can do it.
Deni: Right? It is doable! We hear the stories all the time. I mean, we’ve put some on here. And, I know a lot of people say, no, you can’t, but it can! So…
Brian: Well, who was it that said, whether you believe you can or believe you can’t, you’re probably right.
Deni: So, it’s true. That is true.
Brian: So as you guys join us, let us know where you’re tuning in from. We always love to hear that stuff. This is an interactive show. It’s not just us lecturing at you. Today, we’re talking all about why self-storage investments beat residential real estate investments. And, you know, we say that not to be smug or to try to show off anything. Deni and I both cut our teeth with residential real estate investments. Most of our real estate portfolio is residential real estate investments. So we’re not trying to knock residential real estate, but so many people overlook self-storage facilities when they get into real estate investing.
Deni: And the goal here that you always talk about, and I know it means a little bit differently, is to diversify, but it’s also to diversify the type. You don’t want to keep everything in one area. And we all saw that evidence with COVID and like office buildings just went. So, it’s important to have a little bit of this and a little bit of that.
Brian: No question. And there’s many different types of diversification. You can have geographical diversification, owning properties in different cities, different states, even different countries. You have industry diversification. So commercial real estate, residential real estate, self-storage, real estate, mobile home parks, RV resorts, and you can do all kinds of stuff with this to diversify your real estate portfolio. And you can even get into passive investments like real estate crowdfunding, like real estate syndications to further diversify your investments. So, Deni tell us a little bit about why else real estate investors should consider self-storage.
Deni: Well, me, coming from a background of managing a lot of units at once, can tell you that you’re not going to have a lot of people arguing. You’re not going to have those kind of noise complaints. You know, I don’t think people’s things make noise so that it’s less aggravating overall. I mean, you don’t have the eviction process is completely different. And in some cases, you have to check what your state, but in some cases, you can have like that TV show where they auction off the car. So you make money on that, too! So, I mean, it’s a lot different than, you know, the kind of rigmarole you have to go through to evict a person.
Brian: Yeah. So less management stress and headaches, less management, labor, less regulation, like you pointed out, Deni. In some cities and states, it can take a year to evict someone. I’ve had to take a year to evict residential tenants before. That’s not going to happen in self-storage. If someone doesn’t pay for their unit. The eviction process is really fast and you remove their stuff from the unit.
Deni: So even maintenance, overall maintenance and upkeep and repair… My husband actually does some work for two self-storage units near us, and so he knows the people. And that’s what they say all the time. Like he comes out and like there’s no lawns, these particular ones. It’s not like you have to worry about that. It’s like either rocks or something like that. There’s a lot of advantages.
Brian: Yeah. And these buildings are very, very simple buildings. These aren’t like houses that have a lot of complex mechanical systems, self-storage buildings. You have very basic wiring just to have lighting. And some of the more advanced self-storage facilities do offer climate control, but not all of them. And that’s really it. You don’t have plumbing systems, you don’t have all of these appliances. These buildings are very simple to maintain and repair. Most of your costs is in marketing, in just getting to full or near full occupancy in the beginning. And then as you have turnovers, making sure you have a wait list or ideally not to keep them full, but that’s really all you’re looking at. You can automate almost all of the management of these facilities. Way less work, less maintenance, less repairs and higher returns on average than residential real estate. And we’re going to be hearing about this tonight from Stacy Rosetti, who’s doing a free webinar on how to invest in self storage within the next 90 days. And we’ll put a link to that in the comments here. But she’s going to go over why self-storage facilities consistently pay high returns, starting at around 12% and going well above 20% on these facilities. So they pay better than so-called sexier residential real estate investments, more popular residential real estate investments. And one of the reasons that they pay better is that they’re not sexy, that, you know, you don’t have so much competition out there from people who watched too much Chip and Joanna Gaines on TV. Right?
Deni: You just have storage wars now. No, just kidding.
Brian: Yeah, Storage war. that’s right.
Deni: Its popularity is increasing because so many people went out and sold their homes because they wanted to capitalize on the high prices and moved in with family members and had, you know, to find a place for their stuff. So.
Brian: That actually raises a related point here about self-storage, is that, it’s actually a recession resistant investment, because when a recession hits and people need to downsize their homes or do what they call household bundling, where people move in with friends or family and combine households to save money, what do they end up doing with their stuff? They don’t throw it all out. They rent a storage unit for it. So even when a recession hits, that can actually drive up the demand for storage units.
Deni: Another thing that’s happening is larger businesses are scaling down their office space to either work at home or whatnot, and they are putting a lot of their business files and stuff in storage units. So there’s going to be a greater use. As we move forward?
Brian: Absolutely. And, you know, to that point where it is talking about about just how much demand there is for self storage. Almost 10% of the US population has a self storage unit. Wow, that’s pretty crazy. So yeah, around 10% of U.S. households pay for a self-storage unit.
Deni: Now, I have to ask Brian, you travel all over the place. Do you have one? I mean.
Brian: My parents! I am too cheap for a storage unit.
Deni: Parents are good for that.
Brian: That’s right. Well, you know, between Katie, my wife, Katie, between her mom, my parents… I’ve got stuff at my mom’s house, at my dad’s house, at Katie’s mom’s house. We’ve got stuff at Katie’s mom’s friend’s house. So we’ve got some of those big plastic bins all over the place. Fact of the matter is, we actually got rid of most of our furniture and belongings when we moved overseas. So we are not one of those 10% of households. But then again, we’re not actually a US household at all. So…
Deni: True that!
Brian: So tonight, free webinar from Stacey Rosetti. She’s coming in to deliver a free presentation to you guys on how to invest in self-storage units within the next 90 days and how to earn 15% or more returns on self storage. To be a great webinar, 8:00 PM Eastern tonight, 5 p.m. Pacific. We’ve got the link in the comments there. Show up, bring your questions. Ask Stacey in real time, your questions about self-storage investing. She’s been in this industry for a very long time. Deni, do you have anything else you want to add before we call this episode complete?
Deni: No, just again, it’s going to be interactive. So it’s going to be more interesting than just being talked at. So definitely check it out.
Brian: All right, guys. Well, hopefully we’ll see you tonight, 8 p.m. Eastern, 5 p.m. Pacific. Bring your questions and we will see you soon.
Deni: See you soon. Bye bye.