At one point or another, most people have considered renting space at a self-storage facility. Whether additional space is necessary because of a move or just as an extension of personal storage, a storage unit can be useful for many reasons. While most people look at self-storage from the perspective of personal use, they don’t often consider it as an investment opportunity. However, there are many benefits to investing in self-storage, including the fact that this type of investment can be very helpful in diversifying your portfolio.
John Grifonetti is an investor and entrepreneur from Old Tappan, New Jersey. John began his career as a CPA, working as the president and COO for an online brokerage firm. Eventually, he took control of an interdealer broker specializing in credit default swaps. After working with the company for some time, he decided to retire. Although he has been retired for 10 years now, John’s drive and creative business mind have prevented him from fully embracing the retiree lifestyle. John continues to invest in small businesses. His extensive knowledge of markets and his ability to innovate and motivate have allowed him to help these businesses grow and prosper. He shares his investing tips and explains why he invested in self-storage facilities.
High Demand Among Millennials
It’s well-known that American culture is one of consumerism. Millennials in particular, with their increasing purchasing power, continue to accumulate goods. However, residential property size continues to decrease. Smaller dwellings mean less storage capacity, leading to a lack of personal storage. As a result, more and more millennials are looking for self-storage. As well as needing more space for personal storage, many millennials are reaching a stage in their life when they are relocating or purchasing property. Therefore, permanent, or transitional storage is required for moving. John Grifonetti notes that, in addition to millennials, many baby boomers and empty-nesters continue to downsize, resulting in the need for additional storage space.
When it comes to real estate investments, self-storage offers one of the most cost-efficient opportunities. In particular, overhead costs are significantly less when compared to other real estate ventures. John Grifonetti explains that self-storage facilities require little ongoing maintenance and minimal management. In fact, most self-storage businesses, especially those with technological tools incorporated, are almost entirely self-sufficient, requiring only part-time management. In addition to low overhead, self-storage facilities require much fewer construction costs than other real estate projects. Thanks to the simplicity of these facilities and the fact that renters do not live on the property, the likelihood of major maintenance or repairs is also greatly reduced. Also, there is almost no legal cost regarding evictions Rental contracts are almost all direct payments via credit cards or bank ACH transactions. If Payments aren’t made because of cancelled cards, and if clients don’t respond within a short period of time, the unit is repossessed and items are auctioned off to recoup costs.
Cash Flow and Tax Advantages
Self-storage investments offer high returns with the potential for exponential growth. The increased demand for personal storage has resulted in increased revenues and low turnover means a steady cash flow. As well, because self-storage units are rented month-to-month, business owners can increase rent more frequently. On top of this earning potential, investing in real estate, like self-storage facilities, has many tax benefits. This includes the ability to deduct expenses, including property taxes, interest, and depreciation. As an additional investing tip, John Grifonetti recommends capitalizing on these tax advantages by investing in self-storage. These deductions can help investors minimize income and therefore income tax owed.
Although some people use self-storage as a temporary option, most unit rentals are long-term. Even rent increases do not mean that renters will move elsewhere. For the most part, self-storage renters are not sensitive to price changes and will stick around, even as rent increases, unlike traditional real estate properties. Low turnover means steady income for business owners and investors, as well as reduced marketing, maintenance, and administration fees. John Grifonetti suggests that, overall, this leads to increased profits and a higher return on your investment.
Real estate is a great option for portfolio diversification. This type of investment is particularly valuable because it is relatively unaffected by changes in the economy. Self-storage is especially resilient during times of economic hardship because of its diverse uses. John Grifonetti notes that, when the economy is booming, people are buying more and, as a result, need a place to store extra items. On the other hand, if the economy enters a recession, the need to move or downsize also requires additional storage. Therefore, regardless of the economy, the need for self-storage remains unchanged.