Should You Invest In Self-Storage?
Welcome to Mason Equity Partners, a second-generation family-owned and operated commercial real estate investment management firm. With a proven track record for self-storage facilities development and operations in tier 1 metros including Los Angeles, San Francisco, Houston, Chicago – we specialize in unlocking advanced investment opportunities for both seasoned and novice investors. In this introductory post, we delve into why we invest in self storage…and perhaps you’d like to too?
The Appeal of Commercial Real Estate
Investing in commercial real estate, particularly in tier-1 cities, offers several advantages:
- Hard Assets: In worst-case scenarios, commercial real estate retains value as investors still own buildings and land that are costly to replace. Urban sites, especially, hold value over the long term.
- Barriers to Entry: Operating in major cities requires specific expertise, creating a competitive moat for those who can navigate these challenges.
- Stable Cash Flows: Rents tend to increase over time, providing a steady income stream.
Why We Invest in Self-Storage
Self-storage investments are particularly attractive to us because:
- Sticky Tenants: People dislike moving. Once their belongings are in storage, they’re likely to continue paying rent rather than dealing with the hassle of moving.
- Regulatory Barriers: Cities often make it challenging to build new storage facilities, reducing competition and promoting long-term rent growth.
- Recession Resistance: Demand for storage is driven by population migration and growth, making it resilient during economic downturns.
- Low Maintenance: Once built, self-storage facilities require minimal capital investments for a long time.
- Fragmented Industry: The majority of self-storage facilities are small one-off businesses, creating significant opportunities for professional investors and operators like us to amass multiple facilities and drive efficiency through economies of scale.
While self-storage investments are lucrative, they are not for everyone. It is operationally intensive, cash-hungry, and location-sensitive. DO NOT INVEST IN SELF STORAGE if you are:
- Looking to park all of your life savings in one investment – Commercial real estate investments are meant to be held for a certain amount of time until the business plan is completed. These investments cannot typically be bought or sold as easily as stocks or bonds. We ask that you only invest with money that you can afford to lose, and we highly recommend that our investors diversify their holdings amongst other types of investment.
- Interested in only a quick flip – Some of the best investments take time to mature. We are open to both quick flips and longer-term holds, depending on the deal. A flip can be a great strategy for an underpriced deal where we do not want to be exposed to the property for the long term – we just take our profit and get out. A hold is our preferred strategy for deals located in strong neighborhoods that are difficult for competitors to enter, where we expect above-average rent growth over the long term. In these types of deals we refinance as quickly as possible to return investor capital and then distribute increasing amounts of money to our investors year over year.
Some of the best investments take time to mature.
Our investment strategy includes:
- Build to Core: We develop new projects that typically yield higher returns than existing buildings, selling or refinancing upon completion or stabilization.
- Value-Add Conversion: We convert functionally obsolete buildings into self-storage facilities, capitalizing on the increasing number of defaulting big box retail stores and class B office buildings.
- Buy Adjacent: We acquire existing assets in secondary markets near our core developments, adding value by building additional square footage, streamlining operations, and raising rent.
Ready to Invest?
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