$0 to $2MILLION | Turning Vacant Land Into A Self Storage Facility

How to Invest in Storage Facilities: Lessons from an Investor's Journey

SUMMARY: Learn from Seth Williams's experience building a self-storage facility; success demands market research, contingency funds, an expert team, and preparedness for financial surprises. Avoid common pitfalls like underestimating construction challenges and overlooking the need for a knowledgeable General Contractor.

Feeling overwhelmed by the complexities of investing in storage facilities?

Let’s simplify the process and guide you through the necessary steps for a sound investment.

  • Assessing the Investment Opportunity
  • Navigating Construction Challenges
  • Building a Knowledgeable Team
  • Overcoming Financial Setbacks

Continue reading to transform your investment strategies and ensure your next steps in the self-storage industry are grounded in experience and insight.

Assessing the Investment Opportunity

Seth Williams's journey into building a self-storage facility began with a bold move. He purchased a 6.7-acre lot for $69,000 and faced the arduous task of rezoning it. This initial step is critical and can be a stumbling block if not approached with diligence.

Investing in a new construction, especially as a beginner, comes with advisories. Many cite high costs and the patience required for facility filling. Williams’s experience serves as a testament to such challenges but also illuminates the potential upside of creating a brand-new facility tailored to market needs.

Action Tip: Thorough market research is the cornerstone of any successful real estate investment. Understand the demand for storage in your target area and ensure it aligns with your business goals.

Common Mistake: Don't overlook the importance of having a clear timeline including the rezoning process. Rezoning can be lengthy, often taking more time than anticipated, and impacting your project timeline and budget.

Navigating Construction Challenges

Construction is fraught with unforeseen obstacles. Seth Williams faced numerous issues like complex excavation needs due to the property’s unique topography. Unplanned incidents such as these illustrate how each project calls for adaptability and resilience.

Additional costs should be anticipated. Setting aside a contingency fund can help investors manage such unforeseen expenses. A common oversight is to overlook utility work. Relocating poles or other utility-related work can stop a project in its tracks.

Industry stats are telling. They indicate that excavation can inflate project costs by 10-15%. Proper financial preparation is not just a suggestion; it is an imperative. Without a contingency fund, a budget can be quickly overrun, placing significant strain on an investment.

Building a Knowledgeable Team

Seth Williams quickly discovered the value of expertise when constructing his self-storage facility. He highlights one crucial asset: local construction knowledge.

A skilled team is indispensable for such a specialized project. Williams places particular emphasis on the role of a General Contractor.

Action Tip: To increase the success rate of your project, involve a General Contractor from the get-go. They bring invaluable insights and management skills to the table.

Common Mistake: Lapses in team accountability and critical thinking can severely impact progress.

A General Contractor’s oversight has been shown to lead to a 10% higher rate of on-time project completion. This statistic should not be underestimated as it underscores the benefit of professional guidance and expertise in a field where timing is a corner-stone of success.

Overcoming Financial Setbacks

Financial hurdles are often part and parcel of investing in self-storage facilities. Williams's journey exemplifies this, with an appraisal coming in lower than expected, dictating the need for additional funds.

Such challenges underscore the importance of being financially prepared. Access to reserve funds or alternative financing options can make or break your investment.

Action Tip: Ensure you have a financial buffer or prearranged financing to address any unforeseen costs.

Common Mistake: Failing to anticipate and prepare for an underwhelming appraisal can grind your project to a halt.

Being financially agile is essential, as unexpected investments can be required at various stages of the development process. Williams's experience reminds investors to be ready for such eventualities.

Conclusion

The intriguing saga of Seth Williams' self-storage facility creation imparts key insights, crystallizing the quintessence of investment in this niche market. Reflect on these pivotal learnings:

  • Evaluating the investment landscape is crucial, signified by Williams' audacious move to purchase and rezone land against seasoned advice.

    Action Tip: Immerse in deep market analysis. Common Mistake: Neglecting potential rezoning hurdles can extend your timeline extensively.

  • Construction poses a labyrinth of trials, from the terrain's temperament to surprise procedural postponements.

    Action Tip: Budget for the unpredictable with a robust contingency fund. Common Mistake: Misjudging excavation and utility work can escalate expenses and delay the project.

  • Assembling a proficient team is instrumental, accentuated by Williams' emphasis on local expertise and the essentiality of a General Contractor.

    Action Tip: Engage a seasoned contractor from inception. Common Mistake: A lackadaisical team risks undermining the entire venture.

  • Financial pitfalls, like inapt appraisal valuations, beckon for prudent preparation and suppleness in personal funding.

    Action Tip: Secure fallback financial avenues. Common Mistake: Overlooking the impact of an appraisal shortfall can stall progress indefinitely.

  • Williams' chronicle is a didactic tale, encouraging investors to arm themselves with wisdom and resilience, aiming to master the self-storage investment domain.

Investing in Storage Facilities FAQs

How do I start investing in storage facilities?

To begin investing in storage facilities, you first need to conduct extensive market research, identifying potential areas with high demand for storage. Afterward, you can choose to buy an existing facility, develop a new one from scratch, or invest through a storage facility REIT. It’s important to understand the operational and financial aspects before making an investment.

What are the risks involved in investing in storage facilities?

Investing in storage facilities carries risks such as variable market demand, fluctuating occupancy rates, operational management challenges, and potential financial setbacks like unexpected construction costs or financing issues. It's also possible to encounter rezoning problems and regulatory hurdles which can delay or derail the project.

How much capital is needed to invest in a storage facility?

The capital requirement for investing in a storage facility can vary widely depending on the location, size of the property, whether you’re building or buying existing facilities, and the current state of the real estate market. Initial investment can range from a few thousand dollars for small, rural facilities to several million dollars for large, urban projects.

Is it better to build a new storage facility or buy an existing one?

The decision to build a new storage facility or buy an existing one depends on your investment goals, risk tolerance, and expertise. Building a new facility can offer customized features to meet the specific demands of a market, but it typically involves higher risk and a longer time frame. Buying an existing facility may allow for quicker cash flow but might require additional investment for renovations or modernization.

What should I look for in a good location for a storage facility?

When looking for a good location for a storage facility, consider areas with high residential or commercial growth, limited storage options, and visible, easily accessible locations. Proximity to highways or main roads, the presence of multifamily dwellings, and overall population density are also key factors that can drive demand for storage units.

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