Self Storage REITs: A Comprehensive Guide to Investing

Self storage REITs, or Real Estate Investment Trusts, offer a unique investment opportunity for those looking to diversify their portfolio. Self storage REITs own and operate a large number of self storage facilities, providing a steady stream of rental income.

Investing in self storage REITs can be a relatively low-risk option, as they typically have a high occupancy rate, with some facilities reaching up to 95% capacity. This is due in part to the essential nature of self storage, as people need a place to store their belongings whether they're moving, decluttering, or running a business.

Self storage REITs also offer a relatively high dividend yield, with some paying out over 5% of their net income in annual dividends. This can be attractive to income investors who are looking for a steady stream of returns without having to actively manage the underlying assets.

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Self-storage REITs are a type of real estate investment trust that specializes in owning and operating self-storage facilities. They develop, own, and manage storage facilities and rent them to individuals and businesses.

These storage facilities come in different sizes, depending on the space required. Self-storage units can range from small to large, accommodating various needs.

Some common uses for self-storage include keeping valuables safe, renovating a home, storing goods, downsizing, relocating, business storage, and storing vehicles. People use self-storage for a variety of reasons.

The rental contracts for self-storage units are typically short-term. This allows individuals and businesses to rent a unit for as long as they need it, without being locked into a long-term commitment.

Here are some common uses for self-storage:

Self-storage REITs offer a unique combination of benefits that make them an attractive investment option. They have historically delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation.

Self-storage REITs are recession-resistant, with self-storage revenue increasing steadily during the pandemic and occupancy averaging 96.5% in the third quarter of 2021. Even during the Great Recession of 2008, self-storage showed a positive 5% return.

One of the key advantages of self-storage REITs is their steady income stream. The demand for storage units increased to 14.5 million in 2022, with owners seeing an annual return on investment of almost 17% over a nine-year span.

Self-storage REITs benefit from steadily rising demand for storage space, driven by factors such as relocation, decluttering, disasters, changing life circumstances, and business purposes. These factors tend to keep occupancy levels high while steadily pushing rental rates higher.

Here are some key benefits of self-storage REITs:

Investing in self-storage REITs can increase your dividend income significantly, as these organizations are required to distribute at least 90% of their total taxable earnings to shareholders.

Self-storage REITs can be invested in through various options, each with its own benefits.

You can trade self-storage REITs publicly like stocks through your preferred online stock broker during stock market trading hours.

Investing in publicly traded REITs can increase your dividend income significantly, as these organizations are required to distribute at least 90% of their total taxable earnings to shareholders.

Self-storage REITs have historically generated above-average total returns, making them attractive investment options.

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Self-storage units typically have lower operating costs, usually around 35% of revenue. This is significantly lower than other income-producing property types.

One reason for this is that self-storage spaces don't experience the same level of wear and tear as apartment, office, or retail properties. No clogged plumbing calls in the middle of the night!

Property taxes make up almost one-third of the expenses for self-storage properties. This is a notable factor to consider when evaluating the overall cost of ownership.

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Public Storage is the largest self-storage REIT, starting 2022 with over 2,700 properties and more than 198 million square feet of rentable space.

It also owns a significant stake in European self-storage REIT Shurgard Self Storage and industrial REIT PS Business Parks.

Public Storage differentiates itself from its peers with its property development platform, the only REIT to develop new properties through this strategy.

This approach has enabled Public Storage to earn higher investment returns compared to acquisitions over the years.

Public Storage's diversified portfolio and unique development strategy make it an attractive investment option for those interested in self-storage REITs.

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REIT ETFs can make real estate investing accessible to anyone, no longer a rich person's game.

You can trade REIT ETFs through your preferred online stock broker during stock market trading hours.

Investing in REIT ETFs can increase your dividend income significantly, as these organizations are required to distribute at least 90% of their total taxable earnings to shareholders.

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Investing in large facilities can be a lucrative option for those looking to diversify their portfolio.

The largest facilities in the world are found in the oil and gas industry, with some refineries covering over 2,000 acres of land.

In the United States, the largest solar farm is the Topaz Solar Farm in California, spanning 9,500 acres.

The largest wind farm in the world is the Gansu Wind Farm in China, with over 10,000 wind turbines.

Investing in large facilities can provide a steady stream of income through long-term contracts with utilities and other companies.

Investing in self-storage REITs can be a great way to diversify your portfolio and earn high returns. Self-storage REITs have historically delivered competitive total returns, based on high, steady dividend income and long-term capital appreciation.

One of the main advantages of self-storage REITs is their recession-resistant nature. Self-storage revenue has increased steadily during economic downturns, such as the Great Recession of 2008, and even during the pandemic, occupancy averaged 96.5% in the third quarter of 2021 compared to 91.5% in the first quarter of 2020.

Self-storage REITs also benefit from steadily rising demand for storage space, driven by factors such as relocation, decluttering, disasters, changing life circumstances, and business purposes. These factors tend to keep occupancy levels high while steadily pushing rental rates higher.

To invest in self-storage REITs, you can trade them through your preferred online stock broker during stock market trading hours. Most REITs, including self-storage REITs, are publicly traded like stocks.

You can invest in self-storage REITs by buying publicly traded REITs through your preferred online stock broker during stock market trading hours.

Most REITs, including self-storage REITs, are required to distribute at least 90% of their total taxable earnings to shareholders, which can significantly increase your dividend income.

Self-storage REITs are publicly traded like stocks, making it easy to get started with investing in this sector.

Investing in self-storage REITs can be a great way to diversify your portfolio and reduce overall portfolio risk, thanks to their low correlation with other assets.

Self-storage REITs have historically outperformed other real estate investments, including leading REIT ETFs like Vanguard Real Estate ETF (VNQ 1.31%), making them an attractive option for investors.

To get started, you can consider the following leading self-storage REITs: Public Storage, Extra Space, and National Storage, each with its unique operating model.

These REITs have successfully profited from rentals, reinsurance, fees, and retail, ensuring varied income streams and high demand, low costs, and historical outperformance.

As a self-storage REIT investor, you'll need to consider the management aspect of your property. You'll probably need to have a person on-site during business hours to control access to the facility and deal with walk-in customers.

The average self-storage facility in the U.S. employs 3.5 employees. This is a significant consideration when it comes to staffing and operational costs.

You'll want to think of your property as a retail establishment, where customers can come and go as needed. This means being prepared to provide equipment like hand trucks or platform trucks for use.

Having a person on-site will also allow you to make equipment available for use by customers. This can be a key differentiator for your facility and help attract and retain customers.

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