Real estate is a huge topic, especially when it comes to investors. Most people think of homes, condos, or even flipping houses. Not too many people realize that another big trend has been happening under our noses for a long time now: self-storage units.
If you close your eyes and picture your city or neighborhood, we can guarantee that you see self-storage locations all the time. The reason this kind of investment is growing is because of how much demand there is for one. In many cities, especially in Los Angeles, there is a growing number of people having to downsize their homes due to housing costs. However, stuff is very valuable to us and even if folks are downsizing, they are still choosing to keep their prized possessions. These units consist of concrete floors, partitions walls, and generally a heavy gate to keep everything protected under lock and key. These units range in size and price and are paid monthly.
Real estate investors are taking these factors into consideration, and are pooling money together to build, or take over these self-storage facilities. This is a great example of real estate syndication, and taking that concept to greater heights, as is done with self-storage syndication.
How does it work?
Self-storage syndication has the basic concept of real estate syndication, which we have detailed on this page. (re syn #1) There is a group of investors who look for storage units that meet their criteria. This is based on location, demand, and size. This group decides to do plenty of research regarding the site location, size, expansion power, prices, and units. Once they have decided on what property to invest in, they need to find other investors willing to invest money into this project. This means that the main group seeks out the deal, and investors to allocate enough money to cover the costs of the purchase, but also make some improvements as well.
There are many reasons for investors wanting to buy self-storage units, however, the main one would be pricing. If you have one family in a home and decide to raise the rent, that tenant might leave if they can no longer afford the rent. Now, you can get stuck with the house payment, as well as any repairs or improvements on the property. With self-storage units, many folks will continue to pay the rent even if the price is raised. This is because the price usually stays within reason, but also takes a lot of effort to move all of their things than simply pay ten more dollars a month.
Another reason for this popularity would be the number of units. If you own a house, only one family pays for the rent and utilities. In storage units, depending on the size, of course, you could have hundreds of units being rented all at once. There are so many reasons why people choose to invest in different types of real estate, so if you want to learn more click here. (re syn #3) Self-Storage syndication is only one great example of how real estate syndication works. As always, speak to a tax professional before making any big decisions regarding your money and tax strategy.
If you would like to know more about how self-storage syndication works, Karla Dennis & Associates has a podcast giving all the details.