Even if you've always dreamed of owning investment real estate (whether single-family rentals, duplexes, or even commercial buildings), a self-storage unit may not have been on your radar. You may have associated these units with a more transitory population that was unlikely to provide the greatest return on your investment. However, the self-storage industry has been booming in recent time, and these units now appeal to a variety of consumers at all income levels. Read on to learn more about the investment opportunities that may present themselves with a self-storage unit, as well as how you can go about securing financing for your purchase of an existing facility or the construction of a new one.
Is a self-storage facility a viable real estate investment?
Self-storage rental properties are significantly different from residential rental properties, and even most commercial properties. As the owner and property manager, you'll own the land on which the self-storage facility is located and will sub-lease individual units to renters, who are free to use the unit to store any personal or professional belongings they'd like.
While more tenants can bring more headaches, they can also provide the potential for more profit. Unlike a single-family home (or even a duplex), the odds that all your tenants will stop paying rent at once is minimal, helping ensure a fairly consistent cash flow even when you're dealing with tenant turnover.
And unlike a single-family home, where the eviction process can be lengthy (and leave you with a vandalized or neglected home that requires thousands in repairs), a storage unit eviction is a fairly simple process that may even legally entitle you to ownership of the contents of the unit (no matter how valuable). In other cases, you may be able to auction off these storage unit contents to help offset any costs associated with the eviction or the termination of the lease agreement.
How can you get started in the self-storage business?
One of the primary reasons behind the popularity of single-family homes as rentals is the ease with which an investor can take out a mortgage on this property. Obtaining financing for commercial real estate or other non-residential real estate has traditionally been more difficult than obtaining a home mortgage, even for a non-owner-occupied home.
However, with recent developments in self-storage financing, your dream of becoming a real estate investor could be within reach. Non-recourse loans secured by the self-storage facility itself are now being offered to potential buyers, allowing greater flexibility to those who don't wish to put their personal assets on the line.
These non-recourse loans are unlike mortgages and other types of recourse loans in that when a default occurs, the lender cannot personally go after the property owner and his or her assets to satisfy the debt. Instead, the lender is permitted to foreclose only on the property securing the recourse loan, and if the amount this property can fetch at sale isn't enough to pay off the outstanding loan balance and any other expenses associated with the property, the lender must simply write these losses off.
On the other hand, if you default on your home mortgage in a recourse state and your home is sold at sheriff's sale for less than the mortgaged amount, you could find yourself personally liable for any difference. Your lender may seek to garnish your wages or seize other assets until this balance has been paid.
Taking out a non-recourse loan to purchase a self-storage facility may be the best way to get your feet wet, so to speak; you'll be able to enjoy a relatively low interest rate and short loan period (compared with 15- or 30-year conventional mortgages). At the end of your loan period, you'll be able to decide whether your storage facility's rental rates are enough to cover your costs, and can then make the decision whether to sell your facility or purchase another one.
Learn more about your options by visiting resources like http://www.getepicstorage.com.