Questions For First Time Self Storage Investors

If you’re looking for an alternative real estate investment that will provide you with a stable, predictable income stream, minimal maintenance, and low operating costs, investigate self storage. The dollar per square foot that you’re getting on each unit is similar to what is earned on multi-family investments, and you don’t have to know how to operate the business. 

Investing in self storage isn’t only for the wealthy and well-connected. Anyone of any background can be successful in this market. But, just as you would with any financial deal, you have to ask the right questions so that you can make an informed decision.

The Right Questions 

1) Why Should I Invest in Self Storage?

There are multiple reasons why self storage is a lucrative investment opportunity. The short answer is that with this type of investment you can quickly compound wealth and grow net worth. The long answer should come from the company that is sponsoring your investment. For more information read Why Investing in Self Storage is Red Hot.

2) What is the Difference Between Self Storage and Other Commercial Real Estate Asset Classes?

Among other factors, your expense ratios are lower in self storage, and the foreclosure rate is a lot less than in other assets. Self storage performs historically well even in a  downturn market. Watch this video for more information: https://www.youtube.com/watch?v=sgEeY8TebQw  

3) What is the Minimum Investment?

The minimum investment at Pinnacle Storage Properties is $50,000. 

4) What is An Accredited Investor?

  • An accredited investor has earned income that exceeded $200,000 ($300,000 with spouse) in each of the prior two years and reasonably expects the same level of income for the current year, and
  • Has a net worth of over $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

5) What is A Non-Accredited Investor?

  • A non-accredited investor has earned income of less than $200,000 ($300,000 together with a spouse) in each of the prior two years and reasonably expects the same for the current year, and  
  • Has a net worth of less than $1 million, either alone or together with a spouse (excluding the value of the person’s primary residence).

6) Do I Have to Be Accredited to Invest?

No. Investment opportunities are available to both accredited and non-accredited investors. For more information, check Pinnacle Storage Properties FAQs.

7) What is the Average Return on This Deal and How Often Can I Expect a Return?

This $38 billion dollar industry has been the best performing commercial real estate class for 40+ years. In the last 30 years, the returns for storage have reached 17.34%. A return could take the form of receiving regular payments for a specific term or a payoff when a sale or recapitalization takes place.

8) Who is Your Typical Investor?

There is no “typical” investor. Investors are professionals, families, and individuals who recognize the potential in commercial real estate, particularly the self-storage model. They recognize the recurring cash flow, appreciation potential, and lower correlation with the public markets.  

9) Are You Willing to Provide Me with Investor References?

If the investment company is not willing to show you investor references, look elsewhere.

10) Do I Have to Know How to Operate a Self Storage Property?

Absolutely not. If you partner with the right company, they should have a sophisticated operations platform that can be applied to build value into the facility. Pinnacle Storage Properties has a superior operating platform providing the opportunity to leverage systems across all locations, including marketing, training, and revenue management.

11) What Risks are Associated with this Type of Investment?

Just like any other investment, you could lose all of your money.

12) What is the Typical Foreclosure Rate?

The foreclosure rate is only 8% per year historically, which is incredibly low in comparison to other asset classes. In today’s environment the foreclosure rate is around 2%.

13) How Do You Find Deals?

At Pinnacle, we get involved networking with top-level brokers by getting on their distribution lists when they offer deals. We get first looks from broker’s general email blasts, and we do cold calling.

14) How Does Self Storage Perform in a Down Market?

Self storage has been historically recession proof. If people are forced to downsize their homes or businesses, they still need storage. People want to hold on to their possessions in any situation. 

15) What is the Worst Deal You Ever Made and What Did You Learn?

The worst deal we ever made at Pinnacle ended in a lawsuit with the contractor due to delivery on construction being eight months behind. We learned two things. First, that we need to react more quickly to lease up situations; and, secondly, we need to add clauses to contracts that allow an earlier termination with the contractor. 

16) When You Sell Properties, HaveYour Projections Proven Historically Accurate?

At Pinnacle, none of our projections have proven historically accurate because projections are based on assumptions, and you have to react to market changes along the way. The majority of our projections have been better than expected and a few have been worse.

17) What is Your Exit Strategy?

You should have a rigorous understanding of the company’s plan to liquidate the asset. Here at Pinnacle Storage Properties, our objective is to bundle the properties and sell them at a compressed cap rate. People with more money are apt to pay more for 40 properties than they are for individual properties, because this allows them to place their money faster and in larger quantities. This provides them and us with more of a return. 

18) Will You Share Your Underwriting Model with Me?

The company should be willing to show you how the underwriting reveals the financial feasibility of your investment. Pinnacle Storage Properties is willing to share the underwriting numbers with any investor.

The answers to these questions will give you a basic understanding of how the industry works and how these investments can help you to grow wealth. At the end of the day, it’s important to trust the people that you’re trusting with your money.