Self-storage in Melbourne has become one of the fastest growing areas in commercial real estate in Australia. As a matter of fact, it shares just about as many opportunities as with any other real estate investment, including residential and apartment rentals, retail outlets, and investments in offices or industrial properties.
Investors are most attracted to its low operating cost, and banks prefer the low default rate on their loans to investors. Also, there are a number of ways for the investor to profit, beyond just the unit itself. These can include:
- Selling locks
- Selling boxes and moving supplies
- Incorporating truck rental services at the storage facility
Are Self-Storage Investments Safer than Other Real Estate Investments?
The eviction laws and the eviction process make it a lot safer for investors and allow you to recover a part of, if not all of, your investment.
Also, self-storage remains unaffected during recession. When the economy is bad, people are downsizing and looking for storage for their excess. In a better economy, they are always looking for a place to store their older goods.
Investors can take advantage in slow economic times, as people downsize when they move from:
- A large office to a smaller one
- A large home to a smaller one
- One city to another
In addition, investors are their own bosses and do not have the worries of residential property owners. For instance, there are no water problems because no water runs through a self-storage facility. Therefore, leaks and plugs are the least of your worries.
Although the cost per square feet may be as much as any other real estate investment, self-storage investments do not require high operating cost to keep it running. It has lower maintenance and operating costs so the return on investment is just as good—if not better—than other real estate investments. This means that your profits can be much higher.
Funding and Returns on Self-Storage Investments
Self-storage is appealing to banks because of its very good income potential. The low operating costs only add an icing on the cake. This makes it a lot easier to find funding than, for example, with apartment complexes.
In addition, tax and economic advantages include:
- Cost segregation by showing greater depreciation
- Increased appreciation with increasing occupancy
- Increased market value with increasing occupancy
Drawbacks and Risks Involved in Self-Storage Investments
The self storage facility would require a very good insurance policy to avoid liability and cover losses in the event of:
- Fire damages
- Structural damage
Factors that could negatively affect the facility include:
- Bad location away from traffic
- Poor rental management
- Over-assessment or over-payment for the facility initially
- Over-board vacancy
- Eviction of tenants who fall behind on payments
Not too different from most real estate investments, it all comes down to how well you manage your end of the deal. Before any investment, a good amount of research and background knowledge will enhance your opportunities of a profitable investment.
Despite the risks involved, self-storage is a very profitable venture whose potential should you can tap with certainty.