It’s important that you find your niche in the real estate investing space.

If you’re looking at commercial real estate, but you’re not quite sure about multifamily, there are other asset classes to consider, and one of the most appealing is self-storage.

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Storage is an essential need for many. People rely on storage units to free up their living space, hold their belongings temporarily during a move or transition period, or even keep family heirlooms safe.

Is self-storage a good investment?

Is it as good or better than multifamily?

As with any business venture, there are some things to consider before investing in a storage unit.

The Pros and Cons of Owning Storage Units

First, let’s look at the advantages.

The Pros

My favorite attribute of this asset class is the fact that it’s recession-proof. When considering an investment, it's always necessary to look back at trends and the history of a market. When we look back at recessionary periods, self-storage facilities held strong.

This makes self-storage profitable not only when times are good, but also when times are economically rough.

This is an asset class for which there is a consistent or even rising demand.

Even in areas where there is a high rate of unemployment, people need a place to store their belongings as they are making adjustments to their living situations.

In today’s world, more and more Millennials are choosing a nomadic lifestyle, often creating a need for storage solutions.

Another thing I like a lot about self-storage is the value-add component.

Applying technology, like automations that upgrade access and allow renters to self-serve, or a robust website, not only increases the revenue of a storage units, but also streamlines the management.

This brings me to the aspects of self-storage I don’t like.

The Cons

One of the big drawbacks to owning a storage unit is the necessity of self-management. This is an arena where it is difficult to outsource to management companies. There simply aren’t that many reliable companies specializing in management of self-storage.

I talked with Hunter Thompson, who owns thousands of self-storage units, about this on our podcast. He really struggled with it until he shifted and started to self-manage.

You also have to be aware that sometimes, your renters are going to be struggling and stressed.

If you think about the reasons why people would need to rent a storage unit, it stands to reason that sometimes, they are in dire circumstances. People coming out of eviction, for instance, are going to be looking for the least expensive option and might struggle to pay what they owe.

You also have a unique security concern when it comes to storage units. From locks on all of the doors to security cameras on the grounds, you’ll have to employ safeguarding systems and frequent upgrades as your business grows.

Is self-storage as good as multifamily?

For me, the answer is no. While it’s certainly a solid investment choice, especially given its recession-proof nature, I choose to focus on building my multifamily portfolio.

Multifamily syndication is the best investment on the planet.

You have a lot of choices when it comes to investing. Multifamily real estate is the one investment that is low-risk AND generates above-average returns. Couple that with the favorable tax benefits and your limited liability as a passive investor, and you would be hard-pressed to find a better investment opportunity.