The events of the past two years have caused many people to rethink their plans, work setups, and living situations. For some, that means relocating to a less expensive part of the country. For others, it means downsizing or getting a new job.
All of this is fueling a tremendous need for self-storage. And so if you're looking to add to your investment portfolio, it pays to consider self-storage REITs.
Capitalize on that boom
Self-storage REITs, or real estate investment trusts, are companies that own and operate self-storage facilities. These facilities are commonly used by individuals and businesses alike.
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While the need for self-storage isn't particularly new, it's likely to increase in the near term as more and more people reevaluate their living situations. Now that remote work is so ubiquitous, employees who can do their jobs from anywhere may be more apt to hop from city to city in search of the perfect one, all the while giving up their leases. People in that situation will need a place to store their belongings -- and that's where self-storage REITs can capitalize.
Furthermore, in the coming years, we're likely to see many baby boomers exit the labor force and downsize their homes once they're no longer working and collecting a paycheck. Once that happens, the need for self-storage could really explode.
Additionally, during the pandemic, many city dwellers embarked on a mass exodus and fled to the suburbs in search of more space. Now that pandemic restrictions are largely lifted and cities are thriving again, those who sought solace in the 'burbs may want to move back to the cities they abandoned. And they're apt to need a place to store their belongings, especially since returning to a city generally means losing out on square footage instead of gaining it.
That's why now's a great time to consider adding self-storage REITs to your portfolio. As it is, roughly 38% of Americans have used or plan to use self-storage in the near future, according to a recent report by StorageCafe. And as that number grows, so too is self-storage revenue apt to increase.
What about the risks?
No matter what type of real estate you choose to invest in, it's important to understand the risks. One aspect of self-storage that's unique to the industry is that units are commonly rented out month to month. That differs from the models most REITs use, which is to operate properties that enter into longer-term leases of one year or more. That month-to-month model could result in less steady, predictable income for self-storage facilities.
Also, right now, economic conditions are such that many people can afford to rent self-storage units. But during a recession, that's something consumers may no longer be able to afford.
Despite the risks, it pays to look at self-storage REITs if you like the idea of investing in dividend-paying companies with growth potential. It also pays to consider self-storage REITs if you've been eager to dabble in real estate investing but don't want to assume the risk that comes with buying and owning actual properties yourself.
