Written by: Victoria Kennedy
It is both natural and expected that the economy will ebb and flow, but even knowing this fact, many are taken by complete surprise and found unprepared when a recession is on the horizon. In fact, many people struggle financially without a downturn on the horizon, with reports stating that 30% of adults in the U.S. struggle to make ends meet. This kind of dip in the market is relatively unpredictable, and it leaves people wondering about the well-being of their investments or if they should just pull out completely.
Nobody wants to lose their life savings or their livelihood, which is why it is imperative that investors and those interested in becoming one educate themselves, especially about recession-resistant asset classes. Out of all the asset classes, there is only one that has been tested through time and economic downturns and proven to shine, even in a recessionary market, and it is self-storage.
We sat down with AJ Osborne, CEO of Cedar Creek Capital and leading expert on the self-storage industry, and he shared some self-storage investment tips and valuable insights about how self-storage investing truly is recession-proof and how you can successfully navigate economic uncertainty with your money intact. Here are the top three reasons why Osborne says self-storage is the right place to invest.
1. Self-Storage Outlasts Economic Changes
Because of the wide range of advantages it offers, self-storage stands strong against economic changes. The self-storage industry is especially appealing when compared to other asset classes, as it eliminates the need for dealing with tenants, termites, or toilets.
Additionally, from a business perspective, it requires minimal maintenance, staff, and expenses, making it a cost-effective option. Moreover, self-storage generates cash flow from its operations and experiences appreciation growth as a real estate asset. These advantages contribute to the enduring success of self-storage, even during economic fluctuations.
“We have month-to-month contracts, and we can adjust immediately to economic conditions. Consider inflation or downturns. We just immediately adjust the rent, and this still gets people in. It’s an operational hedge—it coincides with the economy because it’s so cheap to go up and down in price each month if we lose occupancy; it really is as simple as adjusting,” added Osborne.
2. A Diverse Customer Base
One of the simple facts about self-storage is that there are a lot of customers, and there always will be.
“When you are dealing with apartments, for example, you are looking for someone who is looking for an apartment. With storage, you are looking for any type of customer. We’re looking for individuals, we look for companies, we look for contractors, and there are different utilizations, meaning we have wine storage, we have our boat storage. You have people that are moving. You have companies that need distribution. We have climate-controlled options. There’s all these different product types that we can offer for all different types of customers,” said Osborne.
3. Economic Impact on Customers
The economic impact on customers is directly aligned with why, exactly, self-storage outlasts economic changes.
“In hard economic times, like we were in 2008, everybody thought that people would stop paying for a storage facility before they’d stop paying for their house. But the reason that that doesn’t make any sense is that when you need money, your $50 a month storage bill doesn’t mean a whole lot, but the $2,500 a month house payment does. If I have to give up one of those, it’s the $2,500 because the storage won’t make a dent,” said Osborne.
And as he points out, if people give up the rent, they will then need storage to put their stuff in until they get back on their feet. This is great for investors because rates can be raised in instances such as this, and the impact is still low compared to most other product and service rate increases.
“We can raise rates by 10%. That only totals about $5. Nobody cares about that $5 increase, but, on the other hand, if you raise rates on a lease or an apartment by 10%, that’s a significant amount. All of a sudden, you just raised $300 for an individual that literally changes decisions and budgeting and everything month to month. So, the impact of self-storage on customers is really, really low,” he added.
Self-storage appeared as a worthwhile investment opportunity in 2008, practically out of nowhere, and now it is the lowest defaulting asset and the best-performing asset in over 20 years. For the reasons Osborne outlined and many more, self-storage has been and continues to be the best asset class to invest in.
About AJ Osborne
AJ Osborne is the CEO of Cedar Creek Capital and has an impressive 20 years of experience as a Self Storage owner, operator, and developer. He is a founder and board member of the largest Self Storage Co-op, Storelocal, as well as Tenant Inc – a saas company supporting self-storage facility management. AJ has also written the No. 1 bestselling book on Self Storage Investing and hosts the top-rated and listened-to self-storage podcast, Self Storage Income. Accredited investors can find more information here: https://www.cedarcreekwealth.com/
Read More: https://insightssuccess.com/