While many self-storage facilities across the country can accommodate the storage of RVs and boats, there are few that offer an actual real estate investment opportunity. Enter the self-storage condominium, which allows a customer to buy a specific unit at a facility, pay a fee similar to that of a homeowner’s association, and sell the unit at any time.
Self-storage condos remain a niche market, but awareness of and attraction to the product is growing. The market that had begun to flourish in 2005 hit a wall when the economy soured. Construction stopped and potential condo buyers could no longer find financing. But interest is still there, says Ted Deits, developer and owner of Eucalyptus at Beaumont in California. His facility opened in March 2009 after three years of development. It has 108 condo units with resort-inspired amenities, including a 2,700-square-foot clubhouse, individual door alarms and 24-hour access.
Inside Self-Storage recently spoke with Deits about the advantages of boat/RV-storage condos, how the industry was affected by the recession, and what’s in store for the future.
Why makes a self-storage condo a good investment for a customer?
It’s fueled by three things: amenities, security and financial benefits. In most casts, rental facilities offer few amenities the serious RVer is seeking, such as wash areas and dump stations, and have limited access hours. Typically, they are built with an eye toward return on investment (ROI), but ROI can be skewed in the wrong direction when the owner starts adding amenities.
While cost is everything when building and running a rental storage facility, a storage-condo developer can “front load” his project with all the amenities required. The cost for these amenities is paid by each condo owner, bundled into the purchase price, and the continued operational cost for these amenities is minimal.
One unseen benefit of condominium storage is the community aspect. Condo owners are not transient. They’re on site several days a week, tinkering, talking and generally just hanging out. The result of this familiarity with the project is these owners know each other, resulting in a new unforeseen security benefit—neighbors.
There may be financial benefits as well. Depending on where a tenant lives and the cost of available storage, it could actually be cheaper to buy a condo than to rent. In our area of Southern California, enclosed storage averages about 60 cents per square foot. Using 650 square feet as an average, the rental cost per month is about $390. You can purchase the same size unit with a monthly cost of about $300 per month, including $35 per month association dues. If a condo owner holds the unit for five years, and it appreciates 2 percent per year, the monthly cost is actually about $202 per month.
Naturally, when paying $390 per month for a rental with no chance for any ROI, the actual cost benefits lean toward condo storage. Having said that, real estate is a long-term play. Those that only need storage for a year or two would probably be better off renting. There is a place for both revenue models.
What are the land and market requirements to develop self-storage condos?
There are three types of locations to consider: a neighborhood location, an “on the way” location, and a destination site. Neighborhood locations are the most ideal, as those who own RVs, cars and boats like to tinker. However, land costs often prohibit this type of storage.
On-the-way locations are facilities found on the way to a popular destination. These sell really well when potential buyers consider that driving the first 30 miles by car is less expensive than driving the RV. Since they own their unit, many simply store clothes in the RV, the refrigerator is running and ready, and the batteries are all charged up.