So you want Mailbox Money?

Invest as an LP

Welcome to the world of self-storage investing, where you can make money while people hoard their junk. Seriously, though, investing in self-storage can be a lucrative business if you apply tactics and tech. And to be fair, it’s not exclusively junk.

As a limited partner (LP) in a self-storage investment, your returns can vary depending on a few factors, such as location, market demand, and most importantly, management. But fear not, we'll break it down for you.

First off, let's talk about the types of returns you can expect. As an LP, you'll typically receive two types of returns: cash flow and equity growth.

Cash flow is the money you receive from the investment on a regular basis, usually quarterly or annually. It's like getting a paycheck, but instead of working for it, you're earning it passively. The cool kids call this Mailbox Money.

Equity growth, on the other hand, is the increase in the value of the investment over time. It's like buying a house and watching its value increase over the years, except you don't have to deal with leaky faucets or a mortgage.

Now, let's dive into the numbers. According to industry reports, the average annual cash-on-cash return for self-storage investments is around 7-8%. Not too shabby, right? Granted this includes lots of REIT data with much more conservative returns than the lean, mean deals that we operate.

But that's not all. Self-storage investments also have the potential for higher returns through equity growth. In fact, some investors have seen returns of over 20% in just a few years.

Of course, these high returns don't come without risk. As with any investment, there's always a chance that things could go south. But if you do your due diligence and invest in a well-managed, well-located property, the risk can be minimized.

Speaking of management, it's a crucial factor in self-storage investing. This seems obvious, but I’ll say it: A poorly managed property can lead to low occupancy rates, high delinquencies, and ultimately, lower returns for investors.

On the flip side, a well-managed property can lead to high occupancy rates, low delinquencies, and happy tenants (who are more likely to renew their leases). Happy tenants = happy investors.

Managing a deal well is how we make our money. Before I ship an LOI, I need to see clear operational upside. That means driving revenue. We raise rents, automate, cut expenses, leverage offshore talent, and wrap those beautiful metal buildings in technology.

Like most real estate assets, location is key. A storage property located in a high-demand area with limited competition is more likely to have high occupancy rates and strong returns (duh). On the other hand, a property located in a saturated market may struggle to attract tenants and generate cash flow. Don’t confuse desirable locations with market saturation. Some tertiary towns have brought some of the best returns.

So, what's the bottom line? Investing in self-storage can be a great way to earn passive income and grow your wealth. As an LP, you'll receive cash flow on a regular basis and have the potential for equity growth over time.

But before you dive in, do your research and make sure you're investing in a well-managed property in a high-demand location. And remember, just like with any investment, there's always a risk. But if you play your cards right, you could be sitting pretty while your tenants are hoarding their stuff.