Here are 10 quick reasons why Titan Wealth Group is selling all of our residential rentals and replacing that passive income with self-storage:
1. HIGHEST RETURN versus any other real estate asset class. From 1994 - 2017, storage returned an annual average of 17.43%. Based on that annual average, $100,000 invested in 1994 would be $4,026,413 today.
2. RECESSION TOLERANCE: From 2007 - 2009, self storage dropped -3.8% vs the S&P's -22.0%. This was the smallest drop of any other real estate asset class.
3. SAFEST LOANS a bank can make. From 2011 - 2018, self storage had the lowest default rate versus any other real estate asset class. When those rare few properties did default, the banks only lost an average of 1.52% per default.
This shows with the type of leverage that is available to Titan Wealth Group. In August of 2018 we closed on a property with a 30-year fixed, fully amortized, commercial loan at 5.25% with first year being interest only. We chose to go with 20% down but could have gone with 15% down, not including any seller carry-backs we could have negotiated to get down to a 5% net down loan.
Titan Wealth Group’s August 2018 Self Storage Acquisition
4. PEOPLE = LESS MANAGEMENT: Many smaller facilities are unmanned or automated. Units can be rented and paid for from a phone without the need to do a "showing". Example: Our 133-unit facility does not have an office. We pay a 1099 contractor to pick up any checks from the facility and to mow/plow twice a month for the average 3 hours per visit. We bought this facility for $1M at a 8% cap rate. Six months after acquisition, the projected value is $1.6M which will allow us to cash out and build another 100 units bringing the value up to close to $3M.
5. FRAGMENTED MARKETS = OPPORTUNITY: Of the ~52,000 storage facilities in the U.S. only 18% are owned by the 6 large REITS, another 8% are owned by the next 100 largest operators, leaving 74% of facilities owned by "mom & pop" operators.
6. EASY EVICTIONS: Storage is guided by lien (property) law as opposed to tenant/eviction law which means we lose less days than any asset class that physically has people in it. This means that the second a client is late, their gate passcode is deactivated and their unit is over-locked. In the case of a delinquent unit that does not come current, we can abide by local lien law timelines, collect the outstanding balance through auction, and have a new tenant in place in less than 45 days.
7. LOW BREAK-EVEN OCCUPANCY: Un-leveraged assets have break-evens in the low to mid 30% occupancy. Leveraged assets have break-evens in the low to mid 60% occupancy. This is partially due to much lower overhead because no "tenants, toilets, and trash." This means minimal utilities in addition to no carpet cleaning, painting, leaky faucets, winter HVAC and water heater failures, etc.
8. HIGH STICKY FACTOR: A $20 increase on a $150 unit is not worth the $500+ moving bill to go to another facility but is a 13% increase to the bottom-line.
9. REACTIVE PRICING MODEL: When a certain type of unit (ex. 10’ x 10’) are in low supply in the market / our facilities versus another type, reactive pricing can be implemented on that unit type, raising the rental rate by 50%+ in some cases and tenants will still rent them.
10. ANCILLARY PROFIT CENTERS: In addition to unit rentals, we also experience income from packing and moving supplies, locks, truck rentals, business center income, 90% renters insurance commissions, vehicle parking, cell tower leases, billboard advertisements, etc.
While these are 10 very good reason to invest in self storage, there are many more we can share in addition to elaborating on these reasons. Feel free to contact us at info@titanwealthgroup.com for more information.