Self-Storage Investing in Texas

April 30, 2023

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“If you don’t find a way to make money while you sleep, you will work until you die.” — Warren Buffett

As Warren Buffett so astutely points out – the way to wealth is to learn how to grow your money without having to work harder or longer. Passive income is the most desirable route to building wealth.

With a steady income from stock dividends, bonds, or alternative investments, you have the time to enjoy the fruit without having to endure the labor.

Self-storage facilities can be a smart passive income investment with low risk. Once you have done your research and decided self-storage is right for your portfolio – you may be ready to look for storage investment opportunities in Texas. That is where our private asset management team comes in.

When you decide to invest in self-storage, you will find there are multiple ways to invest in self-storage properties. If you are able to raise sufficient capital and have the time and expertise, you can buy or build your own set of units. You can invest in REITs that invest in and manage portfolios of such facilities around the country.

Or, you can invest through a private syndication solution, such as Custom Private Equity and have an investment that is custom tailored to your needs.

From 2005 to 2013, the Custom Private Equity team created and managed a portfolio of 40 self-storage facilities in Texas growth markets.  This portfolio was sold to a national storage REIT producing a return over 31% internal rate of return (IRR) for the partnership.

What is Syndication Investing?

When you invest in self-storage through a real estate syndication, you are pooling your capital with other investors as well as the asset manager to purchase or build a property. The managing partner (or General Partner) is the sponsor for the project and is responsible for market research, locating, underwriting, planning and purchasing or building the property. After the property is acquired, the General Manager is responsible for the day-to-day operations and maintenance.

You and the other passive investors form the group of limited partners and have an ownership stake in the self-storage facility, but aren’t responsible for the headaches that come with the transactional duties or operational functions of the project.

Your ownership stake is dependent upon the investment amount you contribute and the terms of the syndication.

Factors Contributing to Industry Growth in Texas

For a number of years over hundreds of people per day have been moving to Texas.  This trend shows no sign of weakening as major corporations continue to relocate to Texas and people flee from overcrowding, high cost of living and taxation in other states.

Texas is one of the fastest-growing states in North America. 

The major reasons for this are:

– no state income tax

– mild climates

– low cost of living

– affordable housing compared to other markets

– school system is excellent

– jobs are plentiful, unemployment is low, demand is high

– pro-business attitude at the government level

– right to work state so regulations are lower and unions are less prevalent.

Southeast Texas has these factors and the Houston market is strong because of the following:

– extremely busy port area

– high paying refinery and tech jobs are available

– over 5 billion in projected expansion in the refinery capacity over the next 210 years.

– largest medical complex in North America in Houston attracting clients from around the globe. 

– other amenities are plentiful

Our principal team leader in the Self-Storage and raw land development business was the City Manager of Pearland, Texas for 11 years and an active city manager in Texas cities for over 40 years.  During his tenure at Pearland, the tax base grew from $1Billion to over $10 billion in 11 years.  

Benefits of Syndication Investing in Self-Storage

Unlike investors in a REIT, the investors in a syndication are actual property owners and get the pro-rata benefits of property depreciation that can offset a portion of the income.

Real estate has always been considered one of the most stable investments.  Unlike equities or bonds, real estate is tangible and has an inherent value that never goes to zero.   Income producing real estate, like self-storage, is even more stable because of the consistent stream of income it produces.

Historically, self-storage has provided the highest long-term returns as well as the smallest amount of variation in those annual terms compared to other property types.  According to the National Association of Real Estate Investment Trusts (“NAREIT”), “self-storage has been the leading property type measured by average total returns, including dividends, over the past 5, 10 and 15-years.  The following are the 5 and 10 year returns from NAREIT:

Returns Based on Asset Class
Term Self-Storage Multi-family Retail Industrial Office
5-Year Avg. Return 24.4% 20.6% 20.4% 14.7% 12.7%
10-Year Avg. Return 17.8% 13.7% 10.6% 6.3% 9.7%

Why Invest in Self Storage Today?

There are always risks with any investment, and self-storage is no exception. This is where Custom Private Equity’s extensive market research and analysis comes into play to identify the geographic region, municipality, and all the way to specify location that will produce superior long term performance for its investors.   With the current market turmoil and outlook, the stability of this tangible income producing real estate investment is particularly attractive. Investing in self-storage facilities offers a lucrative opportunity today and for the foreseeable future.

With the investing choices for investors seeking high-yield investments that generate monthly revenues.

Approximately one in every ten U.S. households today rents a self-storage unit. Annual nationwide profits from this type of real estate investing will soon reach $40 billion. The currently booming industry of self-storage may be a highly profitable investment to consider for your property portfolio today.

Let us build a self-storage portfolio for you

Because we are involved with the ground up development of master planned communities in Southeast Texas and the Houston area in particular, we are presented with development opportunities that others never see. The facility we are building today is in a master planned community and we are the  only Self Storage facility in the community serving 5000+ new homes. 

We have at least 15 opportunities such as this available to us today due to our work in the marketplace for the past 20+ years. 

We want to build you a portfolio of self-storage that will cash flow for decades and be an asset that keeps growing into the future. 

Contact us today to get started.

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