Self Storage Investments Beat the Stock Market

According to an article in yesterday’s MarketWatch, cautious investors may still want to steer clear of most stocks, which are liable to provide a bumpy ride for the next few years. Instead, analyst Jeff Reeves recommends several less conventional investment options, all of which, he points out, are beating the stock market right now in terms of the return an investor could get on his or her investment. Of seven alternative investment options, Reeves ranks self storage as number two -- after gold and before cash.

While the economy is slowly improving, many, if not most, stocks are moving mainly sideways, rather than up. Reeves points out that a self storage facility, if it is well run, can provide annual returns of between five and ten percent annually -- a fairly good return on one’s investment. In addition, he says, owning a business means that it is possible to write off expenses on one’s tax return. On the other hand, there are risks, including the necessity for incurring those expenses in the first place, and self storage facilities are not easily liquifiable investments.

By comparison with gold and cash, self storage, as an investment, holds its own. Gold sets the standard -- it was up 25 percent in the last year. Cash, on the other hand, in a deflating economy, will have more buying power as prices drop, so even investors who hoard cash under their mattresses can expect to earn a return of about three percent yearly in buying power.

Reeves is not the only investor to be keeping an eye on self storage.  In an article posted at the NASDAQ website, Schaeffer’s Investment Research points out that self storage, a market “once shunned by the investing elite,” is doing better than the equities market so far this year. Investors find self storage appealing in part because the costs of maintenance are lower than they are for other commercial properties, and it is not necessary to have a large payroll, since a self storage facility can be run by a handful of employees.

Meanwhile, of course, many investors are staying the course with the stock market, certain that in time, stocks will begin to make their way skyward again. On August 20, investment analyst Roger Ibbotson told CNN Money that stocks will turn out to be a good investment in the long run. However, even Ibbotson warned, “the whole key to getting higher returns in the long run is that stocks are risky. People have to be afraid to take the risk of investing in stocks for them to deliver superior returns going forward.”

Sources used:

“Options update: put sellers swarm Public Storage as stock taps new high.” NASDAQ. Schaeffer’s Investment Research. Sept. 7, 2010.

Reeves, Jeff. “Forget stocks: Commentary: build your nest egg with unconventional investments.” MarketWatch. Sept. 22, 2010.

“Self-storage named among seven investments beating stock.” Inside Self-Storage. Sept. 23, 2010.

Tran, Minh. “Joint ventures as an investment option: three ways to build or acquire self-storage properties.” Inside Self-Storage. Sept. 14, 2010.

Updegrave, Walter. “Are stocks still a good investment?” CNN Money. Aug. 20, 2010.