How To Buy A Storage Facility

Though not as glamorous as investing in a tropical resort hotel, storage facilities can return strong profits on smaller initial investments. Storage properties benefit from a relatively high demand in urban centers and in outlying metropolitan areas where competition may not be as great. A nearly unavoidable fact of life is that as families grow and as individuals start to make more money, their volume of possessions increases while their accessible storage space decreases.

Storage facilities also usually have fewer associated costs than do properties that will be occupied by people rather than things. Operating costs for a storage facility are far below the operating costs of resort hotels or office towers. Non-recurring costs like repairs and renovations are also usually spaced much farther apart and are usually less costly. On the other hand, rental prices per square foot can be smaller, too.

If you are looking for a stable investment that does not require too much oversight in which to place some of your IRA's funds, a storage facility can be a great option. Because there are some recurring expenses however (like the electric bill and labor costs), a self-directed IRA is usually more desireable for this type of investment. If you have to pay custodial fees every time your IRA pays the electric bill, your profit margin can decrease significantly.

Staying within the Bounds of the Law

In any investment involving your IRA where recurring expenses are a factor, you need to be certain that all profits go directly into the IRA and that all expenses come directly out of the IRA. Accidentally paying a light bill with the wrong checkbook can trigger a wave of penalties and fees that can put your IRA's tax-advantaged status at risk and cost you dearly. For this reason you want to always make sure your IRA has enough ready cash to pay expenses and that only your IRA pays them.

Written By Scott Janko, The National Association of Financial and Estate Planning (NAFEP)

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