Self-storage is one of the most recession-resistant real estate investments, yet many overlook its potential… In this episode of The Agent of Wealth Podcast, host Marc Bautis is joined by Mark Helm, Founder of the Q2 Self-Storage brand, developer of the Storage World Analyzer, and bestselling author of Creating Wealth Through Self-Storage, a handy roadmap for investors to navigate the competitive self-storage market.
In this episode, you will learn:
- How self-storage compares to other real estate investments and why it’s considered to be recession-resistant.
- The key factors to look for when evaluating a self-storage facility – from location to market demand.
- Strategies for financing and structuring deals to maximize profitability.
- How to scale a self-storage business and increase revenue through automation and value-add opportunities.
- And more!
Tune in to discover how you can capitalize on the booming self-storage industry and build a recession-resistant investment portfolio!
Resources:
Creating Wealth Through Self-Storage | Q2 Self-Storage | Storage World Analyzer | mark@helmproperties.com | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. Today, we’re diving into the world of self-storage investments – a low-barrier, high-profit opportunity that’s transforming the way small investors can create wealth.
I’m joined by guest Mark Helm, Founder of the Q2 Self-Storage brand, developer of the Storage World Analyzer, and bestselling author of Creating Wealth Through Self-Storage, a handy roadmap for investors to navigate the competitive self-storage market.
A real estate veteran, Mark is a pioneer in the self-storage industry with over 20 years of experience. He’s helped thousands of investors navigate the complexities of this market, leveraging technology and strategic systems to build wealth without requiring huge upfront capital.
Mark Helm’s Journey Into Self-Storage
Mark, welcome to the show.
Hey, Marc. Good to be with you.
Can you start by sharing your journey into self-storage and what drew you to this sector of real estate?
Sure. First, I want to say that I really appreciate the opportunity to be here. I’ve listened to a lot of your podcast episodes — you have such a wide variety of guests, and I’m honored to be in that mix. So, thank you, Marc.
And thank you.
I spent most of my career working as a real estate agent. I got my real estate license on May 1, 1985 — that was also the last time I had W-2 income. I quickly realized I needed to be in commercial real estate and started gravitating toward that.
In 1995, I earned my CCIM designation — which, while not quite a Ph.D., is like a master’s degree in investment real estate. Many institutional buyers and sellers in the commercial real estate space work with CCIM designees, so I felt it was important to get that certification.
A few weeks after earning my CCIM designation, I was in my office when I got a call from the acquisition director of a self-storage REIT.
Recognizing the Potential of Self-Storage
At the time, in 1995, I was primarily focused on office buildings. I worked with a group of investors, finding B-class office buildings in the Louisville, Kentucky CBD. I would sell them the buildings, and my management company would handle leasing and operations. I wore a suit and tie every day, used sophisticated financial analysis software, and thought I was pretty sharp.
I was making a good living, but my lifestyle required a lot of cash going out. Then I got this call from the self-storage REIT acquisition director. He asked if I could help him find self-storage properties — kind of like a hot tip. Now, if you ask a real estate agent whether they can find property, there’s usually only one answer: yes.
So, I went out with him. I was dressed in my suit and tie, and he was in jeans and a shirt. I had my high-end financial analysis software, and he had a laptop with an Excel spreadsheet.
Here he was — a REIT acquisition director, essentially at the top of the food chain in his industry — just using a basic Excel spreadsheet. I initially thought self-storage was a simple business for simple people.
But it didn’t take me long to see what it really was.
For all practical purposes, self-storage is like a warehouse. It’s an industrial building — metal walls, a concrete floor. I had done a lot of flex space leasing in the Louisville market, where warehouse space was leasing for $3.50 to $4 per square foot at the time.
But when I looked at self-storage, I saw something different.
Back then, non-climate-controlled self-storage units were leasing for $9 per square foot. Climate-controlled units were going for $10 to $11 per square foot.
Unlike office, retail, or apartments, there were no tenant improvements. No sinks, no toilets, no carpets — just simple, predictable capital expenses. This REIT knew exactly when and how much those expenses would be.
A small reserve fund — back then, about 12 cents per square foot per year (today, probably 14 or 15 cents) — covered all the capital expenses. And there were no leasing commissions.
I fell in love with the product. It didn’t take me long to realize its potential.
At the time, the one skill I had was finding deals. So, I started searching for storage deals. It took some time, but I closed on my first self-storage project on December 31, 1999. That’s how I got into the business.
Scaling Up: Portfolio Growth and Syndication
And when you say “project,” was it an existing self-storage facility, or did you build it from the ground up?
It was an existing facility when I purchased it. A developer in Bloomington, Indiana had built it. His main business model focused on smaller facilities, but in his hometown, he found a site he thought was great. He built a 62,000-square-foot facility. The last phase had just been completed but wasn’t fully leased yet.
I bought the facility at 50% occupancy — which was great because it meant there was a lot of upside potential. That purchase in Bloomington was my entry into the world of self-storage.
Did you work remotely, or were you living close to Bloomington at the time?
Louisville is about two hours away.
After closing, I spent a month on-site to get my feet wet running the facility. Then, I hired a manager to oversee it.
I quickly completed a couple more deals, forming a small portfolio. I had enough funds to hire someone to oversee the managers, and I supervised that person.
Then, as quickly as I got into the business, I started raising money and syndicating deals.
By 2003-2004, we started receiving unsolicited offers for our portfolio. The way we were structured, majority ruled.
We originally planned a 10-year hold period, but by year three, we were already receiving offers that exceeded our 10-year projections.
We sold the portfolio at a great price. It took me a few years to get back in, but I started building my second portfolio in 2008 — of all years!
Self-Storage During Economic Downturns
But actually, wasn’t that a good time for self-storage? With the housing crisis, people needed places to store their stuff.
Yes, people often say self-storage is recession-resistant.
Now, nothing is recession-proof, but self-storage is more resilient than many asset classes.
In the 2008 recession, the industry lost about 8% of its tenant base. Compared to other real estate sectors, that was actually very good.
During that time, three asset classes stood out:
- Medical office space performed well.
- Student housing surprisingly did well.
- Self-storage thrived.
Now, medical office buildings cost $250-$300 per square foot to build. Student housing? Even more — it’s like building a resort. But self-storage? I was building institutional-grade self-storage for $50 per square foot. At that cost, I could develop a facility that a REIT would be happy to acquire.
The Current State of the Self-Storage Market
What does the market look like now?
It’s a lot different now. There are challenges today, but I had challenges back then too. The main challenge back then was that not many people used self-storage, and banks were hesitant to lend on it.
While there have always been challenges, everything changed after Wall Street and institutional investors recognized how well self-storage performed during the 2010 recession. Once they saw its resilience, money started flooding into the space — just like in other sectors, but particularly in self-storage. A lot of funds were formed, REITs began acquiring each other, and capital flowed in. And when capital flows in, things get built.
You started seeing these massive four- and five-story, 120,000 to 130,000-square-foot, fully climate-controlled facilities popping up everywhere. Now, there’s a lot of supply in the market. But self-storage is different from almost any other asset class because it’s highly localized.
In our portfolio, the average customer lives just 3.2 miles from the facility. In smaller, more rural markets, that distance may be larger — maybe five or six miles — but in most cases, you could send up a drone and literally see your entire customer base. So while it’s interesting to analyze what’s happening in Louisville, Kentucky, or Manhattan, what really matters is your specific trade area. What’s the supply and demand there?
Using Data to Identify Self-Storage Opportunities
These days, we have much better access to data. I can look at almost any address in the country and determine the current supply. We typically measure this in square feet per capita — how much self-storage space exists per person in that area. An average market might have around eight square feet per capita. Some markets can sustain up to 10 square feet, while others may be oversupplied at six. But on average, eight is a good benchmark.
With the data available today, I can quickly analyze a trade area, assess the current square footage per capita, see what’s in the pipeline for new developments, and examine historical rental rates for each unit type — climate-controlled, non-climate-controlled, and so on. I spend a lot more time analyzing trade areas now than I ever did before. It used to be that you could just build a facility and expect demand, but today, you have to be much more strategic.
So you’re really using data to determine whether there’s room for more storage or if a market is oversaturated. But do different regions have varying levels of self-storage demand? For example, would the demand in New York City be different from Pennsylvania simply because of how people use storage in different parts of the country? Or is self-storage demand pretty consistent nationwide?
It’s fairly common across the country now. At any given time, about 10% of the U.S. population is using self-storage or has a need for it.
In Manhattan, for example, there are high barriers to entry for self-storage development. As a result, most self-storage facilities in Manhattan are now conversions — where you buy an existing building and repurpose it for storage. Those projects tend to perform well in that market.
In other areas where land is more plentiful and affordable, expansion or new construction makes more sense. It really depends on the region. But there are still plenty of areas with an undersupply of self-storage.
Just last week, I analyzed a market in Florida where rents were around $20 per square foot — a very strong rate for self-storage. The current supply in that area was only 4.6 square feet per capita, which is well below the national average. That’s exactly the kind of market I want to be in.
When analyzing a potential investment, what’s your first step? Do you start by looking at the data, or do you identify a specific property first and then analyze whether the data supports it?
It’s a combination of both. I do a lot of training and coaching, and one of the first things I teach is how to properly analyze a self-storage opportunity.
Self-storage analysis is a bit different from other real estate asset classes. If you were evaluating an apartment complex, shopping center, or office building, you’d typically start by reviewing the rent roll. With self-storage, it’s different — you start by looking at the unit mix.
I teach people the key financial metrics for self-storage: operating expenses, how much storage space you can fit per acre, and so on. But when evaluating opportunities, I often start by looking at properties with expansion potential.
It’s hard to find an existing self-storage facility today that you can simply buy, make minor improvements, and still achieve the returns that small investors need. Instead, I look for properties where I can add value — either through expansion or conversion.
For example, I’ve done a lot of projects where I buy a 25,000-square-foot facility and then add another 25,000 to 30,000 square feet. That transforms the property into something a REIT would find attractive for acquisition down the line. I also upgrade facilities, modernizing them to bring them into the current era.
Another strategy I’ve had a lot of success with is buying existing buildings and converting them into self-storage. I’ve also done ground-up developments, but I prefer conversions and expansions because they’re faster to execute.
Even with conversions, I can generate rental income while the property is in the lease-up phase. For example, I might rent out part of the building as a warehouse or use it for vehicle parking to generate some cash flow during the transition. With expansions, I can use the existing facility’s cash flow to help support lease-up costs for the new units.
So I usually start with existing properties. If a specific project doesn’t work, but I still love the market, then I start looking for land or conversion opportunities in that area. That’s actually how I found the Florida opportunity I mentioned earlier.
In that Florida example, if the project doesn’t work, but you find a good conversion opportunity, do you need to assemble a local team to execute the conversion?
It depends. If I’m working with someone who has zero construction experience, then yes.
I actually ended up creating a construction company to handle my own projects. Originally, I didn’t intend to do that, but it became necessary. Today, lenders require general contractors (GCs) for most projects. Back when I started, I functioned as the construction manager myself, or I’d hire a construction manager if I couldn’t be on-site. I would oversee the selection of fabricators, contractors, and subcontractors. But now, lenders want a licensed GC in place.
Since interest rates and construction costs have risen, I had to form my own construction company to manage projects more efficiently. We also provide support for smaller investors working on expansions, ground-up developments, or conversions.
That said, the self-storage industry has a unique advantage — many companies that manufacture storage systems also provide additional services. They supply engineered building plans and site layouts, which helps reduce the cost of planning and development. It’s much more efficient than going straight to an architect and saying, “I want to build 50,000 square feet on this five-acre site.” This approach wouldn’t work for most asset classes, but it’s ideal for self-storage.
When working with first-time self-storage investors, how involved do you get in the process? I imagine lenders would be hesitant to approve a loan for someone who’s new to the industry, especially if they’re developing a facility in a different state.
That can definitely be a challenge. In any investment, your success largely depends on the strength of your team.
I act as a consultant or coach, training investors on how to analyze deals and execute projects. When it’s time to approach a lender, we make sure they’re fully prepared. By that point, they have a well-developed plan, a clear understanding of the numbers, and a third-party feasibility report validating the market demand.
If the lender requires a GC, we secure one. If the investor has a full-time job in another state and the lender insists on third-party management, we bring in a professional management company. Everything is factored into the financial model to ensure the asset will operate efficiently and meet lender requirements.
Lenders today evaluate self-storage projects based on stabilized value — typically underwriting to an 85% to 90% stabilized occupancy rate with a debt coverage ratio of 1.2 to 1.3. We make sure those metrics align before presenting the deal.
Self-Storage Management and Operations
Let’s talk about the management side. Once a self-storage facility is stabilized, what does management involve? Most people are familiar with property management for a multifamily property, but what does it look like for self-storage?
Great question. First of all, it depends on the type of self-storage you’re building. Today, there are many smaller, automated facilities. One of the reasons REITs prefer 50,000 square feet or more is that the economics justify hiring managers.
I tell people that while self-storage is a real estate play, it’s more like building a strip center and then opening a store inside that center — it’s an ongoing, operational business. It’s not complicated, but it is an active business.
If you choose to self-manage, as we do, there are key performance indicators (KPIs) to monitor monthly, quarterly, and annually. For example, I always want my income as a percentage to increase more than my operating expenses as a percentage over time.
One of the advantages of self-storage is that owners have more control over net operating income (NOI) than in most other types of commercial real estate. Our leases are month-to-month with a 30-day notice, which gives us flexibility. I can raise rents or add additional income streams, whereas in apartments or flex buildings, income is often locked in by long-term leases. That flexibility is one of the unique aspects of self-storage.
Now, let’s talk about financing. In most areas of real estate, if you try to go it alone, you’ll eventually run out of capital. Do most investors end up using syndication to scale? Can you trade up in self-storage the way people do in residential real estate — starting with a small property and working up to larger ones?
Everyone’s goals are different. Some people, like I did, start out wanting to build a portfolio and quickly realize they need more capital, leading them to syndicate. Others aim to build a portfolio of five or six properties and prefer to do it without partners.
Some investors just want one or two properties as a cash flow source, primarily for retirement. I’ve worked with people who take their net distributable cash flow each year and use it to pay down their loans, so by the time they retire, their properties are free and clear or close to it.
Because of the numbers involved, many people do turn to syndication. Some even go as far as creating funds — blind pools of capital — to acquire self-storage based on specific criteria. But there are many paths. I’d say at least 50% of the investors I work with are involved in syndication.
So syndication is one of the more common ways to build a larger portfolio?
Yes. It also allows investors to spread their risk across multiple markets instead of being tied to a single local economy. Plus, it provides the bandwidth to operate a business more effectively.
But with syndication comes new challenges, right? Managing other people’s money adds another layer of responsibility.
Absolutely. But for investors, joining a syndication led by an experienced operator can be a great way to enter the self-storage business. Some people start by investing passively in a syndication, observing how the sponsor operates, and then decide to become sponsors themselves.
I’ve worked with several investors who started by investing in my deals and others’, then later transitioned into running their own projects.
How much visibility do passive investors really have? Some people get into real estate thinking it’s glamorous, then realize it’s more work than expected. Do you think investing in a syndication or REIT gives them a good sense of what ownership entails?
That depends on the sponsor and how well they communicate. Some sponsors are great at it, while others aren’t.
I personally invest passively in other asset classes — not in self-storage, but in other real estate sectors — to diversify. Doing so has given me insight into what some sponsors do well and where they fall short. It’s helped me improve communication with my own investors.
I don’t run a fund — I came close a few times but decided against it for specific reasons. Instead, I do one-off deals with investors I personally know. I call it “country club money.” Everyone who’s ever invested in one of my projects is someone I’ve talked to and built a relationship with. That’s just how I prefer to operate.
For someone looking to invest passively in a syndication or fund, what are some red flags they should watch for? On the multifamily side, proformas always look great — but what do inexperienced investors tend to miss when evaluating a self-storage deal?
This applies to any asset class, but one of the most important questions to ask a sponsor is: How do you handle surprises? Because I promise you, there will be surprises.
Every deal I’ve done has had unexpected challenges. The goal is to avoid making fatal mistakes. So, I’d ask a sponsor how they navigate those situations.
I’d also look at their track record — specifically, deals that have gone full cycle. That means looking at properties they’ve acquired, improved, held, and sold. What were the actual returns?
Another thing to watch closely is the assumptions used in the proforma. Some fund managers make most of their money on transactions rather than asset performance.
For example, a common trick is to assume a very low cap rate upon sale — say, a 5% cap in year five — which inflates the projected returns. Instead, I use more conservative assumptions: 6.5%-6.75% in tier-one markets and 7% in smaller markets like Pensacola, Florida. I don’t know what cap rates will be in five years, so I won’t assume they’ll remain low.
Key Trends in Self-Storage
What trends are you seeing in self-storage, whether in investing, operations, or analysis?
The biggest challenge today for small operators is the pace of industry evolution. When I first got into self-storage in 1995, an acquisition director told me it was a boring business — the biggest innovation at the time was climate control. That’s no longer the case.
One of the most significant changes in recent years is the adoption of dynamic pricing, similar to airline tickets or hotel rooms. Our operating systems now use algorithms to track supply and demand in a given trade area.
For example, if 10×10 units in your market are 92% occupied, the software may automatically increase rates. Large REITs have driven this shift, and it has trickled down to smaller operators.
Another challenge is the entry price strategy used by REITs. They often set artificially low move-in rates to attract customers, then implement aggressive rent increases — sometimes 30-50% or more within a year. This can distort the perceived market rent.
New software tools are helping by providing historical rental averages, but smaller operators still need to educate lenders about these trends.
Where does all this rental data come from? Are facility owners required to report their rent and occupancy data, or is it collected in other ways?
Good question. The data primarily comes from institutional owners. The self-storage industry has seen significant consolidation, and there are a few major providers of management software.
Many data platforms scrape publicly available rates from storage facility websites. But beyond that, they also access data from these management software providers, pulling insights from behind the scenes.
That makes sense. Well, Mark, that’s all the questions I have for today. Thanks for sharing so much valuable information about self-storage. Before we go, where can listeners learn more about your work or get a copy of your book?
My book is available on Amazon, and my website — Creating Wealth Through Self Storage — offers a lot of free training. I also have online courses available for purchase.
If anyone wants to reach out, they can contact me through the website or email me at mark@helmproperties.com. I try to be as transparent as possible.
Great! We’ll include all those links in the show notes. Thanks again, Mark, and thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show. We are currently accepting new clients, if you’d like to schedule a 1-on-1 consultation with our advisors, please do so below.
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