The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1084 UNLOCKING SYDNEY'S STORAGE: DOES IT SPELL CAPITAL GROWTH? 🏪
Ready to disrupt your idea of lucrative real estate investments? Ever considered how your need for extra space could be the key to your financial growth? This episode takes us deep into the exciting, emerging market of storage units and reveals why this concrete box could be a surprisingly profitable investment. We take a look at the impressive numbers behind capital growth in storage units and how it's giving traditional real estate a run for its money. With insights into the diverse group of investors tapping into this market, this episode is set to widen your investment horizons.
From car enthusiasts needing a place for their vehicles to homeowners looking to declutter, we discuss how storage units have become a flexible and in-demand solution. We explore the factors behind this trend, including the impact of Covid, the rise of e-commerce, and the simple need for extra space. We also provide real-life examples of individuals and businesses who have made substantial returns from their storage unit investments. So if you're a real estate investor looking for a fresh perspective or someone simply curious about unconventional investment opportunities, this episode is for you. Tune in and discover a whole new world of investment possibilities.
Buying a concrete box as real estate and renting it out, surely Can it make as much money? It can't make as much money as a house or a unit. Stay tuned, we're gonna tell you if they're a good investment to buy storage units. Hello Billy boy, how are you the old man and the young man's body?
Speaker 2:I'm really good. I'm actually quite excited to talk about this because we're both a bit of a fan of storage. I lost your audio Can you hear me now?
Speaker 1:Yeah, you're back. It's a big emerging market and people are often scratching their heads because it's an emerging market. It's a foreign market that we're not used to the last 10, 20 or 30 years in real estate, but there's a lot of money being plugged into storage. People are buying these storage units and they're renting them out or they're using them. What are you seeing out there, bill?
Speaker 2:Well, there's two things that I scratch my head over. One is it always seems that there's a lot of people doing it storage. You've got your mate who's renting out your lock up garage for 50 bucks a week and happy to just do a bit of a cashier on the side. And then you've got these giants like Storage King who have got a multi-million dollar compound where you can drive your truck in. You've got 24-7 access, swipe cards it's gone really, really technical and seem to be doing really well from it, and then everywhere in between. So, one, there seems to be a lot of people doing it. And then, two, there's people that want it to rent and to buy for so many different reasons.
Speaker 1:So today we've picked this apart. We've shown some trends of people that have bought 5 or 10 years ago and shown you how much they have not made or they have made To, why. We've also picked apart why it's doing well in our opinion, because it's almost it's not a joke, but it's almost amusing when you think of yourself People really renting that stuff or they really buying that stuff. Yes, this is a real thing. It's a lot of people's weekly pay or it's a lot of people's superannuation that they're buying these storage units for, so it's a big ticket item now, yeah, so let's get into the numbers, because I think this is where it gets interesting.
Speaker 2:We're going to talk about this morning the capital growth side of things. Now I'm going to move this way a little bit, but that is. It's a little bit hard to make out there, but that is the numbers of how much people have made it or not made it, as you said, and these are across three sites that Mark's been really heavily involved with selling and we've now retained some of the rental business, I believe. So it's Brookvale, brookvale and Chroma, three local storage facilities on the northern beaches. And, kindly, from the team, we've got some data to show you. Tell me more, I'll talk you more.
Speaker 2:So on the far right column, capital growth, that's what we really want to know about. You can see there's some pretty astonishing numbers there Across the three sites. From what I can see there, it's as sort of low as 34%, 33%, which is still pretty impressive, 29% at the bottom there for Chroma and getting as high as 75%. So how does that work, mark? That's almost approaching doubling their money over the period they've owned them. In the near future I reckon We'll pass Mark again, but from what I can see here and I've not actually leased or sold any of these units, but I know the sites and their locations. It seems to be that there's quite a variety of people getting into these storage units. Mark, tell us why are they making such strong growth? Because they're not very old.
Speaker 1:You know what? It's an emerging market because I think Covid would have helped it a little bit. I think people just love having that extra base that they can work from, get out of the house and they can go to the storage unit and pick some stuff up, drop some stuff up, hang out a little bit. Maybe it's e-commerce. I think a lot of e-commerce business have exploded over the years so they don't quite need a big factory for their e-commerce business. They just need a couple of cubes to store their stock within that.
Speaker 2:We've lost you for a sec.
Speaker 1:These things are anywhere from a garage, I guess if you can imagine a garage on ground floor. But there's like a hundred of them all together. Some of them are extra high, as in 5 metres, almost double the height of a storage unit. Some of them are extra long, double the height of a storage unit.
Speaker 2:That's a mezzanine storage, just to give people a reference gap. Yeah, so yeah, some of these are got mezzanine storage. Some have got the ability to pull a truck straight in where you know your typical storage facility or garage can't, and that's quite appealing to some of these small commercial business owners or landlords. What percentage of these that you're selling are going to an owner or occupier or investor?
Speaker 1:I would say it's really funny that they are both, which is very different to residential. Often when they sell they people have an attitude that it's going to swing both ways, that they will use it some time or another for themselves and they will rent it out at some time or another. So I would say which is very different to how people buy units or houses it's going to do one thing for the rest of its life, that's it, but this tends to do both. If I was, strictly speaking, I'd say people buying with a blended approach, these properties would be about 60%. You know, we're not sure if we're going to rent it or we're not sure if we're going to use it ourselves. I would then say the remainder, sort of 20%, will be no, it's going to be investment, remainder 20% probably. That I'd say 50% would be blended 25. 25 would be investor only or using it only for themselves, owner occupied only.
Speaker 2:Yeah, good to know. So yeah, as you say, that can be anyone from someone who just needs a bit of space at home, wants to keep them, wants to keep the boss happy, maybe just declutter a little bit to someone who has got some you know stock that they need to just move out of the house, or you know the business or moving sites. So many different reasons.
Speaker 1:So, before we get rid of this graph, I just want to say these we have there's about four storage facilities that have that are for sale on the northern beaches or you don't have. We've sold in, sold down, sold out in the northern beaches. These four this is people that have bought in there have then, consequently, some people have sold, and then we've tracked all that data to show you the growth they've had. So the rents have been very good and the capital growth has been excellent. The capital growth has probably been consistent with units and houses as well. So you would never really think as a storage unit is making capital growth, as in the value doubles or goes up, but it's definitely done that and that is living proof of it.
Speaker 2:It's amazing and I know before we move on to the next one. They're, all in all, it's a great investment, but they're not small purchase prices, some of these, or selling prices. We're talking up to a few hundred grand. It's a lot of money.
Speaker 1:We've sold a couple of yeah, we've sold a couple for 500, 600,000 car enthusiasts Absolutely love them. I've sold one the other day to a lady where she's storing all of her books. So they're moving from a house in St Ives and they're going into an apartment they want to place to store all their books. A lot of people with superannuation so having two or 300 grand in superannuation between you and your wife or another family member is he's not unheard of. So people are buying these with their super and then they're renting them out. Traders love these storage facilities because they can store the big dirty stuff. It actually keeps people in their homes for longer because often their homes get stressed because of storage. So when they can actually strip that away they can enjoy their home more or for longer. They can empty out that third bedroom sort of thing.
Speaker 2:Yeah, and I think, when you look at it on a wider, a wider geographic area, much more than just Sydney, it goes on to say that some of these sectors have been growing at 14% a year, which is really, really impressive. So you can see that from the top to bottom Adelaide, sydney, perth, brisbane, melbourne they've all done some really strong numbers. So, revenue growth over the last 12 months to July of this year, adelaide's leading it, leading the race at 14%, for Sydney's close behind at 12. And this is what surprises me Average fees per square meter in Sydney is $425.
Speaker 1:Yeah. So I guess, to reference that, for people, a double garage which is sort of about 15 plus 15, like 32 meters squared in Kroma, which is probably the cheaper of the commercial areas in the northern beaches cheapest I'd say. That's getting about 200 to 20 a week, a week. So then the rate of return is pretty good. It's pretty much about a 5% return, if you're wondering which is similar to a two-bedroom unit or a one-bedroom unit or at all, and it's actually probably a bit better than a house gets for rent. So that return that you're getting on storage not bad at all.
Speaker 2:But I think the winner here for many people is that there's no, or there's far less tenant interaction, tenant maintenance if you are renting them out less headaches that sometimes are put off for people, particularly if they're buying it as just a straightforward investment, they don't want the headaches. They're almost like locking the money away in the bank.
Speaker 1:And you're not maintaining a human as in, you're just maintaining boxes in the property. So it's a little bit easier to maintain. With repairs, maintenance, You're not doing kitchens, you're not doing bathrooms, it's just a big concrete box. So it doesn't need a lot of money invested in it for rejuvenation over 10 or 15 years. And not only that, it's an expensive thing to build, so the build cost is generally very is surprisingly high for these guys. So I think that protects it a little bit. For you're not gonna see like an over saturation of storage units in the market. We certainly haven't seen it in the last 10 years. And that's storage units today. Billy Bob, that's storage unit. There's plenty to talk about.
Speaker 2:That's plenty to talk about. But yeah, if you're curious to buy, you can't live in it, but you can certainly buy it to use it or rent it out. You get in touch with the team. They're experts.
Speaker 1:That's it and something that I get asked all the time. Can people run their business from it? You definitely can in terms of storage for your business, but I think setting a desk up and staying there 10 hours a day I don't hear of that much, but it's more for your e-commerce business and store eating your stuff, collecting and dropping off 10, 20, 30 times a day. Another thing that I love about them is they're open 24 hours a day, so a bit different to retail, for instance, but you can get in and out of here all day, all night, to do stuff.
Speaker 2:It's well said, good investment. There's the numbers for you. Get in touch. There it is Love. You see ya, bye.