Recently, a client called our office to ask if he could use his self-directed IRA to invest in a mini storage facility.
The answer is yes he can! After doing some research, we learned that investing in a mini storage facility either as an equity partner, a private lender who may assist the investor in acquiring the facility, utilizing a Private Placement Memorandum that acquires mini storage facilities, or the actual acquisition of a mini storage facility by the IRA are all being accomplished.
I am always amazed to see what people do with their self-directed IRAs!
Consider the following if your IRA is interested in investing in this type of asset:
1. Private lending money.
Look at the Down Payment, Loan to Value and Investment to Value and consider no more than a 5-year term.
2. Private parties acquiring storage facilities need to understand:
- CAP rates
- NOI, or net operating income, of the facility
- Vacancy rates
- Location of the facility
- Demographics and competition to make sure the facility can make a profit.
- Management. Does Management have the experience in this industry?
IRA Innovations does not give investment advice. With this type of investment, a company pursuing larger dollars that solicits investors may require an Accredited Investor Disclosure. Accredited investor rules require that individuals have a net worth of over a million dollars or income of $200,000 or greater per year for at least the last 2 years. The investor would sign a “declaration” stating that he meets the qualifications. An investment with a self-directed IRA has to follow these guidelines as well. If you as an investor don’t qualify under the accredited investor rules, your IRA cannot be self-directed into that particular investment. This pertains to Regulation D Product Offerings or Private Placements and Syndications. For more information on investing in PPMs or Syndications, visit our website at irainnovations.com
Self-storage facilities have the potential to be an excellent investment for your self-directed IRA. People need a place to store their extra belongings if they are downsizing or moving to a new location. In addition, operating costs could be lower than in other real estate related assets. Make sure you study the market and the investment and seek professional advice before you invest.