Storage pod investment a good idea?
|Investment | Property
Asked by IStep, submitted
26 June 2013.
I have a friend who has invested, through a broker, in storage pods. The guaranteed return in the first two years is 8% each year. Do you recommend such an investment for income investors?
Answered by Justin on 23 August 2013
Investing in storage pods, or self-storage, isn't on the surface a bad idea. Demand for self-storage in the UK is high and managed well it can be quite a profitable venture.
The gist of these investments seems to be you buy a long lease on a storage unit or pod and the self-storage company handles renting it out and maintenance, in return for a fee.
However, as an investor there are a few potential drawbacks.
Firstly, the investment is unregulated, which means if someone runs off with your money then tough. You won't be able to fall back on the FCA or a compensation scheme and will instead have to take matters into your own hands which could prove expensive and ultimately fruitless.
Secondly, assuming the investment is bona fide, you will be reliant on the operations of the self storage operator concerned. If they are inefficient then occupancy could be low, hitting your rental income. And if they go bust your investment could prove worthless unless another operator takes over the management of the premises and your pod/unit, in which case they would probably negotiate different management fees. Things could get very messy.
And thirdly you may struggle to find a buyer in future if you want to get out.
Having looked around the web most of the adverts for storage pod investments lead back to a company called Store First Ltd, which operates several storage depots in the Yorkshire and Cheshire regions. While I have no reason to believe the business is anything other than proper, the potential issues I mention above could apply in a bad case scenario.
In simple terms it seems you buy a 250 year lease on a pod from £3,750 depending on size. Store First puts in place a 6 year agreement to rent and manage your pod, promising an 8% yield (after fees) in each of the first two years, with the option to extend the guaranteed return at the end of two years. When your pod is let you'll pay 15% of your rental income to Store First, as well as service and ground rent charges, basic details here.
Even if we assume occupancy is good, what happens if Store First goes bust or walks away after six years? You could be left with no rental income and an asset that's very difficult to sell on.
All in all, I think there are just too many potential downsides to make these types of investment appealing, but obviously you’ll need to investigate more closely and form your own conclusion.
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Readers' Comments (5) - To post a comment please register or login
Comment by alzie01 at 12:08pm on 04 Oct 2014:
Advice on Store First Investment
The SSA UK has concerns about some of the information that Store First is releasing to potential investors in their self storage business. These concerns are detailed in an advice paper for potential investors in Store First that you can download here. For more information please contact the SSA UK office.
Note that Store First are not members of the SSA UK.
Be aware that I invested £140,000 in October 2011 and up until October 2014 have had less than £800 return. I have not been able to exit the investment, and when Store First did make an offer, in June 2014, the failed to carry through. Totally untrustworthy company, STEER CLEAR.
Comment by Sucker at 12:25am on 04 Nov 2015:
I invested in 2 storage pods at Glasgow Airport from Store First about two and a half years ago. The first two years I was paid the promised rate of return.
Last month (October 2015) I got a letter from the management saying it had changed hands, and basically I would only receive rent if the pods were rented.
Latest letter says the tenant has relinquished his lease.
No rent has been forthcoming- due last month, but I have had a bill for the ground lease.
Living in New Zealand, and with the rate of exchange being 43p to the NZ dollar, with all the legal costs and the endless hassles of trying to manage this so called wonderful investment, sadly I realise that if it seems to good to be true- it sure is.
So much for a little extra in retirement.
Comment by Scammed at 6:21pm on 16 Mar 2016:
I too invested 2 pods though an agency, Select Property , agent name is James Foden, in November 2013. Before I placed the deposit , I specifically asked the agent will he help me to dispose the pods in the future if I want to sell them. The answer was yes but with a fees. I contacted him in December 2015, as you can guess it by now, he no longer can help me and was not even willing to give me other agencies contact that would.
Just like Sucker I am stuck with the hassle of ground rent etc and Store First refuses to buy back.
I am a Malaysian , I thought 3rd world countries have more scam, guess I am wrong as I never got scammed in Malaysia before instead by a first world country companies, Store First and Select Property.
Investors please stay away from this two companies!!!!
Comment by mortgagehunter at 1:55pm on 12 Jul 2016:
Just came across 2 clients who have these dreadful things. They have both been siting empty for over a year no income at all. This is a case of getting clients money locked in and no easy way of getting it back out.Why would any adviser shoehorn their clients hard earned money/ investment into 1 single asset.
Some investors have been selling pods for 5k at auction. The only option for this is a complaint to FCA.
Comment by MorningAll at 2:38pm on 02 Sep 2016:
On their website they are still called STOREFIRST MANAGEMENT LTD, dissolved, now called STOREFIRST LIMITED.
The internet contains numerous adverse comments about this company, it also mentions that the Directors have an history of previous company failures, for making blue sky offers and unloading financial disasters on unwary investors. To rope you in they are offering an immediate 8% return, some wise heads see this as an offer to retain 92% of you're money and, its a disturbing fact. that the storage pods they sell are terribly overpriced and unsellable when you want out. Their impressive looking storage depots have a busy Oxford Street storage lane, and a less popular Regent Street lane, then the Sahara desert is evident elsewhere in the building including the deserted upstairs units. Mark my words you will be buying the desert (deserted) areas but shown Oxford Street if you call in to view, needless to say the units build price is guessed @ £1000.00 each. Even more disturbing you have no share, no rights and no control in the main building itself if a distress sale was to occur, (Pssst: Anone want a used Storage unit with very little use and flimsy walls and doors) My advice is to contact a Nigerian conman direct and cut out the UK middelmen, you might get a better deal. Leave this alleged investment well alone. On paper it looks good, in practice its has the long lingering unsavoury smell time-share investments have.
PS: On their website contact page they are still called STOREFIRST MANAGEMENT LTD, a company that was dissolved by Company House 2 years ago, will someone please tell their www-site designer its now called STOREFIRST LIMITED.