While the stock market fluctuates, savvy investors are seeking alternative ways to turn their capital into gains. One important alternative investment is real estate, which can hedge against Wall Street’s volatility while generating passive income.
In particular, according to Sergio Altomare, Co-Founder and CEO of real estate private equity and development company Hearthfire Holdings, investing in self-storage facilities tends to be an overlooked area that promises robust returns.
“If your cash is in the bank, then it’s technically on fire,” Altomare says. “During times of inflation, investing in self-storage enables investors to get their money out of a savings account and open up a new source of income. These facilities also tend to be recession-resistant.”
According to Altomare, self-storage offers unique opportunities to make one’s investment portfolio more resilient in two main ways.
Why self-storage is resilient
First and foremost, self-storage tends to be financed conservatively. “Banks typically favor investment in need-based asset classes like multi-family residential properties, and self-storage is actually a luxury-based asset instead,” Altomare explains. “It may not seem like it, but being able to afford a self-storage unit — even though the monthly cost is similar to that of a cell phone — is indeed a luxury.”
These more conservative loans mean that investments in self-storage tend to withstand sudden increases in interest rates, offering greater stability during times of economic stress.
The second reason is that tenants default on their self-storage units at a much lower rate than residents of multi-family buildings. “Due to the recent interest rate hikes of the years after COVID-19, we’ve seen a spike in multifamily defaults, whereas self-storage has remained very low comparatively,” Altomare says. “While multifamily default rates shot up around 12.9% at the beginning of 2025, self-storage default rates still hover around one-tenth of this.”
Yet those aren’t the only good reasons to invest in self-storage facilities.
Benefits of self-storage: Low expense ratios
As Altomare explains, another important consideration is overhead. “Self-storage tends to have lower expense ratios when compared to other real estate asset types,” he says.
This low overhead is partly attributed to the fact that self-storage facilities don’t require much maintenance.
“Self-storage facilities are very simple in design and construction,” Altomare explains. “This leads to lower maintenance and repair costs than a more complex structure like an office, a retail shopping facility, or an apartment. Those three asset types have numerous moving parts, appliances, and utilities, resulting in a long list of items that often require repair. Conversely, self-storage facilities often have few toilets and typically only one office microwave throughout the entire facility. There are fewer moving items and not much needs fixing.”
Since self-storage facilities don’t require much maintenance, they also need minimal on-site staff. “This reduction in labor costs directly helps with lowering the facility’s operating expenses,” Altomare says.
Meanwhile, handling tenant relations is easy with self-storage units, but not so much with residences and offices. “The simple design of a self-storage facility also allows operators to leverage technology in a way other facilities cannot,” Altomare says. “Online payment systems and digital documents can streamline lease creation and the onboarding of customers both remotely and at scale, which reduces administrative costs.”
Other benefits of self-storage
Another consideration is that, while office and residential spaces need periodic renovation, this is not the case with self-storage facilities.
“Remodeling a multi-family unit can cost $7,500 to up to $30,000 per unit,” Altomare observes. “No self-storage facility will ever be doing an expensive remodel like that. They might spend money on upgrading the aesthetics of the office so prospective customers feel comfortable when visiting the site, or they might add additional units, thereby generating additional rent.”
Speaking of rent, self-storage buildings can accommodate a large number of units in a relatively small space. “Self-storage facilities can have a thousand units in less than the space it would take to have 510 bathrooms,” Altomare says.
As Altomare explains, self-storage offers legal advantages as well. “There’s typically a lien agreement and not a lease agreement,” he says. “These contracts tend to favor the landlords within the eviction process, which reduces costs associated with non-paying customers and allows for a swift relisting of units. Month-to-month contracts also allow for facilities to be leased again more quickly.”
Generate passive income while protecting your time
Want to get in on the action without spending a lot of time learning the self-storage real estate market, vetting specific properties, and then managing them?
According to Altomare, valuing your time is the hallmark of a “truly sophisticated investor.” For him, time is investors’ “most valuable asset” and “most precious resource.” “Savvy investors go beyond looking at the ROI and think of the return on their time,” he explains.
There’s good news for these savvy investors.
“Investment firms like mine enable people to invest passively,” Altomare says. “Investors can partner with a team that knows more and can do more than one individual could ever possibly do on their own. Why spend your own time learning the painful lessons when you can partner with an expert with 20 years of experience?”