How to Determine the Right Property for Your Self-Storage Business

In a hot stock and real estate market, investors are looking for innovative opportunities beyond the traditional buildable land and apartment blocks.

When you work with self-storage investment experts, like the ones at passivestorageinvesting.com, you’ll learn that a self-storage business only comes with low capital expenditures, so it is resilient against economic downturns. Thus, it is actually a good investment to make.

But before you start, you should know that the ownership of a self-storage business offers you the option of either building a new facility or purchasing an existing one. Each comes with its own set of advantages and disadvantages. Let us evaluate both so you can determine the best opportunity for you.

Choosing the Right Option on Self-Storage Real Estate for Sale

In the current economy, the self-storage industry has proven to be recession-resistant, with investors earning strong returns on investment (ROIs).

Here is the million-dollar question, though: Should you build a self-storage facility or buy an existing one?

Unfortunately, there is no solid cover answer to this one. Your choice depends on your unique business requirements and location.

However, whether you are building or buying, you must do your due diligence on:

• The status of the self-storage industry in your area.
• The specific market you are interested in serving.
• Your current and future competition.
• The different partners, vendors, and technology tools that you need in operating a storage business.

The process may seem long and boring, but research will save you plenty of time and money. As part of your due diligence, attend national trade shows to meet with other investors and self-storage owners, and learn all you can from the discussions.

Also, a thorough business plan is critical to your success! Plan for everything from your management style to gate security; the last thing you want is some surprise enormous expenses putting an end to your dream. A sturdy business model helps you spot great opportunities and identify what properties are a bargain for you.

Assuming you have the financial resources to do either, do you want to develop or buy a facility?

Developing a Facility from the Ground Up

Years ago, putting up a facility was as simple as purchasing land, putting up the structure, and making money. However, things have become more complex today.

Current markets are experiencing increased competition, high land and construction costs, and extra regulatory requirements.

Plus, consumer demand is driving for the use of multi-story setups that are climate-controlled. As a result, self-storage facility construction is now much more expensive. Regardless, it is still a wise investment choice.

So, what should you do when you are building a facility?

Choose a good site

The land for sale you choose should be highly visible and offer easy access to a major road. A site in a high-growth area or one with clear indicators of progress is your best option. Consider a location with residents having higher-than-average household income within a three-mile radius. Of course, the location should have minimal or no self-storage competition within a one-mile area.

You should also check with the local building authorities to find out what plans they may have for that particular area. While a site may seem underserved, the chances are high that other developers have noticed, too. While competition should not sway your decision to develop, awareness of the planned and existing projects will help you choose an appropriate site.

Moreover, the area should be large enough and properly zoned to host your development. It should have easy access to electricity, sewer, water, and other utilities.

The self-storage unit mix you put up depends on the income levels and population density of your chosen location. High-income neighborhoods usually demand high-security, climate-controlled features. Commercial-oriented and suburban markets, on the other hand, may demand large spaces, while apartment dwellers are fine with smaller units. Since financial return diminishes with the increase of unit square footage, you must put up a unit mix that caters to your market.

Remember, not all land is suitable for putting up self-storage facilities. The shape and topography of the land also have a large bearing on the facility you can put up.

Plus, always create an exit strategy for any site you find, just in case zoning does not go as you intend. Overall, the site should be highly comfortable for you and your self-storage business.

Professional planners, engineers, and self-storage investment experts, like the ones at passivestorageinvesting.com, can help ensure you succeed in your project. The process involves a considerable amount of money and time, but the reward is well worth it!

Buying an Existing Facility

Choosing an existing storage facility is easier than building from the ground up, but selecting the right one can also be a challenge.

With so many facilities available on the market today, you need to create a system that helps narrow down your list. 

Steps to take when choosing a facility

Step 1: Research – Purchasing a business is a potentially life-changing decision, so make sure you are ready for the commitment that comes with owning one. Find out the hours and necessary skills required, as well as the projected revenues you should expect once you own a storage facility. Once you are ready, begin researching self-storage businesses for sale in your area.

Step 2: Compare options – Find the best self-storage facility for your new business using the criteria below:

• Experiences high-traffic and is convenient for your target customers.
• Has a high population density within several miles.
• Has ample amount and size of units—the more units there are in a storage facility, the more money you stand to gain!
• Is in good condition and requires low costs for maintenance.
• Has modern features.
• Is sold at a good price.

Step 3: Find out more – Once you have signed a non-disclosure agreement or any other similar contract, it is time to ask the seller these questions:

• Why are you selling the property?
• What are the current expenses and self-storage business profit?
• Will the existing staff members stay on the property after the close of the sale?
• What is the facility’s current occupancy rate?
• When was the last time the facility’s features were updated?
• Are there security measures, such as cameras and key cards, installed on the facility?
• How are tenants paying their rent?

Aside from asking these questions, you should also review critical financial records, occupancy reports, contracts, and tax statements.

Step 4: Review the asking price – Using the information gathered in the steps above, evaluate the facility’s selling price. A price from a professional valuation service does not provide much leeway for negotiations. If the asking price is from the owner and not a third-party, you have plenty of room to negotiate and come up with a price you are comfortable with.

Step 5: Make an offer and close the deal – If the information and answers are satisfactory, make your offer. Contracts and negotiations may be complicated, so it is advisable to bring in a professional, such as a lawyer or a buyer’s agent, to help you out.

Build or Buy: Know What’s Best to Start Your Self-Storage Business

Personal knowledge and expertise, combined with available financial resources, dictate whether to build or purchase a self-storage property. To determine your profile, here are things to think about:

Build

The answer is yes if the following apply to you:

• You have an intricate understanding of the market.
• You can determine whether the existing supply outweighs the potential market demand.
• You have some development experience to move ahead with.
• You have a team consisting of a qualified real estate lawyer, land planner, soil engineer, MED engineer, civil engineer, architect, surveyor, title company, and structural engineer.
• You have support from people with strong real estate developer skills.

After construction, do you have enough self-storage management experience to understand client requirements, proper leasing techniques, and innovative marketing efforts?

Buy

As previously mentioned, investing in self-storage deals is far less daunting compared to putting up a facility from the ground up. But you still need to evaluate yourself before buying an existing self-storage facility.

For starters, the property should meet your predetermined investment strategy and ROI goals. Then, use the same criteria above for the buyer, but use different responses to decide whether to buy a facility.

Conclusion

The self-storage industry has evolved from what it was many years back. In those days, storage facilities were mom-and-pop establishments where “simplicity” was the word.

But today, the industry is experiencing tremendous growth and achieving new levels well beyond the pioneers’ dreams. Whether you want to buy or build, self-storage is a lucrative investment vehicle. Just make sure to seek your options with the help of experts, like the ones you’ll find at passivestorageinvesting.com.

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