Have to say I’m really impressed with the quality of the contribution being made by many of the members
in this discussion group.
Looking for some insight into self storage without having to ante up for a CD set from some guru.
I am familiar with many of the issues related to a multi-family purchase, but not that familiar with all of the issues to be considered in self storage
Just looking for the things to look for and what to watch out for when considering a self storage purchase.
What about:
Trading area: what is the typical competitive trading area radius
Supply: How to determine if an area is under served or over served
Demand: How to determine what the likely demand will be for self storage in any given area
Due Diligence: What am I looking for when inspecting the:
-Building
-Land
-Surrounding area
-Financials
The most important aspect to consider is the condition of the premises. Another very important thing is asking price of the unit. Choose the size of the unit depending upon the type of storage facility you want to provide the customers.
Make some research and visits to the self storage unit before selecting and finalizing one.
The larger facilities make better money than the smaller ones - most of the Mom and Pop Storage companies are priced so competitively that the rents just cover the expenses.
The good thing about them is that there isn’t much that can break - it’s a metal box!
Once you get the mortgage paid down, the cash flow is good.
As a Self Storage owner myself, I would encourage you to check out ISS (Inside Self Storage) - sign up for their newsletter and read a few issues before taking the plunge.
Points to consider:
How available are you to rent the units? Are you going to manage onsite or will you have to meet the customers at the units?
Look at at least 2 years of rent history - the storage business ebbs and flows depending on your climate (moving season, boating season, snowmobile season, etc). Sometimes I’m completely full and sometimes I have 5 open, but the average is 95% full.
Check out the competition! Are they full? Are the rates comparable?
Determine a competitive rate, do the numbers.
BE SURE TO RESEARCH the laws as a Storage Owner… I changed my lease 4 times in the first year, each time due to learning something I wish I had known in the beginning. I.E. you cannot auction the property of someone in active military duty - make sure find out when you rent the unit if they are active military! Also, states have different laws on what is reasonable for late fees - you WILL have late customers. I have 3 that simply pay an extra $20 every single month.
You’re mentioned all points are important while taking property on rent or buying. But does the investment fundamentals are depend on current share market position. Is it then what will be the best time for that?
I don’t have any self storage experience, so take this with a grain of salt.
I have looked into this in my area. I know the owner of a self storage lot around here. She started with one building costing approx $20k (50k today) and placed it in a semi-rural area with much less stringent zoning restrictions than inside the city limits, but still on the highway. She is a pretty fair amount below market rent ($15/month below what they rent for in town), but was able to put up a building without fences, paved roads, stormwater detention ponds, etc. Some of these things would be desirable like the fence, but they could be added after a year or two. She says her units have always been 100% occupied and she has a waiting list.
Based on what I’ve seen, she has about $150k cost in her three buildings with about 100 units renting for $45-$80/unit depending on size. The land was probably $20k, first building $20k, second $30k, last $50k. Then there’s bulldozer work and gravel.
There’s another place right next to where I work. They have six buildings and outdoor storage. They are probably taking in two and a half times what my friend is, but their up front costs had to be over a million with the paved areas (required by the city), more fancy looking buildings, more expensive real estate (IIRC it was an 8 acre lot at between $40-$60k/acre), more attractive road entrance, etc.
As far as occupancy, I would ask!! I usually get a straight answer from other investors. Otherwise find out how to get inside and count the locks on the doors.
But I would look at the municipality very carefully. They above anything else control expenses because they hate places like this. Be in a place that wants your business there. You may look at developing one. That’s the way I would do it, for the example shown above. If/when my friend sells her units, the sale value will be based on profit, not cost to build.
