It may seem like a great investment to purchase a self-storage unit, but the numbers on a listing do not necessarily tell the whole story. A property’s performance can also be affected by deferred maintenance, location, operating expenses, competition, or future development.
A hasty purchaser might find costs to be an issue after closing. The wiser way would be to look at the facility as a real estate asset and as a business. Knowing what the most common pitfalls are can assist investors in asking more pertinent questions and making a well-informed buying decision.
Schedule a Detailed Property Inspection
While self-storage units might seem low-maintenance business properties, they are not. There can be maintenance problems that rise to costly consequences. Check roofs, doors, locks, paving, drainage, fencing, lighting, electrical, security, and any climate-controlled areas.
Be sure to look at deferred maintenance. It is good to work with qualified inspectors and contractors who know what to look for in commercial properties and can provide an estimate of the cost of any upcoming repairs.
Research the Local Market Thoroughly
Self-storage is a very location-sensitive industry. When looking into self storage for sale, research the surrounding population, household growth, income statistics, and traffic flow, nearby businesses, housing development, and other facilities.
Compare the sizes of the units, rental costs, facilities, offers, availability of renting and living in the unit, and the condition of the units. Local market research enables you to know if current performance is likely to persist or if there are other factors at play.
Consider Financial Estimates
Consider property taxes, insurance, utilities, payroll, maintenance and management costs, marketing, software and other operating costs. If the seller makes large rent increases, ask them why they think that.
Use the basic and the optimistic scenarios to determine the expected return. Think about the possibility of fewer people occupying, additional costs, or delays in the improvement process. A realistic financial model is more useful than an attractive spreadsheet based on best-case assumptions.
Importance of Management and Technology Needs
A self-storage company can run efficiently with a few employees. Online rentals, electronic gates, video surveillance, automated payment systems, and remote control monitoring are among the many tools that can be found in modern facilities. These can make things more efficient, but they also come with maintenance and expenses.
If you’re going to assume responsibility for the management, realize the time that you will need to put into it. If you plan to use a manager or third-party operator, be sure to factor in their charges in your financial planning.
Don’t Rush the Due Diligence Process
Do zoning, permits, property boundaries, leases, contracts, environmental, insurance history, tax records, and other documents prior to purchase. Future possible alterations or additions to the property should also be known.
Collaborate with legal, financial, and other experts, such as commercial real estate attorneys, accountants, lenders, inspectors, and others, as necessary. The most important thing is to be able to walk away if the numbers or the property condition don’t make sense for the investment.
