Ready, Set, Sell!

The final decision has been madeyoure going to sell your self-storage property. Youve consulted with your partners, CPA and closest business advisors. The conclusion among all parties is now is the proper time to market the asset. Interest rates are low, the sellers market remains strong, and 1031-exchange buyers are frustrated with finding replacement properties.

Though these basic real estate components reinforce and substantiate your assessment to selland this process has been repeated thousands of timeseach new entry to the selling market brings its own indecision and unique anxiety. If youre an experienced seller, you understand the process and requirements of each phase; if not, you need to carefully plan your marketing and selling strategy.


The first step in the process is to locate an experienced and competent broker whose self-storage agency track record and reputation reflect professionalism, market knowledge and appraisal comprehension. This individual should also have an almost instant ability to bring forth the most qualified local buyers for your property profile.

National self-storage operators are no longer preeminent buyers in the industry. A self-storage brokerage specialist can evaluate and appraise your property based on local and regional market values. He can suggest changes, modifications and enhancements that will add value and maximize the ultimate selling price. Clearly, selling the property internally can be time-consuming and difficult. Any transactional or legal missteps made during the process can be costly and, often, unalterable. A first-class broker is worth far more than any reasonable brokerage fee associated with the completed transactionsuch a broker will maximize profits and provide peace of mind.

Market Value

In combination with a good broker, the market value of your property needs to be established. The value will likely be derived from cash-flow-related calculations and computed via a capitalization rate of net operating income. Other factors that figure in establishing property value are:

  • Age and type of construction
  • Local competition
  • Availability of developable land
  • Area demographics
  • Comparable rental rates


The creation of a due-diligence document binder is a critical next step in the process. The binder should contain all the necessary documents a potential buyer will need to review in the orderly evaluation period. This important activity will expedite the duediligence process. The binder should include the following:

  • Bank statements (two years)
  • Real property-tax invoices (two years)
  • Utility bills
  • Profit-and-loss statements (two years)
  • Occupancy reports (two years)
  • Outside service agreements
  • Environmental reports and surveys
  • Preliminary title report

I also recommend you work with your attorney in drafting the formal purchase agreement prior to coming to terms with the potential buyer. Having this document prepared allows you to control the terms and conditions of the sale. You are also better equipped to respond to any changes in the agreement a potential buyer may have. Additionally, have your broker contact potential lenders for the property. This will expedite the loan process and circumvent any initial problems a buyer may have in qualifying and securing a loan.

Curb Appeal

A pre-marketing checklist should be developed in conjunction with your broker to ensure all primary curb-appeal and deferred maintenance issues are addressed and/or corrected. Basic deficiencies in the common visual areas can cause potential buyers to think the property may have other veiled problems. It is essential you understand your propertys weaknesses and be prepared to address any issues that may arise regarding them.

There are myriad studies that have demonstrated the critical importance of cosmetic detailing in selling any form of commercial property. A basic pre-marketing checklist should include the following:

  • Pressure-wash the facility and driveways.
  • Paint wood, block and stucco, where necessary.
  • Replace street numbers.
  • Check, replace or repair facility signs.
  • Number each hallway and staircase.
  • Check, replace or repair facility ingress and egress signage.
  • Refresh the facility landscaping
  • Check the integrity of fencing, lighting, gates, elevators, etc., and make any necessary repairs.
  • Check for on-site water-retention areas.
  • Check storm-drain integrity.

Marketing and Property Exposure

Comprehensive and efficient property exposure is one of the most important functions a real estate broker can provide the property owner. The subject property must be marketed and shown at its best. Normally, an all-encompassing marketing brochure will be drafted by the broker and disseminated to the investment community. The subjects typically discussed in the marketing brochure include, but are not limited to:

  • Investment summary and financial analysis
  • Loan/cash-flow analysis
  • Unit mix and income schedule
  • Location map with facility photographs
  • Facility features
  • Rent survey
  • Demographics

A key factor in distributing the marketing brochure is understanding the buyer profile for the property. Again, in terms of efficiency, the broker needs to expose the property to those buyers in the region who would most likely have a general interest in acquiring it for their own portfolios. Familiarity with and identification of the proper buyer profile is a critical brokerage function. Marketing and property exposure sells the property. The property and marketing brochures should be exposed through the following venues:

  • Direct phone contact and mailing
  • Newspaper and magazine advertisements
  • Real estate websites
  • Outside brokers

What to Expect From the Buyer

Astute, qualified buyers establish their goals and required financial returns regarding self-storage investments long before a purchase agreement is executed. A property must satisfy the buyers parameters. As such, be prepared to review your property with the buyer to conduct a thorough due diligence.

The topics a buyer must evaluate generally consist of the following:

  • Verification of occupancy, rental rates and late fees
  • Physical inspection with a building inspector
  • Discussions with city planners to evaluate any future self-storage projects
  • Evaluation of delinquencies and auctions
  • Review of the local Yellow Pages ad
  • Verification of fixed expenses
  • Certificate of occupancy, and related city and county documents

It Boils Down to Dollars

As with any commercial real estate investment, the value of the property will primarily be based on cash flow, not the number of storage units, rentable square feet or the size of the land. The amount of income that flows to the bottom line will always link your selfstorage property to its market value. As much as possible, keep your actual rental rates consistent with advertised rates and area competition.

Finally, keep your occupancy as high as possible. These two primary characteristics should give you an excellent chance to receive maximum value in the sale of your investment property. Good luck!

Stephen I. Grossman is a senior vice president with Lee & Associates, Newport Beach, Inc. He has been responsible for the sale of more than 500,000 buildable square feet of entitled self-storage land, and the sale or escrow of more than 2 million square feet of existing self-storage facilities. For more information, call 949.724.4709; e-mail [email protected]

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