In this installment of the Real Estate Roundup, we'll take a look at the investment climate of the American Midwest. Commenting on this region are Bruce Bahrmasel, The Preferred Realty Group, Chicago; Arnold Erickson, Commercial Realty Services, Des Moines, Iowa; Larry Goldman, Prudential Commercial Resource Realty, Kansas City, Mo.; and Harold Helm, RE/MAX 100, Louisville, Ky.

Since many of the large financing companies have left the market, who has filled the role of self- storage lender in you area?

Goldman: The local and regional banks are the primary lenders in this area. Most still like storage for its diversified, steady income stream and overall stability.

Helm: Local banks where buyers have existing relationships have been the main source of funds. However, I have had a recent inquiry from Midwest Bankers, which is a commercial finance company.

Has the shaky economic climate affected the amount of construction taking place?

Erickson: The economy has not affected the amount of construction taking place in the Des Moines area.

Goldman: The market is so strong--due to 1031-exchange money and strong returns--that new construction has not slowed down in the Kansas City area.

Helm: Current economic conditions have not reduced construction because our market in the Louisville area is pretty well saturated. It may have slowed things in smaller rural communities.

Who is actively buying in your markets?

Bahrmasel: People who are migrating from other real estate markets, such as apartment buildings and other investment properties. These buyers are seeking a more reasonable return on their money than their current real estate investments have provided them. Also, the wealth effect created by the current economy has contributed many buyers seeking investments less risky than the volatile stock market.

Goldman: Regional and local multisite owner/operators. Many storage investors have come from more management- intensive property types, such as multi- family and shopping centers. They trade into storage to reduce operational "headaches," i.e., tenant calls in the middle of the night, broken-down plumbing, etc.

What reasons are you getting from prospective sellers as to why they are getting out of the business?

Bahrmasel: Most sellers see this as a good time to sell due to a strong sellers' market. The other reasons are life events: marriage, divorce, retirement and death.

Goldman: Life events, such as relocations, retirement, etc. In other cases, some investors sell because of concerns about overbuilding and potential devaluing of their properties.

Helm: Retirement, divorce or partnership dissolution are the principal reasons for selling. Self-storage is still an excellent investment, and owners often wait until their market has peaked and becomes overbuilt before they decide to sell. Gauging when demand is good and the bloom is on the rose is hard for sellers. When a property has been good to them, they have a hard time considering selling.

Rate your market on a scale of one to 10, with one indicating a buyer's market, and 10 indicating a seller's market.

Helm: This market is still heavier with buyers rather than sellers. I would rank somewhere between four and six.

Bahrmasel: Eight.

Goldman: In areas with population-growth rates in excess of 2 percent, I'd give it an eight. In the few areas with stagnant or negative growth, I'd give it a six.

In this volatile market, what is the most important thing a seller can do to help sell his property?

Erickson: Sellers must be realistic and willing to sell their property at a fair market value, which, today, is very close to an 11 percent cap rate.

Goldman: Maintain strong documentation of revenues without ignoring late fees and retail sales. Build or leave room for expansion to at least 40,000 square feet. This allows the buyer the ability to dilute operating expenses, such as management and advertising costs. That size of facility opens up the universe of buyers and lenders considerably.

Helm: The most important elements a seller can add to help sell a property are good financial records, land for construction of additional units by the new purchaser, and a price that allows the purchaser to earn a return on his investment. Real pluses are the ability to accept trades of other real estate, or to provide seller financing.

Michael L. McCune has been actively involved in commerical real estate throughout the United States for more than 20 years. Since 1984, he has been owner and president of Argus Real Estate Inc., a real estate consulting, brokerage and development company based in Denver. In January 1994, he created the Argus Self Storage Real Estate Network, now the nation's largest network of independent commercial real estate brokers dedicated to the buying and selling of self-storage facilities. For more information, call 800.55.STORE or visit www.selfstorage.com.