Any way you look at it, there are certain procedures that should be followed to ensure success in self-storage ownership. And most, if not all, of these procedures require professional assistance. It means assembling a team of experts who can help you thoroughly research the project to determine whether it is a viable plan. The two most revealing documents the new owner needs are a market analysis and a feasibility study.
The market analysis will reveal primarily demographic information about your market: the ages, gender, income and education of the people who live there; whether they reside in single- or multi-family residences; if they are renters or homeowners; the mix of residences and businesses; and other important information.
The feasibility study should be conducted by an independent third party. It will include information such as an analysis of the competition, a financial pro forma, a projected cost analysis and a suggested site layout. In the final analysis, this study will determine whether you should proceed with the project or abandon it. This type of research should be done prior to acquiring the property.
Site Selection. This is probably the most important decision you will make, so be sure you’ve done your research. This applies to purchasing new property as well as land you may already own. In both instances, the important question that needs to be answered is this: Is the site location suitable for self-storage?
Self-storage is a local, retail business limited to a very specific area surrounding a facility site. Customers will come from an area consisting of a certain radius or drive time from the site. Potential tenants will demand convenience, easy access and proximity to their homes or workplaces. If your facility is off the beaten path or removed from a major thoroughfare, customers will not seek you out; they will simply take their business elsewhere.
Financing. Unless you are independently wealthy, you’ll need money to finance the development of your facility. Normally, your best bet is to borrow from a local commercial lender. That’s because they probably know you and are familiar with the property you plan to develop. As a rule, expect a lender to loan up to 75 percent of the total appraised project cost, not including the cost of land; but that percentage may go higher depending on your financial strength.