You would be wise as well to ensure the appraiser also has every possible bit of evidence from the market, which will lead to a better value conclusion—one that is well supported by facts and not just opinions. Here is a partial list of documents your appraiser might request:
- Unit-mix report
- Itemized income and expense statements
- Subject sale history
- Current tax bill(s)
- Site plan
- Legal description or title report
- List of recent capital improvement
Step 2: Prepare for the Property Inspection
The appraiser will determine the quality of construction, current condition and competitive position in the market. The appraiser will look for items of deferred maintenance, such as buildings in need of paint, broken or damaged doors, cracks in the pavement, etc.
Regardless if a building needs a fresh coat of paint, the overall appearance says volumes about tenant appeal and what kind of owner you are. Just as body language says more than words, trash littering the property, dirty vacant units or bathrooms, overloaded trash bins, burned out hallway lights and fences in need of repair all say a lot about the kind of operation you’re running.
The appraiser will compare your facility to your competitors, so take this opportunity to explain how it differs from the competition. For example, point out that all your units have ground-level access, or your closest competitor is only 80 percent occupied because it has too many small units, is harder to access from the busy street or driveways are too narrow for rental trucks. This isn’t putting down the competition, it’s stating facts that might not be so obvious to the appraiser.
Remember, you live with your facility day in and day out, 365 days a year. The appraiser has only a short time to learn everything about it and determine how it will perform in the future.
Step 3: Discuss the Competition
The appraiser will survey the competition to establish market rental rates, assess the level of concessions or discounts offered and determine the level of physical occupancy in the neighborhood. This all has a bearing on the level of tenant demand, so share your knowledge as to which facilities are most competitive and why.
Tip: Give your appraiser a list of competing facilities. This is your opportunity to point out who your real competition is so the appraiser doesn’t use the mismanaged 30-year-old facility down the street to estimate rental rates and physical occupancy levels.
If there is a new facility in your neighborhood, don’t be afraid to point it out. Better you point it out and explain your opinion of its potential impact than the appraiser reaching his own conclusions without the benefit of your input.
Step 4: Discuss the Financials
It’s important to go over the operating statements with the appraiser. Make sure he understands each line item. Point out expenses that may not be a normal reoccurring operating expense, or one that is not typical of other self-storage facilities. Perhaps you chose to “expense” the recently installed new roof on a small building instead of capitalizing it. You need to let the appraiser know or he might assume your maintenance budget runs higher than it actually does.