You have received dozens of unsolicited calls over the years from so called “buyers” and brokers wanting to buy or list your facility. You’ve read other articles like this so you know the market has turned, cap rates are increasing, financing is difficult and there are fewer qualified buyers. You’re thinking about selling but waiting for the right time. In spite of a difficult market you’ve decided now is the time to sell your self-storage facility. Now what?
The first thing to do is decide whether you are selling your property yourself or enlisting the help of a broker. All the recommendations and suggestions made here assume you are hiring a broker, so if you are selling your property yourself you should transfer all the responsibilities I have assigned to the broker to yourself as you read through this article.
If you decide to use a broker to represent you, be sure to select the right broker. By that I mean somebody who knows the self-storage business and your local market in particular. This will be somebody with a track record of helping other owners market and sell their self-storage facilities. There are a lot of risks in this market. Don’t let your choice of brokers become another one.
The right broker will establish realistic expectations of what the property will ultimately sell for and set an appropriate asking price to increase the likelihood that you achieve that goal. By setting the asking price too high you run the risk of not selling at all, thus missing the opportunity to achieve optimum value. By setting the asking price too low you risk leaving of money on the table. Most important, you must understand current market conditions and know if values are trending up or down. With this knowledge, you should be prepared to set a price that is “ahead” of the trend, whichever direction it is going.
The right broker will advise you as to which, if any, deferred maintenance issues should be dealt with before placing the property on the market. Unless your property is new, the buyer should not expect it to be in “like-new” condition. Therefore, it may not be necessary to spend much improving the property’s physical condition prior to sale. You should take the time to replace burned-out light bulbs, fix minor damage to doors and metal building corners, replace faded or missing unit numbers and generally clean up the appearance of the property.
If some aspect of your property’s condition might enhance the marketability of units or the amount of rent that can be charged for them, it should have been addressed long ago. It would probably not be cost-effective to address it now. In other words, property value is mostly a function of current income not what the income could be if you repainted all the doors, installed new landscaping or remodeled the office. Spending a lot now on issues like these will probably not translate into a substantially higher sales price because it takes time for these kinds of improvement expenses to translate into increased revenue.
The most cost-effective way to achieve optimal value for your property is simply to be sure it is clean. The most you should have to do is apply a seal coat if the asphalt is showing signs of deterioration.
The bottom line is that your property’s income is achieved either because of or in spite of its appearance. There are many buyers who look specifically for properties that can be improved because they believe that by purchasing such a property they have a better chance of growing the income than they would if they purchased a newer property in perfect condition.