The typical length of time to sell a facility is roughly six months. This time frame can be extended if the property is in an inferior location to competition, deferred-maintenance items are extensive, or buyers cannot obtain financing. The primary reason is over pricing of the facility.
To prevent over pricing, work with an experienced broker who specializes in self-storage. A broker can provide you with a valuation of what the property will bring in the market. The facility should be priced at what is commonly called, “the high end of reasonable.” Overall values are not at the market peak today. However, they’re closer to their highs than historic averages, let alone market bottoms.
The biggest threat to completing a sale is pricing the facility to yield investment returns for buyers that make no sense. You can usually get a buyer to look at the property once, but getting him to revisit can be a challenge. Buyers tend to believe a seller is not “real.” Once a seller understands the returns a buyer is receiving, he’ll have confidence that the price he should ask makes sense for both parties.
We are in unusual times and, as is typical with real estate, the value of your facility depends on many unique items specific to your property such as location, competition, condition, financing and pricing. Hopefully, you planned early for the day you’ll leave your business. If not, plan now. Assemble your team of advisors. Know what your facility is worth. Have realistic expectations. Understand how this asset fits into your bigger plan and timeline, and monitor your plan regularly.
John E. Barry is the vice president of brokerage for Investment Real Estate LLC, which provides brokerage, management and construction services as well as feasibility studies for self-storage owners in the northeast and mid-Atlantic States. To reach him, call 717.779.0804; visit www.irellc.com.