Buying Self-Storage: Finding a PRIME Property That Meets Your Goals

Dale C. Eisenman Comments
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Whether you’re an experienced self-storage owner or just entering the industry, a review of the elements to consider when acquiring a facility will make for an orderly approach to the decision-making process. This article will not cover every conceivable item, but rather serve as a framework to help you make the best investment. 

Your Goals

The first step when considering a self-storage acquisition is to look not at the property, but at yourself. What are your goals, time frames, budget, resources, location and experience? Is it important to find a property that’s close to home? Do you plan to perform the onsite or offsite management duties or will you hire a third-party management company? What is your cost of capital, both debt and equity? Will you have other investors and, if so, how will their requirements factor into your approach?

The list is long and should be specific to your situation, but the key is to understand your objectives first, and then start the process of determining if a property matches. Bottom line: know thyself.
The second step isto know, not guess, what you can do. What are the strengths and skills you intend to bring to the project? What can you do to achieve the goals and objectives you have set? Is your skill in finance, management, marketing, construction or site selection?

An often overlooked aspect of “what can you do” revolves around capital. Many potential buyers fail to have an accurate or realistic plan for financing a contemplated acquisition. In the current environment, knowing what you can do includes knowing what you can finance (unless you’re a cash buyer). Lenders have become much more conservative in their underwriting. As a result, potential buyers should discuss financing options with lenders prior to spending time and money on investigating properties.

Finding a property that matches your personal criteria is the next step. Everyone wants a PRIME property, but what qualifies? Let’s break it down as an acronym, with each letter representing an element of the process to determine if the self-storage property meets a buyer’s specific criteria. Keep in mind this isn’t meant to be an exhaustive outline but an overview. 

P = Property

This may seem obvious, but an examination of the physical property and the surrounding area is critical. While some of the in-depth investigation may be reserved for contract due diligence, an adequate initial examination should be conducted prior to entering a purchase agreement. As a buyer, consider at least the following:

  • Location: Is the property in a retail setting? Is it conveniently located to its market?
  • Visibility: Does the property have good visibility on a road with adequate traffic counts?
  • Building layout: Are the drive aisles adequate? Is the layout customer-friendly?
  • Unit mix: Are the units of the proper number and size? If not, can they be changed?
  • Rental office: Is it of adequate size and layout? Can and should it be modified or relocated?
  • Onsite apartment: Is an apartment needed? If not, can the space be converted?
  • General condition: Is the appearance attractive? Are the buildings in need of repair? Is the roof sound? Is the pavement in good repair? Are there any apparent water issues?
  • Expansion: Can the facility be expanded? What value should be assigned to expansion land?
  • Appearance: How does the property rate overall?
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