Hire a general contractor to coordinate all of the construction vendors. He can pull together a project budget that includes site work, utilities, electrical, building materials, concrete, landscaping, paving, and fencing and security systems. The contractor should also include a contingency budget. He’ll make municipal and bank inspections go smoothly as well. It may sound easy to oversee the building process, but you had better have plenty of time and energy if you want to take this on yourself.
Having a general contractor to coordinate your building supplier along with the site work and preparation is crucial to reducing your building expenses. Unexpected delays can become a costly drag on the project, so keep things moving to avoid material-price increases and storage expenses if things are out of sync. The sooner you complete construction, the sooner you can open for business.
It’s now time to bring on your most valuable asset for success in self-storage: the property manager. Today’s manager needs a combination of skills including sales, customer service and marketing. The manager usually works alone and needs decision-making authority that goes along with the responsibility of operating a facility.
Be sure you’re conservative in your rental assumptions. Allow more time than you think to rent up to stabilization―typically three to five years on projects of more than 25,000 square feet. Allow for promotional discounts, and don’t be too aggressive on future rents. This economy has made it tricky to garner projected revenue, so budget for a worst-case scenario. If you have that factored into your pro forma, you’ll rest easier.
This is a general overview of key areas to be aware of as you move forward with a self-storage project. Land development involves a lot of “hurry up and wait.” All aspects of land approvals invariably take longer than expected, as does the financing process, the mobilization of the construction team, and even the lease-up period.
Budget everything on the conservative side—from time to money—and have lots of patience. With this as your foundation, along with a great site in a pocket of opportunity, you too can find success in self-storage.
John E. Barry is a self-storage broker and owner with Investment Real Estate LLC in York, Pa., which, along with Investment Real Estate Construction, provides feasibility studies, brokerage and construction services for self-storage operators in the mid-Atlantic and northeast states. For more information, call 717.779.0804; visit www.irellc.com.