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Buy, Sell or Hold? To Maximize Your Self-Storage Investment, Understand Your Objectives

Ben Vestal Comments

With nearly 50,000 facilities totaling more than 2.1 billion square feet nationwide, self-storage is no longer a sleepy little industry that goes unnoticed. Every day, there are bound to be people considering a facility sale or purchase. If you’re one of them, it’s important to understand your true objectives and how to execute them if you want to maximize your investment.

Following are situations in which you might find yourself if you are an owner (seller) or buyer. See which applies to you and things to consider before taking the plunge.
Should You Hold?

Self-storage is a very good business with a bright future. If you agree and are sure you want to own and operate your facility for the next five to 10 years, then you’re a “holder.” If you fall into this category, you must follow these three important rules:  

  • Lock in a low interest-rate loan for at least five years, longer if possible.
  • Have enough money to weather the up and down revenue swings all income-producing real estate experiences over an extended period of time.
  • Make sure your facility is positioned to be a market leader and you have the flexibility to adjust quickly to changing demand characteristics, such as lowering rates, free rent, etc.

These rules should enable your investment to capitalize on improving market conditions and remain viable when circumstances deteriorate.
Should You Sell?

There’s a difference between thinking about selling and actually becoming a seller. To clarify the difference, it’s important to understand your objectives. At some point, almost everyone will become a seller. Thinking through the following factors and understanding the current market will help you determine how close you are, and give you some options to maximize your investment.

I’ve recently had discussions with five facility owners who are selling or thinking about selling their properties. All are in this position because they face one or more pressing issues: retirement, divorce, estate planning, partnership problems, liquidity challenges, desire to relocate, health concerns, or worries about capital-gains tax.

These are just a few of the things that make owning an investment property difficult. About 80 percent of all self-storage sales are a result of personal issues rather than what some would call “taking advantage of the current market” or concern for the future market. This proclivity to make the final decision based on personal concerns is entirely appropriate, but with a little planning and realistic thinking about the market and what the future may hold, it can be very rewarding and lead to a higher return on investment.

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