Make sure you can demonstrate to an investor that you have a sound accounting system. Don’t wait until you’ve made the decision to sell to implement your financial controls. An investor must be convinced the numbers you’re presenting adequately represent the financial condition of your property. Otherwise, he will likely pass on your opportunity or offer less than he might be willing to pay. Also make certain you have historical data to present to prospective purchasers.
Manage Rental Rates
The potential of a self-storage property to increase rental rates in the short or long term is compelling to any buying decision. In determining offering prices, buyers are often reluctant to place a value on future increased rents. Since most underwriting of value and offering price is based on income over at least a 12-month period, rental-rate increases on existing or future tenants put in place immediate prior to a sale are often discounted or even ignored by potential buyers.
So, once again, planning comes into play. Having an active program of judicially managing rents on existing and new customers will pay off well beyond the additional revenue obtained, as it can be magnified when a property goes to sale.
Keep Up With Collections
Active sellers often fear foreclosing on delinquent tenants, since such action will result in a temporary decrease in occupancy rates. At such times, it’s important to remember investors are not purchasing an occupancy rate but a reliable cash flow.
Do you have a number of tenants who are casual in their willingness to pay on time or are delinquent, but you figure you’ll eventually collect the rent? While you may eventually get your money, you’re missing the opportunity to create certainty in the mind of a potential buyer who’s willing to pay more for a facility with a perceived superior rent roll.
Make a Good Impression
There are some other things you can do today to prepare your facility for a future sale. This includes improving the curb appeal and enhancing the overall maintenance—even if you’re full. If your office is too small to effectively serve as a retail center for moving and storage items, consider expanding into an adjoining storage unit.
In doing so, you’ll not only increase the potential for more revenue, but provide for a greater selling price based on the capitalized value of that additional income. Take the steps above so that when it comes time to sell your facility, it will attract quality investors at a good price.
Jeffrey Supnick is president of Supnick Real Estate Co. and a 27-year veteran of the self-storage industry. He has formerly served as a real estate officer for Public Storage Inc. and Storage USA. Supnick Real Estate is a full-service firm devoted exclusively to self-storage brokerage, consulting and property-management services. For more information, call 856.722.1414; e-mail firstname.lastname@example.org; visit www.supnick.com .