By Bill Alter
For owners and investors who are new to buying or selling self-storage properties, the sales-transaction process may be intimidating. Solid preparation makes the difference between smooth sailing or a bumpy ride. Following are tips to ensure the former.
Selling a Facility: The Loan
So you’re thinking of selling your self-storage facility. Now what? While comparing your sell vs. hold options, start gathering financial information and reviewing it for completion, making sure profit-and-loss statements are accurate and you can easily discuss the property’s operating history. Do you think you want to do a tax-deferred exchange? Have you taken the maximum amount of depreciation allowable? This is the time to have a conversation with your attorney and tax accountant about your desire to sell to ensure there are no surprises. Here are seome other things to consider as you move through the process:
Financing. Know whether your sale will require the buyer to assume your existing financing or secure a new loan. You may want to require your buyer to demonstrate his ability to actually obtain the financing needed to close the deal.
Cash vs. buyer loan. Consider whether to accept a lower offer if it’s all-cash or the buyer can prove his ability to get a loan. If there’s an existing loan that can or must be assumed, find out what it will take to accomplish that, and be prepared to share the information with the buyer.
You or your broker should contact a number of prospective lenders so you’re prepared to provide whatever documentation a lender may require to process the buyer’s loan application as quickly as possible. The process of assuming a securitized loan is also difficult and expensive. Find out what’s involved and communicate it to the buyer. If there’s an existing loan that will have to be paid off, you should be prepared to deal with that and know what it will cost.
Facility Value and Marketing
Once you’ve decided to sell your self-storage property, a valuation will need to be determined. By setting the asking price too high, you run the risk of not selling at all, thus missing the opportunity to achieve maximum value. By setting it too low, you run the risk of leaving money on the table. Most important, you should understand current market conditions and know if values are trending up or down. With this knowledge, the asking price should be set ahead of the trend, whichever direction it’s going.
Before the official marketing of the property commences, talk with your facility manager about your intentions. Nothing is more painful than when your manager accidentally finds out you’re planning to sell and didn’t tell him. An honest discussion that’s encouraging and potentially incentivizes him is usually the best option. Cooperation on the part of the manager is beneficial for the sale price and often results in the staff being retained by the new owner.