Marketing a self-storage property can take just a few weeks if the conditions are ideal, it’s priced right, the existing loan can be easily paid off or assumed, and the operation is well-documented. However, it can take several months if the property is priced too high or there are conditions in place that take buyers longer to understand.
The Seller’s Due Diligence
Once you’ve determined which offer is best, focus on the buyer's qualifications and track record. What transactions has he closed recently and does he have the financial strength to close this one? Does he have financing readily available? Request some proof that the funds needed to close are obtainable. Google your buyer. Yes, use a search engine to find out more about him! Check for lawsuits and criminal activity. If there are skeletons in the closet, you want to find them now, not 30 days from now.
The due-diligence period will be shorter if the required materials are gathered ahead of time so they’re easily deliverable to the purchaser once escrow is open. Typically, buyers will ask for historical financial statements, rent rolls, environmental studies, surveys, service contracts, appraisals, real estate tax bills, and even copies of invoices for expenses paid. Organize all of these documents as soon as possible so they can be delivered quickly to the buyer and get the transaction off to a smooth start.
Additionally, your buyer will be more comfortable with the property if its owner is meticulously organized. He may even agree to a shorter due-diligence period if records are available quickly.
Buying a Facility: First Considerations
Purchasing a self-storage facility can be intimidating. There's so much competition from other investors and so few properties available that actually make economic sense. But even under these conditions, opportunities do exist if you know how to find them and what to look for.
The first thing to do is decide where it would be best to own a self-storage facility. Consider things like:
- What are the growth markets?
- Will you manage the facility yourself?
- Will you hire an offsite company to manage it for you?
- How often will you visit the facility?
To be competitive, be prepared to offer a fair price. Offer the largest possible earnest-money deposit and the shortest possible due-diligence period. You can only do these things safely if you’ve already researched and understand the local market.