When Selling Your Self-Storage Facility, Timing Is Critical to Maximize Investment Return

By Ben Vestal Comments
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The growing supply of willing and able lenders and the shortage of qualified borrowers has swung the leverage to the borrowers for the time being, which has allowed sellers to reap the benefits of the qualified buyer’s ability to pay more due to better financing terms. However, it’s possible the pendulum could swing back to the financial intuitions in 2016 and 2017, as they will have many more opportunities to make loans.

Competition

Another factor facing sellers today is increased competition or potential future competition. We’re seeing many local markets being are seriously affected by larger, more sophisticated operators. In addition, the prospects of new competition being built is coming back into the picture after a five-year hiatus. New development is slow in coming; however, it never seems slow if one is built in your market!

A Real Seller

Determining if you’re a real seller is the single most important decision any self-storage owner can make. A real seller has a defined reason to sell and is willing to price the property at level within the market. Serious buyers want serious sellers. When a buyer finds out a seller isn’t realistic about selling due to price, timing or market conditions, he will seldom become interested again. The result is a non-serious seller offends his best prospects, and they will remember. Overpricing is not harmless!

Personal Issues

Retirement, estate planning, partnership problems, liquidity and divorce are just a few things that make owning an investment property difficult. Experience has shown the vast majority of self-storage sales are a result of personal issues, not what brokers would consider market-driven factors. This tendency of owners to base their final decision on personal issues is entirely appropriate. However, with a bit of forward thinking about the market, small adjustments in the timing of a sale—one to three years—can have a very beneficial effect on an investment's internal rate of return. Just consider the value swings we’ve experienced over the last five years!

Any of the topics mentioned above may have a material impact on a buyer’s or seller’s investment outcome. It’s my unfortunate duty to report these unique market conditions will come to an end. I wish I could predict exactly when this will happen, but I can’t. It has been my experience that you can’t call the top of the market because by the time you make the call, the market has passed you by. If you’re at or near one of those “personal crossroads” or your gut tells you now’s the time to capitalize on the market conditions, it’s time to get serious about selling.

Ben Vestal is president of the Argus Self Storage Sales Network, a national network of real estate brokers who specialize in self-storage. Argus provides brokerage, consulting and marketing services to self-storage buyers and sellers and operates SelfStorage.com, a marketing medium and information resource for facility owners. For more information, call 800.55.STORE; e-mail bvestal@argus-realestate.com; visit www.argus-selfstorage.com.
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