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6 Common Myths About Self-Storage Development

By Jim Chiswell Comments
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There are many preconceived myths about developing self-storage. Sometimes they sprout from pure enthusiasm over our industry from those who see the benefits of building a facility. Other times, they’ve just been perpetuated over the years. Like any commercial development, self-storage can be complicated, full of challenges that can try even an experienced builder’s patience. In the end, however, it’s well worth the effort, as evidenced by the intense interest in this real estate asset class today.

To help those new to the storage industry—or anyone who’s been out of the game for a while—here are six myths about developing a property in no particular order. Hopefully, this insight will help you make the right decisions in your quest for self-storage ownership.

Myth 1: I already own the land, so that eliminates a lot of obstacles.

Since the beginning of the self-storage industry, it seems that “already owning the land” has been and still is one of the biggest motivations for getting into the business. Decades ago, when the nearest competitor might have been 25 miles away in the next county, owning a piece of land gave you a leg up. In today’s super-competitive environment, however, it often puts blinders on otherwise very astute people.

I’ve heard on numerous occasions the pride folks feel that they’re using land their grandparents owned to build their first storage facility. I always challenge them to take a step back and objectively answer the question, “Would I buy this land to develop self-storage if I didn’t already own it?” In many cases, the answer is a resounding no! Notice I didn’t say in every case, but know that owning the land doesn’t mean it fulfills the vision of the ultimate self-storage site.

Myth 2: The seller’s real estate broker said it would be OK to build self-storage there, so I’m good to go.

With all due respect to my colleagues in the brokerage community, this myth most often results in problems. First of all, the seller’s broker is not working for you. His goal is to sell you the property, building or facility and earn a commission. When I find myself in this conversation with clients, I always lean on the adage, “trust but verify.” This is what you must do when buying land—or any asset.

You might trust the person with whom you’re dealing, but you still need to personally verify the information you’re given to ensure it’s 100 percent accurate. It’s the zoning or community building official who must confirm what you’ve been told, or the civil engineer you’ve hired. The last thing you want is to end up owning land that’s actually zoned for a park.

Myth 3: The land is zoned industrial so, of course, I can build self-storage.

All across America, the issue of how a piece of land is zoned and what you can build on it “by right” is a local political jurisdiction determination. I’ve lost track of the number of parcels of land with an “industrial zone” label that still involved the issuance of a special-use permit for self-storage. And in a few worst-case situations, self-storage wasn’t permitted in any zoning category within the community.

As a potential self-storage developer, you’re always knocking on the door of the local municipality responsible for zoning or development standards to get a definitive answer to these questions. You need to know: What zoning allows me to build self-storage and, realistically, what hoops do I have to jump through to get a building permit, especially if the land has to be rezoned?

Myth 4: The banker will just be interested in my personal financial condition, not the deal itself.

I can remember just one situation in all my years of consulting when a banker told me he didn’t care about the project the client was proposing to develop—he was prepared to give the customer a loan. However, this client turned out to be one of the largest public shareholders and among the biggest depositors at that local bank.

The details of your bank submission are critical. Even with the financial world truly awash in cash to lend, the bank’s underwriting department is still going to examine the details of the deal and, just as important, the management side of the project.

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