The Dirty Dozen: A 12-Point Pre-Offer Checklist for Self-Storage Acquisitions

If you’ve decided to buy a specific self-storage facility, you’re going to want a qualified professional to inspect the property prior to acquisition. But before you sign a contract or even make an offer, there are things you can do on your own to determine whether this is a deal worth pursuing. If the asset in which you’re interested can pass in the following 12 areas, it’s likely worth spending the money to have specialized contractors perform a more in-depth assessment.

The 12-Point Checklist

1. Dig a hole next to the driveway to determine the depth of concrete or asphalt and aggregate. It can be different depending on the area, but it typically varies from 1.5 to 5 inches of concrete or asphalt, with 4 to 30 inches of aggregate. It’s smart to ask a local civil engineer and steel supplier what they recommend. If the site you’re considering is far off their recommendations, there’s a strong likelihood that you’ll face site issues in the future.

2. Lift unit doors to ensure they slide and latch properly. When you open a unit door and stop it at any position, it shouldn’t go down or up. If the door moves, the spring likely isn’t working properly and needs to be fixed. Also, most door tracks have small holes through which you can see the door edge. If the edge isn’t visible this way, it could mean the door will pop out easily or grind against the edge of the track. In addition, look at the rope pulls to see that they hang low enough to be accessible by your shortest customers.

3. Check units for vapor barriers or condensation control on the ceiling. As self-storage facilities age, or when inexpensive materials are used, the vapor barriers can rip or even fall apart from leaks in the ceiling. The latter is usually the bigger concern, but it’s also important to prevent condensation from forming inside units and wetting stored contents.

4. Look for wet spots/trails to ensure drainage is working properly. Pooling water is a common issue, but so is drainage that’s so fast it causes the water to run off driveways and erode the edges. Both can be major long-term issues. It’s important to point out any visible trouble spots, so a professional can provide a quote to fix problem areas.

5. Look for signs of pests. Depending on the type of self-storage site and its location, this may be a lesser concern, but it should always be on your radar. In general, pests are much more common in rural areas, but they can crop up anywhere. For example, I’ve had facilities with no history of pests suddenly have mice due to construction from a nearby plot. They were literally chased out of the woods by all the activity. Once mice and other animals discover any type of food onsite, including tenant items stored against facility policy, more are sure to follow.

6. Take note of video-camera coverage and quality. As you walk the property, look to see where security cameras are positioned and take note of the make and model, if possible. Ideally, you want cameras that produce a picture detailed enough that you could read a vehicle’s license plate. I run across facilities with inferior camera setups all the time. Nothing is more frustrating than catching someone doing something they shouldn’t but then not having video of high enough quality to make an identity.

7. Verify that gates opens smoothly, even in winter. Self-storage gate systems can be a little jerky. One thing to look for is whether the chain produces a wave when it initiates opening. If this is the case, it may be getting caught somewhere, or too loose, which will eventually wear out the system. In cold-weather climates, identify how much of the gate system is covered to help prevent it from freezing up in the winter.

8. Check out facility lighting at night. I normally ask someone to visit the property and take video of the site perimeter and each driveway. A woman’s perspective can be valuable here because most tenants are female and the No. 1 reason they pick a facility is safety. So, ask for their impression of the self-storage property at night. If they didn’t feel safe and didn’t want to get out of the car, that answers the lighting question.

9. For multi-story facilities, check the elevators and ask for service records. This is a logistical and customer-service issue. If there’s only one elevator and it has a service problem, it can be a big inconvenience for tenants as well as a safety headache. Make sure all elevators have been serviced regularly.

10. Test the climate-control settings. If the property you’re looking at has climate-controlled units, it’s helpful to know the range capacity. Depending on what’s being stored, some tenants may need items to be at a lower temperature while others may want it warmer.

11. Visually inspect the roofs. Damaged roofs can lead to big problems. If a self-storage facility has a flat roof, watch for pooling water. If it’s shingled, try to see if there are any missing shingles or areas with nails popping up. If it’s steel, determine if it’s a screw-down with visible screws or a standing-seam design. Screw-down roofs will require periodic maintenance to prevent leaks. Standing-seam is your best option because it tends to require less maintenance and is a lower risk for leaks. Finally, check to see if the drains and gutters work properly. It isn’t unusual to find they’re clogged if they haven’t been properly maintained.

12. Check the upload/download speed of the internet. This is something you typically don’t have to worry about if you’re in an urban area, but in rural locations, it can determine how well your gating and camera systems will work. If internet connection is poor, you won’t be able to view or access your cameras remotely without a lot of buffering.

Inspection Escalation

The above are general items for which to watch when conducting an initial assessment of a potential self-storage acquisition. If everything checks out and you’re inclined to move forward, a more thorough inspection by a professional is warranted, particularly when it comes to electrical, plumbing, HVAC, insulation, roofs and other structural items. While it can be difficult to fully evaluate a facility, especially if it’s mostly occupied, this “dirty dozen” checklist will give you reasonable insight to the overall quality of your prospective purchase.

Charlie Kao is the principal of Twin Oaks Capital, a Michigan-based commercial real estate company specializing in self-storage and multi-family assets. Services include real estate brokerage, asset management, feasibility studies, consulting and building-construction management. The company and its affiliates have owned, operated or planned more than 1 million square feet of self-storage. Charlie also owns House of Kaos Real Estate School, which provides continuing education credits for licensed realtors. He can be reached at [email protected].