Tips for Ensuring an Efficient Self-Storage Real Estate Transaction, Whether You’re a Buyer or a Seller
Buying or selling a self-storage facility can be a complicated and unpredictable process. The key to ensuring a smooth, efficient transaction is being prepared. The following tips will help you minimize risks and increase the likelihood of a successful outcome.
April 29, 2024
In 2023, an estimated $14.2 billion in real estate transactions were completed in the self-storage industry. That’s a big number that may make it seem as though closing deals in this industry is easy. The fact is a facility sale or acquisition can be a complex process that requires careful planning, effective communication, and a thorough strategy of risk identification and mitigation.
Whether you’re a seasoned investor or a first-time buyer, optimizing the self-storage transaction process can lead to a smoother and more successful outcome for all parties. Following are tips for navigating it to increase overall efficiency and reduce potential stress.
Confirm Your Timeline
Once your self-storage deal is under contract, it’s wise to confirm the overall timeline, including all dates pertaining to the transaction. While it may seem safe to assume that all parties are reading the same contract, take the proactive step of clearly expressing all time frames and deadlines and communicating them with every party involved.
Consider clarifying key contract items. For example, there’s a difference between a day and a business day. If any of the transaction timelines are dependent on deliverables, such as title commitments or surveys, be sure everyone knows that. Finally, pay attention to any provisions that detail when and how notice of proceeding must be given.
While documenting this information is seemingly elementary, it’s the first step in mitigating the risk of unintentionally falling out of contract or missing a financial-bearing deadline. Avoid the temptation of relying solely on one party for detailing critical dates and uphold accountability on all sides by defining timelines early.
Build Relationships
Qualified real estate professionals with experience in self-storage can be an invaluable resource throughout the transaction process. They can help you identify environmental concerns, draft necessary closing documents, and navigate complex legal and financial issues.
Additionally, a good relationship with all external parties not only affects the efficiency of the transaction, it serves as a benefit if the deal begins to go off course. Having the right people in your corner will act as a safeguard against slipping timelines and growing urgency should an issue arise. Once these relationships are formed, develop them further through strong communication and personal thoughtfulness.
Conduct Thorough Due Diligence
Before moving into the closing period of a self-storage deal, it's essential for the buyer to conduct thorough due diligence on the property. This involves reviewing documents such as tenant leases, financial statements and property records to assess the property's condition, potential risks and compliance with regulations. This process of assessment allows both parties to identify any issues that may affect the transaction and address them proactively while minimizing the risk of costly surprises down the line.
Typically, the best way to keep track of all the moving parts of the due-diligence process is by using a checklist. This is a simple, dependable method for ensuring all risky areas have been viewed, identified, and either mitigated or accepted.
Use Technology to Streamline
In today's digital age, technology can be a way to streamline the real estate transaction process. Data rooms for due-diligence material, e-signatures and online document-management systems can help you stay organized, sign contracts and manage documents remotely, saving you time and effort. Additionally, there are now numerous artificial-intelligence solutions to help save time on tasks such as drafting and creating closing documents.
Communicate Effectively
Effective communication is the key to a smooth and efficient self-storage acquisition or sale. Keeping all parties involved and informed of any new developments in the deal, including real estate brokers, lawyers, lenders and sellers, is crucial. Furthermore, being proactive in addressing any issues that may arise is the best defense to ensure the closing remains on track. Clear and timely contact can help prevent misunderstandings and delays, ensuring no major items get missed.
Prepare a Closing Checklist
A comprehensive closing checklist is essential to ensure that all important documents have been signed and collected. There are many moving parts during this period that could fall through the cracks to cause a delay, such as collection of signatures and notarization of recordable documents. Additionally, properly preparing for the transition of ownership of the self-storage property comes with many other tasks. A comprehensive list of deliverables to be completed will help ensure everyone involved is working in a coherent direction.
Anticipate and Plan for Potential Delays
Despite your best efforts, delays can still occur during a self-storage deal. Anticipate potential hiccups such as financing issues, inspection problems or legal challenges, and plan accordingly. Build some buffer into your timeline so you have time to address any issues. This is particularly important when working through third-party visits and reports.
Seek Experienced Advice
It’s important to seek advice from experienced legal and tax advisors to ensure you’re complying with all relevant laws and regulations and are making sound financial decisions. Their expertise can help you navigate complex issues and avoid costly mistakes. One example that has become more common recently is the larger property-tax bills many self-storage buyers are seeing after closing. Seeking advice from a local tax attorney may help buyers have a better understanding of this expense and prepare accordingly.
Stay Flexible and Open-Minded
Self-storage transactions can be unpredictable. By staying flexible and open-minded to changing circumstances, you can navigate the process more effectively and increase the likelihood of a successful outcome. If there’s one thing that’s common in real estate, it’s that almost nothing goes exactly as planned. Having the ability to work with the buyer/seller as problems arise will ultimately provide a better experience.
Differentiate Yourself
The self-storage industry is picking up steam and more transaction volume is expected over the next few years. As buyers flood into the market, timelines and overall efficiency will become a major deciding factor for many sellers. Ensuring effective communication, careful planning, and a willingness to adapt to changing circumstances will differentiate the buyers who are sophisticated from those who aren’t.
Moreover, serious self-storage buyers who have mastered the ability to take control of the disorderly nature of real estate transactions offer a competitive advantage and better reputation over others. By following the above tips, you can stand out from the crowd by streamlining the transaction process and making it more pleasant overall.
Kiersten Wallerstedt is a risk and transaction manager at Spartan Investment Group, a vertically integrated self-storage investment firm based in Golden, Colorado. She can be reached at [email protected] or 866.375.4438.
About the Author
You May Also Like