Getting Ready to Sell Your Self-Storage Facility: Preparations to Help Ensure Maximum ROI

You’ve built and operated your self-storage business to the best of your ability, and it’s been a significant part of your professional journey. Now you may be presented with the opportunity to harvest the fruits of your labor and maximize the return on your investment. There are many buyers trolling the market for good acquisitions. If you’re looking to sell, how can you ensure you and your property are prepared to attract high-quality buyers? Consider these suggestions.

Spruce Things Up

Physical appearance and curb appeal have a tremendous impact on any real estate. Properties that are clean and in the best condition will simply sell better. To prepare your self-storage property, make sure your landscaping is well-maintained. Confirm that all the lights, locks and doors are working properly. Examine the roofs, drains and gutters for proper drainage. Refresh the office and any areas that need painting, general cleaning or updating. Remove any trash and non-business materials, inside and out.

Yes, these may seem like commonsense recommendations, but they’ll add value to your self-storage property, thereby increasing your bottom line. Consider the minimal time and expense required as a short-term investment with a great return on your equity.

Consider Capital Improvements

Maybe some of your self-storage customers have suggested property renovations, or you’ve been advised by a broker that certain capital improvements would make your property more attractive on the market. Would these upgrades need to be done for a prospective purchaser? If so, set yourself up for success by factoring the new enhancements into the sale.

Keep in mind that many buyers are courting lenders, so recent improvements to a self-storage property are music to their ears. The adage remains true: Adding value reaps more than it costs—it fosters trust.

Update Your Rent Roll

Part of your exit strategy should be to raise the existing-tenant rents to their full market potential. The benefits of this are two-fold: You’ll increase your revenue while generating financials that are more appealing to self-storage buyers and their prospective lenders.

To sell, you’ll need to provide a rent roll to help a buyer evaluate the income potential of your self-storage business. If you’ve historically kept only a simple paper ledger, consider creating a digital file of all your units categorized by size and type, such as drive-up or interior, ground floor or upper level, climate-controlled or traditional. This’ll be useful to the new owner and any third parties evaluating your operation, so you’ll be creating a great selling tool.

Audit Yourself

Just as you would when preparing to sell your personal residence, you need get your self-storage “house” in order. Gather your business and real estate tax records. Correct any inaccuracies and compile a list of any historic property improvements, issues or problems. Take an inventory of non-storage assets such as security cameras, desks, computers, etc., and assess their value.

Make sure your business-entity records are current, and be prepared to share your income records, expense documentation, tax filings, and capital-improvement and expense receipts. Knowledgeable buyers will quickly move on from reluctant or questionable record-keepers. This is also a great opportunity to review how far you’ve come with the business.

Meet With Your Attorney and Accountant

Whether you’re the sole owner of the self-storage property or you have partners, consider involving your attorney in a simple estate-planning conversation. The various forms of ownership may behave differently in the event of a change, so understanding your particular situation is critical.

In addition, the sale of the asset should involve your accountant for tax-planning purposes at a minimum. This person can provide valuable insight to the tax ramifications from disposition.

Find a Broker

After doing all the above, if you determine that you’re ready to sell your self-storage facility, your next move is to enlist a professional broker who’s licensed in your state to market the property. There can be big differences in how a storage property is constructed, managed and measured compared to other commercial real estate assets, so find a broker who specializes or does significant transaction volume in this industry. Make sure they understand the nuances, language and metrics used to evaluate and promote storage facilities.

Last but certainly not least, the broker should be someone with whom you enjoy working. This is a big decision for you and one that may impact your family for generations. Find a professional you like and trust to help you through the process.

List Your Property

Once you’ve made your decision, the listing process begins. This can vary greatly depending on your self-storage broker’s proximity, availability and business model. The first step is an initial meeting in which they’ll be able to develop an understanding of your objectives and gather information to help you reach them. This is followed by a second meeting to review underwriting, owner financials and the broker’s valuation.

When the valuation is finalized, the next step is to sign a listing agreement with the broker. Then you should be generally comfortable with turning the process over to the broker while you focus on running the business. The best-selling point any self-storage owner can offer buyers is an operation that’s humming on all cylinders. Any potential purchaser would welcome a top-performing asset and pay a premium for a well-run, leased-up facility.

Remember the Golden Rule

In matters of money and livelihood, emotions tend to run high. It isn’t always easy to balance sensitivity and cooperation throughout the self-storage sale agreement. The Golden Rule applies: Be nice and treat others as you’d like to be treated. This includes your buyer, trade partners and employees, and especially your facility managers.

A happy employee can be invaluable during the sales and due-diligence process. In addition, they could essentially be auditioning for a role with the new owner. Give them the chance to shine and help you toward a successful closing.

Brian Davison is vice president of brokerage for Investment Real Estate Group of Cos., which brokers the sale of self-storage facilities in the Northeast and mid-Atlantic. He’s an associate real estate broker, and a member of the national, Pennsylvania and Lancaster County Association of Realtors. To reach him, call 717.779.0804 or email [email protected].