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Seeking Advice -Building New Self-Storage Facility
I'm looking to invest in self-storage in the smaller cities and towns surrounding the Twin Cities area and am debating between two options: buying land and building a new facility or purchasing an existing one. I'd like to get an idea of what is costs to build from scratch.
Let's say I find a 2-acre lot to purchase. Aside from zoning issues, permits, and city/county requirements, which are highly variable, I'd like to get an idea of how many units/buildings and how to lay it out for most efficient use of space for those 2 acres. Assuming the 2 acres is 100% usable, I'd like to do buildings on one acre and outdoor RV/boat storage on the other acre.
I've looked online at several companies that build storage buildings, but I don't know what size to ask for quotes on.
Does anyone have software recommendations that can assist in planning and designing the layout of the facility? Any recommendations for companies or consultants who specialize in self-storage construction?
I would greatly appreciate any advice, experiences, or resources you could share to help me plan effectively.
Thanks in advance for your help!
I have a question about something in between those two options. And I'm not suggesting I have the answer, just a question.
Office buildings are basically "on sale" right now. The flipper folks always like to say "you make your money when you buy," meaning that the lowest possible and highest value entry price point is one of the most important things.
So let's visualize a single story office building. A/C already in place. Single story so you don't have to worry as much about load bearing and weight. People looking for self storage really don't give a **** about the paint or carpets, so you can leave it as is, tear out the carpets, whatever. The in-place plumbing will overkill, so if over time you lock and shut down a couple bathrooms (so you have less to maintain), whatever.
If you hire someone to build, you're going to pay full retail price. If you buy existing, you're going to pay full retail price. If you buy the "on sale" office building, it will cost some money to convert, but if the savings is there on the initial buy price to more than make up for it...
And then let's say 5 or 10 years from now the "work from home" fad is over and offices are in demand again. Cool. As storage units turn over, re-rent them as offices gradually, if it makes sense. Your eggs aren't all in one basket.
So... what would that look like?
@Chris Mason thank you for your response. I have contemplated doing a conversion like that with existing warehouse or office space but I am extremely new to commercial real estate investing and I think that is beyond what I'd like to tackle in the beginning. Maybe after my first couple of facilities I will seriously consider something like that. Excellent idea!
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Quote from @Tammy Garst:
@Chris Mason thank you for your response. I have contemplated doing a conversion like that with existing warehouse or office space but I am extremely new to commercial real estate investing and I think that is beyond what I'd like to tackle in the beginning. Maybe after my first couple of facilities I will seriously consider something like that. Excellent idea!
Zoning would be a significant issue. One can't just do a conversion like that at will, commercial is not a singular universal designation.
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@Tammy Garst there is a specific, detailed study report you would need to achieve financing of such project, and generally city/county approvals on build.
That study somewhat answers much of this. It will define what demand is, in what specific unit types, for today, next few years, and the longer term.
It will also detail other various impacts such as traffic, security etc..
From what I have read here, you effectively have 0 knowledge/information. That's not a slight, I know you said you've done some research, this is to put things into perspective for you because some of what you have said here has clearly defined to me that your lacking some very key very fundamental information.
For example, we NEVER just randomly look at land than ask if it will work, no. We first identify a market of opportunity. And we quantify the exact opportunity volume and specific demand segment. This will define for us what size of land we will be targeting, what unit compilation we are looking at doing which helps define some of our cost outlay and we will have an idea of market pricing capacity so from this we can formulate a generalized range of acceptable site development costs which then empowers us to know; what kind of land are we looking for, in what area, what's an acceptable price range to delve further......
And these that I mention above are the very basic ABC's of it, super basic stuff. We NEVER go for land than DD to sort if it will work, that would waste monumental amounts of time.
Than one has to get familiar with the market one is targeting, I get with various government board members and engineers to find receptiveness of such project and if city plan already has a designated area of interest for such, which it often does. I don't know anyone who does such development projects without "rubber-stamp-approval" in pocket long before actual submittal for approvals. It's just how things are done.
And being new, your all but certain to be required to have a JV on it, to get approvals and/or financing. A big factor to these approvals is on the operators involved, confidence in there capability. When they are gambling on a completed project, they want to know a battle tested captain is at or along side the wheel.
And than we have environmental impact studies, navigation of these, the various types of wetland delineations some being buildable or with mitigation potentials and others being absolute... Water retention planning, on and on the various details go.
First and foremost you are going to need a JV/Consultant "partner" in it, for a multitude of reasons. Unless.... your happy to be VERY cash-deep into it and ready to absorb the hit's of a LOT of time delays and additional expenses or cost over-runs. Missing any 1 detail can cost dearly in time, money or both.
Sorry I am working off top of head and don't have a ready list, so I am probably bouncing around a bit on details.
On purchasing existing, it's VERY dangerous waters. My most important factor in such is I want to know with absolute clarity why seller would even consider selling, and is that reason beneficial for me. It rarely is. Most often it's either they have developed from 0 and are now willing to sell at sky high multiple, meaning your going to struggle to make money as you will need everything to run great for an extended time horizon.... OR they are a very small, very novice "Ma,Pa" operation aged out, dilapidated, not really much there to be honest and after years of decline now retiring out. Often it's a site that has to be fully redeveloped to hold value and that cost considerable itself.
Sometimes opportunity can be found, but it's rare. There has been a few years now of persons calling to buy these, and trailer parks, like crazy.
It's important to have a well defined plan and exit strategy. Are you developing to develop, rent stabilize and sell? Or looking to ride it for ____ years. Because this will also define your market of opportunity.
In my opinion, it's THE best rental to hold in a landlord/investor perspective, AND it is the most complex and detailed to start into.