Anyone had experience with building or owning storage buildings?

Question

I have 2 acres in a prime location on a 4 lane highway and was wondering if the highest and best use for cash flow would be to build storage units on it. I don't know if going with a franchise that has a proven system or learn on my own. The land is paid for, partially cleared and level. Has 295 feet of road frontage and is about 395 feet deep. Any ideas will be very helpful.

Scott Meyers · Answer

Larry,

A quick reply to your question:

1.  Yes, I've done Storage - over 3,500 units and buying/developing 4 more facilities this quarter.  I also own an education company that teaches investors like yourself how to get into the business.

2.  First of all, Check for zoning 1st to see if Self-Storage is currently permitted or if you can obtain a variance without an act of Congress, or God himself.

3.  2 acres is too small of a parcel to build a site large enough to attract the Franchise folks.  Regardless, you don't need them - I'll post later as to why I feel this way.  Property management companies can handle this for you, WITHOUT paying upfront fees or royaltees....

4.  Get a feasibility study by an industry consultant.  Don't guess when it comes to the supply index, or the projected cost to build and the holding costs until you obtain stabilization.  Besides, the bank and/or your equity partners don't want your opinion - they want realistic projections by an unbiased 3rd party that specializes in the asset class.

5. Ignore the opinions and advice of other BPers that have and will weigh in on this thread UNLESS they have experience in Self-Storage (Sorry Guys, but I am continually having to post rebuttals to your erroneous and just plain BAD advice, like some given above).

6.  That being said, I suggest investing in your education on the asset class by attending a number of the Industry conferences like The annual Inside Self Storage Conference, The Self Storage Association annual show, and the Self Storage Academy as you continue down this path.  I also suggest using consultants and hiring a mentor before moving forward with any development project.

A LOT to consider here, but obviously, I love the asset class - Sold off over 500 single family and apartment units back in 2005, and never looked back.

Keep us posted.

Scott,

Jay Hinrichs · Answer

@Gino Barbaro  I have owned self storage  it was a unique building in Portland it had 44 units 10X 20's insulated and dry walled with nice garage doors.. and there was 7k sq ft of nice commercial above it.

we play heck trying to keep the commercial occupied.. it was in a bad location for commercial as it was off the beaten path BUT right across the levee form a few hundred floating homes and in the middles of a 160 unit townhouse project.. so it took a while but we got it all full.  the storage carried the project.

it was a class A space  as it had to be to hold up the commercial on the top floor. it had elevator etc.

what I found is this is really not real estate investing.. like a income property like you buy.. its a business.. its the business of selling people a place to store their stuff.. lots of turnover .. and ours was not big enough of course to have on site management and I did not want to office there.. so it was really a pain in the butt for us to manage.. I would have to send my secretary to show a unit so she would be gone 2 hours.. and maybe the people were no shows.. LOL.. of course we were not that great at it.

But then I got the idea ( and we turned what I thought was a white elephant into a nice project) I had just bought my Hanger at Aurora state airport  and it was a condo.. so I thought hey all those folks in the floating homes.. they will never have storage.. so I put a condo plat on our storage took about a year and maybe 50k it was actually easier than I thought it would be. .. created 44 storage condo's.. now we have all seen the big storage condo's were folks with 2 million dollar motor homes store their stuff or small business shops.. but this was somewhat unique I thought to have 200 sq ft storage condo's well they were quite popular and we sold them all on long term contracts.. so now we shifted the burden of running the joint to the owners created an HOA let them self manage etc.. then we turned the top 7k sq ft into heated storage.. and sold that off ...

So long and the short of it.. if I had an inkling to go into storage it would have to be like Ken who posted above you have to make it a big business. And you need to have facilities big enough for onsite management.. unless of course your going to mom and pop it and you enjoy tinkering with your storage units.. because you live right there and have nothing better to do.

One other friend of mine owns some big ones in Sonoma county ( nor CAL)  and he is the same its a business .. he also owns shopping centers.. and has developed time share in Cabo.. so pretty sophisticated guy..

Lance Langenhoven · Answer

The nice thing about self-storage is that in most of the non-franchise concepts you don't have to risk all the money at once. You can build one storage building and start leasing that out.

Once it's fully leased, build the next building. So.... unlike multi-family apartments where you pretty much have to build the whole development in one go, this is far less risky as you can do it one building at a time.

George Flevotomos · Answer

It may be a good idea to call or visit competing facilities in your market. If they're managed well but have high vacancy, then your market is probably saturated. If there is a waiting list, move forward with your plans.

Omar Khan · Answer

@Gino Barbaro (every time I read your name, "the G Daddy" just goes through head!), @Scott Meyers, @Jay Hinrichs As always, excellent posts with a lot of value for us novices. Thank you for sharing your thoughts.

Christopher B. · Answer

@Gino Barbaro

Thanks for the input Gino. You guys are doing good work. Congrats on your success.

Gino Barbaro · Answer

Hi @Christopher B.

It was timing. I started buying in 2013 and there were some great deals.  Self storage has many strong qualities, but if we do go into recession a lot of people will cut out that expense, unless you live in an area like Florida that does not have basements.

To me self storage has a lot more turnover than apartments and I view it as a benefit. We all don't need self storage but we do need to live somewhere

I think either asset class is terrific. I just became comfortable with multi

Happy new year

Gino

George Fitz · Answer

@Larry Watson Another vote for @Scott Meyers. I attended one of his academies and found it extremely useful. I'm in the business now and have relied heavily on the knowledge I learned there. Hearing about what you're looking to do, I think you'd get a lot out of attending.

Gino Barbaro · Answer

@Larry Watson

Hi Larry

@Scott Meyers is the real deal.  I bought a program from him years back.  Although I chose apartments over self storage, his info is accurate and spot on.  Check out his site.

Good Luck

Gino

George Fitz · Answer

@Larry Watson There are several top-notch self storage management companies that provide full turnkey operations for you and will also advise you during feasibility and construction. This may be where you want to start. Feel free to PM me if you want any names. You will need enough scale to justify the cost, but it's the way to go in my opinion. Let the experts run it and get it leased up while you focus on the next deal.

Anyone had experience with building or owning storage buildings?

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