Storage facility investing

[Patrick Flanagan]

What are some of the most important things when looking to purchase a storage facility? Besides the obvious of buying right. I’m going to start contacting owners asking if they want to sell their facility and I’d like to know some things I should be looking for.

Is there a general rule for how big the population in a area needs to be? Or do I really need to be focusing on the location of the property?

Thank you for your help! 

[Scott Meyers]

Hey Patrick!

You ought to expect to purchase the Facility for basically what it's worth.  (Granted if you have good negotiating skills, you could buy it at a discount, but be careful that during your negotiations, someone doesn't come along and buy it out form under you if you stall too much.)

That means use the Income Valuation Method (as it's been performing for the past 12 months).  You'll want to certainly conduct a Pro Forma to see where you can take it - meaning increasing both Revenue & Value once you are the Owner Operator.  But you shouldn't expect to pay now for work that you'll have to do later.

Also, in order to get a complete picture and put it into context, you'll want to conduct a Market Study & Competition Analysis. And yes, there are some rules of thumb that make it more appealing (greater density & higher population is better, more multi-family than SFH, more Renters than homeowners, Car counts, & of course as @Greg Dickerson says - you'll want to conduct a supply index).

But in the end, you can make Self Storage work in Primary, Secondary, Tertiary Markets and Rural, Suburban,  or Urban, too.  The more the merrier (population count), is typically ideal as long as the market isn't over-supplied.

Best of luck to you.  Please let me know if I can be of any help.

Scott