Is this a good location for a self storage project?

[Christian Smith]

I have a 2.6 acre commercial property I've just closed on. I would like to build multi-family on the property in the future, but the market for construction is too high to justify new construction residential right now. So I'm exploring the option of using half the property to build self storage on to start generating cash flow. I've done my own market analysis and I would be entering the market with very little competition while there is a need for self storage in the area. The property however, is located in a single-family neighborhood with homes along the perimeter on two sides. Is there anyone with self storage experience that may have insight on whether or not self storage could potentially be successful in a single-family neighborhood with proper marketing?

[Henry Clark]

@Christian Smith 

Notes below.  1.  Market demand thought process.  2.  Self storage development checklist 101.

I'm originally from Pickering, LA.  An hour north of you.

1.  Risk management.  After the floods two years ago through out the country, all of the Self storage insurance companies, quit covering floods.  Being in Lake Charles, will you be "Paid Off" before the next major flood?

2.  Since you already have the spot purchased.  Count every storage unit within a 3 mile radius.  Keep track of 10's/15's/20's.  Then get a population count.  Using a ratio of 6 storage units per 100 people, compare that to the number you counted.  If you counted 1,500 units but your 6/100 says there is a need for 2,000 then you "might" build.  Don't trust me.  Validate.

3.  2.6 acres is just the perfect size to start a self storage location.  Don't plan to add MFH to it though.  

4.  Looking at sparefoot for Lake Charles, I only see one person turned on.  This means two things.  Either a lot of people don't use Sparefoot, thus you will take a priority position on the internet if you sign up with them.  Or, most of the locations are full and have all of there storage units filled and turned Sparefoot off.  You can verify by calling around.  Which means demand is high.

Market Demand- “Will they come?”;

I'll give you the tool I use, but you will have to make an investment of your own time. Otherwise you don't own the data.



Step 1 "Capacity":
Count the units and sizes in that market. Get headcount by googling the town or zip code. Be aware if the town is standalone, or it might have a large population outside since it is a suburban community to a larger town nearby. Add those people in by using County or School area population.

Example:
Town 1:
#of units/headcount= 300 units in the area/ population 3,000= 10 units per 100 people.

Town 2:
500 units; population 4,000= 12.5 per 100

Town 3:
and so on.

Do every stand alone town in a 60 mile radius, or until your satisfied. You will get a High, Low and a average. I have a certain ratio per 100 headcount (not households, not age, not sex) I use when deciding to buy or build in a town. You will get to the same answer I have.

Luckily we are all the same. Death, divorce, fire, home sale, floods, layoffs, etc. No matter whether your Rich or poor, city or country folk. The ratio above works anywhere.


Step 2 "Existing":
In each town count the number of units by size. When I do my ratio I assume all units are the same. Count the 10/15/20's. Any smaller units just make them equivalents of a 10 x15. Example: 3 5 x 10's= 1 unit

Although I am counting them all as the same, the reason, I say count by size is for when you build. You want to go the Size sweet spot where it is under served. If everyone built all 20’s then you built 30 wide buildings with a lot of 15’s and then a mix of 10 and 20’s.

Step 3: Lets calculate "Demand":
Number of units needed (Step 1) minus Number of units existing (Step 2) = Quantity to build.

Town 1:
300 - 100 = 200

Town 2:
500 - 400 = 100

Town 3:
and so on.

This will help you pick which town you have the greatest potential for success. "Subject" to other factors that is where you want to either buy or build first. You only need to do the above once. I have kept this ratio in my head since the first time and make all my decisions using it, before I move into a market. If your in a large city, use this ratio. Pick the zip codes in your territory.

Many exceptions to the above.
a. My town has the highest per 100 count around by far, and I am still building. There are reasons.
b. I just built in a town that was not the best of the ratios. But the largest facility with 1/2 the business is 4 miles out of town by themselves.
c. There is a town that is Fully Saturated. No extra unit will ever be rented in it. I would love to build there. Everyone built 10 x 20's for some reason and they did it at the south end of town where the zoning is easiest. I can build halfway to the population who are in the North end of town and I would build 10's and 15's with some 20's. Everyone thinks they have less than they have. They will rent 10's or 15's first.
d. We are building our last location. Your eyes never stop looking. The best spot I have seen is a cornfield where you can't see a single house. Would loved to have built that one.


You don't know me.
1. Own the data yourself. Don't have me give you the figure. Question the logic, “all of us are the same”.
2. We are in 5 towns, 8 locations. Most are in towns of 5,000 or less. We are in Phase 1 rent up stage in our first large city (1mm) location (630) and in building stage across town (330).

I have used this tool for all of the Buyouts or build outs above. "Put your money where your mouth is." Realize there is an existing market ratio already based on square foot, this is the one I use however, because I “Own it”.


Ad Hoc- Traffic counts
Two locations, one with 70,000 Vehicles per day and one with 15,000 per day. Both in the same general area. I picked the 15,000; why? Learn the nuances. Start small and make your mistakes then. The 70,000 is all interstate traffic, who are not your customers.

Don’t trust me. Own the info, it’s your money. Everything in the Storage business can be validated. Start small and make your Big Mistakes early.

		Storage Startup Checklist 101
		Response to Zagreb, Croatia startup
1	Why Do Storage?
2		Why Storage? Why you?	I’ll do a separate Topic. Don’t know your financial’s, but you will outstrip your collateralization fast. Develop a relationship with someone you trust and bring them along for the ride. Preferably an Apartment developer. They don’t have to invest in the first project, but you will need them later. Make sure this a solid relationship, otherwise they will cut you out once your successful.
3	Market/Demand:
4		Market size	See post, if your the “first”, then you don’t care. You have more than enough Market, in a 800,000 Pop city.
5		Outside or climate controlled?	Let your search and “deal” decide. Look for both an outside Land acquisition or an old industrial building. If you get a large enough building, finish it out in stages.
6		Market location	Seek your higher income areas first. Pick along the A2, A3, A4 corridors first. Stay away from the mountains. Do several small locations, no smaller than 1 hectare. Once you have the experience and Financial support, go for a Climate controlled location in an old neighborhood that is high income or rebuilding itself.
7		Zoning	See post
8		Site location	Have several searches and deals going at once, most of them won’t pan out for the price you are willing to pay. This way you “can walk away”. This gives you negotiating power.
9		Site acquisition
10	Financing:		See “Topic”
11		Financing-construction	Find a banker who knows Apartment building construction
12		Financing- rent up stage	Same as above. You want “interest only” and not principal for a portion of the rent up period.
13		Financing- long-term	If your going to grow, unless you have significant capital at your disposal, find a future business partner.
14		Business Model	I’ll clean up and post one of my spreadsheets later.
15	Construction:		Use local knowledge/availability
16		Permits
17		Building type
18		Building manufacturer
19		Contractor
20	Day to day:
21		Rental Contract	Post a “Topic” on this Forum and ask for some copies sent to you.
22		Rental Rates	Zagreb’s GDP per capita is $19,132 versus where I live $60,246 metro area of 1mm. Thus if I say a 10 x 20 “Foot, not meter” unit is $120, then yours would be around $40. Making this simplistic. Get on Sparefoot and pick a US city similar to Zagreb and pick out prices for 10 x 20/15/10/5. Then take 1/3 of that for your price in US $, then convert. Recommend you don’t use this as your starting prices; go after a richer neighborhood and charge higher prices.
23		Auction rules	Post a “Topic” on this Forum and ask for some copies sent to you.
24		Security system	Situational, work with your local security firm.
25		Fencing	situational
26		Self Service or manager	situational
27		Management software	Since the world is internet based, see if you can use one of the Storage management softwares in Zagreb. Do not do this on a spreadsheet or paper. You need to develop a system to grow with.
28	Marketing:
29		Website	check ClarkstorageLLC, and others on this forum. Take the best from each and make a template, for a better one.
30		SEO management	Since your the only one, you just need Google Map Pins and build up your google ranking under key words.
31		Marketing Software	Sparefoot or similar in your market area. If none exist for Storage, seek out Apartment, home, AIRBNB, Craigslist sites. If you have Craigslist, put an add out there with your offering and price. Different sizes and prices. Get feedback.
32		Marketing	Something you probably already know.
33		Social Media	Something you probably already know.
34	Insurance:		Leave to you for local knowledge
35		Business
36		Renters
	Sundry:		Leave to you for local knowledge
		Property taxes
		Legal system