Self storage evaluation basics

[Mike Stock]

What are some basic rules of thumb or tips to evaluate self storage? 

Thank you. 

[Paul Stout]

This is a great question @Mike Stock  I should have asked it before I put my current mobile home park under contract.  The park I have under contract has a small storage facility on the grounds too.  I can tell you how I evaluated it.  I don't know if it was the correct way or not.  This unit has (3) 12'X24' and (2) 24'X24' spaces.  The current EBITDA is $205 per month which I feel is under market.  I gave it no value on my offer price for the park since there are repairs needed and it will cost money to deed it separately.  I did assign a value in my loan application package to the banker.  Based on what I was able to find in the area I put the value at $31,500 which is based on a 10 cap and an expense ration of 25%.  I believe the monthly EBITDA should be $350.  It is at the edge of the park so I plan to deed it separately and sell it.  I am a mobile home park investor not a self storage facility investor.  The banker did not balk at those numbers at all and they are carrying paper on many self storage facilities in the area.  I gave him a pro forma based on me keeping it and one with me deeding it separately and selling it.  He felt that the price was reasonable based on recent sales of facilities in his area.  

$350 X 12 months = $4200

$4200 X 25% expense ratio =$3150

$3150 at 10 cap = $31500

My price quotes on survey and title work are $2500

Repairs will cost approximately $3000

I plan to sell FSBO so I should net around $25000

That will go directly to the bank to release the mortgage on that piece of the property.  I will probably ask $35000.  Again, I am not a mini storage investor so this could be way off.  My other though is to tear it down and place another mobile home.  Preliminary price quotes place the demo and site work to prepare for a mobile home in the $7500 range.  That will add more value and income to the overall picture.  Once I close I will do more in depth research to see what option makes the most sense.  The city is open to allowing me to add another mobile home lot.  The market is good for both storage facilities and mobile homes.