Feasibility study checklist for Storage Facilities
If you are buying an existing or developing a new storage facility and intend to take it to its highest and best use, then you must consider doing a feasibility study.
A feasibility study by definition is the analysis of the positive and negative market forces that can impact the outcome of a business endeavor, in this case, the success of a storage facility business.
Such a study can involve a macro view, called extrinsic numbers, and micro view, called intrinsic numbers (if a facility already exists), to verify the viability of the investment and its potential success in a particular market.
This feasibility is basically due diligence that involves the discipline of conducting the following checklist:
- 1. Identify the competitors in your market.
- a. The size of each facility
- b. The unit configurations
- c. The occupancy percentage
- d. The average rent amount
- e. The trends compared to past performance
- f. Amenities and features they offer
- 2. Identify average income in your 3 to the 5-mile radius and find at least 25,000 potential customers in that vicinity
- 3. Look at an exposure of your facility versus competitors from the traffic and signage standpoint (a large percentage of storage facility users come from the signage and live within a 5-mile radius)
- 4. Look at the profit and loss statement of the facility if one exists, or the cost of building one out to identify potential and weaknesses
- 5. Identify a site layout if you are building or expanding to get the best building to lend ratio for the area
- 6. Identify lender and financing cost
- 7. Plan out the cost of rehab to the existing property and the proforma (future numbers) that the facility can realistically produce.
- 8. Identify the potential for increased rental square footage by adding space for each unit or adding units
- 9. Identify a higher a better use such as storage condo conversion and what it would cost to get the condo regime approved by the city planning and zoning department
- 10. Identify potential added revenue areas such as signage, vending machines, added services, and so on
- 11. The conclusion should be a clear understanding of whether the property in a particular location is viable and will produce the right return on investment or not. This study must consider that the returns must be within a reasonable period of time after spending a reasonable amount of investment capital.
- 12. The end goal is to make a clear decision based on facts and figures whether to operate it for the long term or resell it for faster gains.
This study will be your guide if you proceed to stay within an acceptable financial budget and a reasonable time constraint and get the property to perform as expected within a small variance.
You can learn how to do that in my training events, or you can pay approximately $7,000 to a consultant who graduated from such training.
In closing, if you are conducting your own study, you should not be looking for factors that confirm your initial beliefs, rather discover facts that challenge your expectations.
After all, most commercial real estate deals look very good on paper, but you will be dealing with reality down the road.
In commercial real estate, if you are trained, you can turn a good deal into a great one and the benefits are incredible.
So the wise thing to do is to perform thorough due diligence and keep in mind that one right deal can change your financial life forever.
To wise investing...
Cherif Medawar
Comments