What are the deciding factors on a property?

While it may seem like location, condition and financing might be the most important factors in determining if you want to purchase a property, when you are dealing with self-storage it comes down to 2 things. You need to make sure that the property has a good return on investment and upside potential.

Because everything hinges on your cash flow, you want to make sure that you are in a good location so that you can get maximum rents. You also want to verify that you can’t get out located by another facility. If another facility gets between you and your renters, they are unlikely to drive past it to get to you unless you have better pricing. If you have better pricing, then your cash flow will go down.

Property condition can affect your cash flow as well. If you find a property that no one wants to rent from because of the appearance or lack of appearance, you may be able to get a better price. This will allow you to fix up the property so that you can get the maximum upside potential. However, you need to make sure that you can do the repairs for less than the amount of the upside potential. You don’t want to spend $200,000 just to increase the property value by $50,000. You want to try to double your investment when you can.

Financing is important. If you can’t find a way to purchase the property, then it doesn’t matter how good the deal is. But you will find that when you discover a great opportunity, the money will come. Whether that is through investors, loans or assigning your contract. You will be able to make a great deal work.

When you are looking at a property, make sure that you consider all the expenses. The current books may not be accurate. You want to double check all of your numbers to verify that you really will be able to make a good return on your investment. Start by finding out what the average cap rate is for your area, and then try to get a better deal. You may pay less based on current occupancy levels, but if you are certain that you can improve your occupancy levels, that will increase your cash flow which will increase the value of your property.

There are so many different facets to every transaction. Make sure that you are doing your research. You don’t want to get emotionally involved in a property. You may overestimate your profits which will hurt your bottom line. Do the research and make sure that you will have a profitable return on investment and upside potential. As always, happy investing.