Equilibrium Will Affect Your Offer

Every time that you make an offer on a property, you will need to evaluate the area that the new self-storage property is in. Even if you have already evaluated this city, a different part of town will have different results. Every property needs to be checked for cashflow, upside potential and marketability.

In addition, you need to evaluate the market that is within a small radius of that self-storage property. Typically, you are looking up to a 3 mile radius but if you are in a large metropolitan area, your radius can be significantly smaller and if you are in a less populated area you may go as large as 5 miles.

As you look at your market area, start by determining how much self-storage is within your determined radius. How many other self-storage facilities are there? How old are they? What are they asking for in rent? How much self-storage do they have and how much is still available? You need to know the occupancy rates for each area that you are researching. You may find that one part of town has a better occupancy rate than another part of town.

You also want to determine how many people live within that radius so that you can determine how much self-storage is available per capita. In January 2023, the self-storage industry statistics indicated that the average per capita use of self-storage is 6.1 square feet. If you know that your area has an 87% occupancy rate, then you can determine whether or not your area has reached equilibrium. To do this, simply add up all the self-storage that is available in your radius and divide by the population. If there is more than 6.1 feet available per capita, you might be oversupplied. If there is less, then you haven’t reached equilibrium in that area yet.

If you are working in an area that you are not familiar with, you need to find out what the rate of equilibrium is for that area. Some areas use more self-storage than other areas. Large homes don’t need as much storage as smaller homes that have less places to put precious items. As a result, they use less self-storage. If you are looking at a facility that is surrounded by large homes, you may have a harder time filling your units than if you were in an area of smaller track homes.

Always start by talking to an area expert to find out what your numbers should be before you begin making offers. You should talk to several people to make sure that they all agree. This is a great way to build your power team in your new area as well.

Once you have determined if the equilibrium in that area will allow your potential self-storage property to flourish, then you can pursue the rest of your research. If you know after a preliminary rundown of your numbers that you are interested in a property, tie up the property so that you can do your due diligence. You don’t want to miss out on a great opportunity because someone else made an offer while you were doing additional research. Your feasibility study will tell you everything you need to know about your property in greater detail. You need to determine enough to know how much to offer and whether or not the property makes sense.

If a property doesn’t make sense at the purchase price that the seller is asking, figure out what price it does make sense and see if your seller is negotiable. Don’t pay too much for a property. If the seller says no today, stay in touch. You never know when their circumstances might change. Determining the equilibrium is a quick way of finding out if the market is oversaturated. If it isn’t then you may have found a great opportunity. As always, happy investing.