Why Do You Want a Feasibility Study?

You are in the middle of your due diligence process, and you have decided that everything on the property looks great. You don’t want to spend the money on a feasibility study when everything looks so promising. However, this is not the time to cut corners. The fact that you have verified that everything looks so promising is the perfect time to back that up with a feasibility study.

When you are planning on financing a property with a bank or partners, they are going to take what you have to say with a grain of salt. However, if you can back up your numbers and projections with a feasibility study, they are much more likely to listen to what you have to say. This also shows your investors that you are serious about your project and that you are committed to getting accurate information to make sure that you aren’t making any mistakes.

Most of the time, your investors are going to require a feasibility study before they are willing to invest in your project. They want to make sure that you are not presenting them with information that leans towards your desired conclusions. They want a non-biased third party who will present only the facts. A feasibility study shows them that you have had third party consultants review and inspect the property to make sure that it is a good opportunity. They don’t care whether or not you do the deal, they only care about the validity of the study. As a result, your investors trust them.

As you branch out into new locations, you may be unfamiliar with some of the nuances of that area. Your feasibility study will allow you to get a third party perspective that is not emotionally involved in the project. As a result, they may see things that you missed. This study may keep you from investing in a project that will ultimately fail and cost you a lot of money. This is why you want to have a second opinion to back up your conclusions.

You want to do as much of your own due diligence as possible to make sure that you are not hiring a research team to find out that your property is a dud. If you know that your property isn’t going to meet the necessary standards of your lender, then don’t waste your time or money; move on to the next project. However, if you think that this is a great opportunity, get the feasibility study to back up your research.

Prepare your own feasibility study prior to ordering one to make sure that you are on the right track. The first thing that you want to do is conduct a preliminary analysis. What do the financials look like? What do you think you can change to improve the property to increase the performance of the self-storage facility and improve the pro-forma? If there is no way to improve the current financials, what reason do you have to get involved in the project?

Next you want to look at the market in the area. Is the market at equilibrium or is it oversaturated, or does it need more self-storage? How will this affect your plans? What self-storage facilities are currently in the pipeline? What will this do to the saturation levels? How much competition is there and how are they performing? You want to make sure that the market isn’t all performing badly.

Now you need to look at costs. How much is it going to cost to do everything that you want to do to bring your idea to life? How will these costs impact your profitability? If you are building, will the city even allow you to create what you are envisioning? Once you have come to a positive conclusion, you need to hire someone else to come in and back you up. This way, you can move forward with confidence. As always, happy investing.