Getting Started in Self-Storage

Self-Storage is not a get rich quick plan. Self-storage is a way to slowly build up your net worth and passive income until you are able to comfortably live on the proceeds. If you are looking for something that will put cash in your pocket in the next 2 weeks, it is possible to do that with self-storage, but it is less likely.

When you decide to step into the world of self-storage it doesn’t matter what background you are coming from. However, there are a few things that you need to be prepared for. You need to know that your potential partners, Realtors, and lenders are going to expect you to be able to perform. If they don’t think that you can close a transaction, they will not waste their time working with you.

When you are getting started, you need to make sure that you are prepared to answer questions about how you are going to finance the property. If you haven’t met with a commercial lender yet, find one. If you don’t know how to find one, find a good commercial Realtor that specializes in self-storage. Ask them who they recommend or who they work with. Then go meet with that lender. This is always the first step. Once you know how the money works, then you can be more confident about talking to everyone else.

Once you have established that you need 10% down because you are doing an SBA loan, then you can start talking to potential partners. Now you know approximately how much money you need to raise to get into a self-storage facility. You can also more confidently talk to your partners about how the financing is going to work. Your partners are going to want to know how long their money is going to be tied up and what your exit strategy for the property is. Talking to a lender helps you determine what some of that is going to entail.

Now that you have your financing coming together, you can start talking to Realtors and sellers about their properties. The problem with most properties listed on the MLS is that they are asking market price. There are a few oddballs that are low, but for the most part, the seller and the Realtor have determined a price that will get the seller the maximum amount of money. However, if these properties sit on the market for a long time, there is a chance that the seller will be more willing to negotiate on their terms. There may also be situations where you can expand the property so you know that you can increase the upside potential substantially. Never buy a property with the expectation that it will appreciate.

You make your money when you buy the property, so you always have to buy at the right price. Most of the time, the right price will be less than what the sellers are asking. However, on occasion, the upside potential will justify the purchase price. When that happens, the property will sell very quickly. Make sure that you get an offer in on the property with contingencies so that you can do your due diligence.

Your Realtor and your sellers are going to interview you to verify that you can actually close on the property before they are going to be willing to accept an offer. This takes you back to your lender. You will need a lender that will back you up when the Realtor calls and asks if you can perform.

Your lenders, investors, and power team are critical to your success. However, your power team includes a lot more people than your Realtor. You are going to need experienced managers, often contractors, handymen, and a myriad of other people to help you keep your property viable. Because of this, you may want to consider looking into finding an experienced partner or mentor. There are training courses too that can help you with the basics.

There are a lot of moving parts in a self-storage transaction. You often can’t do one piece without another. While this may seem frustrating at first, it does eventually come together so that you are able to purchase properties. The most important thing is that you have to start. If you never start, you will never get anywhere other than where you are today. As always, happy investing.