The First Rule of Thumb to Successfully Navigate Self-Storage

Lot Size

When you are looking for properties, you want to have 5 rules that you follow. The first rule that you should add to your business model is the size of the lot that you are looking for. Typically, you want to find parcels that are three to four acres. These lots should have existing buildings on them, but vacant land is great too.

When you are evaluating a current project, you are looking at the current value as well as the potential value of the project. You want to know that it has an upside potential. We are going to try to buy the property at its current value based on its current income. The gravy, or the best part about the property, is the fact that we can go in and make some changes to the existing property so that it will produce more income without increase our costs very much.

There are several ways to improve a property. You might go in and streamline the backend or add another building or simply raising the rents until they are at market rates. Any of these things can increase the net income on a property and increasing all three can increase your bottom line substantially.

One of the reasons that we want a building on the property is the bank. When we take the project to the bank, and they ask if we have current income, we can show them that it does. We can show that the property currently makes money instead of simply having to show them how it has the potential to make money. The bank is more inclined to work with you when you have an income history instead of when you have a piece of dirt with no income history.

As you look for properties, look for land where sellers believe that they are landlocked or self-storage owner who think that they have completely developed their project when there is actually a huge area to expand. You will be able to buy these properties at a discounted rate knowing that they have an upside potential.

I had a seller tell me that his property was completely developed. We took an aerial of this property and his space and realized that there was an acre of property that was not being used. We bought it for the current value, added another building and sold it for a profit.

I like to find the opportunities first. I like to search for properties that have a low cost per square foot and then look at the market to see if it will support self-storage. Once I find the property, I evaluate the market by doing a five-mile radius survey of the self-storage supply index in that market, and then determine whether to invest there. So, start looking for three to four acre parcels of land that you can turn into gold mines. As always, happy investing.