How to Evaluate the Demographics of a Location Prior to an Offer!

Before you can even make an offer on a property, you need to know if the property is located in an area that can afford self-storage. If you are not, then you might have the most beautiful, perfect facility but either your occupancy levels will be very low, or your rates will be. Either way, the property won’t be as profitable as you had anticipated.

Start by finding out what the median household income is in the area you are looking. You can do this with an internet search. You want households that have an average median household income of $45,000. We shoot for this target because if they make less than that, they don’t have two nickels to rub together to be able to afford self-storage. If you go into the higher income areas, then they are going to be living in larger homes that already have storage within the home so they don’t need self-storage facilities.

In addition, we want areas that are 75% owner occupied and 25% multi family. This is a good mix for self-storage. Try to avoid areas that are all young people; they haven’t had a chance to build up enough belongings that they need self-storage.

Finally, you want to look at comparable properties. What have other properties like this one sold for? You want to try to compare properties that are similar to each other. If you are comparing a self-storage property to a large empty warehouse the values are going to be different.

One of the easiest ways to make sure you are offering the right amount on your self-storage property is to find out what the average cap rate is in that area. Once you know that number, then you want to offer that cap rate or a higher cap rate. If you are at the current cap rate, then the property needs to have an upside potential otherwise it will be difficult to convince investors that they want to invest.

Start looking for areas that have a median household income of $45,000 with the right renter to owner occupied mix. Then find out if the supply index is right. If it is start looking for potential deals. As always, happy investing.