How to determine what to offer on a self-storage property!

There are many factors that determine how much you should pay for a property. It ranges depending on the local market and the rental rates in each area. However, you want to shoot for a range between $5 and $15 a square foot. Some markets will be outside that range, but the rates will compensate for it.

One of the factors that you need to look at when you are determining what to offer is the condition of the property. What items need to be replaced? Is there an elevator and is it working? Has the elevator been serviced recently, ever? The other big question about the elevator is, “Can it haul big things?” Your elevator needs to have a load capacity of 4000lb to 6000lb and be big enough to put a king size bed in it. You also need to evaluate the HVAC system and the roof. How are the floors? Are they strong enough to be weight bearing or are you going to have to replace them? All of this is going to add to your costs.

Ideally you want to find properties that you can double the value of the property. So, if you are buying a property for $1.3 Million then you want it to be worth $2.6 Million in three to five years. If it is going to cost a few hundred thousand dollars to do that then you have an opportunity. However, if it is going to cost $1 Million dollars to do that, then you may have trouble finding investors. When you have a huge up front cost to bump up the value then you want a bigger return.

You want to try to find properties where you can increase the value by making the property more efficient by improving the management of the property and lowering the expenses. You want a property that currently has low rents so that you can gradually raise them.

When you are able to find properties with great potential, you will be able to find people who are willing to partner with you. Investors want to see great returns. When you find a property that is performing great and already at the top of the market and priced accordingly, then there isn’t a lot of profit to be made. But, when you can find a grand slam deal where you can create value with your changes to the property and your improvements in the management, those are where our equity investors get excited. Look for properties where you can create value and then turn around and sell them at the top of the market. As always, happy investing.