Evaluating your Competition During Due Diligence

If you are out located or out classed, you are going to have a hard time competing with the other self-storage facilities in your local area. The area that potential renters go to rent self-storage is very small. Typically, it is no more than 3 miles. You need to find out how much competition you have in those 3 miles and how well located they are to the rental population compared to you.

Evaluate your competitions condition and amenities. Do you offer the same amenities that they do? Are they in better condition than your property or are they about the same? You are trying to look at it from the viewpoint of the renter. If they are trying to choose between your Self-Storage Facility and someone else’s facility, which one is better? If it isn’t yours, then the only reason they would choose your facility is if your rates are less.

The current rates in the market will determine how much you can charge for rent. If every other property is still stuck in the dark ages on rents, then it will be difficult for you to charge modern rents to make your property cash flow. Typically, a climate controlled 10x10 needs to rent for at least $100 a month and a non-climate controlled needs to rent for at least $70 a month. When your competition is renting them for $50 to $60 a month, the market is too low, or the demand is too low and that isn’t something that you can fix. You cannot change what your competition is doing.

Don’t get so stuck on a property that you buy it in spite of what all the evidence is showing you. If you are in an area that is oversaturated, underpriced and the property is out located by the competition, you need to move on. On the other hand, if your research shows that you have found a great opportunity then it is time to get a feasibility study done to back up your research. Do your due diligence on your competition to make sure that you know what that market is doing because no two markets are the same. As always, happy investing.