Evaluating your Potential Conversion for Profitability! part 1

After you have found the perfect conversion property location, it is time to decide if it will work for your self-storage project. The first thing that you want to determine is if the project is big enough, do you need water and how is the elevator situation.

There are two rules of thumb that you can use to determine if there is enough rentable square footage to be profitable. The first rule of thumb is for rentable square footage and the second if for whether or not you can have one or two floors in your facility.

First of all, you can typically use about 75% of a building’s square footage for actual rentable square footage. So, if you find a 100,000 square foot building, you can rent 75,000 square feet. The second rule of thumb is that if you have 19 foot ceilings, you can typically have two stories. This means that if that same building happens to have 22 ft high ceilings, then you actually have 150,000 square feet of rentable space.

The amazing thing about a multi-story building is that the financial difference is substantial. Your taxes are a little higher and your utilities might run a little higher, but your management costs remain about the same. On the other hand, your rents double. So, any time you can add a second floor, you may want to figure that into your plan.

When you have a multi-story property you do have to have sprinklers. It is important to make sure that you can get water to the property. If you can’t get water to the property, then a second story isn’t an option. If you can get water to the property, then you need to look into the costs. It can be a formidable expense to get water run to your self-storage facility. Installing sprinklers can be expensive too. Make sure that you consider the costs of sprinklers when you are determining your expenses.

As you are looking at the property that you are purchasing, remember that you can’t just add walls and be done. You have to really look at the property and make sure that your configuration will work with the current floor plan. You and your architect need to thoroughly examine the current footprint to make sure that your dream self-storage facility will work there.

Elevators are important too. While your current property might have elevators, they may not be big enough. You need an elevator that is at least 6x9. This is an oversized elevator. You also want to make sure that you put your elevators at the edges of the building. You don’t want to make people carry their belongings to the center of the building just to carry them back to the edge again.

Remember that people don’t like to store higher than 3 floors. Even though the elevator is doing the work, renters tend to be turned off by higher floors. Try to keep your height to 3 stories or less or plan on having to lower your rents the higher up you go.

These are just the first three things that you should look for when you are considering a property for a conversion, there are several more coming up on Monday. Have a great weekend and as always, Happy Investing.