What is the first thing I should do to invest in self-storage?

If you want to invest in self-storage, you need to start looking for properties that you can make offers on and then make offers. I know that many of you are thinking, wait a minute, I don’t have a business entity set up yet. I haven’t designed my business cards much less ordered them. I don’t have a website or an e-mail address. How can I start talking to sellers if I don’t have the perfect business entity in place? If you get an offer accepted, you can get the business in place before closing.

There are so many people who spend all of their time building the perfect business that they forget that the perfect business involves networking and making offers. If you are not talking to sellers and making offers, you are never going to buy a property. You must make offers.

So how do you know if you should make an offer on a property. The first thing to take into consideration is price. You need to know what the property is worth today. It is nice to know what the property is going to be worth down the road, but you can’t really predict what the market is going to do. However, you do know what it is worth today. If something happens where you have to get out of the property fast, you need to be able to sell the property without taking a loss. If that happens, can you do something else with the property to make it more valuable than what you paid for it? Did you get it at a good enough price that you can sell it as is and not lose money? These are important factors to keep in mind.

When you are first starting out, you may not know the values in an area. If this is the case, work with someone who does. Find a good commercial real estate agent who is familiar with self-storage and can hand hold you through your first deal. Another way to look at the property is based on the cap rate. You take the net operating income and divide that by the purchase price. This tells you what the cap rate is. If this number is better than the market average, you are getting a good deal. If it isn’t, then they are asking to much.

Always try to get the best deal possible. You make your money when you make your offer. You don’t want to get stuck with a property that you are upside down in. As always, happy investing.