The Third Rule of Thumb is Due Diligence

When you are negotiating your contract, you must put in a due diligence period. This gives you time to make sure that the property is what you expected it to be. Sellers will often inflate the facts about the property in order to get top dollar for the property. Your job during due diligence is to sort through all of the information you have been given and verify what is accurate and what is not. While you are looking through the information that the seller gave you, you should be gathering your own facts too.

You want to start by making sure that the property is zoned appropriately. If the property is already self-storage, then you are probably fine. However, if you are looking at converting a property, you want to make sure that the current zoning will allow you to put in self-storage. If it won’t, part of your due diligence period needs to verify that you can a zoning change or zoning variance that will allow you to build what you want to.

You want to make sure that your property is structurally sound. Again, if you are going to be converting, you want to make sure that the property you are looking at can be converted into the property that you want to create. If the property is not structurally able to be converted, then what is the point in purchasing it?

You want to verify that you are in the right location. Location matters in self-storage. Self-storage used to be out in the back of the worst properties. Now they are front and center and easily accessible. You want to make sure that your property is in the right location.

You want to verify that your property makes sense financially. You don’t want to have offered more for the property than it can support. You need to double check the rents and verify the expenses. Will the property’s net operating income pay for the property and leave money for a profit?

Due diligence is the period of time that allows you to find out whether or not this is something that you actually want to buy. If you don’t, then you can walk away without a penalty. If you do, then you can move forward with the project. Make sure that you take advantage of your due diligence period and put in the research.