How Do You Know When to Sell Your Self-Storage Facility?

This is a loaded question. Should you ever sell such a great asset. It all boils down to your business plan. If you are in it for the long haul to give your children an inheritance, then you are probably never going to sell.

However, if you purchased the self-storage facility with other people’s money, then you will have to cash them out at some point. Often this is a preset time that is part of your business plan. Your investors know exactly when they are going to get their money back. On the other hand, you may have put a 3 to 5 year clause in your contract that allows you some flexibility.

There are 3 factors that you should consider before you put your self-storage facility on the market. First of all is how are the interest rates? When interest rates are lower, you can get a higher purchase price for your property. When interest rates are higher, your buyer has to get a higher CAP rate for the property to make sense financially. This means that your sales price is going to be lower. Make sure that you keep an eye on interest rates so that you don’t get caught in a bad market.

Another factor that you should consider is the current occupancy rate of your unit. If you want to sell for top dollar, then you have to get the max net operating income that you can. If there is any type of seasonality in your area, you need to keep that in mind before you put your property up for sale.

Finally, you need to look at your CAP rate. The lower the cap rate you can charge, the higher the sales price. If you are in a tight market, you may find that CAP rates start to go up. When a buyer has to get a higher CAP rate, they want a lower purchase price.

Don’t lose track of what the market is doing. You want to make sure that you can sell for the maximum price possible. You need to keep track of what interest rates are doing, where the CAP rate is sitting and how to maximize your net operating income. As always, happy investing.