Creating Self-Storage Out of Thin Air – Almost

When you are looking for self-storage in a location where no one wants to sell, what do you do? The first thing to remember is that you don’t give up. You may not be able to purchase existing self-storage but if the market will bear it, you can always build or convert. However, when you decide to create self-storage there are 2 things that you need to keep in mind.

1. 1 - Financially, does this project make sense in your current market?
2. 2 - Will planning and zoning allow the project to happen?

First, you need to evaluate your current market saturation. You need to know if the market has room for more self-storage. If the market is oversaturated, you don’t want to waste your time building in that location. There are only so many self-storage renters in any given market. Roughly 1 in 5 people use self-storage. This makes it easy for you to determine if there is any demand for additional storage.

You want to evaluate the 3 to 5 miles surrounding the location you are planning on converting or building. Find out what the population is in that radius. Once you know the population, multiply that number by 20%. This will give you the maximum number of self-storage renters in that area. Now you need to find out how much self-storage is already available.

Use Google to find out how many other self-storage facilities are already available to those potential renters. Once you have found them all, find out how much self-storage they offer. You can go online to find out how big the facilities are. If they don’t tell you how many units they have, they will tell you the square footage. You can divide that by 110 and that will give you a rough estimate of how many units there are in that 5 mile radius.

Now you want to look at those two numbers and see if they match. If they do, your market is in equilibrium, and you don’t want to build. On the other hand, if there are more renters than there are units, you have a market that wants more self-storage, your market is undersaturated. If there are more units than there are renters, your market is oversaturated, and you do not want to build.

If you build in a market where there is no demand for self-storage, you are not going to get the kind of occupancy rates that you desire. Because of this, you will get much lower returns on your property. This will lower the value of your property and hurt your bottom line. Always make sure that it makes sense to build before you do.

Second, planning and zoning give the final say on whether or not that facility is going to appear. You need to know what the guidelines are in that location. Every planning and zoning department is going to be a little different to work with. However, there are a few things that are consistent no matter where you are. They have laid out a way that they want the city to look. They know where everything is going to go and if you are trying to do something different than that, you are going to have to get a variance. If they don’t like what you are trying to do, they will make it extremely difficult, possibly impossible for you to do.

Once you have a property under contract, go talk to planning and zoning and see what they think of the idea. Do not talk to them prior to having something under contract. Once you talk to them, the word will get out what you are trying to do. If they like that idea, someone else will hear about it and possibly beat you to the seller with an offer.

Find out what your planning and zoning requirements are to put in a self-storage facility. The first thing you want to ask about is the look of the building. What are they going to require for the exterior? If they want the entire building done in brick and crown moldings, that will be expensive. Are they o.k. with hardy board and metal doors? What landscaping are they going to require. Can you get them to go down to the very minimums. You want your self-storage facility to look nice and be inviting, but you do not need it to be a palace with gardens to prove it.

Find out about lighting. What are the lighting restrictions in that location? You want your property to be well lit to prevent vandalism and theft, but do not bother the neighbors. There is a fine line. Find out what the setback requirements are. Can you still build a big enough facility to make the financials work? Planning and zoning should be able to give you a list of what will be required. If you are converting a property, find out if the property is already zoned for self-storage. This will make your build time significantly shorter.

Building or converting a property to create self-storage for yourself is a great alternative when you can’t find anyone who is willing to sell. You always want to make sure that the market can handle additional self-storage and that your planning and zoning will work with you. As always, happy investing.