Why do the supply index when buying a Self-Storage Facility?

When you are buying a self-storage property, there are a lot of properties that look like they are a great deal, when in fact, they are not, because the market is oversaturated. However, there are a lot of amazing opportunities out there too. Your job is to determine which type of property you are looking at.

The supply index is one of the key indicators that you should check each time you are doing your due diligence on a property. You want to know if the property you are looking at is in an oversaturated market or if it is in a market that is still growing. The supply index will tell you if the self-storage facility you found has a high vacancy rate because of mismanagement or oversaturation.

In order to determine where a market’s perfect equilibrium is you want to find out what the rentable square footage is for that market. The way that you do this, is you add up all the self-storage facilities’ rentable square footage and then divide that by the population. While that may seem overwhelming and like a lot of math, it is actually quite simple.

You can easily find out how many people live in the city you are evaluating by going to that city’s webpage. They will tell you how many people live there. Finding out the amount of rentable square footage takes a little longer. You need to go to Google Maps and find all the self-storage facilities in that city. Then you can look at their county records to see how much rentable square footage they have. After that, the math is fairly simple.

The number for saturation is fluid. You will want to look it up when you are evaluating your market. However, right now, the number is 5.9 square feet per person. This means that if you run your numbers and discover that there is only 2.8 feet of storage for each person in the city, then your market is undersaturated. The opposite is also true. So, if there are 7.6 feet of storage in that city, then you will have a very difficult time filling that self-storage facility no matter how good your rates, marketing and management is. As always, happy investing.