The tremendous growth recorded by the self-storage industry has made it a viable investment destination for investors looking to explore real estate options that have nothing to do with apartment buildings and land. With the growing demand for storage space, the industry has successfully positioned itself as the next big thing on Wall Street.
Several factors contribute to the popularity of self-storage facilities. Besides allowing customers to rent out spaces they can access whenever they need, they provide security for personal effects. Some facilities have now even evolved by offering some perks like providing enough storage spaces that enable renters to drive their cars right up to the entrance.
The sizes of self-storage spaces aren’t the same everywhere. It can be as big as 10’x20′ and as small as 5’x5, depending on the owner’s wants. These spaces come in handy for several situations, but the most common one is storing extra belongings during a move or life transition.
Venturing into the Industry
Venturing into the self-storage industry can be quite an excellent investment – one with great potential. There’re two ways you can go about it – partner with a self-storage REIT or be a standalone investor.
If you’re going in as a standalone investor, you can decide to go all out by constructing the facilities yourself or buy an existing facility as many do. However, the latter is more cost-effective. These real estate gems offer high flexibility, making them withstand all economic conditions.
As an investor thinking of buying out some self-storage facilities for sale, there’re several factors to consider before committing your finances to the venture. We’ll examine five of them below.
- The Market
Like every other industry, investments in self-storage are a function of market forces. The dynamics of demand and supply significantly affect the viability of the market and investments. So, before making moves to purchase a facility, it’s essential to consider the current state of the market.
Study the self-storage market within the vicinity of the facility you intend to buy and surrounding areas, and draw an inference. Doing this will let you know the state of things and enable you to make informed decisions. You’ll be able to know if to go ahead with the investment at that specific time or exercise some delay.
- Location
The location of a self-storage property will always be its most significant attribute. While it’s highly possible to change marketing strategies and beautify the facility, it’s hard to replicate it with an unpleasant location. Ideally, a storage facility should be at the center of the city for easy access and management. But, government legislation in the form of zoning disapproves situating a self-storage facility at this location.
However, there’s other locations ideal for storage, and investing in those places is key to having a profitable investment. All you need to do is ask the right questions. It would help if you found out how visible the site is, the daily traffic count of the area, how accessible it is from the primary thoroughfare, etc.
Asking these questions will let you know whether the business will thrive in that location or not. It would be best if you had somewhere that can boost the property’s value and one that can help generate your desired investment returns.
- Present Condition of the Property
The present condition of the self-storage facilities for sale is another essential factor to consider before investing in them. Embark on a comprehensive physical survey of the property and look out for the amenities it offers. Carefully inspect elements like access gates, security cameras, office, manager’s room, etc., and ensure they’re in excellent condition.
Also, check the maintenance schedule of the facility to know if the owner has been effecting required repair and maintenance. The roofs – how old are they? Do doors open easily or require extra effort? All these and more are crucial questions to ask to ascertain the property’s existing condition before buying the storage unit business.
If you find out that some amenities or items aren’t in good shape, get an estimate of what it’ll cost to fix them to ensure that the income flow will cover it.
- Competition
Before you can tag a business as being successful, it must have outdone the competition and control the market. Diving into self-storage investment opportunities without having a viable plan on beating the competition would be setting yourself up for failure. It’s an essential factor you can’t afford to ignore.
When scouting for an ideal location for the business, ensure you think about the competition. All efforts must be on outselling the competition, and you can only do that by eliminating every possibility of them getting access to more traffic than you. If a major is in a location that offers their signage access to 10,000 views, find one that gives yours 20,000.
Besides marketing, pricing is another area you can’t afford to let the competition get the better of you. Consider researching how your target property’s rental pricing compares to the competition. You don’t want to charge more while your competitors charge less under the same circumstances. Also, ensure you put in place amenities that you know might attract more customers to your space.
- Dependability and Integrity of the Owner’s Information
It’s no news that the owners of some self-storage facilities for sale often withhold vital information from prospective buyers for personal gains. To ensure you don’t fall into the trap of debt and legal troubles due to acting on false information, ensure you confirm any information supplied by the owner or broker.
Consider hiring a highly qualified self-storage investment broker to guide you through the sale process. Have the owner tender copies of federal tax returns for the past three years, seek a reasonable explanation for discrepancies and differences.
Also, consider evaluating your tenant quality by assessing the rent records. Find out if tenants are current on their rent, the consistency of their security deposit (if available) with the lease, the ones on pre-paid and auto-pay, etc.
Asking all these questions will open your eyes to all you need to know about the facility before making financial commitments.
Conclusion
While the purchase of self-storage facilities can be a life-transforming investment opportunity, it’s a serious undertaking. It requires embarking on thorough research of the target property, the competition, and potential to justify the risk. Meet with self storage investors here if you want to pursue this investment route.
