The self-storage industry continues to witness tremendous growth despite the economic challenges that have rocked the country in recent times. While it may not be the largest market in real estate, it has managed to become a subject of interest in Wall Street and among seasoned investors. While it might take years to see a return on your investment, it’s a venture worth undertaking. By definition, self-storage is a type of real estate with low capital expenditure and maintenance costs that can provide a steady cash flow even during a down period. It offers investors new and innovative investment opportunities with little or nothing to do with high-priced buildable land and buildings.
One advantage of self-storage facilities is that they can withstand both economic prosperity and downturns. Despite the fluctuation in demand and pricing dynamics, its market continues to record significant growth and attractive capitalization rates. If you’re considering exploring this industry successfully, you must learn how to buy a self-storage facility. While it might sound all easy and straightforward, rest assured that it isn’t. It requires adopting a holistic approach and possessing excellent bargaining skills. Read on to see some of the steps involved in making a good purchase.
1. Select an Area of Interest
Selecting an area of interest is the first step towards buying a self-storage facility. It involves deciding on the specific location you want the property. While doing this, you might want to consider ease of access and control before settling one. While it might not be a strong determinant of its success, driving to your facility whenever you want helps ensure more effective management. Consider looking at storage properties within proximity to your residence so you’ll be able to go visiting as much as you want.
2. Embark on an Extensive Research
Buying a self-storage facility is an investment and business endeavor requiring gathering the facts and data surrounding the venture. There’re several real estate investment platforms where you can read about investing in self storage facilities. Get acquainted with all it takes to own and operate a storage facility. Besides that, do your due diligence on the skill sets, capital, marketing strategies, maintenance, projected income, and other information that will be instrumental in the successful running of the business. Once you’ve done all these, then you can proceed to the next step.
3. Compare Options
When scouting for a list of available self-storage facilities, the chances are that you’ll come across more than one self-storage real estate for sale, all possessing diverse attributes. The onus is on you to weigh them and figure out which one would be ideal for your investment goals. Some factors to consider when comparing options include the location (a convenient, highly accessible, and moderately populated is ideal), condition of facilities (the present condition and expenses for potential maintenance), number of units available (the more, the better), price, the material used in constructing the facility, etc. With these factors and specs, it won’t be long before you find the ideal option that matches your criteria.
4. Questions Are Necessary, Ask Them
Questions are essential – a curious mind is likely to learn how to buy a self-storage facility faster than a quiet one. Even when you’ve found the ideal facility, asking questions is essential. Making inquiries about a subject of interest never killed anyone. Instead, it opens your eyes to some facts that are paramount to decision-making. Asking questions is also part of the due diligence process. Before finalizing deals and making financial commitments, questions you need to ask the owner of the property you intend to buy must border on their reason for selling the property, its present occupancy, the number of storage units buildings for sale, current expenses, property condition, how tenants pay their rent, etc. Besides asking questions on the business asset, it’s also essential to see and review documents that deal with finances, occupancy, tax, and contracts. Doing this will give you a complete picture of what you’re getting into and how to navigate the business.
5. Review the Asking Price
Now that you’ve gathered a series of information about the business and its assets through research and inquiries, the next step is to analyze the asking price. This stage can be pretty tricky, and it’s where some of the information gathered during your research will be useful. In a situation where the valuation of the facility took place with the help of professionals, the window of negotiation might be small or non-existent. However, if the asking price came from the owner without the input of a third party, you’ve got a great chance at flexing your bargaining skills,
6. Make a Series of Offers
The main idea behind this step is that in your search for an ideal self-storage facility to buy, you’re likely to end up with more than one excellent option, from which you’ve got to choose one ultimately. The idea of which option to select significantly depends on price and your financial capacity. By making a series of offers to several viable options, you’re merely ensuring you get the best price. The goal is to buy less than the asking price, after all. If you make ten offers, you have a better chance of securing the best deal than if you make two.
7. Negotiate and Finalize the Deal
Here’s where your negotiation skills will come in handy. It’s one of the essential things to learn on how to buy a self-storage facility. This stage is often somewhat complicated is better pulled off with the help of a professional self-storage investment broker, as they’ve got extensive knowledge and experience of such a deal. Once you’re satisfied with the information at your disposal and are convinced of the viability of the investment, the next thing is to make an offer and negotiate the deal. Keep an open mind and ensure you leave the table with the best deal you can get. For the legal aspects of the sale, consider hiring a lawyer. Their presence will ensure that no one rescinds on the terms of sale.
If your investment and financial goal for 2021 is to invest in a self-storage facility, you’re on the right path. It’s a venture with great potential. However, don’t go at it alone – consider the help of professionals that are well-versed in such matters.