BiggerPockets

Hey Guys,
I have a small commercial multi but my main focus has been res. property. I have a question about self-storage and I have never done it before. I have a line on a 42,000 s.f. commercial building in a densly populated area. Scrappers did some serious damage to the building and I can pick it up for under $2.00 a square foot. My analysis of repairs tells me I can have the entire thing rehabbed to a useable self-storage facility for under 400k. I've done my analysis of the local market to determine there is a sustainable market for this facility where it is located. The cashflow is also in order and the taxes are remarkably low - less than 5k per year. I have a strategy for management as there is a retail space attached to the front of this building.

I guess my only questions going further are for experienced self-storage investors. Any pitfalls I need to keep an eye out for? Thanks.

Tim

I dont own any self storage but work with several operators in helping them acquire facilities.

I would say if you can pick up a building for $2 a sq ft, you are in great shape regardless of what you try to do with it.

For storage, I have a client who retro-fitted an old factory into self storage and he said it cost him about $20 sq ft. He is making a killing on the buiding now too.

As for self storage markets and sustainability, the main thing you would want to concern yourself with if there is a high barrier to entry in your market. For storage, that would include large plots of vacant land within a 5 mile radius and/or other vacant buildings in the immediate are with that type of square footage.

Worst case scenerio is that you open up, get leased up, and then someone opens up down the street at lower rents and drags your profit down.

As far as running it, most of the national companies also manager other people properties for about 6% of the gross income a month and they put their brand on it. They may help with helping you with the design, etc..as well, but I am not positive on that.

Your other option would simply be to tie up the property, get it approved for storage and quickly flip it to a storage company.

Sorry....this post is officially ALL OVER THE PLACE!!!! :woohoo:

This is a great thread. I have been thinking of doing a self storage business for some time also. I have researched good locations but I cant seem to get the inside information like people who have ran/run them. Everyone seems to be very hush hush about how they run their business and problems that arise.

Are there any other tips that anyone has?

Try these...

http://www.selfstoragetalk.com/

http://www.insideselfstorage.com/

http://www.selfstorageeducation.com/

Thank you!

Those are great links. You just gave me something to go the next few days!

July 5, 2008

I love that BP forums share links!

Thanks for the info.

I am putting together my first commercial deal and it involves 5,000+s.f. and one of my options is to use it for storage. The weblinks you provided are a wealth of information for me.

Any experience in storage of semi-trailers? There is 2 acres on a state route that I'm researching the codes, rental income, etc.

Regards,

thanks for the links, they are very helpful.

That is the name of my book. I am the leading consultant to the self-storage industry, providing feasibility studies, financing, due diligence and general consulting. If you would like to review your project, you can call me.

This is great business, but it is not for everyone. It is NOT a passive real estate investment. For those who have the right site and the right business plan, it is a FANTASTIC industry. Thanks for thinking about self-storage.
RK

Self-storage is a little tricky. In the past, it was such a great business, that it required very little attention. True, compared to residential real estate, there are no leaky commodes or carpets to replace, but a 42000 ft sq store (note I used the word store, as this is becoming a retail play if done right) will have 370 or so spaces (the right unit mix is critical). That means you are trying to keep 370 spaces full (I think of them as plates spinning in the air). The typical self-storage customer thinks they are only going to rent for 60 days. You have to keep the phone ringing and it is possible, in a well managed facility, that the rrental ates are adjustes EVERY DAY. Fortunately we have software for that. I do not know where you are located, but if you were to visit a Westy's near the City or a similar high volume, high profile, high profit self-storage store, you would see lots of activity. I have seen thousands of facilities across the US with an under educated manager who watches Jerry Springer and reads People magazine all day and says " there is nothing to do" . It is a self-fulfilling prophecy, and it is all at the owners expense. I could go on, but looking at industry trade magazines will lead you to understand how storage, done correctly, is not a passive investment. That is one of the biggest mistakes most new owners make, is thinking this was a 'no brainer' no management business.
The feasibility study is your first major step. Please let me know if I can help.
RK

We have self storage facilities available nationwide for sale or partnership. They were acquired through master leases and are expiring soon.
Feel free to visit www.commercialbuystore.com for details

Thanks