Analyzing Self Storage Facility

[Gloria Grotjan]

Looking for guidance on rural Self Storage facility in 185,600 person county. This property is off the beaten path in a historical town of 2,367

Current occupancy is at 92%. Nearest storage facility 12 miles away in another rural town. Besides the due diligence on financials what if anything should I be concerned about?  

[James Seely]

There seems to be a good niche in small town self storage.  I've purchased a couple of self storage facilities in a town that has a population of 1000 with 160 total self storage doors.  We are often full and sometimes have a waiting list! The nearest city (100,000) is 15 miles away and each small town around us has their own self storage facility.

Both deals were different but here are a few things i would make sure to do.

- Look for ways to increase sales.  Is there room to add more units, add outside storage, sell boxes and locks, Uhaul rental.

- Compare the proforma to actual rent.  Sure they say they are getting $80 for a 10x10 but when you look at the real numbers you see a range of prices from $40-$70.  Make sure to negotiate price down based on that.

- On the purchase contract be sure to write in that the ACH withdrawls should be made by the seller with a check delivered at closing (assuming the draw is on the 1st and you are purchasing on the 1st).  The last facility I bought the sellers decided not to do that even though we had discussed it and it made for a painful first month.

- Both of the facilities I purchased were taking a loss as far as the IRS knew.  This can make it difficult to know what the true expenses are.  Find someone in a nearby area that owns self storage and find out what their actual expense numbers are.  This might be difficult if they see you as a competitor though!

- Make sure it's not in a flood zone

- Our state has sales tax on self storage.  Make sure the sellers aren't including sales tax in their sales numbers and if they are adjust the purchase price down to account for that.

- Factor in any increase to property tax.  If the property taxes are currently based on $100,000 value and you purchase the property for $200,000 your taxes could get doubled.

Let me know if I can answer any specific question and good luck!

James