Storage Units: What Should We Consider Before Buying?

Question

We are thinking about purchasing storage units. What are the main considerations we should focus on before making a purchase? i.e. location, number of units, local income levels, etc.

Storm S. · Answer

@Norman Wright Jr. storage is definitely a speciality real estate sector unlike some of the traditional real estate sectors you now have two components in the deal the real estate side and now also a operations side. Getting a good deal but being a bad operator can make your venture unsuccessful I would suggest partnering up with a successful operator to gain some experience and to reduce your risk. On ground up developments lease ups can take 4-5 years for the property to stabilize

Brad L. · Answer

Demand for unit size varies based on location. For example, 10' x 20' units and larger are in much higher demand at my facility (population of ~45,000 within a 15 mile radius), which is located in what I'd consider to be a more rural, but still city, community right on Lake Michigan. A lot of renters store classic cars, boats, 4 wheelers, snowmobiles, etc. and my 8'x10' units are much more difficult for me to rent.

Not to sound cliche, but location is everything in the self-storage industry. My facility is located in the middle of a residential area (rezoned residential lots) and I have nowhere near enough units to keep up with demand, but I know the facilities on the outskirts of town, which although they are mostly still full, have a harder time doing so and often have lower prices.

I'd imagine in the bigger cities maybe the smaller units are in higher demand due to renters storing more household items and less vehicles, boats and other toys, but maybe someone that owns a facility in a bigger city can comment on that.

The one thing I really dislike about my facility is that there is no additional land build more units, so when purchasing an existing facility keep that in mind. If it doesn't already have 125+ units, you may want to find something with room to expand.

In my experience income levels don't play a huge role, as I have tenants of all income levels. The exception of course being if your facility has 15'x20' units for $600/mo in a low income area, or something extreme like that.

Number of units is a tough one because that can vary from owner to owner. Do you plan to manage or will you hire that out? On-site manager? There are a lot of options for remote management of a facility, but if you can't physically get there every couple weeks at minimum, you may want management and would have obviously have to figure out at what number of units that would work.

Any other questions?

Garrett Blanchard · Answer

Interested in this too...

Blake Drennan · Answer

@Norman Wright Jr. would be happy to connect. I’ll send you a PM to find a time to chat.

Norman Wright Jr. · Answer

@Blake Drennan Thank you for that very pragmatic information... That is what I am searching for. Solid info from those who have put it to practice.

I'd love to have a conversation with you if you could find the time?

Thanks again.

Blake Drennan · Answer

@Norman Wright Jr. @Garrett Blanchard here is the viewpoint from the development side of storage, which I imagine is still applicable for an acquisition strategy- One of the main things we are wary of is oversupply, especially with so much supply being brought to the market these days. We have compiled a list of "go / no go" metrics that help us decide whether to move forward with a project or not. I would suggest compiling a list yourself based on your own investment criteria and what market you are focusing on.

For example, some of the things we look at:

• 3 and 5 mile population and population growth
• 3 and 5 mile facility square footage AND pipeline (how many existing + how many are coming online soon... you don't want to be leasing up at the same time as a competitor)
• Daily traffic / visibility
• Occupancy of competitors
• Barriers to entry (lots of other areas zoned for storage?)

For unit mix, this totally depends on what is supported in the market as Brad mentioned above. Try to gather unit mixes from local operators and get a feel for what units they wish they had more or less of. Unit mix is a big deal for reaching a stabilized occupancy, which is why we have architecture and design in-house at our firm.

Feel free to reach out if you have more questions.

Norman Wright Jr. · Answer

Thanks for the great info @Storm S.

I agree with you... it's not just about a great deal. As with all property Operations is a make or break.

I like your idea of connecting with other operators and getting some mentoring... I will explore that for sure.

Thanks for caring and sharing.

Storage Units: What Should We Consider Before Buying?

Most Popular Reply