Self Storage Opportunity

7 Replies

I have the opportunity to but a self storage development site for next to nothing, but I know nothing about this type of business.   Anyone here built one before?  This one is climate controlled, 60k sqft with 500 units.   I'm thinking $75 /sqft including site work?   Its a very nice, higher end facility.   Let me know if I'm way off.  I appreciate any help.

You have the opportunity to buy land zones for it, or a facility?  As it is unclear from your post.  I know that both Michael Wagner and Scott Meyers on this site have some experience with self storage development and running facilities.  Not sure about your area, but that price is in line with what I've seen for a single stor y, climate controlled facility (and potentially a bit high depending on if you do the general yourself).  


Though if you are asking this, you should probably also consider all of the risks of development, such as if the area has an oversupply, if you have deep enough pockets for it (as there will be significant equity contributions needed for the loan and for holding costs until you can get to stabilize occupancy, etc).  If you want to go forward, I would suggest that you get a feasibility study done and if it is good and you still want to, to do a commercial site apprasial/study.

Originally posted by @Christopher Lombardi :

I have the opportunity to but a self storage development site for next to nothing, but I know nothing about this type of business.   Anyone here built one before?  This one is climate controlled, 60k sqft with 500 units.   I'm thinking $75 /sqft including site work?   Its a very nice, higher end facility.   Let me know if I'm way off.  I appreciate any help.

 Unique very specialized niche market of real estate.  It's a lot like a retail business only you're also the operator.  There's a lot of upselling--boxes, packing materials, etc.  Recommend you do a lot of due diligence before jumping in.  Don't know what type of projects you work on typically but a 60K SF SS development would be a big project to handle.  Not sure about costs in your area but $75/SF sounds light.  

You got some good advice above and I appreciate the shout out @Dave Peirce! You will definitely want to get smart before diving in. @Scott Meyers is your guy when it comes to ground up development. I prefer to buy and expand existing properties. That said, $75 per square foot is in the ballpark. Generally speaking, the industry standard for non climate controlled single story is $30-35 per square foot all in (exclusive of land). Climate controlled starts at $60-65 and climbs from there depending on market, site and ammenities!

Thanks for the shout out, @Michael Wagner .  Yes, we've done a lot of development, re development, and ground up facilities, and while those numbers are in line, remember, you always need to look at the value-add based on the locality.  What is in the immediate area, what is slotted for development in the near future, and what are the demographics for climate controlled facilities nearby.  For example, in many markets that were overbuilt in the last two decades, municipalities have imposed moratoriums on new development or the current facilities consumers are using are poorly run and not user-friendly.  In such a case, adding value and/or expanding the facility offers incredible value to the consumer and the ownership.   

It's not especially clear to me from your post whether this is an existing facility or a ground-up development since you said, "it's a very nice, higher end facility" and earlier had referenced "a self storage development site" so if you are looking at an existing facility, by all means, get painfully clear in the due diligence phase.  We routinely see bad bookkeeping, questionable (or optimistic) rent rolls, and all manner of numerical freewheeling in financials, so make sure the numbers are accurate, and then, check again.  

If you are dealing with an existing facility, then I'd strongly recommend you understand the value-add you and your team will bring aboard with the purchase. NOI is your friend in these deals, especially when it comes to an eventual exit strategy.

@Scott Meyers . Thanks for the response. It’s land with approvals to build a very high end two story climate controlled facility. It would be three buildings with 30k sqft each. Just not used to doing this type of development. The engineer was estimating 900k per building but I wanted to double check the numbers for getting in. The seller is willing to sell to me for nothing with some share in the profit on the backend. I’m just trying to figure out what to expect.

Christopher Lombardi - Just seeing this post of yours and I wanted to state the obvious - if you'll be building three buildings, by ALL means, set these in phases.  You'll not only have revenues but more importantly, DATA ... and that data can, in many instances, allow you to lower the cost of money for phase two and three.  

As to the seller and their desire to simply take a touch on the back end, please please please get those expectations in writing!  All too often, we find these sort of "handshake" agreements in place in our own due diligence for purchases.  Obviously, this can make for considerable challenges in clear title and the sales process down the road.  

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