Storage Unit analysis

[Dustin Brackins]

Hi, I'm brand new to BP so I'm sure this may have been asked before but her goes... I have an opportunity to purchase a 262 unit storage facility and can structure a deal with no money out of pocket. I'm trying to find the right purchase price however they have an almost 30% vacancy/delinquency rate. Average in my area is around 5-10%. Does anyone have insight on what performance indicators I should be looking for? This would be my first storage facility, my other un its are a mix of commercial and residential. Thanks for the help, Dustin!

[Scott Meyers]

Hey Dustin!

From a high level, you need the following bullet points answered (numbers where appropriate, narrative & thought-process, too):

1) What is the VALUE? (This is basically REVENUE minus EXPENSES = NOI / CAP RATE = VALUE)

2) What are the FINANCIAL ASSUMPTIONS (how are you gonna pay for that)?

3) Where will you take this Facility in 3-5 years? PRO FORMA

4) How are you going to manage it (IOW, you're buying a business, get away from the spreadsheet and think this through...you need to be able to explain it to yourself, your spouse, the bank, potential partners, etc.)

5) "How am I going to make money?" (That question needs to be answered for whomever might have a financial interest in your Facility, see #4 above)

Again, high level, but that's the best way to describe it in layman's terms. Answer those five and you're well on your way to whether or not to move forward.

Please note that there is a lot more to type or say or teach on how to properly evaluate a Facility, but all of those five above are imperative.

Good luck!  Please contact me if I can be of more in-depth help.

Scott