Evaluating a Self-Storage Facility– How Do I Evaluate The Area?

You found the perfect property, the numbers look good, you are ready to make an offer, but first, you just want to check one more thing. You should make the offer with a due diligence contingency. You don’t want to spend a lot of time and money doing research on a property only to find out that someone else tied up the property. Always tie up the property with a contingency and then begin your research. You want the offer to be contingent on a lot of things, but especially contingent on a feasibility study. This can be a lengthy process so give yourself 3-6 months to do your due diligence.

When you are evaluating a property, one of the things that you should evaluate is the neighborhood. Location, Location, Location applies to self-storage too. You want to make sure that there isn’t another self-storage property between you and your target market. If there is, potential tenants are more likely to go to the one that is closer to them. People like convenience when it comes to self-storage. Most people rent within 3 miles of home.

The first thing that you need to do is a demographics report. Start by drawing a 3-mile circle around your property. How many other self-storage units are within that 3-mile radius? Now if there are some major boundaries in that area, like a river, or a state line, you don’t want to cross that boundary. If you are in a more rural area, you may go out to 5 miles. If you are in a very populated area, then you may only go a few blocks. You are trying to find out how much competition there is in that area. Once you have this then you can determine your supply index. We will talk about this in our next blog.

Now that you have found how many properties are in the area, you need to evaluate each property. How old are they? How far away are they from your property? Are they brand new or are they older properties? If they are older, are they well maintained?

What does your property look like in comparison? Appearance is important to getting new clients. If your property looks run down, old and unsecure, you are less likely to get new tenants than the updated, nice looking property down the street that has the same rental rates. You want your tenants to feel safe. In addition, you want to make sure that your property is up to code. What are the requirements? Are you going to have to upgrade what you currently have to be up to code? How good is your signage? Can people easily find you? The most important place you need to be is page 1 of a Google search! However, you also need a sign that allows people to be able to easily find you.

As you evaluate each of these properties, you want to find out several things about them. What kind of amenities do they offer? Does your property offer similar amenities? What kind of visibility do they have? Does yours compare? What are their current rental rates? Is yours lower, higher or the same? You need to really understand your competition.

The best way to find all of this out is to have a feasibility study done. However, you want to know the basics before you order one. They are expensive, but worth it. If your property obviously isn’t going to meet your expectations after you have done basic research, then you don’t need to move forward. However, if after your initial study you like what you have found, then it is time to determine your supply index. Join us in our next blog to find out why this is important.