When you’re buying, building or expanding in self-storage, you want to make sure you do everything right so that you can squeeze as much revenue as you can out of the facility.
Here are seven tips for ensuring profitability if you’re undertaking a self-storage facility acquisition or construction project.
1. Know when to expand.
“Operators should not wait until they are completely full to plan an expansion,” said Terry Campbell, vice president of sales and marketing at BETCO, a supplier of self-storage buildings.
“If you’re 80 percent full in the fall, take action or you’ll miss opportunities,” Campbell added. “A self-storage facility with no space is like a convenience store with no milk or bread.”
2. Buy the right property.
If you’re going to build a facility from the ground up, pick a piece of land that already is zoned for self-storage. Securing the necessary permits or rezoning can take months or even years.
3. Check out the competition.
Ideally, you’ll hire a third party to help when you’re buying, building or expanding. That third party, such as a consulting firm, can help you scope out how nearby facilities are operated.
“It’s important to know who is the best in the area and why,” said self-storage consultant Ben Burkhart, owner of StorageStudy.com. “It’s also important to identify the obsolete players—those who still operate like it’s 1980. In addition to the objective data, the subjective read is important.”
4. Review the rent.
Before you write even one check for a purchase or a construction project, you should investigate the rental rates of nearby facilities. One potential deal-breaker is if a facility’s rental rates are above the market rates.
“If current tenants move out and are paying above-market rents, it can take six to eight months to build replacement tenant rates to the same level,” said Ben Vestal, president of the Argus Self Storage Sales Network.
5. Count the cars.
Drive-by traffic is vital to filling self-storage units, so it’s wise to pick a location where at least 5,000 cars pass by each day, said Jamie Lindau, sales manager at Trachte Building Systems, a supplier of self-storage buildings. The site should have a large and growing population within a three-mile radius.
“Ideally, your competitors should be at 90 percent occupancy or higher to justify building,” Lindau said.
6. Consider the size.
Burkhart said operators often think too small when building a facility.
“If you’re planning to have less than 200 units, maybe you shouldn’t build at all,” Burkhart said. “It’s difficult to operate cost-effectively with a small number of units, especially when you’re competing against operators with 500-plus units who can scale their resources.”
7. Map out your marketing.
Planning for marketing should start at least three months before a new or expanded facility debuts. Take into account both online and offline marketing initiatives. For starters, you’ll need to set up an attractive, user-friendly website.
To learn more about how to ensure profitability when buying, building or expanding in self-storage, download this free white paper: selfstora.ge/buildbuyexpand.