THE TOP 7 DUE DILIGENCE CONSIDERATIONS WHEN BUYING A SELF-STORAGE FACILITY By Jeremiah Boucher

Investing in a self-storage facility can be a lucrative venture, but like all real estate investments, it requires thorough due diligence. Before diving into such a commitment, it's essential to understand the various factors that can influence the success and profitability of a self-storage facility.

Here are the top seven things to watch out for during your due diligence process, and a quick checklist of the most important factors for each.

#1 Location, Location, Location

Market Analysis: Understand the local market demand. Is there a growing need for storage solutions in the area? Look at population growth, urbanization trends, and local economic factors.

Competition: Identify other storage facilities in the vicinity. How do their rates, occupancy levels, and amenities compare?

Accessibility: Ensure the facility is easily accessible from main roads and highways. Check for any planned infrastructure changes that might affect access in the future.

#2 Physical Inspection of the Property

Condition: Conduct a thorough inspection of the facility to identify any structural issues, water leaks, or potential maintenance concerns.

Security: Examine the security measures in place, including surveillance cameras, access controls, and perimeter fencing.

Expansion Potential: If you're considering future expansion, check the available land or space and local zoning regulations.

#3 Financial Analysis

Revenue Streams: Beyond storage unit rentals, identify other potential revenue sources, such as retail sales (locks, boxes) or truck rentals.

Expense Review: Scrutinize the facility's historical operating expenses. Look for any anomalies or areas where costs can be reduced.

Occupancy Rates: Review historical occupancy rates. Consistently low rates might indicate an oversaturated market or operational issues.

#4 Legal and Environmental Concerns

Title Search: Ensure there are no liens or encumbrances on the property.

Environmental Assessments: Especially if the facility is older, consider conducting an environmental assessment to identify potential contamination or other environmental risks.

Zoning and Land Use: Verify that the property's zoning allows for its current use and any planned expansions or changes.

#5 Operational Assessment

Management: If the facility has on-site management, evaluate their performance and consider whether you'll retain them.

Software and Technology: Review the facility's management software, security systems, and other technology. Are upgrades needed?

Marketing and Online Presence: Assess the facility's online reviews, website quality, and overall online presence.

#6 Customer Contracts and Relationships

Rental Agreements: Review existing rental agreements. Are there any unfavorable terms or long-term contracts at below-market rates?

Customer History: Understand the customer base. Is there a high turnover, or do customers tend to rent long-term?

Deposits and Payments: Ensure that security deposits are accounted for and that there are no significant outstanding payments.

#7 Growth Potential and Exit Strategy

Market Evolution: Consider how the local market might evolve. Are there significant developments planned that could increase demand?

Facility Upgrades: Identify opportunities to add value to the facility, such as adding climate-controlled units or enhancing security features.

Exit Strategy: Even before buying, think about your long-term strategy. How easy will it be to sell the facility if needed? What are potential future valuations?

Conclusion:

Investing in a self-storage facility can offer significant returns, but it's crucial to approach the process with a meticulous eye. By focusing on these seven areas during your due diligence, you can mitigate risks and position yourself for success.

By Jeremiah Boucher

Jeremiah Boucher, a self-storage industry expert, has rapidly built an impressive 1.5 million square foot portfolio consisting of 61 properties in just 7 years. Specializing in suburban and exurban properties, he has successfully navigated the market by purchasing directly from original mom-and-pop owners. Jeremiah provides valuable insights, lessons learned, and strategies for finding and financing deals, providing invaluable guidance for those interested in exploring the lucrative self-storage sector.