STEEL SELF-STORAGE UNITS: WHAT INVESTORS SHOULD KNOW BEFORE BUILDING OR BUYING

Self-storage facilities continue to proliferate, and the activity appears to remain steady even in times of economic downturn. When people feel flush, they buy stuff and then need somewhere to keep it. When the economy dips, people move around or become displaced and need somewhere to keep their belongings while they move or downsize their homes.

Steel self-storage facilities are particularly durable investments in more ways than one. Besides the stability of your investment in the industry, a self-storage unit built of steel is an extremely durable piece of real property that will be rentable for decades. The default rate on loans for self-storage businesses is one of the lowest of any industry and financing is easily accessed from multiple sources.

Self-storage facilities are built to generate income from the very beginning and appreciate over time if operated properly. These are not just buildings; they are businesses to market and manage.

Before you invest, here is what you need to know about buying or building a new steel self-storage facility.

INTERESTED IN BUILDING A SELF-STORAGE FACILITY?

LEARN ABOUT THE OPTIONS AVAILABLE THROUGH STURDI-STORAGE »

PRICING
As you may have guessed, self-storage is hot right now. In primary markets, investors should be ready to pay top dollar to win the sale of an existing self-storage property.

If you choose to build, here is a breakdown of construction pricing:

Single-story self-storage construction costs about $35 to $45 per square foot. The metal building structures represent about 25% to 30% of the overall construction costs.
Multi-story self-storage construction, including landscaping, office, and off-site improvements will cost around $42 to $70 per square foot.
A construction loan may be more difficult to obtain than a mortgage for an existing facility simply because the construction loan is based on the financial strength of the borrower whereas a commercial mortgage is based on the cash flow of the business you are purchasing.

If you decide to purchase an existing facility, review whether the price is based on current financial performance or expected pro forma. A pro forma-based price is riskier since it is a projection rather than a historical number. Also, find out if the financial information includes a management fee and payroll; modest facilities are often owner-managed and do not have a payroll or management fee.

Since the primary market is so expensive, you may want to concentrate on secondary and tertiary markets. Once you have purchased, expect to wait four to five years for the return on your investment.

PICK YOUR LOCATION, LOCATION, LOCATION
The adage of real estate still stands. Follow these tips to select an appropriate property to consider.

Is there decent access?
Is it visible to moderate street traffic at a minimum?
Are there other facilities within a three to five-mile radius of the property?
If you are considering an existing facility, think about whether the buildings appear to be well maintained.

ANALYZE THE LOCAL MARKET
Self-storage has moved out of the industrial park and warehouse zone and closer to where the customers live. You need a facility, or vacant land zoned for self-storage close to the population center.

Your top two questions to ask are:

Will the market support another self-storage facility?
How many competitors are in the local market?
A market feasibility study will answer those questions as well as help you determine the best mix of units for the area. Will you need more boat or RV storage? Do you need to include climate controlled units?

When evaluating management and operations for an existing facility, use the economic occupancy instead of the physical occupancy. A metal self-storage facility may have high physical occupancy, but if rents have not increased for some time, the economic occupancy may be lower than you would expect.

You should learn whether other self-storage developments are already being planned in the area and if they will occupy a better location than yours. If occupancy levels at competing facilities are weak and the rental rates low, your facility will not be feasible.


roll forming machine price Purlin Roll Forming Machine light steel frame machine manufacturers