Self-Storage Investing: 10 Questions to Ask Before Buying a Facility

Self-storage can look simple from the outside.

Rows of units.

Monthly rent.

Limited interior improvements.

But evaluating a self-storage property requires much more than counting doors.

Before acquiring a facility, investors should understand the business operating inside the real estate.

1. What Is the Occupancy?

Understand both:

• Physical occupancy

• Economic occupancy

A facility can appear full while actual collected revenue tells a different story.

2. What Is the Unit Mix?

Review the mix of:

• Unit sizes

• Climate-controlled units

• Drive-up units

• Specialty storage

where applicable.

The unit mix affects customer demand and pricing.

3. What Are Current Rents?

Do not evaluate only asking rents.

Review:

• Actual in-place rents

• Discounts

• Promotions

• Delinquencies

4. What Does the Competition Look Like?

Understand nearby:

• Facilities

• New construction

• Pricing

• Unit availability

• Amenities

5. What Are the Operating Expenses?

Potential expenses may include:

• Payroll

• Management

• Insurance

• Utilities

• Repairs

• Security

• Marketing

• Property taxes

6. What Is the Physical Condition?

Inspect:

• Roofs

• Doors

• Pavement

• Drainage

• Gates

• Security systems

• Electrical

• Office areas

Deferred maintenance can materially change the investment.

7. Is There Expansion Potential?

Additional land may appear attractive.

But verify:

• Zoning

• Permits

• Site constraints

• Drainage

• Utility capacity

• Development costs

before assigning value to expansion.

8. How Is the Facility Managed?

Management can strongly influence:

• Revenue

• Collections

• Customer experience

• Expenses

• Occupancy

9. What Capital Improvements Are Coming?

A property may require near-term investment in:

• Roof

• Asphalt

• Security

• Gates

• Signage

• Technology

• Unit doors

Include these in the underwriting.

10. What Is the Exit Strategy?

Are you planning to:

• Hold

• Improve

• Expand

• Refinance

• Sell

The acquisition should support that strategy.

Self-Storage Is Both Real Estate and an Operating Business

That is why the analysis should not stop with:

Price per square foot.

Investors need to understand:

• Property

• Revenue

• Expenses

• Management

• Capital requirements

• Market

together.

With investment real estate, the building is only part of the deal.

The economics matter just as much.