“Hey Scott! I’m looking for some ideas on how to get started. I listened to a few BP podcasts yesterday on self-storage, launromats, RV parks, etc. but was hoping to get a bit more granular on specific steps one should take in order to:
- explore the market (resources for this – where to look, etc.)
- find prospective properties (on-market and off-market)
- valuation methods to gauge the potential profitability
- understand the expectation of costs – aside from buying the property, what other things should I be thinking about?
These are just to name a few. Aside from basic investing knowledge and the podcasts I’ve listened to, consider my a clean slate with no habits. Any guidance will be helpful and valuable. I do have a family friend in Washington State who owns a few units in a small town that I can tap into for knowledge, and will certainly do so in parallel to this.
Many thanks in advance.”
For starters, congratulations & welcome to Self Storage investing. If you’re serious about making a go of this you’re going to want to learn all you can about Finding, Evaluating, Purchasing, & Managing a Self Storage Facility. It just so happens I know a guy who literally conducts a 3-Day Academy on this every few months…
But seriously, shameless plug aside, that (learning & doing) is indeed what it takes to becoming an owner/operator. You can piece this together through perusing the internet, subscribing & reading posts or blogs from Inside Self Storage, the national & your state Self Storage Association, & other knowledgeable experts, and so forth.
Here’s my answers to your questions above:
- I typically recommend searching for facilities in a 2-3 hour drive radius around where you live, for a variety of reasons – mainly focus. Once you start looking you’re realize that there’s lots of Facilities available nationwide and if you’re looking at anything, anywhere, and you’re a blank slate, brand new – you’ll probably be quickly overwhelmed. Plus it’s much easier to visit if you decide to possibly move forward.
- You need both methods, as you’re going to want some diverse marketing channels to generate leads. Of course, there are pros & cons to each. On-market: all of the information is there but you’ll typically not going to find screaming deal. Off-market: is where the gems are, but typically you’re going to have to build a relationship first before you can begin to the details on a Facility so it takes much longer than just looking through an already-created OM.
- Typically there are two ways. The more popular is the Income Valuation (how has the Facility performed over the past 12 months? aka NOI/Cap rate) versus the Appraisal Method (comparing to other like Facilities nearby. Nearby typically tends to be many, many miles and it’s hard to get a very close comparison.)
- The #1 concern besides the cost of the Facility is “how are you going to pay for it?”. Your financial assumptions (cost of borrowed money) is going to play a HUGE role in how this gets structured and whether it is a deal or not for you.
I hope this helps and wish you luck. If I can be of any help – please reach out to us!