The self-storage industry has been one of the most aggressively expanding industries in the United States and is expected to continue growing. When it comes time to sell your self-storage property, here are some tips to help you maximize your return!
Before you consider selling, you need to have your finances in order. Gather all your business and real estate tax records. Correct any inaccuracies, and compile a list of any historic property improvements or issues. Make sure your records are up to date and be prepared to share your income records, expense documentation, tax filings, and capital improvements. Knowledgeable buyers will quickly move on from reluctant or questionable recordkeepers, so it’s best to be prepared.
2. Rent Roll
As part of the sale process, you’ll need to provide a rent roll to help buyers evaluate the potential of your business. Make sure you have a digital file of all your storage units categorized by size, location (interior or exterior, ground or upper floor), type (traditional or climate-controlled), and status (occupied, vacant, charity, etc.). This information facilitates a buyer’s work in determining tier pricing allocations for estimating income projections, and it factors into analyses of market competitiveness.
3. Rental Rates
Part of your self-storage exit strategy should be to raise your existing unit rates to full market potential or as close as you can. This increases your facility’s income, generates financials that are more appealing to buyers, and makes financing more feasible for prospective lenders. Whether or not you are able to get the full market potential rate for every rental unit, you will still be showing the potential to produce that amount of income.
4. Curb Appeal
Impressions mean everything. Make sure your facility is presentable and fully functional. Check your landscaping, lights, locks, doors, roofs, signage, drains, etc. for issues. Get rid of all trash, debris, and graffiti. Clean the office. Maybe invest in some fresh paint.
Even though these sound like common-sense recommendations, the results will add value to your business and property value, which will increase your bottom line. Consider the time and minimal expenses as short-term investments with a great return.
Customers and buyers alike will be interested in the security of their items and the facility in general. Buyers prefer self-storage properties that are equipped with relatively strong security systems.
A security gate that requires users to enter a security code, security cameras, monitors visible to office staff, sturdy storage unit doors and secure locks, and adequate exterior and interior access lighting are important security features for buyers of self-storage facilities.
6. Find a Good Broker
Work with a real estate broker who has a proven process and a track record of adding value. Make sure they have sufficient experience in self-storage commercial properties. Your broker can help you figure out how much the market is willing to pay for your business and what needs to be done to best position it for sale.
A good broker is adept at optimizing pricing and contributes comprehensive real estate market and self-storage industry knowledge to the facility sales process. Applying this combination of skills and knowledge facilitates a smoother sales process and an outcome that ultimately satisfies both parties.
7. Economic Occupancy
Valuation of self-storage facilities (and of various other types of commercial rental properties) distinguishes between physical and economic occupancy.
For example, physical occupancy of a property’s rental units might be 90 percent. However, if the rents are being deeply discounted, the economic occupancy rate (the percentage of potential total gross income) may be only 70 percent. This is a significant factor in loan underwriting. So, adjust your unit rental rates and/or your facility sale price accordingly, and be prepared to answer questions regarding your rationales on both points.
If any of these tips are a little too overwhelming to handle on your own, you can contact us today and we can help you throughout the entire sales process!