How to find self-storage investment opportunities?
Because self-storage investing is so desirable these days, many sellers are not willing to part with their self-storage facilities. However, this does not mean that you cannot get into the self-storage industry. There are plenty of properties that are sitting vacant that have the potential of being turned into a self-storage facility, and these often represent great real estate investing opportunities.
There are plenty of properties that you may not have considered to be self-storage investing opportunities, for example, that old bowling alley or that empty ice skating rink. How about that big box retail store that has been empty for the past few years? You might even want to get creative, there are old industrial buildings that can be changed into storage facilities. I like to find out the history of these “Junkers” as I like to call them. You are looking for a big building that can hold a lot of self-storage units for your conversion. This property type is increasingly popular in the self-storage industry and has the power to attract the seasoned self-storage investor as well as the real estate investor who is looking to diversify their portfolio by investing in storage facilities.
Turning old building into profitable self-storage facilities
Once you have found the old building you want to convert into self-storage units, the next steps are to turn the property into an investment opportunity. For this, you will need to plan your facility carefully and that means researching your customer base, calculating your operating income, factoring in maintenance costs as well as putting together a solid business plan that is likely to attract investors keen to get into the self-storage industry. You can only consider your self-storage deal to be a good one once all those bases have been covered, and one of those is parking.
You do not need a ton of parking, find out what the minimum parking your city will allow you to have before putting in planning for your self-storage business. You know that you are never going to have all your tenants there at the same time, but the city may still require a lot of parking. If they require a lot of parking stalls, then get creative on where you place your parking stalls. Depending on the type of building you are converting will depend on where you are placing your parking. Remember that you can put entrances on all sides of the building of your self-storage conversion. You can put parking everywhere if you need to, to be compliant with city ordinances.
If you have a lot of parking left over, this tends to be true when you are dealing with big box stores, find out if you can convert that into storage for RV Parking or Boat parking. You may want to rent out U-hauls as part of your business model, this extra space allows you a place to put those vehicles. You can cross-utilize every inch of the space that you purchase to make the most out of your self-storage units. Self-storage properties that work on that model are often very attractive to investors because they often have a steady customer base and are able to attract even the most demanding of customers such as those looking for vehicle storage space.
However, even though such properties have the power to attract real estate investors, the downside of such a self-storage ideal is the maintenance costs associated with the large parking lot. To get around that, the location of the property is paramount as it is usually the primary factor taken into consideration by real estate investors. In essence, the better the location of your self-storage property the more likely you are a real estate investor will take interest in it.
Planning your self-storage facility
Start by checking with planning and zoning to make sure that the current zoning will allow you to convert the property into self-storage. Usually, the zoning is already zoned so that you can convert the building into self-storage, you just want to cross your T’s and dot your I’s. If it is not zoned for self-storage, find out if you can get a variance from the city that will allow you to turn the building into self-storage.
One of the great things about self-storage conversions is how quickly you can get them up and running. When you start with new construction, you have months of working with the city putting together plans, getting approvals for new construction, etc. When you start with a building that is already built, the process is much faster. This allows you to get from the planning stage to the opening stage in a shorter window of time; a clear advantage for this type of commercial real estate.
Other ways to convert self-storage facilities
Another aspect of self-storage conversion is that you can change the class of an existing storage unit. For example, if you change out the lighting, the security, and the doors, you may be able to convert a facility from a Class C property to a Class B property. So, modernizing an existing storage facility could prove a lucrative investment opportunity, particularly if you do not have the budget to convert an old building into a self-storage unit.
Other upgrades you might want to make to an old self-storage facility include up-to-date climate control and many other little maintenance jobs that will add value. Doing these changes might sound simple but they are the little details industry experts will look out for when they are on the lookout for their next commercial real estate investment. Either way, the self-storage market is hot right now!
How to Find your new self-storage facility
So how do you find a new property to convert into self-storage? Simply do an internet search for properties that have a low cost per square foot. You know what ugly buildings look like. The next step is to determine if this property is something that would work as a conversion into a self-storage business? Our series of blog posts will take you from finding that cheap real estate to knowing if you can convert it into a Self-Storage Facility. We will take you through all the steps from finding the property to convert to convincing investors to back your investment into a new facility or even support the construction costs of converting old buildings into self-storage facilities.
Another way to find these investment opportunities involves getting in touch with a real estate broker who specializes in the conversion of old buildings. They will be able to advise you on the location, the tax benefits you might be able to receive by converting the building, and the construction costs.
Self-storage investing: the location
The next thing that you want to look at when you are considering a conversion of this location into a self-storage business! Location, Location, Location is still true in the self-storage world. If you are looking at a building that has 3-4 properties between you and the majority of the residential population, you are out located. You need to be in an area that is easy for people to see on their regular commute and that is not very far from where the residential population is.
Don’t forget, location is key to attracting both new tenants and investors to your storage facility. If they cannot see it or if it is too far from their home, they will look at other storage facilities. So, in that sense, self-storage is no different from other types of commercial real estate.
The Next Steps
For more on how to determine if your location is good for self-storage conversions, check out our next blog on conversions to further expand your knowledge on this type of facility. As always, Happy Investing.