How Do Buyers Determine if a Self-Storage Facility Is a Good Deal?
There’s an old real estate saying, “You make money when you buy.” In other words, how much an investor pays for a property will greatly impact the long-term success of their investment.
With that in mind, our team of real estate professionals feels especially compelled to find self-storage facilities that we believe are potentially undervalued. The question is, how do we determine if a self-storage facility is a good deal for our community of private investors?
In our experience, identifying undervalued facilities requires careful inspection, industry expertise, and data-driven analysis of six key areas:
Demographics
We like to start by analyzing the demographics of the population surrounding a potential self-storage facility. Understanding the communities around a facility can tell us a lot about the viability of a self-storage investment.
For instance, growth data in the surrounding communities indicates whether residents are generally staying put or moving out of the area. Understanding relocation patterns, especially in those secondary and tertiary markets where we tend to operate, can shed some light on the potential pool of self-storage users in a community. Measuring factors like average income and local residents’ age can also help us determine how likely residents are to become self-storage users.
Understanding the demographics surrounding a facility is an important part of the buying process, as it helps our team determine if the facility is located in an optimal location or potentially poised for future challenges with growth.
Competition
As is true when purchasing almost any physical business location, it’s important to understand the competitive landscape around a potential new self-storage facility. This will help us determine if the surrounding area is underserved or oversaturated.
However, if there are additional facilities in the area, that doesn’t mean the facility is not worth pursuing. When researching potential competitors in the area, it’s also important to consider the current condition of those facilities. We want to look specifically for opportunities to provide a competitive advantage, which would allow us to differentiate our services and better market the facility to potential users.
For instance, a competing facility may lack modern technology and software, making their processes clunky and undesirable to customers. Or, they may be outdated and lack standard safety features like security cameras, secure fencing, or monitoring systems.
Pinpointing key competitive advantages and differentiators in a saturated market is critical to ensuring a confident investment.
Physical Condition
Conducting thorough facility inspections and assessments is a key step in determining the facility’s physical condition and estimated value.
We enlist the help of third-party experts to provide on-site inspections, which can help us evaluate what sort of physical state the facility is currently in. Does it require costly, structural work in order to operate, or are the repairs more cosmetic in nature? Generally speaking, the more structurally sound the facility is, the less our team will likely have to spend on future repairs and fixes. Lower costs can help us better deliver optimal ROI for our investors.
Technology
Increasingly, self-storage facility customers expect a digitally-led experience. Online reservations, automated digital payment, automated access control, smart security systems, digital climate control monitoring, contactless moving processes, and other automated facility operations have become the standard.
While we don’t expect investable facilities to have perfectly seamless technology, it’s important to us and our investors that a facility includes some technology infrastructure upon which to build. And if they don’t, technology is often the first major investment we will make into a new facility, boosting its value and the customer experience significantly.
Expert Consultation
As mentioned earlier, when we’re evaluating properties, facilitating deals, and conducting due diligence on a facility, we leverage the expertise of third-party experts and consultants to help us determine if we’re moving in the right direction.
We value the opinions and insights of those with specialized expertise outside of our own. Plus, having additional eyes on the deal gives our investors confidence that we’ve done everything we could to avoid potential pitfalls and add strong investments to our portfolio of self-storage facilities.
How Belrose Evaluates Self-Storage Deals
For our community of private investors, our team of real estate experts leverages our valued connections with other industry professionals to find off-market facilities that fit our needs. Over time, we’ve developed a rigorous research and due diligence process that enables us to weed out those facilities we believe aren’t suitable for our investors while finding those with the most potential to turn a profit.
Want to learn more about how we find the right deals for our investors? Schedule a quick chat with Belrose CEO Joe Downs today.