How to Get the Best Price for Your Self Storage Facility
Updated: Apr 18, 2022
Selling a self storage facility can be a stressful experience. For starters, there are multiple different methods to list your facility. It is important to understand all the different methods in order to make selling your facility as simple and lucrative as possible.
The Overview
Let's start with a brief overview and then dig deeper. Selling your self storage facility may seem difficult, but it’s not impossible. With the right approach, you can sell your storage facility quickly and at the right price, giving you the best chance to hit your financial goals and exit with minimal headaches.
First off, let's set the tone - here are some morsels to get you in the right mindset to sell.
Present the Uniqueness of Your Property - There are many factors that must be considered: If you want to attract investors, you’ll need to get creative about presenting your property—and not just in terms of amenities and other financial details.
What makes your facility unique? Do you offer a particularly impressive security system or convenience features? Tell those potential buyers what they can expect when they invest in your self storage facility. Even if it doesn’t move them to action right away, it could give them something interesting to think about when you meet later down the line. In a competitive industry like self storage, every little bit helps!
Highlight the Upgrades You Have Made - In order to sell your self storage facility, it’s important that you show potential buyers that your business is ready for a new owner. Highlight how you have made changes and upgrades over time to make sure your facility has remained relevant in today’s market.
Try including information about any modern amenities that you have added, such as climate control or security cameras. You may also want to mention any services or perks you offer, that can further increase revenue. This includes selling moving supplies, selling locks and storage insurance for tenants.
If there are large nearby businesses, explain how your facility is close and is an option for these reliable business customers.
Understand Current Market Trends - If you're selling a self storage facility, one of your biggest challenges will be attracting the right buyer.
However, if you take some time and learn about current market trends and what potential buyers want from a storage facility, you could end up increasing your chances of making a sale. Researching industry trends can help you create a compelling marketing campaign that focuses on the strengths of your property—so be sure to cover these bases before starting negotiations with potential buyers.
Promote Yourself Online - Marketing your self storage facility is a big part of promoting your business. Whether you're doing it on your own or through a broker, you need to make sure that potential buyers have access to all of your important information as well. The more accessible you are, both online and offline, the more likely someone will get in touch with you. Once they do reach out to you, though, what should they expect? How will you help them determine if your unit is a good fit for their needs?
So that's the intro. Some basic ideas to get you thinking about this process.
You made it this far? Are ready to get to the nitty gritty details?
If yes, then let's go!
There are many important steps to get your facility "sale ready". Here, we will go over each one in detail. In summary:
Decide if you want to sell.
Understanding your business. (by understanding your facility in relation to others, you can
Organizing your thoughts/business.
Determining what documents you need. See this Live Oak Bank post for an amazing checklist.
Getting your documents together.
Appraisal.
Determining how you will sell the facility.
Interacting With Buyers
Deciding If You Want To Sell
Are you debating on whether you should sell or not? Something must have led you to this blog post. There are many reasons that owners may want to sell. Here are some of the reasons we have come across.
"I want to sell while the market is still high" - The market is hot right now. Self storage is a popular investment and prices have gone up significantly in the past several years. Many owners are ready to make an exit and know that right now is a good time.
"I am tired of dealing with frustrating tenants" - need we say anymore about this?
"I want to move to another state" - We have heard it plenty of times! "I am tired of the cold. I want to move somewhere that is warmer."
"I am ready to retire!" - So you built your facility 10 years ago? It went up in value. Good job! Selling your facility can be a great way to 'jump-start' your retirement.
"My facility needs lots of repair" - Not every facility is in perfect working condition. Breakdown happens over time, it's normal. With current construction prices, these repairs can be quite expensive. While not all buyers are willing to deal with facilities that have major issues, some buyers specialize in these types of facilities. Check out the Investing Storage homepage if you want to meet one such buyer.
"I want to sell now before taxes increase" - Many people worry that tax rates will continue to rise. Recently, the government has proposed further tax hikes - this can be relevant when selling a larger business like a self storage facility.
Understanding Your Business
Of course you "understand" your business. You have run it for years. You know every detail of its operations. But are you ready to communicate these details to potential buyers? You will get lots of questions when you are ready to sell. Some of these will be important and some will be folks just chatting and 'kicking the tires'. Here are some important details to know before discussions with serious buyers:
Facility Size - how many square foot and unit mix
Facility Occupancy and Facility Estimated Economic Occupancy
Local Competition - Take a look at Google maps and get a feel for the other surrounding facilities. If you want to look more into demand studies, check out this blog post about analyzing competition.
Facility Type (Class A, B or C) - determine if your facility is Class A, Class B or Class C.
Curb Appeal (describe the basics of your facility, did you just redo the roof? Do you have a landscaper that keeps it looking lovely? Are the metal buildings in excellent condition?)
Possible Expansion - Expansion opportunity is extremely relevant to possible buyers. While you may not have permits in hand, it's important to communicate the possibility of future expansion projects to future buyers. Your facility may be too small for some buyers, but with expansion opportunity, it might be just right for the buyer looking to take on a challenge.
Your Technology - what platforms and technology do you use to manage your facility? This can include: email, gate, accounting, website, call center, locks etc.
Your Accounting "Health" - this may be the toughest part for some but having your accounting in order can make all the difference in your sale. Potential buyers are likely running extensive pro-forma calculations to determine if buying your facility is financially viable from them. No one wants to buy a facility and lose money over the next several years. Having yours accounting in order will help future buyers determine the income producing capacity of your facility. This means having several things available: bank statements, tax returns, rent roll, property taxes, P&L, utility bills and any other expenses. The more detail the better!
Once you have all this together, you will be able to easily communicate with potential buyers.
Organizing Your Thoughts and Business
Now that you "understand your business" you are ready to make a plan regarding the sales process. We recommend creating a step by step document with each step and plan outlined ahead of time.
This document can answer several questions including:
Where do I want to list my facility?
What do I think my facility is worth?
How much do I think I can realistically get for me facility? (note this is separate from what I think the facility is worth)
What are my investment goals with the facility?
Am I willing to seller finance part of the facility?
Answering these questions will help guide your responses to potential buyers.
Determining What Documents You Need
You may not have every single document that a seller requests, however, it is nice to have most documents on hand.
Some basics include:
Prior Building Inspections
Rent Roll
Tax Returns
Bank Statements
Prior Surveys
Prior Permits
Engineering Plans
Rental Agreements
Insurance Documents
Utility Bills
Engineering/ Plans for Current Buildings or Expansions
Income Statements
Prior or Recent Appraisals
Deed
Any Agreements with Contractors/Employees/3rd Parties (snow/grounds-keeping/maintenance etc.)
Licenses
Lot Size/Zoning Documents
List of Capital Expenditures
Inspection Reports
Site Plan
Environmental Reports
Getting Your Documents Together
First you determine what documents your need. Then you actually have to go about finding them! All we have to say is... Good luck.
While we can't offer advice on findings the 2019 tax returns that you misplaced, we can offer some organizational advice. Keeping these documents if not done in an organized matter. We recommend using Google Drive to help organize all your documents.
Appraisal and Cap Rates
An appraisal is not 100% necessary to order if you are selling. However, a formal appraisal can help guide you when it comes to the price of your facility. Consider reaching out to some appraisal companies to get a quote.
So the appraisal can be used as a good guide. However, there is also the concept of cap rate to content with. You will hear cap rate discussed at length. It is this authors opinion that while the cap rate can be a good tool to help quickly understand a deal it is not the be-all-end-all that it's cracked up to be. See my post here for further discussion
Determining How You Will Sell Your Facility
First let's go over the different ways to sell your facility.
Using a Broker
For-sale-by-owner
Interacting With Buyers
Congrats! You made it this far. Hopefully you are starting to chat with potential buyers. Buyers will likely run pro-forma numbers on your facility and come up with a set number in their mind. It is important to get a feel for what your bottom line is as well. In the end, the ultimate goal is for both parties to benefit from the deal.
Your ultimate goal while interacting with a buyer is to get a good price for your facility. However, that doesn't mean that you should be a brutal negotiator. Buyers don't want to purchase from a seller who is too aggressive. They simply want to get the facility for a fair price.
On the other side = owners don't want to spend months and deal with dozens of potential buyers in order to sell their facility. That simply want to sell their facility for a fair price.
So how do you go about determining that price? That's a lengthy conversation. Read our article on Capitalization Rate to get a better feel for the nuances of pricing your facility. Simply put, there are MANY things that go into determining price and you should be able to discuss these points with potential buyers.
Getting The Best Price
So you have all your documents together, you know what your facility should be worth and you are now chatting with a potential buyer. You should be ready to seal the deal! You now have all your bases covered, the only thing left is to respond in a reasonable manner regarding the price of your facility. Thats it! There is not magic to the process. Buyers are willing to pay a high price if your facility is worth it - you simply have to ask. If you have a reasonable offer and can back that up with data about your facility, you should be good!
Best of luck and feel free to reach out to Ben or Jordan if you want more advice or are interested in selling!