The self storage market is hot! With strong performance during 2020 and the global health pandemic, storage has been stealing headlines as one of the most desired asset classes. Owners have seen occupancy remain steady, rent collection stay high and revenue grow. The attention on self storage has attracted groups both large and small to the industry in search of their first property. The reoccurring question I receive is how can we compete or what will it take to buy our first deal? I will share below the best practices that I’ve seen both experienced and novice buyers apply successfully.
Understand debt and equity. Currently, we are seeing historically low-interest rates and a plethora of financing options available for self storage facilities. Many first-time buyers are having success with SBA loans that offer interest rates as low as 3% and require down payments as low as 10 – 20%. Understand the equity requirement and the purchase price you can afford and be ready to verify those funds as you start to pursue opportunities. Connect with lenders or mortgage brokers and become familiar with their process so when the opportunity arises you can act quickly.
Know your target markets. If your plan is to target Class A properties in downtown metros for your first acquisition, good luck! You will be competing with well-capitalized, seasoned groups and their resumes will shine. Many first-time investors have had success in smaller or tertiary markets where they are competing with investors with similar resumes and can find creative ways to stand out. These markets might move a little slower but give new owners opportunities to learn with sticky tenant bases and generally less competition.
Be patient and then act quickly. Take the time to understand the industry, be comfortable with financial analysis and realistic in your targeted returns (sorry, there are not many 10% cap deals out there). Aggressively pursue the properties that fit your criteria be willing to act quickly. Quality properties are seeing multiple offers in small and large markets, so be willing to compete.
Connect. Find reputable brokers and operators, attend trade shows, join your state association and ask questions. Self storage is not only a great asset class but a great community willing to share and help you along. Good luck!
About Jordan Farrer and The LeClaire-Schlosser Group of Marcus & Millichap
Jordan Farrer serves as an investment specialist for The LeClaire-Schlosser Group. His service is focused on the disposition and acquisition of self storage facilities in Utah and surrounding regions. The LeClaire-Schlosser Group is a national self storage brokerage team that has closed over $4 billion in transactions across the United States. With a combined 60+ years of experience, we have the knowledge and expertise to assist our clients in reaching their short and long-term investment goals. We offer extensive underwriting, customized marketing, and unparalleled transactional expertise to achieve the best price and terms. We pride ourselves in offering unmatched brokerage and advisory services to both institutional and private clients alike. To learn more, please visit: LeClaireSchlosserGroup.com
