So, you want to buy a storage facility? Before you get to negotiations, you want to ensure you have done your due diligence or audit of the property. Inspecting the property is critical and will determine if you’ve struck gold or need a very large pitcher for the lemon in which you just invested. The following is a list of things to consider when buying a storage facility.
- INSPECT what you EXPECT. Complete a detailed walkaround to make sure your expectations are confirmed.
- Are units occupied?
- Do you see or detect any damage to doors/walls?
- Do you notice any deferred maintenance for items such as gutters, weather stripping, door springs/latches?
Completing a thorough inspection of the property is key to ensure your investment doesn’t cost you more in the long run. Take notes on what was reported versus what you see. For example, the property may have “phantom” (unaccounted), merged or rent-free units. Having these types of units will not give you a true reflection of the occupancy, and there is a considerable difference between occupancy reported as 90% when it’s really 75%.
Don’t hesitate to open vacant units to inspect the conditions. Also, check if maintenance has been made to internal and external building components.
These things can add up and may be something you can request the owner repair before your purchase.
- While you can take occupancy to the bank, it doesn’t pay the mortgage. Occupancy Statistics may not give an accurate picture of actual/expected income.
- Is occupancy inflated?
- What are the statuses of account receivables (late tenants), active promotions and free/discounted rentals?
- Have you reviewed/considered the historical pattern of rate management to date?
As stated above, occupancy may be used to determine whether a property is or can be profitable. However, it should not be the only factor considered when making this determination. Your confirmed occupancy and expected income must align. Depending on the sellers, it’s not uncommon to see high occupancies, multiple accessible units or high amounts of past due accounts. This oversight can affect your annual budget and negatively impact your ability to pay your mortgage with the property income.
Be on the lookout for significant and recent increases to gross potential income or tenant rate increases established to market the property. These discrepancies may affect the value of the property and any plans you may have for rate management.
- Google it. Property status in the community will determine the need for image changes.
- Check Google ratings. Do you need to change the property name?
- Have there been any consistent complaints? Can you fix them right away?
- Have you conducted a mystery shop?
Brand association is important and will impact your current and future customer base. Early on, mystery shop the facility, check reviews; even rent a unit if you’re serious about the purchase. This will help you determine if any brand changes are needed and alert you to existing repair issues. Find this out ahead of time, as you can use it to your advantage and it may make a positive impact on your existing customer base.
Curtis Burns, Regional Director
Absolute Storage Management