Self Storage for Sale – the Helpfulness of Feasibility Study

Allan Smithz asked:

There are many units or facilities of self storage for sale in today’s commercial real estate market; however, an investor should be wary of investing their money in such opportunities unless a feasibility study shows positive results. These studies, completed by independent third party companies, take into consideration a number of different characteristics in order to come to some sort of conclusion about the predicted financial success of a particular self storage facility. These characteristics include the location of the property, the amenities that the facility offers, the average rental vacancies, and the past financial history of the self storage business. By taking all of these facts into account a feasibility study can give an investor a good idea of how a particular business will perform.

Any business owner, real estate investor, or self storage owner will tell you that location is the most important aspect to ultimate success and a high profit margin. A feasibility study therefore places a huge priority on the location of the self storage facility. The study tales into account whether or not the business is located next to a highway, whether or not the building is located next to a busy thoroughfare, or whether or not the facility is next to other, more competitive storage units. Location can also affect tax status (city taxes versus county taxes) and the amount paid for utilities (electricity, water, and waste removal). It also matters what city the business is located in. Some cities offer tax breaks to certain businesses. A feasibility study takes all of these factors into account when considering the importance of location with relation to profitability.

 Another aspect that is considered is the amenities that one business offers over another. In relation to facilities of self storage for sale in local real estate markets these amenities may include a security fence, twenty-four hour cameras, individual locks, climate controlled storage, large vehicle storage, and personal on the premises twenty-four hours a day, seven days a week. The more of these amenities that are offered, the more profitable a property may be.

Probably the most obvious consideration that is made when considering the profitability of a storage unit is the average rental vacancies available. A vacancy means that a rental unit is empty and therefore not bringing in any money. The higher the vacancy percentage the less a storage facility will earn, thereby lowering the profit margin. Most successful self storage businesses boast a fewer than a ten percent vacancy. This means that ninety percent of the units are rented all of the time.

The final aspect that can make one business more inviting to investment over another business is the business’s financial history. Obviously, the past performance of a business is a key to the future profitability of that business. If a property has made a profit in the past, then it is more likely to do so in the future. If a property has not made a profit in its recent history, then it is more unlikely to do so in the present.

While there are many facilities of self storage for sale on today’s real estate market, a feasibility study can help characterize the successful ones ready for investment.

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