08 Nov 2022
This information is provided for discussion purposes and may change based on individual risk tolerances, available cash, loan type, loan interest rates, construction cost and other factors. A site that initially lands in the maybe for all seven factors may turn into a great site with more research. On the other hand one or two no’s can decrease the profitability to where is not worth building.
Many parcels are going to fall in the maybe range at first glance. When they do fall in the maybe or long shot range, it takes a considerable amount of time, additional research, and multiple preliminary designs to see if they are worth making an offer on. Without this significant additional research pre-contract, your money and time during the contract due diligence will be at higher risk than recommended.
Many developers can’t afford to spend days and even weeks reviewing marginal sites. Sometimes you have to pass quickly on a "maybe" parcel so you have more time to look for a winner.
There has to be a line where you can quickly say no and move on. Then there are the tough "maybe" lines.
Here are some recommendations to help determine your lines in the sand for the typical 6-acre site for 80,000 net rentable SF = 62,000 net rentable square feet single story facility.
Yes ++: Zoned for self-storage, permitted use. Final approval by staff only.
Yes +: Zoned for self-storage, permitted use. Final approval by citizen commission/board with a public hearing.
Yes: Zoned for self-storage, permitted by special exception. Final approval by citizen commission/board with a public hearing. The commission has leeway to confirm the use fits in with the neighborhood and may require additional design requirements not specified in the regulations. Important to have the city staff support your project and design features.
No: The property requires a zone change from agriculture or residential to a zone where self-storage is permitted. Typically can cost $10,000+ and 4 months of time with a very high likelihood of denial.
No: Need a zone change from one nonresidential/agriculture one to another nonresidential/agriculture zone. Typically, can cost $10,000+ and 4 months of time with a very high likelihood of denial.
cc single story facility)
Yes: 6+ acres
Maybe: 5 - 6 acres
No: Less than 5 acres (unless you are building multi-story or a combination of both cc and non cc)
Yes: Greater than 15,000 people (Still need to check demand & pricing.)
Maybe: 10,000 people - maybe if no self-storages in the 3-mile radius
No: under 10,000 people - too long of a rent-up time
facility
Yes - over $160/month
Maybe: $120 -$140/month plus if you have done the research and have a game plan where can charge $160/month or more. And the land may be purchased at an exceptional price.
No $120 - $140/month and your system will not allow you to charge $160 plus
No: Under $120/month
Note: this is dependent on your cash investment, rate of return required, and subject to change based on land price and loan interest rate.
Yes: the competition is full and has great rental rates and there are limited pipeline facilities.
Yes: - Total SF including existing, pipeline and your self-storage is 8 sf/person or less
Maybe: Total SF including existing, pipeline and your self-storage is 8 - 12 sf/person. Need to check competition rates & occupancy
No: Total SF including existing, pipeline and your self-storage is greater12 sf/person
Note: Self-storage demand must be confirmed by the occupancy rate and rental rates of the competition.
invest with an SBA loan & 80,000 gross single-story sf facility) in two phases. In the end a feasibility study including a detailed P & L projection by your feasibility expert must be done. These are based upon 15% down SBA loan.
Yes: $500,000 to $800,000 land purchase price.
Yes: $800,000 to $1,000,000 land purchase price. Must pre-confirm all land is usable and land is flat with no unusual or municipal roadway or utility construction required and you have $1M plus cash to invest and you can rent a 10 x 10 non climate control for $160/month or more.
Maybe: Over $1,000,000 land purchase price with very high rental rates ($2/sf) and existing facilities are full and you have cash to meet the 15% SBA down requirements.
No: Over $1,000,000 land purchase price and you only have $1,000,000 to invest.
Yes: Greater than 15,000 cars a day
Maybe: 8,000 – 15,000 cars a day
No: Main street but located behind existing development and cannot be seen by the traffic. No Dead End streets
Typically, it is better to do additional research on maybe sites before you go to contract. If you move forward to a contract with a maybe site you are putting extra money at risk because you have to proceed quickly to meet your purchase option time frame. Once you go to contract with a maybe site you may spend between $10,000 - $20,000 or more to have the contract prepared, 3rd party feasibility study prepared, and some basic surveying and engineering done only to find out the site does not work for you.
And even when a potential site gets a yes initially in each category this is just the start of the Journey. First, you have to personally confirm each item. Just because the real estate agent said the land is zoned for self-storage does not make it true. Once everything is confirmed you need to do your own Mini feasibility study, including a projected Profit and Loss calculations.
Get more information on Storage Authority Franchise at www.storageauthorityfranchise.com
Marc Goodin is President of Storage Authority Franchising. He owns 3 self storages he designed, built and manages. He has been helping others in the self storage industry for over 25 years. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales and operations questions. His best selling self storage books are available at amazon.
