How can you tell if your investment in building self storage facility will be worth it? A feasibility study! Feasibility studies contain tons of information to help evaluate the viability of your potential facility.
In this Gabfocus spotlight, Matt VanHorn of Black Swan Storage Advisors breaks down the key components of a self storage feasibility study and who you should ask to conduct one.
Question: "Why is a self storage feasibility study important?"
Check out the video clip below to hear Matt's answer:
In this Gabfocus Session: Buying & Selling Your Self Storage Facility, we spoke with Jane Sauls (Sauls Storage Group), Kris Bennett (PassiveInvesting.com), and Matt VanHorn (Black Swan Storage Advisors). We had a great time discussing the state of the self storage real estate market.
Check out the full Session to dive deeper!
Don't want to watch the clip? Here's what the experts had to say:
First find somebody who has some experience doing it. There's a number of people in our industry that are really good. Just find the people that have actually been doing this for a while. The self storage industry, as popular as it is right now, it kind of reminds me of hurricane season in Florida. All of a sudden the hurricane goes through, everyone's a roofer. Well, I'm kind of seeing the same thing in self storage. Everyone's a self storage pro. And people I talk to, they were getting in the industry two months ago. So just find somebody that has been doing this for a while. But then what's their experience? And then what I normally do with my clients is I'll do what I call a feasibility review, and I will walk them through an example report, show them what's in it, and allow them to ask any questions about the process of the report that they'd like. And I do that because it's an educational thing first, whether we do business or not, there's no obligation to it or anything, just so people know, because as you're getting into this, the education part is really important. So what are you looking at in the unit mix? How much land do I need? How much coverage do I think I can get? What are the rates? What are the construction costs? I mean, that's probably construction costs has probably been the bane of my existence for the last couple of years where particularly steel costs have just gone through the roof. I mean, I was talking to a builder just two weeks ago, and they just got a notice that steel is going up another 5%. So these are things that you want to keep in touch. What are realistic finance numbers? What are realistic lease up numbers? How fast can I fill the property? How big do I need to go? These are all things that a feasibility study should answer for you, that if you're new in the industry, you're just not going to know. And then if you're even a veteran, sometimes you just might want to double check it. And a lot of times the bank for construction financing is going to want to be done. And then also the way that it's made out and the way that you look on social media and everything else, it's so easy. And if you do it right, like I said, it works very well. But commercial real estate in general is a full contact sport. It really is. And if you're not familiar with what the bank is going to do to you or how something is developed or what the process is or what your unit mixes. You can make a mistake. Know. Get a full recourse loan. Make a mistake. And then somebody's coming after you for that. So these things. I think it's more important to try to find out what you don't know. There you go. That could really come back and hurt you.
