The Five Most Frequently Asked Questions
1 I don’t have any self storage experience; can I build a successful self storage business?
Yes, you can. In fact, the vast majority of the 50,000 self storage businesses in the USA are owned by individuals who only own one self storage facility. They started out just like you with no self storage background. With research and help along the way you can build a successful self storage business that will be more profitable than most other real estate businesses.
Many of the existing self storage were built when “build it and they will come” infancy period of self storage. Now with all the competition and smart money you must be better prepared from day one. You need 3 out 4 of the four things to develop a very successful self storage:
3 Self Storage Experience
4 Marketing & Sales Experience
Storage Authority obviously provides items 3 & 4 but you will be surprised how Storage Authority helps you with items 1 & 2 as well.
The three most common problems I have noticed for new developers is 1) to under estimate the costs (often by over looking some items), 2) under estimating the development and rent up time frames and 3) underestimate the importance of sales and marketing platforms online and off line,
Self storage consistently has provided better returns on investment then the other types of real estate investments. It requires fewer employees and significantly less maintenance, which means less headaches and work for you. (better lifestyle)
And best of all self storage produces one the most important things that many businesses never produce: a residual positive cash flow that can last a lifetime or even for generations. And its fun!
I hate do give a dollar amount because there are so many factors not to mention size. But I know that is what you are looking for. So to start a self storage business (not a self storage hobby or side line) it is typically approx. $400,000 for an SBA bank loan and more for a conventional loan.
Typically, you will need 25% to 35% equity for a conventional bank loan. There can be exceptions to both the low end and high end depending on the market, economy in your area, your business experience & credit rating, individual banks and other factors. It is important to meet with your banker(s) early in the process. You do not even need a piece of property or facility picked out to meet with a banker (or two) to get some preliminary banking input.
SBA loans are available for self storage and they typically require significantly lower equity often 15% of the total cost.
There are several specifics that must be considered to determine the best option. And it is very important to realize not all loans are equal by a long shot. Yes, interest rates and required equity are important there are several other equally import items and that is why you need a self storage expert help you with your loan package.
There are three main areas of cost that should be considered.
The first is the pre construction costs (or pre loan costs). These include feasibility study cost, land surveying engineering costs for site plans and regulatory approvals; bank fees for the loan application (loan application fee or points, appraisal fees etc.), soil testing fees and land option fees, architectural fees etc.
While these fees are often considered part of your equity in the project you typically have to pay these fees out of pocket because a bank will not give you a loan without a Town approved project. This is money at risk because there is no guarantee that the town or bank will approve your project. So it is very important you do your due diligence regarding the “quality” of the land (wetlands – easements -zoning – other restrictions) and with the chances of approval with the Town before you spend large sums for final engineered site plans. Often paying a local civil engineer to review the property and zoning regulations and provide you with a conceptual plan to review with the Town is money well spent. Typically, this first group of fees are typically range from $75,000 to $200,000 if no major problems are incurred.
The second group of costs is the land and construction costs. These costs can vary greatly depending on the price of the land, individual land improvements and size and type of self storage facility. Land can vary from $50,000 and acre to several hundred thousand per acre depending on the location and amount of land. Individual land improvements can vary greatly between sites.
I own 3 self storages and each had distinct special land improvement cost. One site was relatively level with sand and gravel which had low site improvement cost. A second self storage was on a sloped parcel which required an extra 3-4 feet of fill for half of the site. One property required $20,000 worth of soil testing for pollution and more for soil remediation required.
It is hard to give a specific cost for construction. Recently many feasibility studies are using $60 per square foot for construction for typical single story metal self storage buildings, plus soft costs and the land. This preliminary construction cost by square foot estimates do not include the special land improvements or other unusual cost that may be encountered. Multi buildings are typically higher than the cost of single story buildings.
The costs can be refined after you have a chosen a property and your local civil engineer has done a conceptual site plan. And once a final detailed site plan is completed you can have a contractor(s) provide you a construction estimate for a more realistic cost
Early on in the process, as soon as you find a piece of property, I recommend you contact a building manufacturer to get input on the building design. They can also give you a proposal to supply and construct building. I use Trachte www.trachte.com because they make the process simple, and have a better product at a great price.
The third group of expenses is the costs during the rent up period before you break even. Some banks will loan you some of the rent up cost but many (even most) do not. If you did not include the office, maintenance equipment & supplies in your construction cost (which I recommend) don’t forget to include them here. You are going to open your new self storage business with your typical operational costs (loan – employees – utilities – taxes etc. outlined in your business plan) and limited rental income. Every month you will have to put money into your business until you have enough rentals to pay all your bills. This can take several months to two or three years depending on a lot of factors. If you have done your due diligence and determined there is a need for the new storage facility, have a good location with suitable drive by traffic and are prepared to market the facility well you can significantly reduce the time to break even and make a profit. Hopefully you have worked with your bank to cover at least some of your start up costs in your loan package.
Typically, the second phase cost much less to build because you have already paid for the engineering, the property and don’t need new staff so the break even point comes faster.
Financing is one of the major issues for many businesses. Banks typically require 30% down and SBA loans require 15% down. So in many regions you can get started with $350K to $400K cash equity. One option is to join forces with a local land owner as I did for my second facility. The land and design cost may be enough to meet your equity investment in the project. A good written partnership agreement is important.
A good feasibility study is a msut and should provide some preliminary cost until you have more detailed plans and actual bids. If you need initial prices before than I recommend you contact a self storage feasibility consultant to review your circumstances and what size facility you plan to build.
First you need to determine how much self storage the existing population can support and how much self storage already exist. You can do some preliminary calculations on your own. The key is accurately calculating the square footage needed in your area and subtracting the existing square footage and any storage proposed or under construction. For many areas where there are numerous self storage facilities to choose from the draw area is typically a 3-mile radius and the demand is typically 5 to 8.3 sf per person.You can see a sample mini demand study at the Storage Authority News Room
These factors do vary significantly from place to place. For rural areas and areas where there are no self storage facilities the draw area may be larger. You can call a local self storage appraiser (make sure they have a background in self storage feasibility) and ask what numbers they use in your area. Your bank will typically require an appraisal of your project by their approved appraiser. Your bank may give you the names of their appraisers to contact for this local information.
If you are not confident of your calculations or simple want confirmation and some guidance you should get a feasibility study done by an expert. Please understand a feasibility study is not the same as the appraisal required by your bank. For your planning purposes each can cost $6,000 to $7,000. If you want a feasibility study or preliminary assistance with preliminary development cost I recommend you contact Bob Cooper, 866-269-1311 http://www.selfstorage101.com
There are some business theories that should be observed when deciding how much storage to build. One is having an exit stagey. Typically, the highest prices for self storage sales go to facilities that are purchased by REITs or other large self storage operators. Typically, they want facilities that are 40,000 to 50,000 sf and larger.
Also you don’t want to have a facility that is so small that it only proves self storage is a good fit for the area and attracts a larger self storage operator to make the majority of the profits after you did the hard work. The exception to this is if you are considering your self storage business a side business that you built on land your already own and run out of your existing business office.
Self storage rent up is so much faster (and rents for more per sf) when you have an office with regular office hours. To pay for a manager and make a good profit and pay for all your efforts and risks you can use a preliminary estimate of 40,000 sf (for all phases) until you have done all the due diligence for your specific project.
You do not have to build out the entire project in one phase and in fact phasing is highly recommended. It will save you the added expenses of having a large supply of unrented units. A 50,000 sf project could be built in two or maybe three phases depending on the storage needs of a specific area.
The amount of land you need is highly dependent on the local zoning regulations and specific land features. Typically, you will need 4-5 acres for 50,000 square feet of single story buildings, less for multi story buildings. See Site Selection for more information regarding property requirements.
We have you covered with Morrow Hill!
We start by understanding you, your goals and your finances. Unfortunately most people and brokers start by looking on Loopnet. Big mistake, as Loopnet is where we find about 10% off our self storage sites. If thats your plan or your brokers plan it could take you several months if not longer to find the right parcel for you.
Next we provided 30 minute driving maps from your home or from the center of where the you want your facility. This map will also show the existing self storage facilities and the area road network. An areal view will also help you understand the population density. From this you can start to understand the existing self storage density along with changes to the population density.
We then typically choose an existing facility and draw a 1 & 3 mile radius. This in turn allows you to understand the general size of the compitition impact area.
As a side note many people look at the above map of Sarasota FL Area or their home town and think all the good places are gone. I have to laugh because many great successful self storages will be built this Sarasota FL area in the next couple of years. Until you compare the population density to the existing square footage of self storage you can not generalize. Here is the same 30 minute driving time map for Houston TX. See a much higher density of self storage? We have a new Storage Authority just about to start construction in Houston and expect many many more.
The next step is choosing a broker and educating them on self storage. This can take time. The Storage Authority Dynamic Ease Development Series has multiple sections to help you and your brokers find land. And of course we are there every step of the way as well. I hate to say it but many of our franchisees have told us they often do not even get call backs from agents for days.
To reduce the time to find land we have added Morrow Hill as our preferred national brokers. They understand Franchisees, Storage Authority and know how to find land.
If you have a great commercial land broker thats great just make sure they have the land requirements and work sheets from our Dynamic Ease Development Series and have the expertise to use all the tools required to find land fast. One of the many questions I would ask is, excluding loopnet how would you help us land.
The second pit fall in finding land is understanding if you need 5 acres of land, that any 5 acre parcel may not meet your needs for so may reasons and takes substantial investigation. This is because there are so many things that can reduce the usable area including wetlands, flood planes, easements, deed restrictions, utilities, zoning, stormwater detention, endangered species, topography, and even neighbors. And of course the 3 mile population density and amount of existing self storage in 3 miles , traffic counts, visibility, access, pricing are critical in the decision making process.. As a civil engineer and site plan designer for 30 years I learned site development in the trenches and am ready to share them with you and your team. Of course in many respects I am a part of the Morrow Hill team because we started by sharing our ideas on land and we will continue to so.
If you have questions about Storage Authority Franchising or finding land for your next self storage project give us a call. You can also sign up for our news letter and get our white paper on finding land.
Marc Goodin 860-830-6764
This is a great question? If self storage is so good why isn’t everyone developing self storage? If being rich (vs poor) is a good idea why isn’t every one rich? For starters not everyone is prepared to do the work or take the risks either one would take. And for many they simple have other goals.
Here is a slide show from a recent presentation we did for a large franchise consulting group. It is clear most individuals will not build self storage on their own for one or two reasons. One they do not have the money required. (often $400K) or they do not know how to get past the Road Blocks and Minefields. But now for the first time the is a path to get past the Road Blocks and Minefields.
Where Else can you get help on all 4 main items it takes to get develop and operate you self storage Business?
Why not you? Why not now?
Ready to start your own Self Storage give us a call or get pre qualified by applying on line.
Marc Goodin 860-830-6764
Now is one of the best times ever to join the self-storage industry. I hope you have a minute to read a little about my self storage story and Storage Authority. I became a self storage expert by learning in the trenches. As a professional engineer I designed my first self storage over 30 years ago and many more since then, including 3 personal self storages I designed, built, own and manage.
GP & I relaxing on the concrete slab of one of our self storage buildings.
I have helped many people get started in Self Storage. Quickly I learned everyone was asking the same questions over and over so I wrote a couple of self storage books, to help with some of the common questions and sold thousands. But only 1 in over a thousand readers ever got started. For most there were too many unknowns.
My book covers many of the basics but there is nothing compared to having Storage Authority on your Team.
One day a hotel franchise expert, Scott House, gave me a call. He had searched everywhere to find someone to help his hotel and apartment clients get started in self storage, where they would make much better returns. He could not find anyone until he read my books and decided to call me. I agreed to help. After about 2 months he was amazed at how complex it was to get started and how each project is both similar and unique and suggested we develop a self storage franchise. And Storage Authority Franchising was created, the only self storage franchise in the US. Scott got so excited about self storage and Storage Authority that he is presently building his first personal self storage in FL
This is the first draft elevation of Scotts office. The place is going to be beautiful.
Getting started with Storage Authority is easy and the best way to ensure your success in the self-storage industry. You will benefit from our many years’ of experience as we advise and assist you in all phases of self storage ownership, from land acquisition, design, construction, marketing, operations, sales and on-going support. We not only eliminate the need for a costly learning curve but provide your business with the latest technology, operating systems, marketing strategies and ongoing training that will not only allow you to compete in your market but dominate!
Many franchisees want to take advantage of additional profits by building their own self storage vs. buying an existing self storage. This route also allows many new franchisees to get started with $400K liquid cash equity, less than half the typical cash capital investment.
It is a complex maze between finding the right parcel of land, banking, design, obtaining regulatory approvals, construction, and pre-opening marketing and preparations with minefields, delays and cost overruns at every turn. Storage Authority is the Solution. We have learned self storage in the trenches and are ready to help you jump over the minefields.
You don’t want to be feeling like this guy! And that is why we have your covered!
We have created the Storage Authority proprietary “Dynamic Ease Development Series” Finding Land Through Pre-Opening Tasks. This step by step process along with our one on one expert guidance helps our franchisees throughout the land discovery and development phases, get started faster, go around the minefields, save money and be ready to open with a modern, premium facility with clients at the door waiting to move in day one.
We look forward to explaining more about how this optional premium development service will help you build your state of the art facility for less money and in less time, with confidence. The great news is we are waiving the $50,000 fee for this premium service for franchises awarded in the next 2 months.
I would love to sit down over a cup of coffee and tell you the rest of the story. Send me an email and I would be delighted to meet you in Sarasota FL
To Your Success!
Ps Don’t forget to sign up for our free news letter on our website. Every month you get the latest Self Storage news and tips you can use. www.storageauthorityfranchise.com
Many franchisees want to take advantage of additional profits by building their own self storage vs. buying an existing self storage. This route also allows new franchisees to get started with less than half the cash capitol investment. The problem is they do not know how to started.
It can be a complex maze between finding the right parcel of land, banking, site plan design building design, obtaining multiple regulatory approvals, construction and pre opening marketing and preparations, with minefields, delays and cost overruns at every turn. Marc Goodin, our founder, has learned self storage by being in the trenches and is ready to help you jump over the minefields. He is a professional engineer who designed his first self storage over 30 years ago and many more since then, including 3 personal self storages he designed, built, owns and manages.
We have created the Storage Authority proprietary “Dynamic Ease Development Series” Finding Land Through Pre-Opening Tasks. This system along with our one on one guidance helps our franchisees get started faster, go around the minefields, save money and be ready to open with a modern premium facility, ready to rent up. Our Strategic Development Systems consists of an integrated step by step process where our expertise provides guidance and support throughout the land discovery and development phases.
Here is a partial list of items covered in our dynamic Ease Development Series.
Chapter 1 Introduction
A Building Your High Performance Team
B First 30 Days
C Development flow charts
D Chapter 1 Worksheets
Think Retail $17.95 on sale for just $12.99 and sell more locks than your competition sells at $9.99.
Chapter 2 Land
A The Basics of a Good Location
B Typical Basic Land Requirements
C Hiring a Quality Broker to Assist You with Finding Land
D Additional Ways to Find Land
E Initial Land Review Prior to An Offer or Feasibility Study
F Making the Offer & Due Diligence
G Feasibility Study
H Chapter 2 Worksheets
Chapter 3 Purchasing an Existing Self-Storage Facility
A Seven Primary Steps of a Real Estate Transaction.
B Investigating an Existing Facility
Chapter 4 Banking/Lending
A Loan Options
B Loan Considerations
C Often Over Looked Expenses
D Chapter 4 Worksheets
Chapter 5 Design & Regulatory Approvals
A Finding Design Consultants
B Site Plan Design
C Regulatory Meetings
D Building Design
E Security Design
F Video Surveillance Design
G Chapter 5 Worksheets
Chapter 6 Bidding and Construction
A Finding a Contractor
B Construction Specifications & Bidding
C Construction Review
Chapter 7 Pre-Opening Preparations
A 120 Prior to Opening
B 30 Days Prior to Opening
C Pre Opening Marketing
D Chapter 7 Worksheets:
You may even have experience in some or many or these items but you will be surprised how many items are just different in the self storage world and because of that our assistance will make a huge difference. For example you may have a good relationship with your bank and getting a bank loan may not be a huge concern but there are a couple of standard bank loan clauses such as requiring a Debt Coverage Service Ratio ( DCSR) of 1.3 in the loan. This could be risky as self storage start empty and may not meet this prevision in the beginning. But even a good loan request presentation will make you look very professional and experienced in self storage and this along with the Storage Authority Franchise program you may get you a better loan.
Our well timed reminders and explanations will often save you money and give you the proper time for coordination which means fewer delays. You may have many of them on your check list like, wetlands delineations, maximum impervious surface zoning check, sight line check, soil borings, existing water service pressure test for sprinklers, site sign design, photos & reports for regulatory meetings etc. etc, etc, it easy to forget one or two or several get the wrong results or over pay if a clear explanation is not provided. Just for your engineers we provide over several dozen items for them that are often overlooked and typically multiple dozens more as we review their plans. And of course the better your plans are the more accurate your constructions bids will be with fewer problems and cost overruns.
One major area we provide detailed guidance on is your site layout. Often this saves multiple weeks in the process and gets you a better layout and even more square footage.
The best way to learn more about our proprietary “Dynamic Ease Development Series” Finding Land Through Pre-Opening Tasks and our various systems and platforms is to complete our online application to become prequalified for a franchise as soon as possible and start discussions with your franchise director. We look forward to explaining more about how this optional development service will help you build your premium facility for less money and in less time with confidence.
We are ready and excited to help you succeed!
And while your questions may intialy be about development soon your questions will be open and sales, marketing and operation. The good news is we are ready to help you Crush Your Competition!
You Can Do it!