7 Successful Self-Storage Site Selection Strategies

LOCATION, LOCATION, LOCATION!!!! We have all heard how important it is to have the right location, but how do you find the “killer” site? Let’s review some proven tips and tricks for finding the best site.

Purchasing the right site is as much trial and error as it is good luck and science. Do not be discouraged if you burn through five or six (or ten or twelve) sites before you “land” the deal. Be patient AND persistent. If you work long and hard enough, you will eventually close on a property. Detours that you may encounter:

Zoning Issues

Changes in Credit Markets

Sellers That Change Their Minds

Title Issues

Environmental Problems

Competitors

PLAY GOLF. NETWORK, NETWORK, NETWORK. – I honestly believe that some of the best self storage sites in the country today are being found on the 7th green, or in the golf cart on the way back to the clubhouse. Your attorney, CPA, clergy, neighbor and therapist may be a “friend of a friend, who knows a guy, whose uncle has a piece of land…” In other words, use your list of contacts influential to spread the word you are serious about self-storage. Prepare yourself with a concept package. Once the investor is intrigued, be prepared to follow up with a concrete business plan. Include graphics, spreadsheets, and demonstrate that you have a team of experts to get the deal through the 18th hole. Show them that once you have a site identified, that you are prepared to move quickly to execute your plan.

TRAVEL TO NEW AND EXCITING PLACES – One of the largest mistakes first time real estate investors make is they select a market area that is geographically convenient, not economically viable for self-storage. Know that when you limit yourself to one or two markets, you have greatly increased the time it may take to find the best site. In fact, you may have chosen an area that is not ready for self-storage growth, and you may be forcing your project into a crowed market. Check saturation levels, competitive environment and the economic climate of many areas that are acceptable to you and broaden your horizons.

BEGIN WITH THE END IN MIND – Think first about the end. What is your exit strategy? Is this a short term play to springboard into larger ventures? If so, then build your store at a location which meets “Institutional Grade Criteria”. The most important of which are:

Metropolitan Area Population

Traffic Counts

Primary Market Area Population Density

Visibility

Access

Primary and Secondary Median Incomes

Property Size

If your strategy is a long term hold, remember to “never say never”. As soon as you proclaim you will “never” sell your store, Murphy’s Law or your children who want cash, not a bunch of garage doors, may create a need to exit a property. You will want to make certain that you have covered all the bases, and not have created a store with extended marketing times. Be careful of building:

In small towns

In an inferior, less expensive location

Because you already own the land

A store of less than 50,000 square feet (net rentable)

Behind your competitors (both identified and yet to be identified possible)

Two or more Floors in a single story market

Life has a habit of taking strange turns. If you believe that one door opens when another closes, you may not want to be encumbered by a self-storage property that does not allow an efficient exit.

FOLLOW THE MONEY – Be prepared to play with the big boys, where they have invested lots of money. There is much to be said for being “where the action is”. If you are an experienced operator (or hire an expert management company), and build the right product in the right location, you should have no trouble competing with even the largest of operators. In fact, this may give you a distinct advantage. Consider:

Large operators have the resources to conduct thorough market research and have the ability to spend lots of money to analyze markets. I would be very cautious of building in a market that is absent of institutional players. Piggy back off of their market research.

Large operators tend to be rate leaders. I do not know of any major player in self storage with a “lowest price” strategy. Typically, institutions require strong rates of return on an investment, and are not prepared to win customers on price points. What better competition to have than one who is always raising prices. Learn from this, and follow suit accordingly, or be a little braver, and YOU take the initiative and lead the market with the highest pricing. I can almost assure you the big boys will follow suit and move their pricing up as occupancy grows or stabilizes.

Large operators like the efficiencies of multiple stores. This means you may be a good acquisition candidate when you (or your children) are ready to sell. Make it easy on them and yourself to sell the store. If they are in a market, chances are they believe in the market and that makes the purchase of your store much easier.

Be very careful of a market where the big guys are selling their stores. There must be compelling reason for a self-storage investor to get out of a market. This is an indication that the market may be soft, or rates are weak.

GET PROFESSIONAL HELP – There are two sources to look to when finding and evaluating sites. The first are brokers and the second are consultants. Keep in mind that brokers (and boy will I get some hate mail form this statement) may not have your best interest in mind. They ONLY get paid when your money is spent. This motivates them to get the deal to closing, but does not ensure that they are really concerned with what is in YOUR best interest. Here is the second statement that will make every broker hate me…”Make them work for their money”. Nothing irks me more than a lazy broker. Too many brokers believe their role in life is to pass along a name. Most brokers have the ability to “make a deal happen”. This two edged sword can be used to your advantage. Make sure that your broker has been given the right tools to find you a piece of property. Inform them of the following:

Site size

Traffic counts

Density required

Price range

Zoning parameters

There are several broker strategies. One is to use an experienced self-storage broker that knows the business (they are an owner or develop of self-storage properties, not just a broker). This may help to eliminate a number of sites as you are not chasing dead end deals. One caution: this broker is often a competitor, or becomes one.

Make certain that you have a non-compete clause with the broker whom may operate self-storage properties (contractually specify distance and time-frame). The challenge with this type of broker is they may already be wired into an institutional or seasoned developer which means you may be looking at leftovers.

If you have several seasoned self-storage developers in your area, and a site is visibly for sale, there may be something wrong with the site. The second strategy is to hire an aggressive broker that you may have to educate or be patient with in having them find you a site. Once the broker brings you a site, make sure your broker provides you with:

Current demographic data

Traffic Counts

Parcel specific zoning data

A site plan or survey

Recent land sale comparable

Self-storage facility sale comparable

Be equally careful choosing a consultant. Make certain they have a plan and are following it. Make sure they have the resources to carry the ball across the finish line. If they are helping you find a site, have the consultant give you a written strategy to find you the right site. Make them commit that they communicate with you often, and you monitor their performance. If the consultant is strictly helping you with feasibility, make certain that they have informed you up front of what they see as the strong points of site selection, and that you concur as to what the project should achieve. This will save you lots of time and money in evaluating sites.

EXERCISE YOUR CREATIVE GENIUS – Get creative in digging up sites. Consider sites that are too large, and what other types of uses may be compatible with self-storage at that location. Do not be afraid to negotiate. Think about ways to reduce your land cost…

Tax parcel splits

Pad site spin-offs

Joint developments

P.U.D’s

Subdivision creation

Assemblage

Think about joint land uses:

Car Washes

Fast Food Restaurants

Flex Space or incubator space

Record and documents storage

RV and Boat storage

Limited service hotels

Strip centers

Use creative financing to leverage properties:

Seller Financing

Land Leases

Options

Contingent Sales

Life Estates

All in all, life is short and play hard. Be bold, and follow your dreams. If you believe in the industry, and dedicate the necessary resources, you will succeed. While you are looking, educate yourself. Attend conferences, trade shows and seminars. Be diligent. Read trade magazines and absorb as much information as possible about self-storage. But most important maintain a high energy level, do not be discouraged, and if you do not succeed, try, try again!

Protect Your Commercial Real Estate Investments from Fire

Protecting a rental home from the perils of fire is a very hot topic today. Commercial insurance will protect you and your lifetime investments in the unlikely event of a fire. Check your policy for fire coverage.

Did you know that every year problems cause more than 28,000 house fires and massive property damage? Most recent insurance studies indicate “Fires” as causing more than $1.3 billion in property damage (National Fire Protection Association, 2003-2007).

1] Flickering lights, buzzing noises, and face plates that are warm to the touch are all signs that a circuit may be overloaded, or wiring may be wearing thin.

2] Listen to Your Breaker — If you are continually tripping a switch and having to reset your breaker box, your house is trying to tell you something. There may be a fixture with faulty wiring or too high an electrical load on the breaker.

3] Review and Replace — Frayed electrical cords, wobbly ceiling fans, and loose face plates are more than mere annoyances. You should routinely inspect your home and replace or repair items in need of attention.

4] Working smoke and cigarette detectors on all levels of your home is an absolute must. Make sure you have a working fire extinguisher, and you know the proper way to use it.

5] Ban natural Christmas Trees, there are 1000’s of fires nationwide every year.

6] Never rent to smokers of anything, aside from the thousands of dollars third hand smoke causes to a property. Just one errant cigarette or joint can burn down your investment property.

7] Outside BBQ, Deep Fryers and Smokers can cause grease fires.

It is important to consider fire safety at every stage of commercial real estate investing.

This article was developed by Winston Rowe and Associates. They are a nation consulting firm that specializes in working with commercial real estate investors.

This Year’s Renters Want More Space, Good Deals and the Great Outdoors

Winston Rowe and Associates

Renters are on the hunt for open-air amenities, more space, and a better deal in the city they already live in as 2021 unfolds, according to a recent RENTCafé survey on how renters’ preferences have changed as a result of the pandemic.

An improvement in lifestyle was the main driver for the more than 10,000 people who participated in the survey while searching for an apartment on rentcafe.com. The top features respondents searched for a year into the pandemic included open-air amenities (21%) and more space (20%)—data that stands in stark contrast to RENTCafe’s March 2020 survey, where top drivers were price and safety. In addition, space and open air amenities were more important to renters than WFH amenities like home offices.

The prospect of a better deal motivated 29% of respondents, while the need for a change of scenery prompted a quarter of those surveyed to move. And perhaps most interesting? Contrary to breathless pandemic-era reports of Americans ditching their cities for secondary markets, approximately 90% of renters were looking for long-term rentals with 48% looking to remain in the same city. A mere 4% of renters chose to move because they could now be more flexible by working remotely.

“This shows that improving housing conditions—not drastic change—is the goal,” RENTCafe notes in the survey findings. Of those surveyed, one-third (34%) reported they’d already moved once over the last year, with the majority doing so because of the pandemic.

“After months of staring at the same walls, it’s understandable that some people want to make a move now, if only for a change of scenery,” the survey findings note. “However, many of those who moved back in the spring of 2020 seemed to have done so out of need—not because they wanted to. More precisely, their reasons for moving during those uncertain early days of the pandemic were related to their lease being up or feeling financially insecure.”

The survey also revealed that space and open-air amenities were more important than work-from-home amenities. Only 10% said a good internet connection was crucial, and  5% said they needed a home office.

Despite this data, the multifamily industry is prepping to meet the demands of a growing body of WFH renters. Research last year from Newmark showed that multifamily owners are increasing floor plans to create more flexible spaces (think one-bedroom plus a den) and more outdoor space to accommodate workers who are staying home. The firm advises developers, however, to make more incremental changes to unit mixes and amenities since resident needs are still being hashed out as the pandemic wears on.

Source: globest.com

New York Apartment Demand Surges As The City Jumps Into Reopening Mode

Winston Rowe and Associates

A full year into the pandemic, New York City landlords are securing new leases at a rapid clip as depressed prices appear to be luring back—or holding on to—tenants willing to sign for the right deal.

New York buildings in Manhattan, Brooklyn and Queens, the number of leases signed during February beat a record set in 2012 during the comeback from the global financial crisis. The median rental price—lease value net of concessions—fell at least 11% across those boroughs last month, according to a new report by Douglas Elliman Real Estate.

The news comes as New York City slowly begins to reopen. Restaurants will soon be able to operate at 50% capacity and movie theaters are once again beginning to show films. It’s been a brutal year for the city; the seasonally adjusted unemployment rate stood at 11.4% in December, a 7.8% increase over December 2019.

Hundreds of thousands of New Yorkers fled the city at the onset of the pandemic, to ritzy enclaves upstate, quiet towns in the Northeast and other pockets of the country. The coming months will help reveal how many intend to return, and whether rental prices will subsequently increase.

In light of the revived demand, some owners are temporarily keeping units off the market in the hopes of a sustained rebound that may help them get higher rates sooner than expected. According to UrbanDigs, a real estate insights firm, in Manhattan landlords took more than 1,800 apartments off the market in February, as the Wall Street Journal reported earlier this week. For their part, renters are enjoying the reprieve from record prices, which peaked just before the pandemic.

Below is a closer look at the current New York City rental market, utilizing data from Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants.

Manhattan

Non-luxury units offer the best deals, with apartments of three or more bedrooms having the biggest year-over-year discounts, possibly a sign that after living through lockdowns, renters are looking to live with fewer roommates. The median rental price dropped 22.7% over the last 12 months on those units. Two-bedroom apartments are down 8.9%, while studios are down 19.3%.

New signings are up dramatically from February 2020, but the overall vacancy rate remains high, at 5%, compared to 2.01% last year.  More than 40% of new leases come with some form of landlord concessions, the authors said, often one or more months of free rent during the first year after signing.

Brooklyn

Brooklyn saw the “highest number of new lease signings since tracking began during the financial crisis,” Miller Samuel reports, at 1,834 for February, a 133% year-over-year increase. Still, the median effective rent dropped 16.3%, more than any other year in almost a decade. Nearly 40% of new signings last month included landlord concessions.

Studios are commanding the best discounts; median rental prices fell 18.8% compared to last February, while second place goes to apartments with three or more bedrooms, at a 12.5% decline. Still, a glut of inventory remains; there are 3,438 listings in Brooklyn, up from 1,375 a year ago. That figure doesn’t even account for units that have been pulled off the market.

Queens

The story is largely the same in Queens, where February also set a nine-year record. Inventory is up 64% compared to last year, and 36% of signings include concessions.

Overall, the median rental price dropped 13% compared to last February, to $2,522, with studios taking the biggest hit at a drop of 28.7%.

Source: forbes.com