The self storage industry continues to be one of the fastest growing real estate sectors in the marketplace. According to the national Self Storage Association (SSA), the industry generated over $27 billion in annual revenues in 2014 and through Q2/2015 the average national occupancy rates increased to 90%. This growth has led to opportunities for new investors seeking a valuable real estate asset class.
For a new investor in the self storage sector, first seek advice from those with experience. There are a number of self storage consultants that can help new investors understand the marketplace, conduct feasibility studies, translate industry language and more. In a similar manner, some of these consultants can also help a new investor find debt or equity capital financing.
Before making an offer on a facility or signing a letter of intent, secure the financing source. This seems like a no-brainer but without a bank, partner, or private equity firm backing the offer, the seller is likely to not give the offer much, if any, consideration. Most lenders, whether a bank or other institution, will look at a couple factors before providing any level of commitment to an investor:
Note, all financial institutions have various underwriting criteria so make sure to understand the particular institutions experience and risk tolerance for self storage.
Whether an investor is just beginning the search for self storage or ready to make an offer, these areas should help ensure a smooth experience for the buyer, seller, broker and lender.
About the Author
Josh Nicholson is a six-year industry veteran and the Vice President of Business Development for Wells Fargo. For more information call Josh Nicholson at 317-995-9671 or Josh.Nicholson@WellsFargo.com