Underwriting is an essential process in determining the value of your property. Buyers want to find out exactly how much it costs to run a self storage business. Buyer underwriters will comb through a property’s financials to find justification for paying less than what the property is worth on the open market. Perhaps it is due to incomplete documentation, financial discrepancies or unusual operating income and expenses. At the end of the day, top operators did not become successful by paying top dollar for their assets.
To ensure one gets top dollar for their asset, it is important to take an in-depth look at a property’s financial history and analyze revenue and expenses month by month. It is important to identify any discrepancies in the financial reports and formulate explanations for unusual operating costs and income. It is also important to underwrite the pro forma income to include revenue streams that all top operators run. How a top operator runs a self storage property is typically much different than a typical mom and pop owner. The underwriting process should demonstrate how the bottom line plays out when run by a top operator. All of this will flow down to a larger net operating income which adds greater value to the asset.
Having the appropriate financial documentation is also an essential part of the underwriting process because buyers are underwriting hundreds of deals at a time. Having clean, simple financials creates a better opportunity for you deal to be prioritized. Not all local owners keep a thoroughly clean profit and loss statement on a month to month basis. There may be items that are categorized wrong or ambiguous account categories. This can be detrimental to the process. The process should prepare an owner’s financials for a simple underwriting by buyers.
For more information regarding SkyView Advisors' underwriting process contact:
Steven K. Hung
Chief Operating Officer