You already know lenders require a commercial real estate appraisal in order to establish the value of your self storage property. However, these reports, when prepared by self storage experts, offer so much more.
Appraisals on self storage facilities provide a detailed analysis and breakdown of the demographics, competition and expected rates for your facility. For new (ground-up) locations, this is extremely beneficial, as it gives an unbiased, professional calculation of the viability of the project. Appraisals performed by firms knowledgeable in the self storage space will estimate the ramp-up period and stabilization level of the proposed project. This is invaluable as it sets expectations regarding repayment of your loan and helps you determine the working capital you will need to cover your overhead and loan payments until the location becomes profitable.
For existing businesses, a quality appraisal will determine what your business should do in terms of performance, given your location, demographics and competition. It reflects your location’s potential.
Some lenders ask for a feasibility study. Some owners want one in order to determine whether a project makes sense. Nothing against feasibility companies, but sometimes, these studies might be a little more…enthusiastic. They are not trying to trick you. They are human and they want to please their client (you). An appraisal ordered by your lender is almost always more accurate, more detailed and more realistic.
Additionally, you will have to pay for an appraisal during the loan process. Why pay for both an appraisal and a feasibility study?
In the end, you will receive more information, the data will be more accurate and you will have a professional, unbiased opinion of the value of your property. Be sure your lender orders the report. Otherwise, you will end up paying for two.