Sometimes it is hard today to find deals that could work as you look at buying and getting in the self storage business.
Let me give you an example of how parking can sometimes support you.
I analyze five to ten deals per week most weeks, and I ran across one a few months ago.
It is a typical package with mostly fictitious numbers that are much high than what the Owner is currently getting but “adjusted to the market.”
No offering price, but after calling Brokers and getting Sellers “expected price range,” it appears to be a low 5% CAP rate on the Broker’s adjusted numbers.
It drives me crazy.
But the package has some existing parking, just scattered across some unpaved land, let’s say approximately an acre and an additional acre for potential expansion.
After getting preliminary data on the submarket, it appears as if the trade area is at equilibrium, so we don’t feel that bringing more self storage into this submarket is prudent.
So like most deals I look at, I was about to file this away on my computer, but something caught my eye about the trade area.
The average household income was high in—the ’80s.
This facility didn’t represent that fact well, so I took a closer look at the competition.
Indeed, there was lots of parking, upscale covered and indoor parking, and it appeared to be full.
In higher-income trade areas, people often have expensive toys, and this location was near recreational destination spots.
I figured out how much new upscale parking I could get on the expansion lot and the existing one with just surface parking on gravel.
I checked the competitors’ parking process, got some estimates on materials, and then ran a preliminary proforma.
What I have seen in today’s world is new self storage, in a healthy market, leases up at 3% to 5% of the square feet per month.
Parking in a healthy market lease-up between 8% and 12% per month.
Low and behold, this deal could work.
At the lower end of the Seller’s expected price range, we were getting double-digit cash-on-cash returns and, by year five, had created over $1.3 million in value through our parking expansion.
Again, a preliminary proforma. But we would get every assumption validated in due diligence.
As the market and self storage real estate cycle changes, we can at some time perhaps put storage where the parking is.
Here is an example of how parking can make a big difference as you look at self-storage deals.
For more information on how you can get in the self storage business, be aware I am hosting a Virtual Self Storage Bootcamp, Oct. 8 & 9, 2021. Click the link for details.
We cover strategies like this and much more. If you want to be in the self storage business this year but cant figure out how, this training will take you from wherever you are, to knowing what the step-by-step process is today for putting your first self storage project into place.
