The last several weeks we’ve been going into detail about the seven skills required to start and grow an self storage business.
The material is the in-depth look at the skills I wrote about in an article for Inside Self Storage.
The premise of the articles is that as a small investor you need a certain level of return. We need more than 5% to 6% available when you purchase an existing storage facility.
Today, you can purchase existing self storage all day long and generate those returns. But unless you either build new, convert an existing building or do a value-add play, such as an expansion, you can’t achieve returns higher than 5% to 6%.
All three ways to improve the for sale returns you can get involve some type of construction.
Last week we discussed the skill to accurately determine the construction costs of a project. You can either develop that skill set or hire it. My recommendation was to develop that skill for yourself and we discussed how to accomplish that.
This week I want to discuss the ability to construct or oversee the construction of buildings and/or a conversion.
Keep in mind I am approaching this as someone who had zero construction experience when I got in the self storage business. Everything I know about construction and development, I learned from doing self storage.
I also made a lot of mistakes.
Mostly I learned that self storage is not that complicated. There is a sequence of tasks that need to occur in particular order. If those are done correctly with self storage construction, it really isn’t that difficult.
If possible, I recommend cutting your teeth on single story suburban style self storage. It is less complicated than multi-story construction, but not by much.
If you are new to the world of construction, I recommend hiring a construction manager or general contractor. We use a construction manager now because we are very involved in selecting the subcontractors, the storage facility fabrication company, and the erector. We only want someone to oversee them in the field. We have functioned ourselves as the construction manager, especially in the early days. Today, we are too busy and we have found banks like it better if we have one in the field.
But the reality is we could do it.
My coaching to you is to get a good engineer
The engineer drives the project through the approval process for us. They create the site work drawings, tells us the best site work contractors in the area, and review the layout plans we get from the self storage fabricators. They also tell us if we need an architect to add to the plans the site work fabricator generates for approvals. They are critical.
We want to select the engineer, not the construction manager or the general contractor.
In short here is the process we go through on an expansion:
- Get the facility under contract.
- Select an engineer or have our engineer we work with on all projects help select a local *engineer in that area.
- Order the feasibility report.
- Send a site plan or survey to self storage fabricator and ask for a preliminary layout (be willing to pay for that so others can bid it).
- Assuming the feasibility report indicates there is demand for more self storage product, we then have the engineer look at the preliminary layout to see what needs to be changed to get approvals.
- Send out the preliminary layout to other storage system fabricators and get bids so we can select one.
- If the fabricators are going to generate the plans, then we have them send the CAD version to the engineer and architect for them to finish for approvals (if needed).
- Get site work drawings from the engineer.
- Get bids on site work.
- Get bids on all other trades.
- Concrete
- Electric
- Plumbing
- Security
- HVAC
- Fencing
- Have the engineer or construction manager get approvals and permits needed to start site work and then construction.
This is the general sequence of tasks we go through. Some areas of the country are easier than others. Some municipalities are easier to work in than others.
It is good to have people involved and on your team that knows the local process and players involved in getting the approvals.
For us, that is the engineer or construction manager.
Like it or Not
Personally, construction was not something I wanted to be involved with. I just wanted to be in the self storage business.
However, I realized that being successful in life requires getting outside our comfort zone.
That’s where the magic is.
That’s where success is.
Stretch yourself. Develop the skill of being able to run a construction project or at least work with someone running a construction project. This will allow you to be in the best business there is for small investors, the self storage business.
To be a successful self storage business owner today you will be required to know how to run a construction project. Or you will need to understand how to assemble a team to run a construction project. This is the only way to bring more square feet of storage online under the per square foot cost you have already spent to purchase the existing facility and its cash flow.
Do this enough times, and you create true wealth and a fulfilling career in this fantastic business.
