Posted onJuly 31, 2018June 7, 2019AuthorPhysicianREI2 Comments
Pamela, what is a Cap Rate range here, and are there geographic, population density (urban, suburban, rural), local renter’s financial status, facility size, access to major roadways, etc considerations here as in, e.g., MF – or not much of this applies here? Which do, and please add other considerations as you see fit, as there is not much specific info on self-storage easily available.
For passive investing, do you recommend any particular sponsor(s)?
Good questions IMdunDDS (like the pseudonym, BTW)! A few thoughts in not necessarily a specific order:
– CAP rates: at this point in time, CAP rates are fairly similar to what you see regionally in multi-family investments
– Factors that might make for a good opportunity:
* facility size: for large operators looking to reposition a facility, they are wanting to find facilities large enough to attract institutional investors (think REITS) as a possible end buyer once repositioning is complete; this is likely to be 500+ unit facilities and opportunity for expansion if it makes sense for that market
* facility location: in addition to price, self-storage users want a facility that is convenient and easily accessible, preferably within the usual paths of travel they find themselves on a daily/regular basis so urban/suburban areas make the most sense in that regard
* local traffic/visibility of a facility is critical, at least $10,000 cars passing by/day but the more the better
* good mix of unit sizes and at least a portion of that being climate controlled units
* opportunity to increase revenue and improve margins on existing services or products is a plus, like offering moving supplies/trucks, rental insurance, climate controlled units, etc.; if a current owner is not doing any or much of these things that can be a huge opportunity
* facility that has or allows for institution of various convenience factors: 24 hour access, automated access/services, auto/RV parking
– large operators will do a market analysis of the subject market to see if the supply/demand ratio is being met for the given demographics of any given area; positioning themselves to meet this demand and still protecting themselves against local competition is key making facilities with high barriers to entry by other facilities a strong suit
Hope these items are some of what you were looking for! As you have probably noticed from the emails, we have been working with a leading owner/operator in self-storage and preparing to close on a self-storage facility this month. Keep on the lookout for more offerings from this operator and see if it fits with your strategy.
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