by John Stevens
December 3, 2010 11:10 AM
Storage facility owners looking to sell their business should know that nowadays what can make or break a deal are well-maintained due diligence records that are thorough and organized. In today’s market, lenders are running a sharp eye through documentation and heavily assessing the financial well being of a business.
Well-organized records, such as bank statements, property tax invoices and an insurance policy are examples of the many documents that are needed to get a property ready for sale before finalizing a deal. Business records must reflect a strong viability of the business. Cash flow, steady occupancy, market strength comparisons and past financial stability will all be scrutinized. Having these documents in order also assures the buyer a better chance at financing.
Tight lending practices appear to be easing and buyers now have a stronger chance at success. However, a buyer should be wary of investing their money in self storage unless a due diligence records show positive results. Information gathered for this documentation can form a conclusion for a buyer about the predicted financial success of a particular self storage facility. Some important characteristics include location of the property, amenities that the facility offers, the average rental vacancies and the past financial history of the self storage business. A document binder is recommended to keep records organized, but professionals also suggest storing records electronically for back up and easy print outs.
Location is believed by many to be the most important factor to consider when purchasing a self storage business when taking into account profit margins and the ultimate success of the business. Is the facility located next to a highway, thoroughfare, or other storage facility competition? What are the city or county taxes, and how much does electricity, water and waste removal cost? These are all factors to consider for the buyer.
Amenities affect a business’s value tremendously. Whether a self storage facility has security fencing, 24-hour cameras, individual locks, climate controlled units, large vehicle storage, and personnel on the premises 24 hours a day, seven days a week can make a property more profitable.
One of the first things a buyer might look at when considering the profitability of the business is the average rental vacancies available. The higher the vacancy percentage, the less money the storage facility is bringing in. Most successful storage businesses boast a ninety percent full rental status all of the time.
“Self Storage for Sale? The Helpfulness of feasibility Study.” The Free Library. 2010.
Grossman, Stephen. “Assembling Due-Diligence Documentation: Self-Storage Sellers Facilitate the Close With Detailed Financial Records.” Inside Self Storage. Dec. 3, 2010.