Building Your First Self-Storage Facility: Planning, Timeline, Budget and More

Building a self-storage facility is exciting and stressful, and going through the process for the first time can be daunting. But it can be less so if you enter it with realistic expectations and proper preparation.

First-time developers often try to skimp on the planning stage. However, this is a critical step that will allow you to minimize facility maintenance and problems as well as allow for future expansion. Following are important considerations for building your first self-storage project, including feasibility, timeline, budgeting, construction and more.

Feasibility and Site Selection

Location is one of the most important decisions you’ll make during the planning phase, and site selection will be driven by the size and type of storage needed in an area. For example, a multi-story facility can be built on a smaller property with a higher land cost than a facility offering boat/RV storage, which requires more, less expensive land to be profitable.

Before designing your project, conduct research to determine the proper size for your first phase and the unit types that will be in demand. If your own investigation indicates there’s a need and economic opportunity to develop self-storage, hiring a feasibility consultant is an excellent way to get a second opinion. A good advisor can help you prevent expensive mistakes and provide valuable insight. Some lenders even require a third-party study. Consultants offer a variety of services, from simple demographic reports to full-blown studies containing recommendations for facility size and unit types.

You’ll also want to evaluate nearby facilities and those in similar communities. You don’t want to overbuild, but you do want to aim for better curb appeal and features than the competition. Nicer sites usually command higher rents and have higher occupancy. Also consider the resale value—what size and features will make the facility attractive to a buyer if you decide to sell?

When choosing a site, check with your city to see which zoning classifications allow storage. Getting a zoning change is difficult and expensive, if not impossible.

You also need to think about dirt. If you haven’t been involved in construction in the past, you might not have an appreciation for how important this is. Before making an offer on land, consult with a civil engineer to help you understand what’s needed to make the site buildable. New developers often focus—somewhat obsessively—on the building cost and unit mix, when in reality, the largest variable they face is the unknown cost of excavating topsoil, replacing it with free-draining granular fill (known to non-engineers as gravel or sand), and possibly engineering and creating a pond. Your engineer may need to order soil testing to predict the scope of the grading work required.

The Timeline

Most new developers underestimate the amount of time the development process will take. From the point that you decide you’re going to build a facility to when you rent your first unit can easily be three years.

First, the process of negotiating an offer on a land purchase and gaining approvals to build can be long and arduous. Before you secure financing, you might easily spend 5 percent to 10 percent of your project value on architectural, engineering and legal fees. This design work must be done to create an accurate budget as well as to plan and possibly create the renderings your city might require before granting a permit.

During this stage, your investment is a gamble. Money spent prior to city approval will be lost if the project can’t move forward or the land seller backs out. Depending on the city and state, the permit process alone can easily take a year.

Unfortunately, approvals are often given sequentially rather than concurrently. When I was working on my own project—Columbus Self Storage in Columbus, Wis.—it took three months to obtain the conditional-use permit. Then the state storm-water approval took nine months, and the building-permit application took another three months to clear due to an easement that had to be removed.

Once you have your approvals, you’ll probably want to build as quickly as possible. In reality, you’ll need to adapt to the lead times of your suppliers and contractors. Theses will vary depending on the time of year and how busy they are with other projects. Once your project is permitted, your supplier should be able to identify a potential delivery window. If you’re hiring the erector separately, you’ll need to coordinate with this company as well.

No matter what happens with your timeline, you’ll likely be upset that you can’t build and open your facility as quickly as you wish. If you build in the fall, you’ll find yourself wishing the project would have been ready in summer. If you build in summer, you’ll lament that you didn’t pour foundations last fall.

Budgeting and Financing

In the end, it’ll all work out, but during construction, you may find yourself on edge as you make monthly interest payments on a project that’s not yet making a dime of revenue. As soon as possible is never soon enough. This is normal. If you’ve budgeted and planned for a period of negative cash flow after opening, this time can be a little less stressful.

As you work through the pre-planning of your project, you’ll likely find you have a few budget lines that were only rough estimates or some quotes that are out-of-date due to timeline changes. Before submitting budgets to your lender, update these items and collect all of the supporting documentation. Have your business and builder’s risk insurance ready to go. Your lender will require this before closing on the loan. You might also be required to purchase life insurance, which may involve a physical exam and, therefore, require some lead time.

If you’re financing your project with a Small Business Association (SBA) loan, be ready to produce statements showing that your down payment funds were in place for at least two months prior. SBA loans make it possible to get into the business with a lower down payment, but they do bring some additional requirements and paperwork as well as a fee that’s typically added to the loan value.

Before closing, your lender will likely require an appraisal of the project. This process can take a month or two, so give your lender advance notice of your desired closing date. Once the appraisal is performed, don’t make significant changes that would affect the projected cost and revenue of the project. Also keep in mind that you’ll likely pay for the appraisal yourself. In my experience, this is $2,500 to $3,000 for a small project.

Finally, keep meticulous records of all payments. Next spring when your accountant prepares your tax return, expenses will be categorized to create depreciation schedules. Keep copies of checks issued, and monitor payment requests compared to the quotes issued.

Site Prep and Construction

While it’s possible—and a potential cost-saver—to serve as your own general contractor (GC), especially on small, straightforward projects, there are advantages to bringing in experienced help. First, it makes sense if you don’t have the experience or time to manage the construction phase yourself, particularly on larger, more complex projects. Second, a good GC may be better equipped to finish the project on time and able to secure subcontractors at lower rates or on a better schedule.

Depending on project size and complexity, you may be required to have an engineer of record. This could be an independent engineer you hire or a service from your architect. The role of this person is to ensure your project is being built correctly and according to the plans that were approved by your city and state. He should carefully review foundation forms and structural connections.

When your building materials arrive, take inventory of the shipment. If a shortage or shipping damage has occurred, report it to the driver and manufacturer immediately. Damage should be noted on the trucker’s bill of lading when you accept the shipment to facilitate possible claims against the shipper.

Speaking of materials, don’t take for granted that everything will be available at a moment’s notice. Construction materials can sometimes be out of stock. When creating your budgets, ask vendors how far in advance you need to order. On my current project, I’ve been informed that some decorative fiber-cement panels need to be ordered 10 weeks in advance. You don’t want to store—and pay interest on—materials longer than necessary, but you also don’t want a project to be delayed because of a shipment. Don’t let a simple issue prevent you from getting a certificate of occupancy.

Before You Open

It’s easy to get caught up in the excitement of construction, but don’t forget to prepare for the operational side of the business. For example, most successful storage businesses use management software. You’ll need to research, choose and install a program that meets your future needs. You’ll also need to set up a facility website and prepare a rental agreement at least a month or two before your opening day. There’s also launch marketing, staff hiring, a grand-opening event and a whole host of other important items to consider.

Throughout the process of building my own facility (the second-phase foundation forms are being assembled as I write), I’ve often felt the best summary of the process is “hurry up and wait.” I’ve learned that planning ahead, communicating with my subcontractors, and listening to those who have gone through this before—even when they tell me something I don’t want to hear—can make the process smoother. Proper planning is the true foundation to a successful self-storage project, whether it’s your first, tenth or one hundredth.

Steve Hajewski is the marketing manager at Trachte Building Systems, which designs, manufactures and erects a full line of pre-engineered and customized steel self-storage systems, including single- and multi-story, portable storage, interior partition and corridor, and canopy boat/RV. He also owns a self-storage facility in Wisconsin and is a frequent contributor on Self-Storage Talk, the industry's largest online community. For more information, call 800.356.5824; visit www.trachte.com.