When it’s finally time to sell your self-storage property and enjoy the fruits of your labor, you want to be in a position to maximize the outcome your investment. Here are seven tips to help you prepare for the transaction and get the price you want.
Step 1: Raise Your Rental Rates
Part of your self-storage exit strategy should be to raise your existing unit rates to full market potential—or as close as you can get. This will increase revenue while also generating financials that are more appealing to buyers and prospective lenders.
Step 2: Update Your Rent Roll
As part of the sale process, you’ll need to provide a rent roll to help buyers evaluate the potential of your business. Make sure you have a digital file of all your storage units categorized by size, location (interior or exterior, ground or upper floor), type (traditional or climate-controlled), and status (occupied, vacant, charity, etc.). This kind of reporting will be needed by all interested parties, and it makes a smooth selling tool.
Step 3: Organize Your Business Records
Before you put your facility on the market, you need to get your “house” in order. Gather all your business and real estate tax records. Correct any inaccuracies, and compile a list of any historic property improvements or issues. Take an inventory of business assets such as security cameras, desks, computers, etc., and assess their value. Make sure your entity records are up to date, and be prepared to share your income records, expense documentation, tax filings, capital improvements and expenses. Knowledgeable buyers will quickly move on from reluctant or questionable recordkeepers, so make like a Boy Scout and be prepared.
This is also a great opportunity to review how far you’ve come with your business. If there are family members involved, consider including your attorney in an estate-planning conversation. The sale of this asset should, at a minimum, involve your accountant for tax planning.
Step 4: Spruce Things Up
Impressions mean a great deal. Before you go to market, is your self-storage property clean and well-maintained? Make sure it’s presentable and fully functional. Check your landscaping, lights, locks, doors, roofs, signage, drains, etc., for issues. Get rid of all trash, debris and graffiti. Clean the office. Maybe invest in some fresh paint.
Though these are common-sense recommendations, the results will add value to your business and property value, which will increase your bottom line. Consider the time and minimal expense a short-term investment with a great return.
Step 5: Consider Capital Improvements
Perhaps you’ve received suggestions from staff or tenants, or been advised by a previous real estate broker that certain capital improvements would make your property more attractive to buyers. Now, you have to decide: Would the average prospective purchaser expect this kind of upgrade? If so, bite the bullet, and set yourself up for success.
Keep in mind, many buyers are courting lenders. Recent improvements are music to an underwriting department’s ears. This remains true: Adding value adds more than it costs; it fosters trust.
Step 6: Find a Good Broker
If you’re still ready to sell after doing all the above, enlist a professional broker who’s licensed in your state to market the property. This person should specialize and do significant business in self-storage. Ask for the broker’s ratio of listings to settlements; you want to see a high closing rate. You also want someone who’ll value your business properly and get it in front of potential buyers who can close the deal.
Step 7: Go to Market
Once you find a good fit with a broker, the listing process begins. It usually follows a predictable progression:
- You’ll attend an introductory meeting with your broker to discuss objectives and begin building trust.
- You’ll attend a second meeting to review underwriting, financials and facility valuation.
- Once the valuation is finalized, the next step is to sign a listing agreement. Most listings in the self-storage industry run six or 12 months.
From there, you’ll let the broker handle the listing while you focus on running the business. After all, the best-selling storage facility is one firing on all cylinders! Buyers will welcome and pay more for a top-performing, well-run asset.
Remember the Golden Rule
When it comes to their livelihood, people’s emotions can run high. It isn’t always easy to ensure sensitivity and cooperation throughout the listing and sales process. The Golden Rule can help here: Treat others as you would like to be treated.
This applies to your family and staff, especially your property managers. Happy employees can be invaluable during due-diligence process. Remember, too, their behavior during this time might be viewed as an “audition” for a position with the new owner. Give your team the opportunity to shine, and help yourself toward a successful self-storage closing.
Rick Hansberry is director of acquisitions for Investment Real Estate LLC (IRE), which brokers the sale of self-storage facilities in the Northeast and mid-Atlantic. He’s responsible for leading all legal and due-diligence efforts for the brokerage and acquisitions team. He also plays a leading role in strategic planning, accountability and setting company goals. For more information, call 717.779.0804; e-mail [email protected]; visit www.irellc.com.