You have had the opportunity to envision your future self-storage empire in our last blog. Now is the time to really focus on how to make that happen. You can dream all you want, but you must put in the time and energy to turn that dream into a reality. Having a Self-Storage Business is not only a possibility but something that you can realistically accomplish. However, the next section of your outline is going to tell you how you are going to achieve this goal. How to find and finance properties?
Start by looking at your first year. How many properties do you want to buy? Is that one or is that one a month? Your goals and dreams will partially be determined by how you are going to finance your properties and whether you are going to start by assigning your contracts or purchasing them yourself or buy them as partnerships. You need to make this clear as you fill in your self-storage business plan.
Part of how you are going to make this happen depends on your circumstances. If you are brand new to real estate, that is o.k. However, if you are brand new, you might need a mentor to help you get started. This might be a time to look into some training classes or find someone who will purchase a good opportunity from you for a finder’s fee. If they are going to buy a property from you, they will tell you what they are looking for, how much they are willing to pay for it, and what kind of a return it needs to have for them to be interested. They will also tell you what areas they are willing to purchase properties in. This gives you the freedom to start making offers, knowing that you have a buyer lined up. This also helps you know that you have someone more experienced helping you run the numbers on your first deal. Either way, you need to outline this in your self-storage business plan.
You may be a more experienced real estate investor. You may already have a lot of real estate experience under your belt and so you know what you want in a commercial investment. In that case, you may just need minimal guidance in what to look for and what to avoid in a self-storage transaction. There are different pitfalls in each type of real estate, and you want to make sure that you know what to look for when you start in a new area of investing. Again, you can get this information from a mentor or a potential partner. Once you have decided how you are buying the property, then you can start making offers.
You may be assigning the contract to a new buyer or you may be purchasing the property yourself. Either way, it is good to know how you or your new buyer is going to purchase the property. Are you going to be using a group of investors and paying cash for the deal? Are you going to be getting a loan from a bank for a portion of the purchase price? If so, what requirements does your lender have? What are you going to have to show them for the lender to be interested in your deal? Most lenders have a list of requirements that they want to see to be interested in a property. We are going to do an entire blog on what you need to show in your self-storage business plan when you are presenting an opportunity to a lender.
The next step in your self-storage business plan is to list how you are going to find properties. Are you going to enlist Commercial Realtors to help you find great deals? This is a great way to get opportunities brought to you. A lot of sellers go straight to an agent to help them sell their property. If you have networked with a lot of Commercial Realtors, they know what you are looking for and you will be at the top of their list of people to call.
Another marketing strategy that you should implement is direct mail. There are a lot of owners out there that are happy today, but time and circumstances change for everyone. Covid19 is a good example. You never know what is around the corner.
You want to make sure that your name is in front of every owner in the area that you want to dominate. You want them to know that when and if the time comes to sell their property, you want to buy it. Put together a list of properties that are in the area that you want to buy in. Find the owners of those properties and then put together a great mailer. See our blog on how to market to sellers or check out our website for more information on how to construct the perfect mailer to get the seller’s attention. We have an above average response rate on our letters.
You also need to be aware of the competition. Who is also out there buying properties? Can you work with them? Can you convince them to bring you the deals that are to small for them? Can you take them the deals that are too big for you? Is there a way to create a symbiotic relationship or are you always just going to be competitors? How will their business impact your business in that area? Do you want to compete against them? Can you compete against them or should you look in a different part of town?
Finally, what are the returns in your area? Every area has a different return on investment based on the value of land and rental rates for that area. You may be able to get sky high rents in an area, but the land values are so high that your return is minimal. There may be another area in the country where the rents are mediocre, but the land is so cheap that your returns are fantastic. Make sure that you know what the typical return is in an area before you begin investing a lot of time and energy marketing only to discover that this is not an area that you want to work in.
Take the next week to really start filling in this section of your outline. Research the areas that you want to work in to verify what the returns are. Start looking into how you are going to find your properties and who you are going to work with so that you are ready for our next blog. Tune in next time to find out how to structure your business when you are filling in your self-storage business outline. As always, happy investing.