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As owners who have gone through the selling process ourselves, we know that selling your self-storage facility is a significant decision that requires careful planning and execution. You want to ensure you get the best possible return on your investment while making the process as smooth as possible. It is a two way street and you want to navigate it carefully. Here’s a quick guide to help you navigate through the process of selling your self-storage facility:
1. Evaluate Your Facility
Before deciding to sell your facility, you can do some legwork to help potential buyers evaluate your facility. This is not very extensive work, but provides an idea of the value of your facility to the market. This includes:
Occupancy Rates: Are you always full? Provide a history of occupancy rates. Higher and stable occupancy rates indicate a profitable and well-managed facility.
Condition of the Property: Do you take really good care of your property?Assess the physical condition of your facility. Make necessary repairs and improvements to enhance curb appeal and ensure operational efficiency later on for the buyer.
Market Position: Are you the only storage facility in town? Analyze competitors and local demand for storage units, and any new changes. As the industry becomes more competitive and more and more new facilities are being built, it is vital to understand your position in the local market.
2. Screen Potential Buyers
Not all interested parties will be suitable buyers. Screen potential buyers to ensure they have the financial capacity and serious intent to purchase. To help screen potential buyers, you can request:
Tax returns
Lease agreements
Proof of funds or
Financing pre-approval
Unfortunately, as our industry becomes more popular, more and more "tire kickers" may come to the table but do not actually have the ability to close the deal themselves. Because of this, many sellers do opt to look for a more seasoned buyer or someone who has a history of closed transactions.
3. Improve Curb Appeal
First impressions matter. Enhancing the curb appeal of your facility can attract more buyers. Simple improvements like up to date landscaping, fresh paint, and clean signage can make a big difference without putting a big dent in the pocketbook.
4. Prepare Your Documentation
Some buyers will have an extensive list of documents needed which may be pages long. This may be a serious undertaking for you which is something to consider when working with certain buyers and may influence who you choose to sell to. Be aware that at the very minimum, banks and lenders will require you to show tax returns and financial statements, but some buyers are far more flexible in what documents you need to produce.
Having all necessary documentation ready can expedite the selling process. Key documents include:
Financial statements (last three years)
Tax returns
Lease agreements or rent roll
If keeping costs low is a priority for you, doing as much as you can and getting documents ready ahead of time may help limit fees incurred from professionals such as your accountant and attorney. The more they have to produce, and the more information they have to go through, the more they will have to bill you. In most cases, you are the most familiar with your own records so it is easier for you to produce statements and records initially, and then pass them on later for final reviews.
5. Navigating the Sale
Be prepared to negotiate terms of the sale, including the purchase price, payment terms, and any contingencies. While you want to get the most return on your investment and get everything "your way", it is prudent to be mindful any hindrances to that goal and decide what terms are negotiable to you and what terms are very important.
On average, closing a commercial real estate transaction in the U.S. takes between 60 and 180 days, depending on the complexity and specifics of the deal. With self-storage facilities, you typically have hundreds of leases to review due to the number of tenants as well as other due diligence items. (In contrast, the typical residential transaction takes significantly less time, only 30-60 days.) Proper preparation, efficient handling of due diligence, and clear communication can help ensure a smoother and more timely closing process for both parties.
Conclusion
Selling your self-storage facility is a complex but very rewarding process. By taking the time to evaluate your facility and prepare thoroughly, you can maximize your return on investment. Enlisting the help of professionals can provide valuable expertise and support throughout the sale. With careful planning and execution, you can achieve a successful sale and move forward to your next venture with confidence.
Feel free to reach out to industry experts and leverage available resources to ensure the best outcome for your sale. Good luck!
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