Self-storage is turning out to be a hot investment trend for real estate investors in 2018. Whether you’re completely new to the self storage industry or you’re getting ready to close on your third or fourth facility, you’ll want to keep these things in mind before you sign on the dotted line. Check out our top advice for self storage investors looking to acquire an existing storage property.

1. Start gathering data early.

Analyzing financial statements, cash flow, and tax returns is a major part of your self storage valuation process. Just like any other real estate investment, it’s important to do your due diligence before purchasing a self storage business to investigate whether a property is worth the money and risk involved. Your due diligence process will likely consist of financial audits, market analyses, growth trajectories, and a competitive analysis. As a buyer, you need to be proactive in gathering all the information you can about the business, starting with the last three to five years’ worth of business statements. From cap rate analyses to tax returns, market analysis reports to historical operating expenses, you’ll be poring over a lot of business data.

Do your due diligence before acquiring a property to ensure the investment makes sense long-term for your business model.

To get detailed business information and historical records on the property, your seller will need some kind of reassurance that you’re a serious buyer. Discuss your interest with the business owner (usually stated through a signed letter of intent) and provide a signed confidentiality agreement that specifies you will not share the seller’s private business information with outside sources or competitors. Use the information you gather through due diligence to determine the financial feasibility of the property, forecast future cash flow of the business, and evaluate the economic viability of further development.

2. Assess the market’s long-term potential.

Market research is key to finding that diamond-in-the-rough property that will become a strong revenue producer in the future. As exciting as the industry is, many markets are at risk of being overbuilt, and competition among operators is fierce. Before you join a new market, you’ll need to assess the long-term growth and stability of the area to ensure it can sustain demand for your self storage property.

Research valuation and acquisition trends and learn from other operators’ wins and losses in your market to create a competitive advantage for your business.

Check out the local competition. Competing with high-budget REITs can be tough, and in a highly-saturated market, you’ll need to find a competitive edge in order to succeed - slapping “AAA” on the front of your storage facility’s name isn’t enough to stand out anymore. Find out where new apartments and residential areas are being built, and study your self storage property’s location compared to new developments. If you’re planning on building more climate control or updating the facility’s outdoor parking areas, ensure you’ll be able to get zoned for more building and future construction on-site. Find the current rent rates in your area and prepare your business model to stand up to any new competition.

3. Get your hands dirty with a property inspection.

Every storage market has difficult weather - if you’re in Minnesota, you’ll be nervously checking facility plumbing and heating to ensure it can stand up to a cold winter. If you’re in Florida, you’ll be mentally checking things off your hurricane preparedness plan. If you’re an Arizonan, you’ll be worried about keeping your climate controlled units’ AC running through a sizzling hot summer. There is no perfect location for self storage, and every facility location will have its own set of difficulties.

No matter what you’re planning to do with the acquired property, ensure you inspect it carefully with the help of a trusted contractor to limit unexpected repairs and hurdles to construction in the future.

When doing a property inspection, you’ll want to carefully walk every foot of the property inside and out with a trusted building inspector and keep an organized list of anything that is in need of repair. Keep a close eye on anything that doesn’t meet current building codes and will need to be fixed before you can even open for business. Whether you’re flipping the property or not, you’ll need to watch out for roof leaks, broken HVAC systems, fire code non-compliance, wood rot, and interior water damage. Find out if there is a warranty remaining on the roof, unit doors, elevators, or gates.

4. Secure the rights to digital assets.

Before you sign a contract to purchase a storage business, make sure you’ve secured the rights to your new business’s digital assets as well as its physical assets. The digital assets of a self storage business include all digital files of the business that add value and are discoverable in a system (such as the internet or a software program). Digital assets include the self storage business’s web domain, passwords, social media, facility photos and videos, email accounts, vendor emails and contact information, software data such as occupancy reports, tenant records, and lease agreements.

It’s incredibly easy for buyers to overlook this important step, and forgetting about it is a big mistake. If not agreed upon in a contract, a seller can hold them from you and extort a price, or take their leads and tenant records to a competing self storage business. The business’s social media pages, web domains, and software data are valuable business assets, and as such, their transfer of ownership should be included in your sales contract.

Digital assets include web domain names, passwords, social media pages, review sites, email accounts, software data, tenant records, and lease agreements.

As a buyer, you need to be organized and proactive in requesting and securing the rights to the self storage business’s digital assets. Before requesting digital assets be transferred at sale, do a little research of your own to evaluate the property’s website, social media accounts, videos, images, and online reviews. Check out current and past reviews for the business, and find out what the overall sentiment is about the facility online. Even if its website is ranking poorly and the property’s reviews are overwhelmingly negative, you’ll still want ownership of the digital assets in order to turn the business’s reputation around.

If you are buying a property that is not part of a multi-facility portfolio, the transfer of digital assets is relatively simple - the owner just needs to give you all of the account logins, passwords, and transfer domain ownership over to you via a signed contract. If the property is part of a brand portfolio, you’ll need to ensure that redirects are in place for a set period of time (at least 60 days) upon transfer of ownership to give search engines enough time to crawl and recognize the new site. You’ll also need to redirect pay online URLs to allow current storage renters to pay their bill and avoid confusion. Work together with your website provider to ensure all redirects and domain ownership changes are handled smoothly, and you’ll be able to transfer the ownership of digital assets quickly and painlessly when the business changes hands.

5. Work with a team of professionals.

Whether you’re a seasoned property buyer or you’re acquiring your first self storage facility, you’ll want a team of professionals at your side to help you sort through the legalese and technological mumbo jumbo. If you’re in the market for a new self storage investment, try working with a self storage broker. Self storage brokers are investment advisors with self storage expertise, market knowledge, property development plans, and marketing expertise. They’ll help match you with a property that meets your goals and facilitate a smooth transaction.

Work with a team of experts to help you navigate the legalities of the sale, ensure smooth software, security, and web marketing transitions, and avoid construction woes.

You’ll also want a strong legal team on your side. Have your attorney review all legally-binding documents and assist in the writing of the sales contract. Be sure to have a trusted accountant available to look over financial records like P&L statements, tax returns, and historical operating expenses. If you’re working with a self storage broker, they may be able to refer you to accountants and attorneys with industry experience.

Last but certainly not least, be sure to work with an industry-leading technology team to ensure all digital assets are transferred as specified in the sales contract. If you’re transferring old software data to a new system, choose a user-friendly, cloud-based software provider with both plenty of experience with software data migrations and superior customer service throughout the setup process. Your web marketing team will work with you to help you transfer domain ownership, set up necessary redirects, and create a modern, mobile responsive website for your new business that ranks well in search and brings in leads online.

Thanks for reading! If you liked this blog post, you may also like: The new storage owner’s mini-guide to buying, building, and acquiring storage facilities, 5 things to know before you become a storage owner, and How to choose the right self storage contractor for your new build.