Self Storage Due Diligence: What Buyers Need to Know Before Closing

Bob Copper Offers Insider Tips on the “Outside the Box” Podcast

Tune in to the “Outside the Box” podcast to hear Bob Copper share his expertise. Hosted by Terry Campbell of Johnson Insurance, the series covers the latest trends in self storage, RV, and boat storage insurance, explains how to manage risks, and offers useful tips from insurance experts.

Key Factors to Review Before Closing

Terry and Bob outline the critical steps buyers should take before closing a deal. They stress the importance of verifying unit counts and sizes, reviewing leases and rental rates, checking for discounts, assessing cash flow and bank deposits, identifying deferred maintenance, confirming permits, and evaluating the property’s physical condition.

Unlocking Value in Underperforming Properties

The conversation shifts to underperforming properties and whether they truly offer value-add opportunities. Problems such as poor management, low rents, weak marketing, or an unsuitable unit mix can often be fixed, making these facilities attractive to buyers. However, hurdles like market oversupply, low rental rates, and declining demand are much more difficult to overcome and can significantly limit the potential for improvement.

Insurance Considerations

Insurance is another critical consideration for buyers. New owners may face higher premiums due to updated replacement costs, lender requirements, flood risk, or previously uncovered exposures. Terry cites cases in which insurance costs have tripled when a property changes hands, underscoring the need for careful review.

Market Studies vs. Feasibility Studies

Bob breaks down the difference between a market study and a feasibility study for developers. A market study examines key factors such as demand, competition, area demographics, occupancy rates, and current rental prices to assess the viability of a self-storage project. A feasibility study takes a deeper dive, analyzing whether the entire business plan – including construction budgets, expected operating costs, lease-up timelines, and long-term cash flow projections-will be financially sustainable.

New Opportunities in the Market

The episode wraps up with a look at new opportunities in flex space, boat storage, and RV storage – sectors gaining traction as traditional self-storage development slows in some markets. Terry and Bob note that these sectors are attracting investors seeking alternative revenue streams. As consumer needs evolve, staying informed about emerging trends can help buyers spot growth opportunities early.