What Is My Self-Storage Facility Worth?
Sometimes, self-storage facility owners want to know what their self storage facility is worth. Knowing the value of your self-storage property in the current market not only helps with a realistic idea of what your business is worth, but will also help you get a good and fair price if you ever plan to sell your storage facility.
Here we will share with you how to value your storage property so that you know it’s worth at any given time. Let’s dive in.
How to Establish the Value of a Self-Storage Property?
Learning how to value a storage property without realtor input is an important skill that every self-storage owner needs to have. But before we delve into valuing your storage facility, here are two things that you need to remember :
The condition of the facility, site, market competition, and many other aspects affect the value of a self-storage facility. Self-storage also competes with industrial, office, and retail real estate in the market along with other investment options.
Investors in this space — as in any other market — naturally look for good returns on their investment. So while calculating the worth of your storage space, it is important that you assess its past income revenue and future earning potential.
While we are on this topic, remember that if you plan to sell for cash, buyers will not pay you for future income gains. Usually, buyers do not place much value on vacant units or expansion land.
Storage facilities are often sold at a rate less than their replacement costs and the costs incurred by the current owner. This is because buyers only pay what they feel is justified by the expected returns.
Here we will tell you the steps that you need to follow to calculate the worth of your self-storages, whether it is a mini storage facility or even a boat and RV storage facility.
To calculate the value of your self-storage facility, you need to review the past business records and accordingly predict the future income. It is important that you gather accurate information for the review to help you determine the true worth of your facility.
Start with the past year’s income and expenses, older income statements, and occupancy information. Assess and check all the income generated from rents, retail sales, truck rental commissions, administrative fees, late fees, and so on. Also, accurately review all your operating expenses that you have incurred to generate income and subtract debt service, depreciation, and amortization.
Often, many self-storage facility owners do not factor in costs such as payroll, maintenance and repair costs. And they may also add expenses that are not related to operating the facility. Such costs must be left out so that you can get an accurate picture of your operating expenses.
Once you’ve gathered all the information and reviewed the financial data by comparing it from month to month, you will be able to understand the fluctuations in your income and expenses. In different parts of the country, self-storage owners often deal with rentals and certain expenses on a seasonal basis.
Analyzing the last few years of data will help you spot certain trends for your property. A facility with rising occupancy and income is a more worthwhile buy than one that is on the decline.
Calculate the Worth of Your Storage Facility
After collecting and analyzing all your business and financial data, you can now start actually valuing your large or mini storage property. Calculating the value of a storage facility is similar to valuing other real estate properties.
There are different valuation methods that you can use for this purpose. Here are some of the top methods:
1. Income Capitalization Method
This method specifically looks at the cash flow of your storage property. It focuses oncapitalization or cap rate to establish the value of a storage facility that offers rentals. The income capitalization method converts monthly revenue into a return on investment formula to determine the valuation. To calculate the return on investment, you must divide net operating income (NOI) by the sale price.
The difference between gross income and operating costs will give you the NOI value. The sale price is the currently listed rate of the storage facility or the price at which you intend to list it. A lower cap rate will give you a higher return on investment and a better value for the storage property.
2. Sales-comparison Method
This method assumes that the storage facility’s value is directly related to the value of similar facilities that were sold recently. It is apt for determining the value of a storage facility that a business uses for its own purposes.
Under this method, you need to find out attributes such as the age and condition of the facility, lot size, and construction materials. Gather sales data for the facility and rank recent sales as per the degree to which the attributes match.
Factor in the time of the sale and location and accordingly adjust the data. Establish the value based on the best match or an average of all.
3. Cost Method
The cost method may be useful to value a storage building when it’s new or if a business uses it for its own purposes and requires a quick valuation. This method targets physical assets, factors in depreciation, and calculates the value based on the costs that the business would incur to rebuild the facility.
Consider the land value, construction costs, and materials costs minus the accrued depreciation. This will give you the valuation of your storage building.
We hope we helped you make a fair valuation for your storage property that can help you in your business and for selling purposes. If you are looking to sell your facility, we buy storage facilities at fair rates and as is, so you don’t have to worry about renovating or cleaning up your property before selling.
We buy all kinds of self-storages, whether they are large or mini storages or boat & RV parking ones. If you are interested in selling or want to know what your self-storage facility is worth, please contact us to get the process started.