Valuation
Three Approaches to Value
In determining the value of a self-storage facility, the appraiser would consider applying all three approaches to value (cost approach, income approach, and sales comparison approach)
Cost Approach
The cost approach is based on the premise that a prudent buyer would not pay more for a piece of real estate for more than it would cost to purchase the land and construct a building. When determining the value of a self-storage facility via the cost approach, it is best to obtain land sales of vacant land that has subsequently been utilized for self-storage. Additionally, there are several resources that can help estimate the cost to construct a self-storage facility. The cost to build will be dependent on the total number of units in the facility, the amenities, land improvements (such as fence, driveways, etc.), and location, among other things.
Sales Comparison Approach
In the sales comparison approach, self-storage facilities are often valued on a price-per-unit basis, or a price-per-square foot basis. Additionally, a gross income multiplier (GIM) can serve as a supportive cross-check to value.
Income Approach
In the income approach, the appraiser would determine an appropriate capitalization rate to apply to the net operating income (NOI) of the property. Cap rates for self-storage facilities can vary in Wisconsin, depending on the property’s class, location, age, condition, and other factors.
Revenue
Self-storage facilities are income-producing, with revenue being mainly generated by unit renters paying a monthly rental rate. A self-storage facility can also have additional income streams (in addition to monthly rent) which an appraiser would consider in the appraisal.
Rental Revenue
The market rent for a particular self-storage property will be determined by local competing facilities, location to local residences, access into and out of the facility, building amenities, average unit size, the construction quality, and age, among other things. The market rent can be determined for the specific unit types in a facility with multiple sizes.
Additional Revenue
For example, revenue from outdoor parking/storage, late fees, payment processing fees, and equipment rental fees are additional revenue streams that an appraiser should consider in the appraisal.
Types of Self-Storage
Climate-Controlled
Climate-controlled units stay within a consistent temperature range. Climate-controlled units provide air conditioning and heating to the interior portions of the building.
Non-Climate Controlled
Non-climate controlled self-storage is the traditional method for self-storage units. Traditional non-climate controlled units are typically drive-up, where you can drive a vehicle directly to the storage unit.
Outdoor Storage
Outdoor storage is a non-enclosed area exposed to the elements, and can comprise of a paved or gravel lot. Vehicles, RVs, boats, jet skis, and box trucks are often stored in outdoor portions of self-storage facilities.
Get the Most for Your Self-Storage
Hire an Experienced Broker
There are several national and regional brokerage firms that have agents experienced in facilitating self-storage buy/sell transactions. These agents often know the industry, and have a list of potential buyer and seller contacts.
Maximize Occupancy and Rents
Maximizing the occupancy and rents of a self-storage facility can increase the value of the property. Look into marketing software, offering promotions, or adding convenience or amenities, in order to maximize the occupancy and rents at your self-storage facility.
Update Systems
Self-storage users often value the convenience of browsing and selecting a unit online. If your self-storage facility provides a booking system that is automatic and easy to use, it could set you apart from a traditional "pen and paper" self-storage operator.