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Nine Development/Start-up Fees Often underestimated or Forgotten

By Ed Clement

"Your Self Storage Planning - Site Selection - Design-Build" by Marc Goodin

Chapter 12

1. Engineering and architectural design fees have to be paid upfront by the developer. They can run from $100,000 to $200,000 and more for a one-story building project.

2. Town building permits may run tens of thousands of dollars. The construction contracts should be clear on who pays the building permit fees. And don’t forget about the regulatory application fees during the municipal site plan review and approval process.

3. Make sure it is clear who is responsible for construction special inspections (if required), construction stakeouts, engineering, and erosion control inspections, and survey as built, and construction builders’ risk & liability insurance.

4. Your bank will typically have an appraisal done at your expense. An appraisal can cost $6,000 or more. Banks typically also require a phase one environmental report at your expense, which costs approximately $2,000. Your bank may also require a bank inspection to be done prior to the release of each construction draw and typically, you will have to pay the bank for this inspection. Of course, there are several miscellaneous bank fees that add up as well.

5. One of your largest expenses may be the property tax. Most towns are going to assume a full value as if the facility is rented. Your yearly property taxes could be in the $40,000 to over a $100K range for a completed 50,000 sq. ft project.

6. It can take months, or even a couple of years, for a new self-storage facility to rent up to the breakeven point. Many self-storage facilities break even in the 55% - 65% rented range. While monthly expenses can vary, $30,000 plus or minus $5,000, can be used for initial preliminary planning purposes for a new 50,000 net rentable square footage facility.

7. Don't forget about the cost of the initial office supplies, equipment, tools, and sales merchandise. This can run from $10,000 to $15,000 or more. You should include these items in your original construction costs for your bank loan.

8. Remember when you open your doors you will have a mortgage, payroll, and other expenses and very limited self-storage income. Make sure you have ample cash reserves to pay your bills during the rent-up period. While many banks will not loan you this money, some will, so include these costs in your original bank loan application.

9. Before spending large sums of money on design and other items, the first thing you should do is do a feasibility study to determine if the site is a good choice for self-storage. It can cost a couple of thousand dollars for a mini desktop study and seven to ten thousand for a full study. Some banks require a feasibility study. You can ask your bank if a feasibility study can be substituted for an appraisal.

Ed Clement is a franchise director at Storage Authority. One of his passions and responsibilities is helping franchisees find land by sharing how to find land both online and offline. Ed has a strong background in real estate, investment banking, and management consulting. He is available at or 727 946 0745 to answer your questions and share the Storage Authority Franchise opportunity.


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