by Marc Goodin
Don't make the mistake of thinking you can use your gut to determine if a property is viable for a new self storage development. You need to swiftly do multiple Profit and Loss scenarios to see the impact of all the variables that can make or break a new development.
If you can not do various Profit and Loss calculations swiftly stop Looking for land!!!
The economy has changed significantly in the last couple of years making it harder to make a profit. And it looks like things are changing again, making it easier to make a profit.
Interest rates just dropped in the last 7 days. How does that affect your P & L? Maybe we will see another drop this Sept? Rates and other items are looking better than a year ago and I suspect they will even look better in 2025.
There are over a dozen items that need to be plugged into a self storage calculator. And then you often have to look at various combinations of factors and revise many assumptions as you do further research and as the economy gets better.
Here are several items that can vary significantly from one location to another and from the preliminary review to the final review. They also change over time due to the economy in general
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Increase profitability Decreased profitability
70,000 net rentable SF 40,000 net rentable sf
No off-site improvements or unusual site costs. Off-site and or unusual site costs
Lower Borrow carrying cost to break even Higher carrying cost to break even
Interest rate 6.5% Interest 8.5%
Construction Cost $75/sf $100/sf +
Average rental rate $2.00/sf/month $1.40/sf/month
90% occupancy 80% occupancy
Land costs $ 800,0000 Land costs $1,500,000
 20% down 10% down
2 years to fill up 4 years to fill up
Expenses 25% of Income Expenses 40% of income
Many factors go into a P & L, and each one can vary, leading to many combinations of factors that should be run through your Profit and Loss calculator. If you do not have one make sure you have the math down to do the calculations and don't skimp on looking at many multiple P & L options just because it takes hours to do so.
If you own a property that you want us to run through our Self Storage P & L we are presently providing this service for free during September. We can also run a property you don't own through our P & L calculator for a nominal fee.
Give me a call or send me an email. Marc@storageauthority.com for a free self storage development consultation.
To Your success!
Marc
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