How Much Cash Do I Need To Get Started? How Much Land?

You typically need between $200K to $400K.  More or less depending on your experience, time committed to the project and location.  Here are some general ideas to get you thinking.

Finding the right land parcel is the first challenge.

Concept Budget 1: – No land Chosen  – 50,000 square foot facility

Typical Land Requirements

Typical Single Story: 4 usable acres, up to 5 acres for strict zoning requirements and/or storm water detentions is required

Multi Story: 2+ acres.

Typical Construction Cost:  – single story $40 per sf, multi story $70 per sf.

When people project lower cost per square feet they are often assuming everything is perfect which is rarely the case and or do not include all soft costs.

Unusual construction requirements such as ledge, significant cuts or fills, retaining walls, unusual zoning requirements, off site improvements, local pricing etc are not included and can significantly increase construction cost.

Item                                        Single Story             Multi Story

Land                                      $400,000 + –             $700,000 Plus

Construction:

$40/sf x 50,000 sf =          $2,000,000

$70sf x 50,000 sf =                                                 $3,500,000

Unusual land etc.                $0 ?                            $0 ?

Franchise fee                       $20,000                     $20,000

Design                                   $30,000                     $50,000

Banking/Prof.  fees            $30,000                      $40,000

 

Total                                       $2,480,000               $4,310,000

Phase 1 -50%                        $1,480,000               No phasing

30% Bank Loan

equity requirements           $444,000                   $1,077500

15% loan equity                   $222,000                   $646,500

 

Challenge #2 is making sure you have a smart design!

Preliminary Profit & Loss:  50,000 sf single story facility when rented

Income – Assume 85% rented with average rental rates at $1/sf

50,000 sf x .85 x $1/sf = $42,500 monthly income

 Expenses – Assume $0.35/ sf  = $17,500/ month

 Gross profit: 25,000/month = $300,000 year

Industry income & expense can and do vary upon many factors including, competition, local property taxes, location and owners experience.  Typical rent up periods for the industry are between 18 months and 3 years.

As you can see multi story facility cost more and can’t be phased, so they require significantly more capitol and initial equity. This is why seasoned self storages developers typically build them.  Many multi story self storages will even have a higher price tag because they are often larger to off set the land cost per unit, to get better returns.

The hardest part is proper operations, sale and marketing. This is where 90% fail.

A word of caution, never accept a parcel of land simple because you own it or the price is low, it must have significant drive by traffic and the area must have an unmet demand for self storage. With the help of a good commercial broker like Sperry Van Ness (Tell them Marc from Storage Authority sent you) you can quickly determine the land cost in various areas to help you update the above budget and determine your options moving forward.

Often there are several ways to reduce the required 30% down payment.  Franchising, which gives you experience and credibility can reduce the required equity requirements.  If you need to reduce the equity requirements further a SBA loan from a preferred SBA lender who understands franchising typically require the least amount of equity sometimes as low as10%.

Now based upon your liquid assets you can start determine the best options for your needs and investigate land, design, regulatory and banking requirements in more detail.  At this point you are either ready to charge forward or realize you don’t have the capital required.  If you don’t have the capitol don’t give up.  Finding a more aggressive lender and or finding a partner with either the land equity or cash equity may be a great option.

Working with an experienced self storage development expert can also help reduce the construction cost and increases profits. You can look at building a smaller facility but they tend to be significantly less profitable and more of a hobby than a business.

Storage Authority Franchising can not only guide you through the planning, design and Construction phase but will give the operational systems and platforms required for success with todays sophisticated competition around the corner.

Your just one call away from Success! 860-830-6764 Marc

If you have any questions please feel to call or email me.

To Your Success!

Marc Goodin

President, Storage Authority

Marc@StorageAuthority.com

Direct: 860-830-6764

Disclaimer:  This is for preliminary education and over view purposes only and should not be used for investment purposes. It is not a Storage Authority Franchise offer. Storage Authority offering is by the Storage Authority Franchise Disclosure Documents only.  Once a property is located a detailed feasibility study, site investigation, site designs, construction costs and regulatory investigation are required in order to determine the cost and feasibility of a project.