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Open self storage unit full of cardboard boxes. 3d rendering

Nowadays, self-storage facilities have become a popular solution for people who look to store various items. Both individuals and businesses use these facilities for a variety of reasons. Self-storage benefits them by providing an affordable means for storing both small and big items. It has achieved many commendations as a valuable commercial real estate investment. You may be thinking how to put a value on the self-storage facility, because if you are looking to have a self-storage facility than you should calculate its gross potential as it helps to determine the value that is likely to be worth in the market. The following are the few ways through which you can calculate your gross potential for a self-storage facility.

 

Get the Actual Figures

The emphasis in this type is upon accessing the actual figures that are related to the payment made for self-storage regarding utilities, maintenance, advertising, and the actual revenue generated associated with the rent from the real estate property. Once you have gained the actual numbers, you go through the necessary calculations to evaluate the gross potential of a self-storage facility. It is imperative to understand that using estimates will not allow you to determine the gross potential of a self-storage facility on an exact and realistic basis. Once all the cost heads have been identified, and actual figures have been attained. Then you can calculate the gross and net profits that can be generated by the investment of self-storage. In this method, the gross potential of self-storage potential can be calculated by taking help from the property owner.

Evaluating the gross potential of self-storage facilities can become a tedious job if the property owners fail to disclose such information. But still, you can get information if you want to calculate the gross potential of self-storage facilities, by going through the industry journals and published annual reports of real estate companies. Calculating the gross potential in the self-storage business and bookkeeping both play an essential role as it records the business transactions through which required data can be retrieved.

Determine a Capitalization Rate

Two factors can affect the property value, which includes: Net Operating Income (NOI) and the capitalization rate (cap rate). NOI can be calculated in the same way as it has always been. Still, recent chaos in the economy and financial markets have pushed the cap rate higher that is why identification of capitalization rate is one of the significant steps to calculate the gross potential in a self-storage facility. However, it is essential that NOI should be calculated for the facilities of self-storage by using the industry-standard parameters for other income and operating expenses. It is defined as the money left after all the operating costs are paid, in which the debt services and depreciation are excluded. You can look at the potential monthly rent flows from the annual reports in which other incomes are added, and economic vacancy is subtracted. The resulting figure is known as the effective gross income (EGI). To calculate the NOI, the operating expenses are subtracted from EGI.

To estimate a return on investment (ROI), the cap rate should be calculated first. This cap rate may be lower in the areas where tenants with a strong profile are common. A higher cap rate may be fixed in the areas that are low in popularity so that the maintenance and repair services can be covered when required. These features can help you to choose a cap rate of any area; however, it is crucial to acquire a property owner because the emphasis has been on the actual figures and not the estimated ones. Fit can also be calculated by using the net operating incomes and the recent sales prices of comparable properties. The calculated rate is then used to calculate the current market value of the self-storage facility. The gross potential or value of the self-storage facility can be determined, once you have calculated both operating income and cap rate, by putting these figures in the valuation formula. The essential aspects that you must keep in mind include monthly cash flows, value appreciation over time, tax advantages, etc. that are considered to be significant expenses of a business.

 

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file, critical financial documents and back office tools in an efficient and secure environment. Complete Controller’s team of US based accounting professionals are certified QuickBooks™️ ProAdvisor’s providing bookkeeping, record storage, performance reporting and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay services. With flat rate service plans, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Blue doors of self-storage garage.

What is Self-Storage?

Self-storage is a system in which individuals rent out space within a premises of a large warehouse or storage compartment. These storage compartments or places are rented out to tenants on a short-term time period. Tenants usually include businesses and entrepreneurs.

Self storage units are no doubt a practical solution, whether they are required to store important family possessions, home storage or business purposes. As all the storage units are somewhat different from each other, here are some tips to make the most out of your self-storage.

How to Maximize Potential through Self-Storage

Consider all the Benefits Related to Vertical Storage

The importance of vertical storage solutions is often overlooked. They provide more space to fit in all the bits and pieces that people might see as extra things that don’t seem to fit easily. Allowing easy access to the things that are stored in them, they make organization easy and extend the maximum available space. An example of vertical storage can be industrial racks.

Without having to dig through piles to get a certain thing stored underneath, vertical storage compartments are easy to stuff, access and maintain. Sensitive items can be stored in them without the worry of them being damaged. For example, clothes can be hung on hangers, preserving them in the best possible condition for their next time of use.

The Need for Extra Security and Why it Increases Potential

When valuable items are stored in storage facilities, it becomes necessary to maintain a high security system on your unit. Important items such as financial plans or jewelry should always be stored in secure safes that require a pass code to access. This majorly reduces the chance of unauthorized access or theft.

Even if the storage units are divided, effective security measures will assure you that your valuable products are safe. Making sure that intelligent locks are installed alongside a system that makes the security or yourself alert, like an alarm system, enables you to recognize any attempts of robbery or unauthorized access.

The storage facilities should be located in well-lit areas with sufficient security measures like:

  • Motion detectors
  • Surveillance cameras
  • On-site security such as security guards
  • Individualized alarm systems

These storage facilities may not be so easy to find but they are generally the basic requirements of security in the industry. Keeping the security measures in mind, you and the authorized personnel should be able to access the secured area anytime.   

Labeling the Boxes or Any Other Storage Compartment

Although you may remember everything you put in every storage compartment, there still lies a high chance that you will forget, which will lead to confusion. You will eventually have to access every storage component until you find what you are looking for. One way to avoid this is to divide your inventory into subcategories and label the storage compartments accordingly.

Alongside, maintain a checklist of everything that is stored in your premises with the exact stored locations. This will make finding your things in the storage a piece of cake.

Always Insure Your Items

It is almost impossible to recover the products or the amount of money invested if they are destroyed by man-made or natural disasters such as a fire, flooding or any other drastic measures. Hence, it is important to get all of your things in your storage insured.

Find the policies of your renters or homeowners insurance and check whether they cover the items in the self-storage unit or not. Make sure that you get at least the minimum amount of insurance on your storage items. Getting insurance will not save your ruined products but at least you will not end up completely empty handed.

Price Should be a Factor, Just Not the Only One

Cost considerations should not oversee the safety measures offered in the storage facilities you opt for. Alongside, always consider the ease of access and look if it has the facility of authorized access or not. Lastly, consider opting for a storage facility that is near your workplace so that it is easily accessible whenever you need to take something or store it back. This will save you travel costs and time taken to cover a long distance. 

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

Empty storage unit with opened door. 3d rendering
Self-storage has gained much acclaim as a valuable commercial real estate investment in recent times.  This is partly due to the increasing storage and warehousing needs of individuals and businesses. Let us briefly explain what self-storage means in the world of real estate. Self-storage deals with renting out storage space to individuals or businesses, usually on a short-term basis. The storage facility can uphold household goods and equipment as well as inventory and archived records. If you are looking for a self-storage facility to purchase, it is essential to evaluate its gross potential or the value that it is likely to be worth in the market. Here, we list a few ways to calculate gross potential in a self-storage investment.

Get The Actual Figures

Here, the emphasis will be upon assessing the actual figures; figures relate to payment made for self-storage regarding utilities, maintenance, advertising and the actual revenue generated regarding rent from this real estate property.  Once you have the actual numbers, you can make the necessary calculations. Using estimates will not allow you to calculate gross potential in a self-storage on an accurate and factual basis. Once the various cost heads have been identified and actual figures have been acquired, you can calculate the gross and net profits that may be generated from the self-storage investment. This is one method to calculate gross potential in a self-storage, with help from the property owner. Property owners that fail to disclose such information make valuing a self-storage property a tedious job. However, you can get your hands on the information needed through industry journals and published annual reports of real estate companies.

Determine a Capitalization Rate

To calculate gross potential in a self-storage, identifying the capitalization rate is another significant step. Cap rate is a must in order to estimate a return on investment (ROI) and it may be lower in popular areas and locations where strong-profile tenants are common. For areas that are low in popularity, comprising mostly of older buildings and weak-profiled tenants, a higher cap rate may be fixed in order to cover for maintenance and repair services, as and when required. These factors can help you with deciding a cap rate in any given area; however, since the emphasis has been on actual figures and not forecasted ones, you may inquire a property owner for cap rate prevalent in a given area where the self-storage is located. Cap rate can also be calculated by using the net operating incomes and recent sale prices of comparable properties. The determined rate may then be used to calculate the current market value of the self-storage facility. The value calculation, in this case, is essentially how we can calculate gross potential in a self-storage property.

Now that you have both the operating income and cap rate, the value of the self-storage property may be calculated by putting the figures in the valuation formula. A few of the important aspects to keep in mind comprise of monthly cash flows, value appreciation over time,  tax advantages, tax breaks from depreciation and any and all significant expenses that are usually involved in a business. These expenses span from mortgage interest, insurance, advertising, bookkeeping, and management all the way to repairs and maintenance.

Check out America's Best Bookkeepers


About Complete Controller® – America’s Bookkeeping Experts
 Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

illustration of a self storage unit
Keeping everything organized in your business allows it to run like a well-oiled machine. The boost in efficiency that proper organization gives is beneficial to businesses, small and large. However, small businesses often neglect this crucial factor of efficiency which limits their ability to grow and expand operations.

One important aspect of keeping a business organized is having adequate space to keep unused equipment, inventory that hasn’t been stocked, and files for records that might be needed at a later date.

What is Self-Storage?

Self-storage is a provision of storage space that is provided by a service provider for a short or long period of time. The tenants of a self-storage space pay rent, usually monthly, to the service provider. Some self-storage businesses may facilitate contracts with annual payments and long-term leases. Tenants can be both businesses and individuals.

Commercial real estate is expensive. However, self-storage falls into the budget of many small businesses. Considering the low price compared to other options, it is easier for businesses to incorporate and sustain the use of self-storage facilities into its operations.

Benefits that Can be Offered for Using a Self-Storage Facility

Certain services might be offered by a self-storage provider other than the actual business of storing materials.  These benefits may include:

  1. Meeting Rooms
  2. Fax and Internet Services
  3. Courier Receiving Services
  4. Package Sending Services

These services are provided to attract smaller businesses, as larger organizations already have them. These services can be beneficial for your small business as it is expensive to get them.

Businesses that Use Self-Storage

Different businesses have different kinds of storage needs. Self-storage units can be modified according to the kind of equipment and inventory you want to store. Examples of small businesses that use self-storage services include:

  • Landscape businesses that require the services of a storage unit to keep their equipment
  • Medical offices that need a storage unit with climate control to keep and preserve patient records
  • Restaurants, hotels, and motels utilize self-storage to keep seasonal decorative items as buying them in the season can be more expensive

In conclusion, if you are an owner of a small business looking to better organize your business in order to streamline operations and improve efficiency, it is recommended that you look into the benefits of availing these self-storage facilities.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Self-Storage Business - Complete Controller

In the 1960s, self-storage development started with pioneers, who identified the increasing demand for commercial and residential storage. They were the real estate developers who produced the stage for the self-storage industry.

The self-storage industry is not much different from industries that deal with demand and supply economics. Commercial and residential storage have increased the facilities that supply them. The increased growth of the industry has contributed to increased public awareness of the product’s personal and economic advantages. The continuous increase in demand is always teamed with excellent potential, and it has made self-storage one of the leading growth industries since 1978. Check out America's Best Bookkeepers

The importance of the self-storage industry cannot be denied. Commercial development of the industry started back in the 1960s. Real estate will always be one of the significant assets for households, governments, and businesses. They are affected by the economic law of supply and demand. However, opening a self-storage business is never guaranteed.

Key Factors of a Self-Storage Business

The critical factors that must be considered in a self-storage business model include the following:

Cash Flow Analysis

A cash flow analysis helps determine the business’s total profit, which is an integral part of any business. Various factors must be considered. They include a considerable amount of leasable space, projected percentage of occupancy, loss due to vacancy collection problems, and gross annual rental income. Check out America's Best Bookkeepers

Development Costs

Developmental costs must be obtained before entering into any business, and the total costs must be considered before making any significant decisions. Bookkeeping can be used to keep track of any information that is related to the considerable costs related to the business. The area of the purchased land should not reflect the full amount of the leasable space upon completion.  In addition to this, the significant factors that help determine the leasable coverage include the utilities, easements, building codes, and physical land features. The figures that are linked to the construction costs are entirely dependent on the type of facility. Almost 67% of the development budget goes towards construction and comprises equipment, labor costs, and many other items. Self-storage businesses require more than half of the developmental costs of multifamily properties, including co-housing properties and apartments.

Financial Analysis

Financial analysis is an essential part of a self-storage business. A cash flow analysis helps in the determination of the ROI just after the development costs. The target occupancy percentage must be developed and is usually around 90%. Other than the target occupancy percentage, the break-even occupancy must be identified to cover the debt services and operational costs. Self-storage businesses believe that the occupancy rate should be between 60%-72%. A low break-even percentage is always ideal for investors because it provides an extra cushion for fluctuations in the market. Check out America's Best Bookkeepers

End Users of the Self-Storage Business

An increase in business-minded individuals mainly powers the self-storage industry. These are the parts of every typical start-up and require a mobile workspace and temporary storage. Companies like e-commerce stores make use of self-storage units as a vital part of their inventory facilities. Other than the commercial market, many people move into new homes and avail self-storage units to store their belongings, whether it be short or long term. The market developed rental rates for many different types of self-storage consumers, and they operate within these rates. This is the key to competitive sales of self-storage units. A self-storage business is beneficial as it is one of the most significant investments compared to other prominent real estate developments. The growth of online businesses and start-ups is expected to help expand the number of self-storage businesses and the industry. 

Rents

Rents are an essential part of a self-storage business. The average annual rent charges for real estate were surveyed in a large number of studies. Self-storage units are similar to multifamily and real estate properties regarding rent prices. The rents and prices of storage services are as follows:

  • Multi-family: $7.5 to $12 per square foot
  • Offices: $14 to $24 per square foot
  • Retail: $16 to $20 per square foot
  • Self-storage: $6.5 to $12 per square foot

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
Self-Storage Business - Complete Controller

In the 1960s, self-storage development started with pioneers, who identified the increasing demand for commercial and residential storage. They were the real estate developers who produced the stage for the self-storage industry.

The self-storage industry is not much different from industries that deal with demand and supply economics. Commercial and residential storage have increased the facilities that supply them. The increased growth of the industry has contributed to increased public awareness of the product’s personal and economic advantages. The continuous increase in demand is teeming with excellent potential, and it has made self-storage one of the leading growth industries since 1978. Check out America's Best Bookkeepers

The importance of the self-storage industry is undeniable. Commercial development of the industry started back in the 1960s. Real estate will always be one of the significant assets for households, governments, and businesses. They are affected by the economic law of demand and supply; however, opening a self-storage business is never a guaranteed success.

Key Factors of a Self-Storage Business

The essential factors you must consider in a self-storage business model include the following:

Cash Flow Analysis

A cash flow analysis helps determine the business’s total profit, which is an integral part of any business. Various factors must get consideration. They include a considerable amount of leasable space, projected percentage of occupancy, loss due to vacancy collection problems, and the income of gross annual rents. Check out America's Best Bookkeepers

Development Costs

Assessing developmental costs and considering total costs is essential before making any significant decisions. Bookkeeping is useful when tracking any information that is related to the considerable expenses related to the business. The area of the purchased land should not reflect the full amount of the leasable space upon completion.  The significant factors that help determine the leasable coverage include utilities, easements, building codes, and physical land features. The figures linked to the construction costs are entirely dependent on the type of facility. Almost 67% of the development budget goes towards construction and comprises equipment, labor costs, and many other items. Self-storage businesses require more than half of the developmental costs of multi-family properties, including co-housing properties and apartments.

Financial Analysis

Financial analysis is a crucial part of a self-storage business. A cash flow analysis helps in the determination of the ROI just after the development costs. The target occupancy percentage must be developed and is usually around 90%. Other than the target occupancy percentage, the break-even occupancy should cover the debt services and operational costs. Self-storage businesses believe that the occupancy rate should be between 60%-72%. A low break-even percentage is always ideal for investors because it provides an extra cushion for fluctuations in the market. Check out America's Best Bookkeepers

End Users of the Self-Storage Business

An increase in business-minded individuals mainly powers the self-storage industry. These are the parts of every typical start-up and require a mobile workspace and temporary storage. Companies like e-commerce stores make use of self-storage units as an essential part of their inventory facilities. Other than the commercial market, many people move into new homes and avail self-storage units to store their belongings, whether short or long. The market developed rental rates for many different types of self-storage consumers, and they operate within these rates. These rates are essential to competitive sales of self-storage units. A self-storage business is beneficial as it is one of the most significant investments compared to other major real estate developments. The growth of online companies and start-ups helps expand the number of self-storage businesses and the industry. 

Rents

Rents are a vital part of a self-storage business. The average annual rent charges for real estate were surveyed in a large number of studies. Self-storage units are similar to multi-family and real estate properties regarding rent prices. The rents and costs of storage services are as follows:

  • Multi-family: $7.5 to $12 per square foot
  • Offices: $14 to $24 per square foot
  • Retail: $16 to $20 per square foot
  • Self-storage: $6.5 to $12 per square foot

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers