Self Storage Is Hot – But Don’t Be Hasty!
In Marcus & Millichap’s Tampa and Orlando offices, we are currently seeing a lot of activity in the self storage market. Prices are up. Properties once shunned as “metal warehouses on month-to-month leases” are now the most talked about real estate in Wall Street boardrooms. Self storage is showing better returns for REITS than Office, Industrial, Retail, Hospitality, or Healthcare. Cap rates are low, interest rates are even lower, and buyers are clamoring for more storage facilities nationwide.
It’s definitely a seller’s market. But how do you know when it’s the right time to sell? And who can you trust to help you make that decision?
Make the right choice
Just like any other real estate transaction, the decision of whether to sell is different for every owner. A great market is just one factor to consider. When owners choose to sell, it should never be because their management company says to or a random real estate agent offers an outrageous price for the property. Individuals should have a strategic plan that includes actions that support their financial goals.
What are you looking for? Long-term cash flow? A three- to five-year opportunity to add value? Or a 20-year get-the-kids-through-college-and-travel plan? The key is having a plan that accomplishes your goals, not your agent’s goals.
Management companies can sell your property, residential realtors can sell your property, brokers from companies you have never heard of can sell your property — and acquisition managers want your property. But before you choose, stop and ask, “Whose interest do they have in mind?” Is the agent who is pursuing your sale truly your advocate, an ally who will fiercely represent you to buyers?
Does your agent have other motives?
Perhaps you’re considering using your management company to handle your sale. Management companies offer a lot of value. They know how to sell units, run specials, tackle P&Ls, take care of advertising, and increase occupancy and rents all at the same time.
However, they are often not experts in knowing a property’s true value and creating a sales environment that maximizes that value. Marcus & Millichap agents are those experts. We can provide an expert Broker’s Opinion of Value, make specific recommendations for getting the best price for your property, and bring a diverse pool of potential buyers to compete for your sale. Without these essential steps, you’ll likely leave hundreds of thousands of dollars on the table.
Does your agent specialize?
Did you know that there are over 60,000 licensed real estate agents in the state of Florida? That’s a figure that includes the income of “part time” agents, “the market is improving I’ll stop leasing real estate” agents, and “self-storage is on fire, let’s make some quick money” agents.
Because the spotlight is on the self storage market right now, many of these generalized agents are giving the market their attention. But to ensure the best result for your sale, you want to verify that the broker who represents you has an established process to market the property, successfully vet buyers, and correctly manage the escrow process.
Most important, your agent should be a specialist with an intimate knowledge of buyers and deep industry relationships. All owners are receiving calls from vendors looking to sell you something. Real estate agents from unknown companies chasing checks should never be a reason you decide to sell.
What is the downside of unsolicited offers?
Have your received this call?
“The market is hot, and I have a buyer on the line. Would you consider selling?”
Unsolicited offers are coming back into style, and brokers who say they represent a buyer are making their rounds.
Unsolicited offers may sound like a quick and easy way to sell. However, in such a scenario, the cards are stacked in favor of the buyer. There is no competition, no back-up offer, and no advocate who understands the process. Often, owners receive an initial high offer, then once they are locked into the process, the buyer negotiates the price downward.
Remember the old saying: “If it sounds too good to be true, it probably is.”
How should you choose your broker?
When you make the choice to sell, make sure you are partnering with the right team. Use a checklist to ensure you’re getting a broker who
- is advocating for you and has your best interest in mind
- does not have ulterior motives — they ‘re not looking to maintain management contracts, buy properties themselves, or just looking for a paycheck
- has a team in place to not only handle the process, but handle the process effectively
- has a strong track record in Self Storage
In addition, look for a group that has an extensive, organic database that has been built over time and can provide your property with the best exposure. Choose specialists who understand the people, the industry, and how to get self-storage deals done.
Make sure the team that represents you has the right stuff. Your financial security and future depend on it.
Senior Vice President, Investments