Self Storage Feasibility Study
Are you planning a new development, expansion, refinance, or acquisition of a self-storage facility?
MMCG invest is an expert self storage feasibility study company. We have years of know-how and unique datasets for any self-storage feasibility study in the US. We serve SBA 7(a) and 504 loan programs.
Before you purchase the site for a self storage facility, a high-quality, in-depth study feasibility study predicts your occupancy and market conditions, analyzes your competition, and shows all financial indicators of your investment.
How to conduct a self-storage feasibility study?
The first step should be the independent cost analysis. There are five major costs.
Purchase of land
A deep demographic analysis is a key to knowing your site's market. What are population income within 2-mile and 5-mile radius? What is the size of the average household? What are population trends? Is the population increasing? Is there any planned new development?
The second step of conducting a detailed self-storage feasibility study are traffic related indicators of your site. What is the traffic on your site? Is your site visible? Statistics say that a visible site has a shorter absorption period of 55 percent, and the average vacancy is lower by 5 percent than a self-storage facility, which is not visible from a road with a high AADT (annual average daily rate).
Is your site between urban agglomeration and mountains, a lake, a marina, or a ski resort? Great, all these generate significant demand for specific self-storage units!
MMCG recently conducted a feasibility study for a self storage facility in Poncha Springs, Colorado. According to average square feet demand per capita indicators, the market seemed to be overfull. However, MMCG conducted a demand generator analysis, which discovered a vast potential for specific units for storing sports equipment. MMCG also considered a massive increase in tourism within the area.
Market and Submarket conditions
The essential part of conducting a self-storage feasibility study is to know your market and submarket conditions. This part includes analytical work with datasets. Datasets contain market and submarket prices, occupancy, demographic change, competitors' capacity, and new development.
Analyze your competition within a 5-mile radius. Visibility, traffic overview, equipment, security, access, mix climate-controlled non-climate controlled units. Compare prices per SF.
Factors causing the adjusted value of the new self-storage facility are better visibility, the most recent development, superior security equipment (including security cameras, pin codes, and alarms), and better access to the units (all units on the first floor, elevator).
To determine the financial feasibility of a self-storage project, you need to finish all previous steps and consider them into well build a financial model.
One of the most important indicators for banks/investors is Debt Service Cover Ratio (DSCR). To conduct DSCR, you need to know your loan amount, interest rate, and amortization. DSCR measures a project's available cash flow to pay current debt obligations. For the purpose of using a feasibility study to help to get an SBA 7(a) loan, DSCR should be a minimum of 1.2x. This means that if the annual Debt Service is $100,000, your self-storage project needs to make an EBITDA of at least $120,000 to prove that your DSCR is 1.2x.
EBITDA company's earnings before interest, taxes, depreciation, and amortization is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
To prove your self-storage is financially feasible, you need to perform a stress test on your project. The sensitivity analysis test decreases occupancy or price per unit by 5, 10, and 15 percent. The higher decrease your project can take and still show a DSCR of more than 1.2x, the more stable investment it is. However, the financial feasibility part of a bankable report should have more investment performance indicators, including Pro forma, Discounted Cash Flow (DCF), Net Cash Flow (NCF), Internal Rate of Return (IRR), Monte Carlo Simulation, and others.
Are you looking for a self-storage feasibility study provider? MMCG is an expert self storage feasibility study company serving the whole US. We provide feasibility studies for SBA 7(a) and SBA 504 loan programs. What does a self storage feasibility study cost? MMCG charges a flat fee of $5,500 per whole project. How long does it take to finish the self storage feasibility study? It takes from 5 to 7 business days.