Timing the Market to Sell Your Self Storage Facility
When considering the sale of your self storage facility, there are many important factors to keep in mind that can determine your success as a seller. One of these factors is the real estate market, as the overall state of the market can ultimately determine the value you can get for your self storage property. Therefore, it is vital to pay attention to the market — but how do you know when it’s the right time to sell?
Here are a few tips that the team at Investment Real Estate has put together based on twenty-two years of experience selling hundreds of self storage facilities.
- Understand the real estate market cycle
- Develop an exit strategy
- Work with a self storage broker
Understand the Real Estate Market Cycle
The real estate market cycle broken down into four distinct parts: recession, recovery, expansion, and oversupply.
The first of these two, recession and recovery, have come and gone over the last decade or so. From 2008 to 2012, the market was in a recession, characterized by high cap rates, lenders unwilling to fund loans, and reduced valuations, meaning that very few owners could sell. When the market was in recovery from 2013 to 2016, the Federal Reserve reduced interest rates to an all-time low. This meant that property valuations increased, capitalization rates were high, and buyers flooded the market. As today’s market continues through the expansion stage and trends towards oversupply, the market has become oversaturated with properties, meaning lots of competition.
Understanding the various stages of the real estate market is paramount in determining when it is the right time to sell your self storage facility.
Develop an Exit Strategy
In addition to understanding the timing of the real estate market cycle, it is crucial to develop an exit strategy in order to maximize your returns. These two processes go hand in hand, as an exit strategy is dependent on timing the market effectively. There are three steps of an exit strategy: hold, refinance, and sell.
- Hold –Holding usually occurs during a recession phase when the market is pessimistic and there are very few buyers. When deciding to hold your property, it can be best to focus on improving management functions in order to prepare your self storage facility for the future, when it may be in your best interest to refinance or sell your property.
- Refinance-This option tends to come up post-recession when the market is in recovery. If selling is something you are considering in your future, it can be helpful to discuss refinancing with your accountant to see if it is a viable or beneficial decision.
- Sell-Though we don’t know when the next recession in the real estate market will come, we know that we are currently in between the expansion and recession phases. In other words, this is an ideal time for a property valuation. If you’re considering selling, examine the current market — now might be better for your investments.
Work With A Self Storage Broker
Selling a self storage property shouldn’t be done without the advice and expertise of an experienced consultant. That broker should have a solid track record of successful closings and knowledge that demonstrates that they know how to add value to a property to make it more appealing to buyers.
The right broker for your facility is someone that will understand your market, the timing, and has been present in the self storage real estate market for years. To ensure that you get the full value that your property can and should bring on the market, consider working with a self storage broker.
Still have questions?
The experienced team of self storage brokers at Investment Real Estate is ready to help you. Selling a self storage property is not something that anyone should have to handle on their own. If you are considering selling a self storage facility and have questions about the best course of action, contact the team at IRE today.