Calculating Your Self Storage Investment in a Challenging Market

Some of the best opportunities in self storage lie in existing vacant buildings. Converting an existing building into a self storage operation can be a very lucrative proposition. There are a number of issues you need to look at to understand the viability of changing an existing building to self storage. One of the first steps is to figure out if it is financially feasible. Trachte’s conversion calculator allows you to understand the basics of whether the project is financially feasible or not. The calculator will help you answer some basic questions

  • Is the existing building too expensive to convert to self storage?
  • Will I get enough rentable square feet in the building to make it cash flow?
  • How much will the entire project cost?
  • How much money will I need to invest?

Simply enter your best guesstimate on development costs, average rent in your market, and estimated square footage in the blue fields. To guide you, we’ve supplied helpful hints for each input field. Just hover your mouse over the field for more details. Contact one of our knowledgeable regional managers for further guidance.

Existing building cost
$

If you are buying a building just input the entire cost of the building plus any closing costs into this field.

If you already own the building, input either your outstanding debt or its present value to determine your return.

Total gross square footage of the existing building

Input the entire total (gross) building square footage of the building into this field. If you have over a 16’ clear eave height then you may want to consider installing a mezzanine system creating two floors instead of just using one floor. To evaluate a mezzanine, add the square footage of the potential 2nd floor area.

Total net rentable square footage
of the gross sqft.

The best way to get the actual net rentable square footage is to draw up an actual unit mix layout. In lieu of this you can estimate that the corridors will take between 17-23% of the space. For example if you have a 50,000 gross square foot building you should get 40,000 net (80% coverage). For multi-story buildings, estimate a slightly higher percentage of 20-28% for non-rentable space to account for stairwells and elevators.

Estimated cost of permits, interior demolition, repairs and painting
$
Cost per gross sqft.

The cost of permits, demolition and repairs varies widely between buildings. This can be the major cost expense with upgrading the building. Input your best guess and then you can raise or lower the costs to help create a construction budget for a feasible project.

Estimated cost of interior corridor systems installed
$
Cost per gross sqft.

The price for the conversion system installs will vary depending on what is your average size unit. If you have an average of around 70 sq ft per unit use $7.00 per gross sq ft. If your average size unit is 100sqft you can use $6 per gross square feet

Estimated cost of HVAC, electrical and security systems
$
Cost per gross sqft.

Typically the old lighting system is replaced with new lights and the existing HVAC system may have to be reconfigured. If so, enter an estimate of $4-8 per gross sq feet to start, but plan to get some bids before committing to the project. If the building does not have a sprinkler system find out the city will make you install one to bring your building up to code. This can be an expensive proposition.

Estimated cost to improve office, signage and exterior appearance
$
Cost per gross sqft.

The cost to improve your office will cost around $40 per sq ft of office area but the greater issue is if you have to make major changes in the exterior of the building. Signage costs can vary dramatically, so get bids on your options and include those costs in your planning.

Total Estimated Cost
$
Cost per gross sqft.

Estimated cost of permits, interior demolition, repairs and painting
+ Estimated cost of interior corridor systems installed
+ Estimated cost of HVAC, electrical and security systems
+ Estimated cost to improve office, signage and exterior appearance.

Average rental rate for project is
$
/ sq.ft per year

Input the data you gathered from your competitive analysis. For instance, if a 10’ x 10’ (100 sq. ft.) unit rents for $80/month, $80/100 sq. ft = $0.80 sq ft/month, $0.80 x 12 months = $9.60 sq ft/year. Input $9.60 into this field.

For a more conservative approach, input the rental rate for a 10’ x 15’ unit.

If considering climate control, add additional rental income for these premium units.

Total Development Costs
$

Existing building cost + Total Estimated Cost

Gross Income
$
per year

Average rental rate for project + Total net rentable square footage

Gross Operating Expenses
%

The range will normally be between 25-40% of gross income at 100% occupancy. The larger the project the percentage usually goes down because of more units to spread the managers cost. This expense includes property taxes, which is a significant variable in evaluating a project.

Annual Operating Expenses
$

Gross Income * Gross Operating Expenses.

Borrowing
%
of the Total Development costs at
%
interest for 20 years
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