When building a self-storage facility, there are many potential mistakes that can be made along the way. Even an experienced developer knows they are going to make mistakes; however, the more mistakes that can be avoided the better. Gaining knowledge of the most likely mistakes to be made is one way to minimize the chances of making them. Below are some common mistakes made when building a self-storage facility.
During the due diligence period of land acquisition, it is critical to gather ALL the information that will impact the development. Some of the information that needs to be obtained includes, but is not limited to the following:
Depending on the requirements of the city/county for a particular parcel it may make the development more difficult or costly. Work on getting all the information on a parcel. If it is not zoned for Self-Storage, learn what it will take to get the parcel re-zoned. Ask the municipality how long re-zoning takes and what the likelihood is of getting a self-storage project approved for that location. Don’t be afraid of asking questions that may not get the answers you want. It is better to know upfront what obstacles and red tape you may face when working with Planning and Zoning. The last thing anybody wants is to finalize the purchase of a property and then learn that you cannot build self-storage on the property, or the requirements make the feasibility of the investment not favorable.
New construction of any building takes time. Do not underestimate how much time each step of the process takes. When putting together a schedule, pad each stage of construction just a bit. Below are a few reasons a schedule could be delayed and/or altered.
Make sure to take into consideration what the weather will be around the time foundation is laid. Warmer climates need not be as concerned as areas where there are freezing temperatures. When temperatures dip below 50 degrees the curing time of the concrete takes longer and if it gets to a freezing temperature there is a risk of the water in the concrete freezing. This will jeopardize the integrity of the foundation’s structural design.
The lead times for material can change quickly and alter the entire schedule. It is critical to be in contact with the supplier and manufacturers on a regular basis to ensure that the appropriate time is taken into consideration for when the material is to be onsite. Keep in mind that the delivery of the materials for one trade doesn’t only impact that trade. That is, if the material for the framing is delayed, then it is going to delay those installing doors. Trades are directly dependent on the timeframes of the trade that comes before them in the sequence of construction. Some of the reasons that material delivery date could be delayed are transportation issues, manufacturing delays, and general shortages in materials.
Yes, we have heard about labor shortages in every industry and construction is no different. It is very competitive in the construction industry and keeping skilled labor employed and working with one contractor has its challenges. When a project site goes from having an 8-person team to a 4-person team, it is going to take longer to complete the project. The labor shortage has also been impacting the design phase of construction. That is, the demand for qualified engineers is great and this means that it could take longer for structural and civil-engineered drawings. Lastly, labor shortages impact the cities and counties, thus making the permitting phase take longer.
Seasonal Holidays will always cut into a schedule. It is important to provide extra time in a schedule for the major holidays such as the 4th of July, Thanksgiving, & Christmas. Some construction crews take off the time between Christmas and New Year’s, which could push out a project being complete by 2 weeks. Also, during these holidays, the delivery of materials may be extended from the normal lead time due to transportation delays or manufacturing factories taking time off during these times.
It is natural to want to save money, but it is critical to not cut corners where it matters the most. Too often, the corners that are cut end up being costly decisions. A prime example of this is not hiring experts during the planning phase of the project. An investor can certainly design their facility themselves; however, getting experts involved will drive good business practices that could save money during the construction. For instance, a structural engineer, that understands self-storage, will be able to cut out unnecessary materials and provide a design that allows for efficiency during the erection of the building.
Another area where people will cut corners is skipping the Market Feasibility Study. Don’t do this. Yes, a market feasibility study may be an expense that you’d rather not pay; however, the information that is provided can make or break a development. That is, if a market feasibility study is showing that there isn’t a lot of demand for 10x10 units, and you build a facility that is largely comprised of 10x10 units, then you are likely to have a lot of vacant units that are not generating any monthly revenue. It is critical to build the size and type of storage of which is in demand.
Lastly, don’t cut corners at the expense of the customer’s experience. It can pay to have the added luxuries to a facility allowing for premium rates to be charged. The little things can be the deciding factor on why somebody chooses one facility over another. Do not underestimate the value of convenience.
There is a fine line between having a realistic budget and budgeting too high; however, what you don’t want is to have too low of a budget. Be conservative with your numbers and if the investment still pencils out favorably, you’ll be in good shape if the numbers come in lower. It is important to categorize your budget numbers by hard and soft costs.
Hard Costs: These are costs that are directly related to the actual construction of the project. These are costs that are for the actual materials and/or labor to complete a specific scope of a project. They tend to be more tangible and have less variation in cost for the duration of the project.
Soft Costs: These are costs that are indirectly related to the construction of a project. These costs typically occur the most during the pre & post-construction of a project. They can be a one-time cost or can persist for the duration of the project. Some examples of soft costs are permitting, architectural drawings, insurance fees, project management fees, etc.
Another kicker is not putting in any contingency budget amounts. No matter how much planning you do, there are bound to be expenses that pop up that are unexpected. With the current volatility of many supply markets, make sure to account for potential price increases. Talk with your builder/supplier about what they are seeing in the market and what they would suggest for a contingency percentage. And, when given the option to “lock in pricing” on material, take the offer into consideration. This could be a huge cost savings on your project.
Yeah, I said it. It is too easy to think that “my way is the best way”. This way of thinking can cost a project a lot of money. As hard as it may be, it is essential to set aside ego and welcome feedback that may be contrary to your own ideas. If you can combat every potential obstacle or if the project is still profitable even in that “worst-case scenario” then you’ve proved why you should move forward on a project. Remember, it is OKAY to walk away from a project that isn’t going to be profitable.
There are several places where you can network and build your “Mastermind Group”, such as local Self-Storage Associations, National Conferences (ISS World Expo & SSA Conferences), Facebook Groups, and other self-storage events.
Save yourself hard lessons and learn from others’ experiences. Ask questions and listen to others tell their self-storage stories. The moment you believe that you have it all figured out will be the moment you land on your rump. Building a team that you can bounce ideas off of could save you a tremendous amount of time, money, and frustration.
Of course, these aren’t all the mistakes that investors can make, but they are some of the big ones. When building a self-storage facility, there will be hiccups along the way, and you are likely to stumble in a few places. However, having the most knowledge possible will help you navigate through the hurdles on your journey. As I tell many of my first-time builders, the first project can feel overwhelming, but with all that you learn the second project will feel much easier.
The experts at Forge Building Company love working with new and seasoned investors. We are here to be a sounding board for ideas and help guide developments along with best industry practices. We have over 15 years of experience and have built over 60 million square feet of self-storage. Let our knowledge and expertise help your next self-storage project be a success.
Melissa Anderson has over 20 years of experience in the Construction Industry and provides insight to those ready to build their brand-new self-storage facility or expand an existing one. With an astute understanding of the self-storage industry, she assists both the seasoned investor, as well as those who are just beginning their journey with the construction of their self-storage project. For more information, reach out to her at firstname.lastname@example.org or at 208-629-2952.