Whether I am building or buying a location, I always run the Estimation template to dial in whether I can or should do the project. Each of us will have our own Payback, CAP rates, cash flow models, and Tax implications thresholds; I am not covering that. This is a back of the napkin estimation, just on a spreadsheet.
Project Estimation Template
We are in 8 locations and 5 towns; and we have used this approach to determine upfront whether to invest or not. Six of the locations are in towns of less than 5,000. Two of the locations are in a 1mm metro area (630 and 330 units). We will have built 47 buildings once we complete these last two sites.
This project list is for outside Storage and for the locations/cities we have looked at. Own the thought process. Example: HVAC, Fire Sprinklers, Facade, frost-free footings, Storm retention ponds, road type, fire hydrants, etc. These and others, are the items that will hurt you if you don’t own your knowledge. This spreadsheet is not all-encompassing. For example on this project, I was “done with the spreadsheet”. I missed that there is a “Wet” spot in the middle. We will need to put in a $30,000 drain tile not reflected in my estimate. Still learning. You might want to put a SWAG factor (5%) in, up front.
Fill in the green areas. For the building quote, get one in your local area. This should represent the Building material, concrete base, and erection all delivered on-site.
Side notes:
- You can also use this template in reverse without knowing your site. Leave the “Land” amount blank and plug numbers in. This will give you a range of how much you can pay for the Land.
- How many buildings should you build Phase One? I always have my first set of buildings pay off all of the land, fencing, initial ground/electrical/plumbing work. We use a 65% break-even factor. This is a Cash flow estimate of how many of the units need to be filled to cover all expenses (except Depreciation) plus Principal/Interest payments. Although this is a little Chicken and Egg, or Circular logic. If you need 150 units to pay these costs, then add 80 more units for a total of 230. 230= 150 divided by 65%. Your building/road layout might dictate you build 240 or 204, then that is what you build. We never want to build just enough units (65%). The most depressing (counter-intuitive) time for a store owner is when you hit 90%; you have to decide if you build another building.
- Phase 2, you will find your break-even is around 35%. This is where the money starts to roll and your occupancy rate risk starts to decline.
See the spreadsheet. Change it and adapt it to your needs. Again, don’t Trust anything I tell or give you. Own your info and data. Anything in the Storage Business can be validated. Start small and make your big mistakes early.
Clark Storage – Best and Most Secured Storage Units in the Area
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