To buy an existing self storage facility, prove the income first. Match the seller's rent roll to 12 months of bank deposits, check delinquency and any open lien files, inspect the buildings, and price the deal on the net operating income you can verify, not on projections.
This is general information, not legal advice. Have a real estate attorney review the contract, title and tenant leases, and talk to your CPA about the tax side.
Why buy instead of build
Buying gets you tenants and cash flow on day one. Building gets you new construction and the layout you want, but you wait through permits, construction and fill-up. Neither is better for everyone. If you are still deciding, run both through the feasibility calculator and read how to start a self storage business.
A purchase also brings problems that are easy to miss: old leases, below-market rents, tenants who have not paid in months, and buildings that need work. Due diligence is how you find those before you own them.
Step 1: Get the documents
Ask the seller for these in writing. A serious seller can produce most of them in a week.
| Document | Why you want it |
|---|---|
| Current rent roll | Every unit, tenant, rate, paid-through date and balance |
| 36 months of income and expense statements | Shows trends, not one good year |
| 12 to 24 months of bank statements | Proves the income is real |
| Delinquency and aging report | Shows how much rent is actually collectible |
| Lien files and auction records | Shows what is in the pipeline and how it was handled |
| Property tax bills and insurance policies | Real expense numbers |
| Utility bills | Often misreported |
| Lease form and any addenda | What tenants actually agreed to |
| Survey, title report, zoning letter | Legal condition of the property |
| Software export | Tenant and unit data you will need on day one |
Step 2: Check that the income is real
The rent roll tells you what should be coming in. The bank statements tell you what did.
- Total the rent billed each month from the rent roll or reports.
- Total the rent deposits for the same months.
- Subtract. The gap should be explained by known delinquency, prepayments and fees.
Worked example (illustrative)
Say the seller shows 100 occupied units at an average of $100, or $10,000 a month. Your review of bank statements shows deposits averaging $9,100 a month over 12 months. The $900 gap could be late payers, free months given as specials, or income that never existed. Ask for the explanation. If you price the facility on $10,000 a month and the real figure is $9,100, you overpay by 9 percent of revenue, and more than that of profit because expenses stay the same.
Step 3: Read delinquency and lien history
Delinquency shows how well the facility is run. A rent roll full of tenants 60 to 120 days late is not the same asset as one with current tenants.
Ask these questions:
- How many units are past due, and by how much? Split by 1 to 30, 31 to 60 and 61+ days.
- How many units are in the lien process right now? What step is each one at?
- How were the last few auctions handled? Were notices kept? Was surplus returned?
- Does any tenant have a dispute, claim or lawyer involved?
If the seller skipped steps in the lien process, you can inherit that risk. Your attorney should look at the files. See the lien timeline guide for what a clean file looks like.
Step 4: Adjust the rent roll the way a buyer would
Sellers show rents; buyers adjust them. Look for:
- Tenants paying far below street rate. That is upside, but only if state law and your lease let you raise rent. See how to raise rent on existing tenants.
- Free or discounted months. The roll may show full rent while the tenant is on a special.
- Employee, friends and family units. Count them at what an outsider would pay.
- Units that cannot be rented. Damaged, full of seller's stuff, or used for storage by the owner.
- Long-vacant unit types. If 20 of 20 interior 5x5s are empty, the issue is the unit, not the marketing.
Then rebuild expenses at buyer levels: property tax may be reassessed after a sale (ask your county assessor), insurance changes with your policy, and a paid manager or your own time has a cost even if the seller worked for free. The revenue and occupancy calculator helps you model rent changes. Get local data on achievable rates from a broker, a lender or an appraiser; do not rely on a seller's claim.
Step 5: Inspect the property
Hire an inspector or contractor. Walk every building, not a sample.
Checklist
- Roofs: age, leaks, stains on ceilings
- Doors: rust, tracks, springs, how many need replacing
- Paving and drainage: standing water, cracks, gate travel path
- Gate and keypad: age, brand, whether the vendor still supports it
- Cameras and lighting: working, recorded, how long footage is kept
- Fire and electrical: panels, lighting, any heated or climate controlled units
- Environmental: ask your attorney and lender whether a Phase I report is needed
- Signs and fencing: condition and property line
Add a repair budget to the price before you negotiate. See security and cameras for what to look at.
Step 6: Price it on NOI
Net operating income is verified income minus real operating expenses. Pricing uses NOI and a cap rate. The cap rate is a market number that depends on your area and the facility. Ask a local broker, lender or appraiser what facilities like this one have sold for. Do not use a rate from an article.
Worked example (illustrative)
Say a facility nets $180,000 a year after your adjusted expenses. If a broker tells you comparable sales are priced at a 9 percent cap rate, the value is $180,000 divided by 0.09, or $2,000,000. If you overlook $12,000 of annual expenses and your real NOI is $168,000, the same math gives $1,866,667. That is a $133,333 difference from one missed line. The full method is in how to value a self storage facility.
Step 7: Line up financing early
Lenders take time. Read self storage financing for bank, seller and SBA options. The SBA lists acquiring real estate and buildings as an eligible use for its 7(a) program, and borrowers apply through lenders. Lenders will want the same documents you collected: rent roll, income statements and bank statements. Reports that come directly from software are easier to trust.
Step 8: Plan the transition
The first 30 days after closing decide whether the tenants stay.
- Get the data export before closing and test it. Check that balances, paid-through dates, and unit sizes load correctly.
- Decide on software. Moving to Stitch includes free migration in 48 hours; see migration and how to switch self storage software.
- Review leases. Your attorney may want tenants to sign your lease on renewal or at the next rent change. See writing a good self storage lease.
- Tell tenants where to pay and who to call. Confusion causes late rent.
- Move payments. Autopay tied to the old owner will not carry over by itself. Ask tenants to set it up again; autopay at move-in is the best habit.
- Fix quick wins. Gate, lights, signs and a website that matches the property.
Red flags that should lower the price or end the deal
- Deposits that do not match the rent roll, with no clear reason
- Many units with balances over 90 days and no lien process started
- No lease or inconsistent leases
- Gate or software the vendor no longer supports
- Roof or paving problems the seller will not discuss
- A seller who will not give a data export
- Zoning that does not allow storage, or a non-conforming use that cannot be rebuilt after damage
Questions to ask the seller
A direct conversation often shows more than the documents. Ask, and write down the answers:
- Why are you selling, and why now?
- Which units are hardest to rent, and why?
- When did you last raise rents, and how did tenants react?
- What repairs have you put off?
- Who are the five largest or oldest tenants, and are any related to you?
- Have you had a break-in, a flood, a fire or a lawsuit? What happened?
- What does the property tax bill look like, and has it been appealed?
- Which vendors (gate, software, cameras, website) are under contract, and when do those contracts end?
- Are there any tenants with special deals not in writing?
Compare what you hear with what the documents show. A mismatch is a reason to dig deeper, not necessarily to walk away.
Common deal structures
| Structure | What it means | Ask your attorney |
|---|---|---|
| Asset purchase | You buy the property and assets, not the seller's company | Which contracts and leases transfer? |
| Entity purchase | You buy the company that owns the property | What debts or claims come with it? |
| Seller carry | The seller finances part of the price | Terms, security, default |
| Earnout | Part of the price depends on future results | How results are measured |
How you structure the deal affects taxes, liability and what you inherit. Decide with your attorney and CPA before you sign a letter of intent.
Timeline you can plan around
A typical purchase has an offer, a due diligence period, a financing period and a closing. The length of each depends on the contract, the lender and the market. Ask your broker and lender for realistic dates, then set your own internal deadlines for the rent roll check, the inspection and the lender documents so nothing waits until the last week.
This is general information. Your attorney, CPA and lender make the final calls on the contract, taxes and financing.