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Feasability Study Needed? What do they do that I cannot?

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  • Feasability Study Needed? What do they do that I cannot?

    New to self-storage, but not new to business, and I'm very hands on, meaning that I like to know everything about everything when I get involved in something.

    As I learn about self-storage from all of the available resources I can find, I'm also simultaneously doing site research and due diligence.

    My initial decision to build new in this specific location was based on my own need. That is, I'm a consumer of the product and thought I would like it if there were the type of facility I'm looking to build in this area. There are other similar (but not the same type of facilities near by), and it struck me that there was a need here for it. Thus, my research began.

    Based on the plethora of knowledge available online, and speaking to some local folks, I've determined all of the relevant information on the majority of items one would look at when building self-storage.

    Now that I have an idea of what I would like to build, on what piece of land, and what estimated costs are for what I would like to build...I've confirmed via my math that this works!!

    As I read about feasibility studies, I might want to look at a 2nd opinion, one that might confirm or oppose my conclusions.

    But...what do they check on that I am missing? And...(more importantly), how do they determine what unit mix might be needed in the community, and whether or not a new facility is needed in that area.


    - Researched all relevant / local facilities + facilities not in the area for comparison to what this market is like compared to another
    - Determined rates for different sizes of units at all these facilities
    - Determined what size of units are available now, what sizes are "out of stock", what sizes they generally have available anytime, and what sizes they rarely see come up available (by calling pretending to be a customer looking for a unit)
    - Stopped by the facilities and browsed as much as I could
    - Reviewed the facilities via Google Maps and Bing Maps (outside parking is a big thing out here (for boats/RV's/etc), so these maps give great insight as to available land and how full it is with parked units from the photos compared to what I see on the ground now in person.
    - Reviewed the local village comprehensive plan for the area
    - Reviewed the local roadwork projects (current and future) as the area is developing
    - Reviewed all demographic information available
    - Etc.

    I've got A LOT of information on the area, my competition, and seem to have a good understanding of what size units are and are not available in the area (sold out), as well as what these costs are.

    The only thing I cannot confirm, is whether or not "if I build it, they will come". Meaning we have X amount of units we need to rent in order to cover debt service and all expenses. I believe we will cover it no problem within the first year as we lease up, but how do you really know?

    So that got me thinking about the feasibility study. Would be nice to have someone confirm my research. But what do they uncover that I haven't uncovered already, and, how do they get their data?

    Would love to hear from others who have done their own research, and then gotten a feasibility study, and whether or not they recommend one, and whether or not they were able to find things you weren't.

    I'm very weary of consultants (a good friend is a consultant and I give him a hard time about it all of the time). Reason being, in many instances one could do all of the hard work and due diligence themselves, and learn what they need to know. No need for a consultant to tell you what you can learn yourself.

    However, there are times when one does not have the time, nor desire to learn what they need to know on their own, and in that case it makes sense to pay for a consultant as they will give you all the data you need, quickly and easily...for a price.

    I guess my point is, what can they find that I cannot find, or haven't already found? If they tell me that in this area the local facilities are leasing at 93% do they know that? I've already called all local facilities, gotten as much data and how many units they have, what mix, and how full they seem to be, found the only local facility for sale (have their gross, unit mix, and capacity data from them), and done all other research I can. it worth it, and how do they get their data?

    Sorry about the LONG post!!

  • #2
    These types of reports speak on a higher level a lot of times. Comparing markets to your market. Dollars per family member (We are a disposable income driven business). Medium income... people per foot of storage space. My best advice is grab one of the more expensive national reports (they are a few hundred bucks) and see where your state or nearby city ranks on that scale. Also, you can see the type of statistical info that a consultant may use to gauge the profitability of your project.


    • #3
      Originally posted by mmidgley View Post
      These types of reports speak on a higher level a lot of times. Comparing markets to your market. Dollars per family member (We are a disposable income driven business). Medium income... people per foot of storage space. My best advice is grab one of the more expensive national reports (they are a few hundred bucks) and see where your state or nearby city ranks on that scale. Also, you can see the type of statistical info that a consultant may use to gauge the profitability of your project.
      Thanks mmidgley. The dollars per family member, medium income, people per foot of storage space, etc...are all very basic demographic data that can be found easily, or calculated with just a little bit of work, and I believe I have all of this data already.

      I guess my question was, what else are they finding that I haven't looked at, or, that I can't find myself but they have access to? And...if only they have access to it, why is that? So for example, I counted all of the units at all of the facilities in my market, then based on my calls to those facilities, was able to determine "about" how full they are, and what type of units are full vs. what is available compared to what they offer. Is this the same research that they consultants would do? I've read they give data on occupancy rates in the area, which is important info, but if I've already gotten the data in the same way they I need them?


      • #4
        Honestly, A good feasibility study is going to run you 5k-10k. Is this something that is in your budget? Again, purchasing one of these basic reports will give you highlight into the answers you seek here. Its very clear your objective is to not go forward with a feasibility study. Another question one would ask is if you already have a plot of land. Cars eper day by your site vs others? people in your immediate area? types of client base? All these come from working with a feasability provider. Most times they request you have a parcel of land in mind. We do not draw customers from more then 10KM away. So your research should be contained within these closer areas. Are you fro a small town? Big city?

        In terms of unit mix. Build in phases... that is my honest opinion. Most of our sites are contructed in 2-3 phases which allows you to completely nail down the exact unit mix that your site needs most.


        • #5
          Thanks for your response again mmidgley.

          My objective is not to be against a feasibility study, in fact, my objective is to get evidence that says TO get the feasibility study.

          $5-$10k would be in the budget, if it's money well spent. But...I do not believe in spending the money if its not worth it. Thus, I'm asking for guidance to determine what else is in the study that I am not privy to, or could be missing.

          We have 3 specific plots of land we are looking at, at the edge of the suburbs, meaning these areas are growing out as populations grow and move outward. Areas that were corn fields 10 years ago, are no longer corn fields, but now new construction communities, retail, etc.

          We have the answers to those questions you mentioned.

          - Cars per day on the main routes, along with future plans for those same routes, and the communities plan for traffic flow.
          - We have the same info for our competing sites.
          - # of people and demographic of client base (with the facility being specifically tailored to this (ie, there is a focus on boat/RV/toy storage)
          - Looking at 1 mile, 3 mile, 5 mile radius
          - It's the outskirts of a big city (in the suburbs / edge of the suburbs)

          Thanks for the recommendation. We are looking at larger lots (due to wanting to cater to boat/RV/toy storage) and because of this will definitely build in phases. The land is far too big to build out at once, so we are looking at a unit mix of storage and parking, with optimal land use to be able to fill the need we've found while being able to cover costs + make profit in phase 1, and then phase 2 and 3 to expand on that to have better offerings and more units to increase profit.

          I have myself completed A LOT of due diligence, and at this point as I'm finalizing the business plan, I'm trying to "sell myself" on the need for a feasibility study. I would like to conduct one, but do not want to spend $10k for them to give me the data I already have. That's not a wise use of money.

          That's why I wanted to see if anyone had done great due diligence of their own, then followed up with a feasibility study, and found that even though they thought that they had all of their bases covered, the study still gave them more/better data than they were able to find, and that it was worth it.


          • #6
            It is great to see you do so much of your homework on your own. You have covered a LOT of the bases that will be covered by the experts who do the studies for a living. Something that you may have done, but I don't think I saw you mention, was to get with the local permitting and zoning departments to make sure that no one is already in those phases ahead of you. the guys who do great studies do that in addition to what you have mentioned. They will also do proformas out 5-10 years which give you monthly breakdowns of what to expect in expenses, what your velocity of rent-up will be and other such good info. They also bring a lot of anecdotal input from their years of experience to the table. Another reason to get a study is the most banks should (we do) require a study by a known expert to provide lending for the project. Sounds like you are the right track by doing enough homework to know whether or not to make the investment of the study. I have seen others just order a study that was a glaring NO and with some research as you have done, they could have saved themselves a lot of money.
            Terry Campbell
            General Manager - Self-Storage lending division
            Live Oak Bank


            • #7
              Thank you for the response Terry.

              The realtor selling one of the properties happens to know the Mayor of that village, and after discussion with him confirmed they would like our project for that parcel (assuming nice storefront and landscaping as typical these days they want to ensure were adding value to the village). However, you bring up a good point to check with the zoning offices to see if there's anyone in the works doing the same thing we are, and might beat us to it.

              As a current business owner (completely different field), I've got a bit of understanding on current and future anticipated expenses, and projected on how some of these expenses will evolve over the next 3, 5 and 10 years, and have this in my plan, though...another excellent point is the velocity of rent-up. In all of my due diligence, this is still a big question mark. That is, I can estimate it, but...still a huge ?? as to how accurate to reality it will be. I'm simply going off of "averages" that I am finding online.

              Could you give an example as to what extent of information you might require from the study? I wonder if I approached a company who conducts these feasibility studies with my plan, gave them the data, asked them to confirm/deny some information and fill in the rest (velocity of rent-up for example), if that would suffice? Maybe giving them a lot of the data up front will lessen their work required = saving us some money but still getting confirmation from them as to the accuracy of information.

              When we are ready, I do intent to approach Live Oak Bank regarding the project and a SBA 7a loan, and do highly value your input.

              Thanks again for your response.


              • #8
                Some of the main things that we look for:

                Size and occupancy of the competition within the market that you would build.
                Supply of existing units that are available
                SF of units per capita
                what month to expect break even
                Are there any projects in permitting or zoning
                The final opinion of the expert

                The experts may review your info, but since they are putting their name on the line and you are paying for their service, they will most likely start from scratch, Just to be sure that you didn't miss anything or over stated something.

                Be sure that when you choose someone to do the study, that they include all of these things and that they have done several of them and that they do it for a living. You also want someone who will tell you 'no' if that is the proper answer.

                Best of luck and we hope to hear from you soon!
                Terry Campbell
                General Manager - Self-Storage lending division
                Live Oak Bank


                • #9
                  Thanks again for the input Terry. I'll be in touch at some point in the future!


                  • #10
                    Getting professional feasibility study from a proven industry professional or self storage valuation company can be the best money you ever spend! Considering the multi-million dollar cost of a self storage project, the 5-15k fee is really a drop in the bucket. It can also ensure you see beyond any rose coloured glasses and bring you another perspective on the viability of your project. Mistakes in rent up really hurt, particularly if you've used a lot of borrowed leverage to get constructed.

                    A valuation company may significantly assist you with getting financing options/approvals and may even give you insight as to other projects planned or being looked at in the same trade area.


                    • #11
                      Thanks Madman. I agree, $5-$15k is not much when you consider the overall picture, and if it's money well spent, I'm happy to spend it. I just wanted see if I could get some confirmation from folks that my thought process was correct/incorrect, and whether or not the study would turn up things I might be missing, or maybe I had covered my bases.

                      I also like your point about the rose colored glasses.

                      Whenever I start a project or have thoughts on something, I always bounce the ideas off of my wife and ask to get her to disagree with me. I then try to make my point and have her agree with me, and it drives her nuts. She always yells (while laughing) that its pointless for her to disagree with me if I wont agree with her points on the subject, and talk her out of it. Same happens with my employees at the office. They always say, why do you ask if you're not going to listen to us, and the whole premise of the activity is to hear the other side. I want to hear other thoughts, and especially some bad/opposite thoughts on the subject, so that I can tackle those obstacles up front, and see if my idea still stands.

                      One of the videos I watched on self storage (I forget the author), said that if you're working in a partnership, and you are the optimist, your partner needs to be a pessimist. Right away I told my wife, I'm the optimist, I'm looking at all the reasons to do this, I need you to question them all and be our pessimist.


                      • #12
                        Not to beat a dead horse, but I've been able to get my hands on a completed feasibility study, and a few samples, and I have the same question. Like the OP, when I begin a project, I am involved 100% in all details and have a desire to be as educated as possible.

                        I would absolutely agree that a study is necessary for any business project, and that the investment in having someone conduct one other than myself is but a drop in the bucket of the overall cost of the project; however, I have not seen anything in any of these studies that I don't already have after my own research that I couldn't complete myself. it seems as-if the internet has simplified this kind of research and allows an intelligent and thorough business owner to complete their own study.

                        Essentially, I am not against having a professional complete the study, but I hoping someone can either sell me on why this can't be done by a capable someone willing to put the time in themselves.

                        Thanks all!


                        • #13
                          An experienced consultant has seen the industry go through highs and lows. His or her experience may tune you into market conditions that you are not aware of, especially if this is your first time through. Additionally, the consultant will have access to more detailed demographic information than you can find publicly available on the internet.

                          In many (perhaps most) cases, the consultant will come up with a conclusion that you will. But most lenders needs to know that an experienced, impartial professional has offered an opinion before they can hand over the cash.



                          • #14
                            Thank you for your response, Steve. To be honest, at the moment, the only reason I haven't nixed the idea of hiring a professional is the potential need to present an impartial study to a lender.


                            • #15
                              To update this thread with my experience for the benefit of others in the future:

                              I completed several months of due diligence in our project before moving forward. My own study and business plan looked great. The numbers worked, and we decided to move forward. Despite what I believe to be great research and a great business plan, the banks require a feasibility study, and since they hold the money, they get what they ask for! We ordered the study in March, and received it back completed the day before the ISS expo. Despite my being very confident in the project, it was still a very long 4 weeks waiting to see if the consultant agreed.

                              And........the consultant agreed. The study came back very strong and recommended we move forward, so...we're moving forward. With confidence.

                              Much of my data and info was confirmed by the study. I believe our two studies were so close because I truly had good information in my study, and looked at this purely from an analytical standpoint. No emotion in it.

                              I would agree that the feasibility study is worth the $, not only for the bank, but for yourself. As noted in many threads, its a small amount out of a much larger budget, and to be honest, its good insurance. Despite my personal study being based on fact, I still had questions as to do accuracy of my own study, simply because this was the first one I conducted. By having a third party professional confirm with the same findings that I had, I am more confident in the project or more confident putting in my own money and asking a bank for their money.

                              In the end, whether or not we NEEDED the feasibility study isn't an easy question to answer. Did we NEED the study to confirm our own study? No, not really, we had the same results. But after looking at all aspects of the project, we WANTED the study. It's good to get, and it's worth getting. I don't think my home will burn down, but I insure it anyway (and would do so even if the bank didn't require it). If I were to open a 2nd facility, and a bank didn't require a feasibility study, I would order one anyway. It's just good insurance, and a smart business decision to do so.


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