It’s impossible to buy a self-storage property without negotiating a price. This is a skill that most Americans are not very good at, since there is no such major in college or class in high-school. So what are the top four tips on negotiating a price on a self-storage facility?
Don’t be afraid to offer the correct price
When you determine what you think the value of a self-storage facility is, then don’t be afraid to convey that on to the owner or broker. Don’t let the offering price – the price set by the seller – be your guide. Most sellers pack on from 10% to 20% of fluff in the price, and some properties are overpriced by 50% or more. So offer only that which is reasonable, not just what the seller wants to hear. If you strike a price that’s too high, the deal will never happen, as the appraisal and lender will never support it. On top of that, why would you want to overpay?
We have found over the years that honesty is the best policy when working with the seller and broker. Don’t pretend that you have a ton of capital if you don’t, and don’t pretend to be interested at a certain price when you’re not. Tell the seller and/or broker that you are trying to make a good investment in self-storage, and that you want a win/win deal to happen. Be honest in your concerns and seller will typically be more inclined to make price adjustments, or extensions for financing.
Be easy to sell to
In short, treat your seller like a VIP. Never be late to a meeting, or forget a scheduled event. You will find that sellers are much more willing to work with you when you have set a good impression. Remember that sellers are always sizing you up to see if you are a good fit, and if there’s seller financing involved, if you can even be trusted.
Have a walk away price
Before you enter into any negotiation, you need to determine the price in which you won’t buy it. This is called the “walk away price” and it’s essential. When you know what you won’t pay, you’ll communicate that to the seller through your actions and body language, and they’ll know that they’ve reached their pricing limit. When the price exceeds what you’ll pay, you simply thank them for their time and tell them you’ll call them periodically to see if they’ve changed their mind. You’ll be surprised how many times they’ll stop you before you walk out the door or call you the next day and take your offer. They were just testing you.
Negotiation is a vital skill in buying a self-storage property at a good price. These four tips will get you on your way.