Thursday, April 26, 2018

How to develop a self-storage facility - From Zero to Permitting

Here is a basic rundown of the process for developing a self-storage property:

Step 0.) Make sure the price of the property, rough price of the buildings, site grading, paving, etc. are included in your costs.  Can this thing make money???? Can you float the payment while it rents up????  Did you remember management and lawn cutting (snow removal)????  If yes to all 3, proceed to next step....
Step 0a.) How are you going to fund this thing?  Is it such a good deal people will fall over themselves to get a piece of the action?  Will a bank loan you the money for this thing?  Be REALLY honest with yourself on this.  Otherwise you'll spend approximately $50K on engineering and leg work, plus the cost of the property only to give it back to the bank.

Okay, enough soul searching, let's get on with it.

1.) Select a property that is zoned appropriately.
2.) Acquire property.
2A.) If property isn't zoned properly, get property rezoned.  You will need steps number 3 - 5 done to have the property rezoned.  I suggest you buy the property contingent to the rezoning or risk total failure.
3.) Have site civil engineer do a preliminary planset (30%) for the site including:
     a.) Buildings
     b.) Office
     c.) Stormwater ponds
     d.) Pavement/Driveways
     e.) Offsets of buildings from property lines
     f.) Landscaping (if required by zoning ordinances)
4.) Have building engineer/designer put together a conceptual drawing for a building or two and the office (if you have one).  Some zoning ordinances have aesthetic guidelines.  Make sure you pass that info along to your building designer so they are incorporated.
5.) Get your costs dialed in for your construction.  Grading will be tough to estimate.  You'll probably want to discuss this with your civil engineers to get rough quantities (or figure them out yourself - Length x Width x Depth = Volume) to bounce off a grading contractor.  Or your civil engineer can assist you.  Most Department of Transportations publish a unit pricing schedule that tells you how much it costs to place and finish construction materials.  For example: gravel, pavement, concrete culverts, catch basins, common excavation, select granular, etc.  This would eliminate the need to pester a grading contractor prior to sending the plans out for bid.
6.) Have building engineer take plans to 100% and go before the City/County boards to get approval.
7.) Building designer will have to submit their plans to the State (unless the SF is under the State's threshold) for commercial buildings.
8.) Get approvals from local agencies and State (hopefully). 
9.) Have civil engineer submit plans to State for State approvals and DNR approvals.
10.) Have building designer dial in their design to submit to building contractors for bid and to the City for building permits. 
11.) Get hard costs on the building from contractors.
12.) Get hard costs on the grading from grading contractors.
13.) Get hard costs on the paving from paving contractors.
14.) You will also need plumbing, well, septic, and electrical permits for their respective trade.  You will also need to send the building design out to each of these guys if you're building contractor doesn't handle all of these items for you.  Remember, you'll probably pay a markup of 10% on each trade if your building contractor handles it.  It may or may not be worth the expense.
15.) Pull permits, schedule contractors and get started!

Like I said, be prepared to spend approximately $50,000 plus the property to get you to this point.  You may be able to wrap everything up into a construction loan, but it's likely you'll have to float the project for a while until you get full approvals.  Plus, the bank still wants interest payments on what you've borrowed while you are developing the property and/or getting approvals.  Be ready for this.  Don't go down this road with $50K and a dream.  You'll probably need $50k for the costs and another $50k to be comfortable.

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