Lake Havasu Storage: Why Due Diligence is Needed Before Investing
While storage facilities may not be the flashiest property type in Lake Havasu City, they offer surprisingly promising investment opportunities. The city has a robust market for different types of storage. There are many upsides to storage facility investments, but this post explores why due diligence is essential.
Why Lake Havasu Storage Investors Need Thorough Due Diligence
Ensuring a Fair Price
One key benefit of due diligence is that it helps buyers avoid overvaluations. Sellers will provide their valuations, but you should perform your own. Sellers may inflate financials or manipulate numbers in other ways. There are also cases where surface-level numbers don’t reflect the facility’s actual value. Independent appraisals, thorough market analysis, and comparable sales data help investors determine the fair market value.
Understanding Financial Performance
A commercial property investment could have any number of hidden financial risks. The facility’s financials may look strong on the surface, but a deeper look could reveal problems. Sellers may inflate occupancy rates or underreport expenses to make the property appear more profitable. A thorough review of tax returns, bank statements, storage contracts, and expense reports will uncover the facility’s true financial health.
Detecting Physical Issues
The physical condition of the property and other assets the business owns will impact the investment’s value. Due diligence can uncover hidden structural or mechanical problems that could lead to costly repairs. Investors should assess critical areas like roofing, foundations, drainage, and security features like fencing and access control systems. Deferred maintenance can quickly lead to expensive repairs for new owners. Imagine parking lots with deteriorating concrete or outdated HVAC systems for climate-controlled units. Identifying these issues can help you avoid costly surprises after the purchase.
Assessing Operational Efficiency
Business operations are another critical element when assessing a storage facility investment. Due diligence helps investors assess operations, from management practices to handling routine tasks. Key areas to assess include rent collection processes, delinquency rates, staffing levels, and tenant relations. Poor operations can lead to high vacancy rates, unhappy customers, and revenue loss. Issues like lax security and poor maintenance practices can also create significant liabilities.
Avoiding Legal and Regulatory Issues
An investor could inherit legal or regulatory issues when buying a storage facility. Due diligence can ensure the facility complies with zoning laws, building codes, and other local regulations. It can also help investors ensure a clear title to avoid ownership disputes and property liens. Investors should also review all vendor and tenant contracts. When you buy a business, the contractual obligations typically transfer with it. Assessing environmental laws and concerns that may impact the property or business is also important.
Are you looking for Lake Havasu storage facilities for sale? At Shuffler Commercial Real Estate, we know the local market and can help you find the right properties. Reach out now to learn more!
