Creating a Use of Funds Statement for Self-Storage Facility Acquisitions
Self-storage facilities have become increasingly popular in recent years due to the growing demand for affordable and secure storage solutions. If you are taking investment for the acquisition of a self-storage facility, you'll need to put together a use of funds statement to help you plan and budget for the acquisition.
Investors like to see a use of funds because it provides transparency and accountability for how the investment capital will be used. By understanding how the funds will be allocated, investors can better evaluate the potential return on their investment and assess the level of risk involved. A use of funds statement can also demonstrate that the investor has a clear plan for how they will use the funds and that they have considered all the expenses involved in the investment.
In this blog post, we'll guide you through the process of putting together a use of funds statement for a self-storage facility acquisition.
Step 1: Determine the Purchase Price
The first step is to determine the purchase price of the self-storage facility you're interested in acquiring. This can be done by conducting a market analysis and comparing the prices of similar facilities in the area. Once you have determined the purchase price, make sure to include it in your use of funds statement.
Step 2: Calculate Acquisition Costs
Acquisition costs include any expenses related to the purchase of the self-storage facility, such as legal fees, due diligence costs, and appraisal fees. It's important to accurately estimate these costs to ensure you have enough funds to cover them. Acquisition costs typically range from 1% to 5% of the purchase price.
Step 3: Estimate Renovation Costs
If the self-storage facility requires any renovations or upgrades, you'll need to factor in these costs as well. This could include repairs to the roof, HVAC system, or other parts of the building. You'll also want to consider any upgrades to security features, such as surveillance cameras or access control systems. Renovation costs can vary greatly depending on the condition of the facility, so be sure to get an accurate estimate before finalizing your use of funds statement.
Step 4: Determine Financing Costs
Financing costs include any fees associated with securing a loan or other financing for the acquisition. This could include loan origination fees, appraisal fees, and interest payments.
Step 5: Include Contingency Funds
It's always a good idea to include contingency funds in your use of funds statement to account for any unexpected expenses that may arise during the acquisition process. A general rule of thumb is to set aside 10% to 15% of the total project costs as a contingency fund.
Step 6: Finalize the Use of Funds Statement
Once you've gathered all the necessary information, you can finalize your use of funds statement. This should include a breakdown of all the costs associated with the acquisition, as well as the sources of funding for each expense. Be sure to review the statement carefully to ensure it is accurate and comprehensive.
Putting together a use of funds statement for a self-storage facility acquisition requires careful planning and attention to detail. By following these steps, you can ensure that you have a clear understanding of the costs involved and that you have enough funds to cover them while also providing an important tool for investors to evaluate the potential return on their investment and assess the level of risk involved.
* If you enjoyed this article about Creating a Use of Funds Statement for Self-Storage Facility Acquisitions, you might also enjoy reading Demystifying Cap Rates and Why Your Self-Storage Track Record Matters.
