Day 33: Self Storage Zoning Laws and Regulations: What Every Investor Must Understand

All right. Well, welcome to day 33 of the Storage 100. I am, of course, Joe Downs with the Storage Mastermind. Today, I'm going to tackle the hidden deal killers, local zoning and regulations. You can have the perfect piece of land, folks, the best financing and handshake deal, but the city council can still crush your dreams. I actually once had a guy come to me for help who was set to close on a prime parcel And the day before closing, the city council passed a moratorium on all self-storage development. Just like that, his deal was dead. He lost— obviously didn't have to close, but he lost months of due diligence and thousands in soft costs, and there was nothing he could do about it. It was too late. That's why understanding the local rules isn't just important, it's the foundation of your investment. So I'm going to break down the most common zoning traps that can turn, you know, that 5-acre lot into a 2-acre headache. Biggest trap for new developers is something called impervious coverage. You might think you bought 5 acres, but the city's impervious limit can cut your usable land in half sometimes. Impervious coverage is anything water cannot pass through. So that includes your buildings, your concrete, your asphalt parking lot. So sometimes you buy 5 acres, but the city has a, let's say, 40% impervious limit. Now you can only build on 2 acres. So this is a hard limit on your density and your profitability. You have to factor this in before you even draw the first site plan. So this limit is often the reason why a seemingly perfect piece of land just doesn't pencil out. Or sometimes you just see them sitting there, you're like, well, they should build something there. Well, they might not be able to or it might not be worth it. So, but impervious coverage isn't the only risk. Sometimes the city just decides to stop playing the game entirely. The moratorium risk is the silent killer that can wipe out your deal overnight. So a moratorium is when it freezes all new permits for a specific specific type of development, for example, like self-storage. They usually do this for either purely political reasons, usually because a resident complains about traffic, maybe it's aesthetics, or just simply feeling like they have enough storage. And you can't fight politics, but you can prepare for it. So the fix to review all that is to— to fix to avoid all that is to review the city council minutes for the last 6 months. Look for any mention of a moratorium or even just discussions about self-storage complaints. Here's a pro tip for you because that sounds awful. I agree with you. Who the heck wants to sit through and read 6 months of meeting notes? But pro tip, use AI to do it for you. And here's a— it's not a selfless promotion because I'm the one promoting myself. You can learn more about how to use AI in your personal life or your personal business on A podcast I host with Peter Swain. It's called Successful Idiots. It's available on most major platforms. And again, it's where we show entrepreneurs how to use AI for their business and personal life. And that's what I would do here. You get your hands on the— you might not even, if it's public record, you'd probably just use AI to go get it for you. But even if you had to go get your hands on it, download it, load it into AI, just ask it to summarize it and what you're looking for. So start using AI, folks. Successful idiots. All right, it's a promotion. I don't know if it's selfless or not, but anyway, never buy land without a zoning letter, which we will talk about next. But before we get there, let's talk about the golden ticket that makes all the risk worthwhile. The grandfather status is the golden ticket in self-storage development. This is what makes your asset protected and creates a permanent moat around your business. So sometimes the municipality taketh away and sometimes it giveth. So if you build your facility legally and then the city changes the zoning to something like residential or they put a moratorium on, right, you're grandfathered in. So you can stay there forever even though the new rules prohibit new storage facilities. So this is incredibly valuable because it means no new competitors can ever build near you. But there's a warning here. If you cease operations for too long, depends on the municipality, I'm sure, but let's say 6 to 12 months, You could lose that status. So you need to keep the lights on even if you have a major event like a fire. The best way to protect yourself from all these risks though is one simple document, and that is the zoning letter. The zoning letter is your insurance policy. It's where you're going to trust but verify. So this is an official letter from the city planning department that confirms the property's current zoning and what you're actually allowed to build there. So you need this because sellers make mistakes. They might think their land is zoned for commercial use, but the city map might say otherwise. This letter is the only thing that's going to matter. It doesn't usually cost much either, maybe $50 to $100. Again, it's going to depend on the municipality, but it might be the best money you'll ever spend in due diligence. You can find templates for requesting this letter if you subscribe to this channel. I'm going to upload a template. But once you have this letter, you can move on to the next set of rules that dictate exactly where you can place your buildings. And that's setbacks. So setbacks is the mandatory distance you must keep from the property lines. So an easement is a right granted to the power company or water company or neighbor. I mean, there's various reasons for easements, but they all happen before you by the prior owner. And what they allow is the water company, electric company, or neighbor or whatever to cross your land either on it, above it, or over it— or sorry, under it, on it, or over it. You own the dirt, but you can't build on it because of the easement. So, or the setback. So always check the plat map and the zoning code. If you miss these details, you're paying for land you might not be able to use. All right, let's now let's talk about the biggest space eater of all, and that is parking. Setbacks and easements already shrink your building area, but parking requirements can kill your revenue. Cities often treat self-storage like a retail store. So you might have to get in there and fight with them. They demand 1 parking spot for every 1,000 square feet of storage sometimes, and that's absolutely insane. Self-storage is low traffic. You need maybe 3 to 5 spots for your manager and a couple customers that you might have in the office at any one given time. You don't need 50. And here's the brutal math. Every single parking spot they force you to have is, Or force you to build is 2— is you're missing roughly 2 storage units. So at, you know, I don't know, $150, $200, that could be $300 to $400 a month in lost revenue forever. So this is the one requirement you're going to want to fight. You can win a variance on parking, parking, because you can prove your traffic impact is minimal, but you have to know how to ask. So you can say it again, you can win it. But you gotta know how to ask. In general, fighting for variance is a gamble though, and you need to know the odds. So we just talked about fighting for parking variance, which is a calculated risk, but asking the city to let you build storage in a residential zone or variance for that or something like that—that's political suicide for those council members. The variance is asking the city to break its own rules just for you, and it's a high-risk move for them. So. I wouldn't count on it. I mean, you're gonna be looking at 6 to 12 months of wasted time and maybe up to like $25,000 in legal fees. And the failure rate's high. It's like 50% or more. So I wouldn't roll the dice on a variance unless you absolutely have to, or you, you absolutely know from speaking to some of the council members that you have a solid case for it. Um, you in general should really only be asking for minor adjustments like A logical change to the parking requirement, not a, not a complete change of use. Um, always try to find land that is already zoned correctly. That's the shortest, quickest, cost— most cost-effective and safest path. All right, let's wrap this up. Um, so you've got the knowledge now, and you know how to read a zoning letter. You also now know how to spot hidden restrictions and when to fight the city. Folks, this information is gold. I hope you agree. So that you'll hit the like button for me and subscribe as well. You don't want to miss the free templates that I will attach to the show notes and of course, to be notified about the daily drops. And hello, reminder, the lives, one of which is tomorrow night, where I'm going to have a special guest, Frank DeSalvo of Franklin Street. Frank is a broker with Franklin Street and very knowledgeable about the state of the industry and what's going on in the market. So again, tomorrow night, I'm going to be recapping Section 2. Which, um, it, uh, today's the last day of the Storage 100 of Section 2. Last day of Section 2. We got a long road ahead of us, uh, which was sourcing deals and with a live Q&A. Um, so I'm gonna recap it, then go live Q&A with myself and Frank, uh, and of course you and your questions about the material that I've presented over the last, uh, little more than 2 weeks, but that I presented to so far. So anything's fair game if you just catch it up. Um, also definitely share this with a friend who thinks they can build whatever, wherever they want because it's their land. They will thank you later.