Welcome to the Self-Storage University Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate self-storage facilities. And your host is a partner in one of the largest real estate portfolios in the U.S. with nearly $1 billion of holdings, Frank Rolfe.
Webster's Dictionary defines survey as to examine and record the area and features of an area of land, so as a construct a map plan or description. This is Frank Rolfe for Self Storage University podcast, we're gonna talk about surveys with self-storage facilities. Now, the most basic survey you can have is called a boundary survey. And a boundary simply is that, it shows you the exterior extremity, the footprint of the land, but nothing more, it gives you metes and bounds in legal description that corresponds to a map so that when you buy the self-storage facility, you're buying the metes and bounds of that boundary. And to many lenders that meets the bill, that gives them what they wanted, that way you know when you're buying that land, exactly what piece of land you're buying. But the problem you have with the boundary survey is, do we really know that everything I need is within that boundary?
Now, some properties are very easy to get a handle on. You can look at the property and you can say, Okay, it's kind of rectangular and here's a corner and there's a big pin with a red fluorescent little dot on it and here's the next corner and you can look down that, you see it's got straight lines and you can look down the straight line and say, Okay, it looks like all of the buildings are within those lines and the roads are within the lines and so okay, it looks kind of good, but not all boundaries are as simple as that. They're not all rectangular, they're not square, many have issues other than just straight linear features. Some literally look like an amoeba. Every bit of it is kind of rounded and angular and you can't just stand there and look down it.
And also many times you can't even go out and find those property corners and pins because they're in areas that are difficult for you to access or you don't wanna go out there, like way out in chest high weeds or with some kind of water feature, so unless you can for sure see those points of that boundary and are 100% convinced the property is within that boundary, you could potentially have a problem. I once bought a property and everything seemed good about it. I used a boundary survey that had been around for a long time and the property had existing debt with a big bank. So I never questioned the boundary survey must contain everything on the property, and then years later, when I went to re-finance it, I found out that about a third of the property wasn't within the boundary, apparently the last bank had never bothered to check it and I had used an assumption and we all know assume means to make an ass of you and me, so I rolled with that same boundary survey, no one had ever questioned it.
But it turned out that when Mom and Pop built the property, they didn't build it on their land, they built it on part of their land and then part of a neighbors land. Now, the happy ending was, I got a local attorney who went to that person, it was a farmer and said, Hey, we got a problem here because our developed property kind of is over your property line and convinced them that we would argue, if push came to shove that we had adverse possession, because they had never notified us that we had egregiously gone over the property line and that we were therefore prevailing cordon until then we'd have everything all tied up in court so they could not sell their property either and so they went ahead and signed an agreement, thereby deeding over to us the missing piece of property, but it was a terrible wake-up call to me because I'd always assumed that a survey wasn't that dangerous.
So sometimes a better idea that a boundary survey is to show a boundary with improvements, this would show you such things as where the buildings are located and the roads are located, and the easements and the driveways into the property. Show that the fence is in fact on your property and not on the neighbor's property. So boundary with improvements is probably what you need to shoot for when you're buying that storage facility to make sure that you're getting what you think that you're buying. But here's the bigger deal, normally you don't get to choose what the survey looks like, that is chosen by your lender.
The lender will say, Okay, I need a survey of this property and then it will tell you other applicable things, it may be improvements, but it may go a step beyond that. Now, if you go and get a step beyond that, you're getting what's called ALTA survey and what that can often represent as things as much as where the utility lines are and even how deep in the ground they are, but that's a very, very expensive kind of survey to make And rarely does the lender require it, but if the lender said you needed to do it or you couldn't get the loan, you would have no choice, you would just have to do it. Now, is a survey essential in every property? The answer's absolutely, you have to have a survey, that's a non-negotiable item, but the type of survey that you get isn't always the same, because again, it typically ties back to the lender. Now, if the seller is going to carry the paper, the seller may not care if you have a boundary at all, because they're very unsophisticated and they say, Well, I've been running this thing and so it must be fine, but that really doesn't work for you as the buyer.
You gotta have some kind of survey. Now, if the seller did a boundary survey in the past, you can often get a copy of that old boundary survey and then you can go back to that same survey or you're gonna get what's called a survey update. Now, on a survey update, what happens is they go ahead and take that survey and mark any new changes, but they do at a very low cost, 'cause they already have that survey in their system. So assuming there are no changes, it's not very hard to get that update. So that's a good low cost way to get a new survey, but again, that's probably only gonna work with seller financing. If there's a bank involved, they're probably going to want to have an entirely different type of survey, a more enhanced survey and they may even dictate which survey company you use to get the survey. The bottom line to it is that surveys are very, very important. If you buy property and the survey does not represent exactly the footprint of where that storage facility is, then you've really screwed up because you're only buying that which is shown on the survey. So you have to at all times, make sure with a 100% precision that you're buying what you think you're buying. You cannot depend on the lender to cover that for you, the lenders are just gonna look through the materials, are gonna sign off on it.
If there's a problem with that survey, it doesn't go back to the lender, it goes back on you, you're gonna lose the property. Now, you know the lender would also have skin in the game, but then again, if the property is in-deficient and it's only where 70% of what you pay, they still come out whole, right? You're the one who does not. So it's up to you as the buyer to be completely sure that the survey is correct, it's exactly what you want to buy and probably the best way to do that is a boundary survey also showing improvements. But again, it's not always your choice on what that survey looks like. The bank is the one who really holds the cards. Now, what do you do if the survey is all screwed up, can you go ahead and buy the storage facility? And the answer is no, I would not. The only thing you could do if you were looking at a property that looks really, really good to you, you really like the deal, but the survey shows that not all of the property is there within that boundary, would be to see if you could at least be the catalyst to try and get it fixed, but you couldn't buy it until you had it done. You can never close on a property where the survey is in bad shape.
We once looked at a property, we tried to buy it, tried to get it done, but the survey was so bad that the title company said we weren't more entitled using the survey. The problem was that whoever drafted the survey years earlier, many years, decades earlier, they had used landmarks which no longer existed. It was very un-professionally done, so it didn't say things like 35 free from this point, it would say like 35 feet from the large oak tree. So large the oak tree was gone and we don't even know which large out they were talking about. It took about a year to fix the survey. Now the seller really, really wanted to sell, they would say, Oh, hey, I'll tell you what, I'll give you a big discount if we can close right now. We said, No, we can't close until we have the corrected survey, 'cause we can't get a bank loan till we have the right survey. So in certain cases, you can get the survey repaired enough to buy the property, but you must not exchange your money, you must not sign closing documents until that survey has been fixed. The survey is a really big deal when you're buying real estate, it's one of those essential pieces that you must have at closing. It's very important that you focus to make sure that you get the right survey. This is Frank Rolfe for Self storage University podcast, hope you enjoyed this, talk to you again soon.