Self Storage Deal (Is it good or bad?)

17 Replies

Hi team.

This deal was presented to me today.   https://charlotte.craigslist.org/reo/d/self-storag...

I am a new investor with NO property yet.  I hoped to start small but when I see things like Multi Family, Self Storage, and Owner Financing, I am drawn to it.  

I actually haven't ran any numbers because there are so many unknowns. 

Is there enough information from this ad to determine if I should CALL ASAP OR RUN AWAY?

If you have experience with deals like this, would you mind sharing your initial thoughts on this one?

FYI, The town of Polkton population is less than 400

If you are new to this game, I would do one of two things first.  Try to find someone who already owns rental units and ask them their thoughts or possibly to partner with them.  To me that looks like quite the undertaking to get back up and running.  The main question I would ask is why has it been vacant for so long?  

I am interested in this topic as my brother and I were just looking at a storage facility that is for sale but we cant get the numbers to work right now either.  it is about 60 percent full in an area that we feel should be more full than that (literally next to a large apartment/condo complex.  

Maybe we can figure these deals out at the same time.

I’ve always been intrigued by how self storage does in rural areas. I get it in cities, near apartments , and suburbs with high population density and smaller homes. If you have a house and run out of storage though , sounds like a questionable person to do business with. Aka a hoarder

I am a real estate investor (with SFR and small MFR's), but have been interested in storage units as well. This unit looks to be too far out from any metro area (1 hour is too far to be useful to you) and the post mentions that it hasn't been used for years (vegetation needs clearing too) . My first inclination would be to stay away. However, if the price makes sense and you have a business strategy (i.e. evaluate how many storage units per capita in the area, nearby schools, etc.), then go for it.

Originally posted by @Eric Burgh :

I’ve always been intrigued by how self storage does in rural areas. I get it in cities, near apartments , and suburbs with high population density and smaller homes. If you have a house and run out of storage though , sounds like a questionable person to do business with. Aka a hoarder

 I have never owned self storage, so my opinion isn't worth a lot. However, I would like to get into it, and I've decided I won't buy anything without some real population around. People won't want to drive a long way to use their storage unit. If that's true, then where will the customers come from? 

@Brian Mangum

What numbers? I think it's safe to say there is zero income coming off that property. The value is going to be based on the value of the land.

Some random thoughts:

- Certainly worth talking to the owner and see what he has to say.

- Make sure the land is indeed zoned for storage.

- Doubtful a bank will finance this, so that's why he's offering seller finance.

- The small population is a concern, but that depends on what sort of storage is available in the area. It's a rural area so I'd say the Trade Area is more like 10 miles.

- Is there any growth happening in that area at all?

Originally posted by @Colleen McCann :

I stand corrected :) I could’ve sworn I had heard that on all the tax reform from last year. Must’ve been regarding a different type that was altered.

 I believe the elimination of the 1031 was "on the table" but that got removed before final passing of the bill...at least as far as real estate is concerned.  Some other assets (non real estate) that used to be eligible for 1031's no longer are.  We got lucky!

I have done a  fair bit of research on storage.  They behave more like a business than a RE asset.  How will you manage it?  This is a full time job, not a RE investment.

There are professional property managers who handle storage facility management just like rental properties, however, @Lesley Resnick does bring up a good point. A facility of this size will have difficulty covering the cost of a management company so keep that in mind. Unless you plan to manage it yourself, you're going to have to hire someone to manage the facility, even if only part time. 

Self Storage is very much like Large Multifamily.

@Brian Mangum I personally would not purchase that site. I buy in metro areas with at least 50,000 people within a five mile radius with an average income of $50,000+. I stay away from rural areas unless it is near a major lake or recreation area where people need to store boats or RV's. If you decide to purchase, I would pay land value only.