First Self Storage Acquisition

5 Replies

My name is Christopher Melum. I am native to Spokane WA, where I have built a mobile welding and fabrication business, which I have used to fund my real estate business. Over the years I have been acquiring under valued properties that I fix up and turn into long term rentals. I am currently looking for any under performing assets around 1 million. I am a very hands on fix anything kind of guy. Derelict properties do not bother me, I see them as an opportunity. I am interested in all forms of real estate. My Ideal property at this point in time would be a 10-20 unit class c apartments, mobile home park, or self storage. I am looking for a project and willing to partner. I am looking to meet new people in our Spokane real estate investment community. I could appreciate some mentoring. I am a Christian, a business owner, a veteran, I can fix anything, and I love Real Estate. I am available any time.

The property I am currently offering on is 2842 W Seltice Way - Post Falls Mini Storage For Sale 19,775 SF Specialty Building Offered at $1,150,000 in Post Falls, ID. https://www.loopnet.com/Listing/2842-W-Seltice-Way-Post-Falls-ID/16453826/
The property is being offered at a 5 cap 65k NOI. I feel this is to low of a rate due to market saturation, there has been 3 other storage facilities built in the last 3 years within 2 miles, the location is fully developed "no space for further growth", and the size of the facility only being 141 units makes it just large enough to need a full time manger while just being small enough that management is a large expense factor, pushing this facility towards the owner operator. I believe that 55k NOI is more realistic and made an offer at $650k putting the cap rate at 8.4 which I felt was more deserving of a property that was constrained by the, small size to management expense ratio, capped development potential, and market saturation. I was quickly denied. I have waited a few weeks and would like to take another shot at it. I feel the NOI is off $10k which is big on such a small property. I would like to make an offer at $725k 55k NOI 7.5 cap

Is there anyone who could give me an outside perspective on how I could better negotiate and close this deal? 

Thank you for your time and consideration,
Christopher Melum

I agree it's over priced especially if you are a "get your hands dirty" kind of guy. You can find neglected storage properties for $15-25 per square foot....fill em up and then sell for 7-9 CAP which often equates to $50-60 per square foot! Personally I would keep looking! Also wanted to mention that you do not need a fu time manager in a property of that size. If go so far as to say you don't need any office hours at all but instead could manage it quite well with an online portal, call center and contracted "boots on the ground" to handle the minimal onsite physical tasks. I live in NY and manage a 24000 square foot property in Florida with this remote structure and it's works perfectly. Took it from 40% full to 95% while increasing rates by 15-30%!

Originally posted by @Michael Wagner :

I agree it's over priced especially if you are a "get your hands dirty" kind of guy. You can find neglected storage properties for $15-25 per square foot....fill em up and then sell for 7-9 CAP which often equates to $50-60 per square foot! Personally I would keep looking! Also wanted to mention that you do not need a fu time manager in a property of that size. If go so far as to say you don't need any office hours at all but instead could manage it quite well with an online portal, call center and contracted "boots on the ground" to handle the minimal onsite physical tasks. I live in NY and manage a 24000 square foot property in Florida with this remote structure and it's works perfectly. Took it from 40% full to 95% while increasing rates by 15-30%!

 Wow that’s  awesome!  Thanks for sharing!

Christopher,

I spoke with a CDA based realtor maybe 5 months ago looking at this exact property and he said he thought it was very overpriced as well, thought it only worth 750-800k. I hope this helps in your assessment. Best of luck friend! I am a local investor in Post Falls moving towards full time investing (am a local business owner and follower of Christ as well). Am starting to heavily market for wholesaling. Please message me if you are interested in properties in our area.

God bless,

Chad

Thank you all for your feed back. I am going to continue with my offer as it is. It is nice to here all of your confirmations that this facility is over priced. I will make my offer and keep looking.

@Christopher Melum - this is exactly the process! Find the facility, do your due diligence, and be VERY clear on the value add you can bring to a facility. There are lots of ways to build in value (and potentially save overhead in the long run), which allows you to increase NOI and create the sweet spot in your CAP rates.

Don't EVER fall in love with a facility, get data and let that be where your decisions come from.