First Self-Storage Deal Under Contract (Muskegon, MI) – Looking for an Underwriting G
Hi BiggerPockets Community,
After spending my career in the single-family residential space, I’ve finally stepped into self-storage and just went under contract on a facility in Michigan. While I’m comfortable with residential numbers, I’d love to connect with someone who can help me double-check the underwriting to ensure I’m navigating the transition to commercial correctly.
Here is a quick snapshot of the deal:
- The Asset: 5 buildings (approx. 23,000 sq ft) sitting on 4.75 acres.
- The Price: $1.5M.
- The Terms: 3.5% interest-only seller financing.
- The Upside: A clear value-add play through rent stabilization and using the excess land.
The 3.5% debt makes this a very compelling entry into the asset class. Still, I want to make sure I’m accurately accounting for the Michigan "uncapping" tax rules and the operational nuances of storage versus residential.
If you have experience in Michigan, I’d love to get your eyes on this. Please reach out if you're open to a quick chat!
Most Popular Reply
That's a nice little deal. The price is a little high in my opinion, but offset by low cost seller financing. What happens after year three is my biggest question.
Inflation, rent growth, operational efficiency will all improve NOI, but you need to get NOI to ~ $120,000 to $125,000 to refinance. Today you could only get ~ $850,000 today from a bank / credit union. Is three years enough runway to hustle? I don't know, that's the business decision you'll need to make. It kind of feels like the buyer is asking you to pay him for the future, but asking you to do all the work to make the future a reality.
Does the debt require principal payments or is it interest only? A seven year loan would be ideal in my opinion.
I like the location, second home areas tend to have higher than average storage demand, especially in cold areas. Storing water toys is a thing.