Mini-Storage Unit Analysis

14 Replies

Hey Guys!

I'm looking for some assistance in how you would analyze storage units. I am looking into purchasing a mini-storage unit in my local area and this will be my first segue into Commercial investing. I currently own residential investments.

Purchase Price: $459.000

# of units: 76

Annual Income $49,000.00
Vacancy Factor (7%) $3,430.00
Adjusted Income $45,570.00
Management Fee (5%) $2,278.50
Reserve Requirment (4%) $1,822.80
Net Operating Income $41,468.70
Cap Rate 9.50%
Total Value $436,512.63

additional expenses: 

annual taxes: $12,908.38

biz ins: $1,871

telephone/internet: $599

utilities(lights): $677

forgot to mention the property is in Milwaukee

Hopefully in a good area of Brewcity ?

Maybe @Joe Fairless  , @Joel Owens, @Roy N., 

@Albert Bui could provide some wisdom.

My accountant in Muskego owns a storage business in Milwaukee.  Would you like to get some advice from her on your numbers? 

@Joe Fairless   thanks for being honest! I do have a lead on an 8-unit building on the wauwatosa/milwaukee border. The owners will be getting back to me in a few weeks.

@Brie Schmidt thank you for the article! i'll check it out :) 

@Karen M.   that would be great. I'm looking for insight on what i should be looking for ect.

@Alex Anderson  were you able to locate asstance on numbers for self storage facility ?

@Scott Meyers

@Alex Anderson  

Alex, that is not a good deal. I paid $465,000 for my storage facility. I bought it in 2012.

A couple things...

1) The taxes seem really high.

2) Physical occupancy is around 85% for the Milwaukee area. I would go by that number and not the 7%. Self-Storage has higher vacancy rates than multi-family.

3) Self-Storage is very management intensive. You can expect a management fee to be in the 10-15% range depending on your city. There are consistent move outs every month that needs to be filled. There are 76 accounts to keep track of. The management fee is way too low. 

4) The subject property has the distinction of being unattractive to big REITs. They want a NOI that can support a full time salaried manager/team.

5) Utilities seem really low. We pay half of what you report annually, monthly in utilities.

Last year my facility did $97,000 in Gross Revenues and our expenses were $40,000. There are many miscellaneous expenses associated with storage. 

This does not look like a good deal to me. I would check the square footage of the property. How much are you paying per square foot? If it's greater than $60 per square foot that's too much. 

Also, I know Milwaukee is actually underserved in the Self-Storage Market. There is pent up demand. Other major self-storage players could come in and develop (if there is land available) and completely saturate the market. This in turn would drive down your occupancy, average rents, and increase the time it takes to flip a unit over. 

thank you @Daniel Miller on the listing sheet it says the building size is +/- 11,000 SF with a lot size of +/- 0.85 Ac. You're right dan, currently the units are 86% occupied, however after looking at the rent roll, it's apparent that some of the units were recently rented, most likely to boost those figures.

I'm still going to do my digging and research before doing anything.

@Daniel Miller  has made valid points, I am by no means a storage locker analyst but do have 2 small facilities.  We have made them as customer friendly as possible (still have kinks to work out), but as an owner know that one 76 units facility will by no means be a walk in the park.  You WILL need some managing assistance. 

For instance, I have a total of 70 units between 2 facilities, and it takes me unitil at least the 20th of the month to have all the books right with rents.  I have about 50 rented, I definitely need assistance, with all the late payments, calling tenants, certified letters, etc.  For me, it is for sure nice to have the 50 extra checks a month, but YOU WILL work for it.  Ive been too greedy in the past to hire someone, but it is infringing on my other businesses right now. 

@Alex Anderson - Thanks for posting this question many moons ago. I have stumbled upon a mini-storage opportunity and thus the power of BiggerPockets found your post. Did you go through with this transaction and any thoughts to share regarding your experience thus far?

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