You need a good locatiion with good demand and limited ability to build more. They're cheap to build, so if the demand is there, someone will build another. Minimal utilities, low (in theory) expenses, no toilets. You need a full time onsite manager. If someone calls and nobody answers, they go to the next listing in the phone book. Since the tenants don't talk to each other like in apartments, you can experiment with pricing more easily. Need a good mix of units that's aligned with local demand. If a tenant doesn't pay, you overlock their unit. A month later you cut the lock and auction their stuff.
hello, I have an opportunity on a storage unit(s) but I doubt I can hire or be on site- if I added a fence and security, do you feel with a well-manned phone number that I could see success here? I'm very interested.
How many units will the facility have and what is the setting (busy corridor, deserted rural, etc.)? If it is smallish and in a busy area a well manned phone and a flexible schedule (on your part) could be plenty to run it. There are also 'self-service' kiosks available for a cost that puts everything a renter needs at their fingertips.
Thanks Ginger - there are around 86 units in a cold winter zone. Looks near an airport that is somewhat rural in that area, but surrounded by a somewhat busy area...near the highway, as far as Ive learned so far. I have a few people and a good phone system, so I think we can "man" it going to and fro' - Im curious about the kiosk - what all do they need to access and how do these work - a keycode etc??
Will, Im too green to figure out your math to assess the value. I have, at least on paper a cap rate of 10.2% and NOI at 45,544...so what is this property worth assuming these numbers are correct? Am I just adding a zero to this 45,000 number?
As far as a kiosk, its looks just like an ATM and is a little computer station where the tenant can fill out rental info, put in payment info, and be up and running. You can see/control everything from a remote computer/phone. One facility near me has one, but I've never gone up to it and checked it out. For TONS of excellent information check out the self-storage association website. We built our facility in 1999/2000 (we only have 105 units) and for the first year I ran it without an office/office hours. When we built the second building we included a small office and I now man it 10 hours per week and keep the phone forwarded to my cell the rest of the time. Several larger owners in my area have an office at one location and not at their other 2 (or 4). Potential clients have to go to the office to sign paperwork and receive unit #/keys before then proceeding to their unit. Most folks will just make an appointment to meet me during office hours and on the rare occasions they can't I meet them at their convenience at my office. As far as determining cost for a facility, I personally would just calculate what its worth TO ME based on income (both current/projected) and keep in mind that as with most commercial banks will only go 70% LTV.
What is the unit mix and are rents in line with the local competition? I gross 65k on my 105 units and use a 15% vacancy rate when doing projections. My rents are slightly lower(by $1-15 per unit depending on size) than my competition because they both bought land across the street from me and built larger facilities at a time when we were tapped out financially and unable to expand. Surprisingly enough having 400+ units go in close to me has not affected my vacancy rate at all (but most of the housing and commercial growth is happening on my side of town for the past few years). Self-storage is a great cash flow property IF you get into it right.
Hi Ginger and Ryan,
Thought I'd add my $.02. Ryan, you are CLOSE in calculating the value of a Self Storage Facility by using a 10% cap rate (dividing Actual NOI by .10) but of course the facility class, market, and current cap rates in the market will dictate which to use: 9%, 8%....
As for Kiosks, there are many ways to evaluate whether you will get the ROI. Generally speaking, it's tough to see the return for a facility with less than 100 units. We usually don't look to utilize them at any of our facilitites below 150, and most likely 200 or more makes the most sense.
Hope that Helps
Also check out the storage investing videos by @ScottMeyers. Lots of gold in there about these topics (pros, cons, feasibility, financing, checklists). Also he goes into lots of case studies and ways to do smarter plays (ie value add t0 existing facilities).
I can't believe I haven't posted on this thread since I bought my facility in 09. I'm sure I've posted my info somewhere on BP in another thread. If someone wants to hunt it down, you have my permission to reference it here. It has been great, but no write off. I may decide the taxes are too high and exchange it for something with same cash flow, but some serious write off. Rich
I would love to have one myself, but my question would be - Is there a special type of insurance you need and how is the price determined? Kinda like living space what should i expect to pay: x amount of dollars per Sq ft to insure?
I personally own 2 facilities, they are both non-traditional facilities though. Both are buildings conformed into indoor units. There pretty cheap to buy and easy to build. I use Trache Systems. Ive made my facilities into completely customer friendly. Keyless entry, I brick in a garage door (in addition to man door), and have 24 motion sensor lights and cameras. I rent parking to boats and rvs (in one of them), and I rent out advertising space on the side of my other facility (8-15ft banners). Also, the one facilty has four apartments above it. Just buy a run down store front, gut the bottom, install units, and rent apartments. All together its about 70 units, and even though I only have about 45-55 rented at a time, im putting little to no effort into them. They are great investment, but Id nervous (due to lack of experience) in buying a 200+ facility. If you are looking to own a big facility, i'd go with an existing, at least its established. Point blank people need to store their junk so your definitely going to have tenants.
The last time I posted in this thread was in April of this year. In prior posts, I mentioned the lack of off setting depreciation for some of the cash flow was a negative for me. When my storage facility was purchased in 09, the occupancy was 55%. Location was fantastic, owners were at each other's throats, they weren't maintaining the appearance, etc. I realized it needed a facelift and some updating but 78,000 cars passed by every day. Once the overdue maintenance was completed, occupancy would rise but ongoing expenses would remain the same (same staff, utilities, yard care, security system, etc) and a much larger cash flow would occur.
We are now 87-88% range and more can be done by someone more motivated. I have been an absentee owner that just looks at monthly reports!
The listing agent from my acquisition approached me with a buyer, but his price was unacceptable. He brought another interested party a week ago and we finalized a contract yesterday at approximately a 30% increase in price.
After studying the return from ownership, I determined I can 1031 into approximately 10 million in apts, generate the same cash flow and return a great amount of offsetting depreciation. Using cost segregation up front, I should be able to generate enogh write off to cover all the net income PLUS cover some additional cash flow from other properties I own.
For me, it was a no brainer. More cash left in my pocket after paying taxes, as well as 3 times the asset value that hopefully would increase in value by the same appreciation %. The current property is free and clear and the new one would have a loan. That is what makes the #'s so attractive.
This was my first entrance into Storage facilities and it has turned out well.
This is NOT a completed sale but looks strong and walk through is tomorrow.
Rich
in my personal opinion, reusing an existing building an converting it into conditioned storage make more sense. i have done this and the start up costs are much less and you are able to charge more.
Just because I'm curious, with companies like Trachte, do they just ship the components nationally and the buyer has them installed on site?
Just posted some of my thoughts on storage facility investing at the link below. Would love to get feedback from this group:
What do you guys think about purchasing rural storage units? Im looking at purchasing a storage unit in a smaller town with population around 6,000. Let me know your thoughts as its 68 units and not a secure facility.
What do you guys think about purchasing rural storage units? Im looking at purchasing a storage unit in a smaller town with population around 6,000. Let me know your thoughts as its 68 units and not a secure facility.
Hey Tyler, I just stumbled upon this post and wanted to give you my .02 cents. Rural self storage investing can definitely work. To put into perspective, I live in a small town with a population of 6,500 and there are over 200 units in the market and they are all full! None of them have a fence either, but are well lit and the crime rate in the area is pretty low so it's not a problem.
A very rough rule of thumb in the self storage industry is about 10% of the population rents storage. So when I approach a market I look at the population and multiply it by 10%. So, with a population of 6,500 I might expect there to be a market for about 650 storage units. Again, this is a very rough starting point and on the high end. Every market you explore will be different. From that point, I lower my assumptions to ensure I'm being conservative or more realistic and I take a look at what's actually in the local market. For example, my market has that population of 6,500 and there is approximately 200 units in the local market and they are all full. I have added to this market and I'm completely full at the moment.
There is another guy in a town close to me who has over 100 units in a town with a population of less than 1,000 people. He's completely rented all the time, but he has that success because the town he is located in has a popular summer lake that people like to boat on and he's located on the busiest road. He's also located right on the local snowmobile trail system so he has boat renters and snowmobile renters and always maintains a high occupancy. From the outside looking in, you would never consider investing in that market since the population is so small. But without really analyzing that market you would have never realized the opportunity for boat and snowmobile storage that actually existed there.
So as long as your units are in a highly visible area within town and look nice I think it would probably perform pretty well, but I know nothing about your market.
What do you guys think about purchasing rural storage units? Im looking at purchasing a storage unit in a smaller town with population around 6,000. Let me know your thoughts as its 68 units and not a secure facility.
Hey Tyler, I just stumbled upon this post and wanted to give you my .02 cents. Rural self storage investing can definitely work. To put into perspective, I live in a small town with a population of 6,500 and there are over 200 units in the market and they are all full! None of them have a fence either, but are well lit and the crime rate in the area is pretty low so it's not a problem.
A very rough rule of thumb in the self storage industry is about 10% of the population rents storage. So when I approach a market I look at the population and multiply it by 10%. So, with a population of 6,500 I might expect there to be a market for about 650 storage units. Again, this is a very rough starting point and on the high end. Every market you explore will be different. From that point, I lower my assumptions to ensure I'm being conservative or more realistic and I take a look at what's actually in the local market. For example, my market has that population of 6,500 and there is approximately 200 units in the local market and they are all full. I have added to this market and I'm completely full at the moment.
There is another guy in a town close to me who has over 100 units in a town with a population of less than 1,000 people. He's completely rented all the time, but he has that success because the town he is located in has a popular summer lake that people like to boat on and he's located on the busiest road. He's also located right on the local snowmobile trail system so he has boat renters and snowmobile renters and always maintains a high occupancy. From the outside looking in, you would never consider investing in that market since the population is so small. But without really analyzing that market you would have never realized the opportunity for boat and snowmobile storage that actually existed there.
So as long as your units are in a highly visible area within town and look nice I think it would probably perform pretty well, but I know nothing about your market.
These are some spot on observations! The only point I would add is that the "highly visible" portion can be either highly visible as folks drive by OR highly visible on the internet. I've got a couple facilities that are set back a little bit from the road. Of course we do what we can to compensate with road side frontage etc. but online presence is our greatest asset. Just pointing out that even a less than perfect roadside position can be overcome.
Thanks @Michael Wagner that is also a very good point. A good website and social media presence has always been important, but it's even more so now. I think a solid location will always be important, but its becoming so to a lesser degree when compared to online presence.
Creating a nice website is also so easy now, too, through providers like wix.com (that's what I use). So much of the competition doesn't take advantage of this and still have no website and it can easily be your biggest sales tool.
Having good pictures is so easy these days with cell phones. I take pictures of units and constantly post to social media, which in turn automatically updates my website with new pictures of my units showing the different ways that people use the units. Definitely a must to be a good online marketer.
I would add a few thoughts... The national average for storage is 7 to 7.8 square feet per person in a 3 to 5 mike radius (you should check both). If your market has less than that, it could be an opportunity for more. It should also have high visibility, which in a competitive market would be perhaps 15-20,000 vehicles per day driving by AND be able to see it clearly.
There is a good book about marketing and running self storage facilities. Contact me and I’ll pass along the title (I can’t recall it at the moment - it’s not obvious).
Why would someone who wrote a book on MultiFamily even know these obscure facts? My company has been frustrated for a while about the overpriced market for apartments. We recently decided to pull together a group of our friends and investors and we are investing in a company who is killing it in self storage. Pretty excited about this right now!
@Tony L. You have received a ton of valuable feedback already. I'd say there is no right or wrong answer or investment. It is ultimately your decision in terms of what works best for you in your personal situation based on your investment criteria.
Here's my take on storage investing: https://www.biggerpockets.com/blogs/10850/74467-do...
To reiterate, at the end of the day, after you go through all of the feedback received, it's up to you to decide what will work best for you!
Best of luck!
Storage units can be crazy expensive. I've found great success in renting out all the storage areas around my investment properties on Neighbor. It's a nice passive way to increase your ROI by $200-$600/month.
@Tony L. We currently own and are in the process of converting three more warehouses into self storage. www.codamg.com more than happy to answer your questions. There are many solid reasons for self storage. We view them as apartments without toilets. @Mark Yuschak Valuation of self storage is similar to other commercial real estate. NOI and Cap rates. However, self storage is very predictable based upon demographics and rental rates. We study the demographics well before we ever make an offer. The proformas can be modeled out based upon historic performance to determine the projected NOI and cap rates. There are feasibility companies that specialize in self storage. Brokers can also provide the most current cap rates. We have seen assets trade between 4.5% - 6.5% for Class A self storage.
The last time I posted in this thread was in April of this year. In prior posts, I mentioned the lack of off setting depreciation for some of the cash flow was a negative for me. When my storage facility was purchased in 09, the occupancy was 55%. Location was fantastic, owners were at each other's throats, they weren't maintaining the appearance, etc. I realized it needed a facelift and some updating but 78,000 cars passed by every day. Once the overdue maintenance was completed, occupancy would rise but ongoing expenses would remain the same (same staff, utilities, yard care, security system, etc) and a much larger cash flow would occur.
We are now 87-88% range and more can be done by someone more motivated. I have been an absentee owner that just looks at monthly reports!
The listing agent from my acquisition approached me with a buyer, but his price was unacceptable. He brought another interested party a week ago and we finalized a contract yesterday at approximately a 30% increase in price.
After studying the return from ownership, I determined I can 1031 into approximately 10 million in apts, generate the same cash flow and return a great amount of offsetting depreciation. Using cost segregation up front, I should be able to generate enogh write off to cover all the net income PLUS cover some additional cash flow from other properties I own.
For me, it was a no brainer. More cash left in my pocket after paying taxes, as well as 3 times the asset value that hopefully would increase in value by the same appreciation %. The current property is free and clear and the new one would have a loan. That is what makes the #'s so attractive.
This was my first entrance into Storage facilities and it has turned out well.
This is NOT a completed sale but looks strong and walk through is tomorrow.
Rich
I see that you decided to go from SS into MF. What is your take now after 4 years on SS vs MF?
Ronak,
I had a previous post in this thread that explained the major reason I went to multi family from self storage. I could use the same amount of funds, make the same amount of cash flow or more, and have some of that cash flow offset by depreciation of an apartment building. There is very little depreciation on self storage facilities but they are certainly a good cash cow.
I disagree with some of the previous posts where various BP members have stated they are just like apartments. If you look at my previous post, when real estate is not selling, no one needs storage facilities. When real estate is selling, buyers and sellers seem to have a demand for extra storage space. That was what occurred with the building I bought in Bonita Springs, Florida. 55% occupancy on acquisition because the real estate market for homes was dead. That is not a good time to raise rents or try and find new tenants. They don't just materialize automatically.
I do agree that storage facilities are much easier to manage, but in my opinion, that benefit is offset when it comes time to sell. There are probably 100 – 1000 more buyers looking for apartment complexes then are looking for self storage facilities. There is not much you can do to improve a self storage facility. You can paint the exterior, improve the landscaping, and change the signage. That doesn't give you much value add potential to present to a buyer. I was happy with owning it, but the real estate I acquired through the 1031 exchange has been off the charts in return. I receive offers on a regular basis of nine to $10 million in sales price for properties I paid 6.2 million and 6.4 million for several years ago.