Self Storage

102 Replies

@Jonathan G.   The Federal government and most states have deemed self storage as Essential, and can be open for business.  Based upon the SSA virtual conferences I have attended and conversations with other operators, most have been able to keep their doors open to serve the community.  With the rapid displacement of college students and need for warehouse space, it appears the overall market has not been impacted.  Data is still limited on rent collection, late payments, and defaults.  Our facilities have remained open.  That being like most businesses, we have altered the operations to protect the managers as well as our clients.   

However, the industry as a whole compared to other sectors of the commercial real estate market has not been hit in nearly the same manner.  The data we have seen shows obviously Malls, Hotels, Casinos, Strip Malls as being hit the hardest.  Data Centers and Cell Towers are the only two sectors of the commercial real estate market that are fairing better than Self Storage with respect to market valuations during this challenging time. 

@Jonathan G. We actually saw an uptick in net rentals over the last two weeks of March and first week of April. But we're expecting to see more delinquent rent. At my largest property, rent due dates stagger, because they are set to be on the day the tenant moved in, rather than all at the beginning of the month. The last week of March saw a 13% increase in delinquent rent. We are also waiving all late fees as a courtesy. Normally late fees are an important revenue center for us. We should have better numbers on rent delinquencies soon. So far though, things have remained mostly stable.

I own a small facility in South Carolina (104 units). I love it. I was invested in multi-family, but like ss much better because it's just steel and concrete...the tenants can't damage it and no one ever calls me at 6am complaining that their child flushed a toy down the toilet like you get in multi-family. I found my facility listed on the RESIDENTIAL MLS!!! Very strange. I have no interested in purchasing multi-family anymore, but I'm always looking for another ss facility.

Originally posted by @Sam Green :

I've heard that investing in Self-Storage is a great idea. I agree! It seems like a great business. I was wondering if anyone has had any experience in this area?


Hello Sam,

Any “potential” real estate investment is a great idea! You must know your financial metrics and long-term goals!  

 

Does anyone have a recommendation on how to find good deals for self storage units?  Other than loopnet.com or crexi.com?  I looked into buying leads from listsource.com, but their self storage leads are horrible. 

I am very interested in buying a self storage unit here in Texas where I live.  

Clemens, definitely follow Michael's advice and try those resources. Also, I would add that if you are going to find a self storage deal, it will probably be an off-market deal where you approach the owner privately. Honestly, these just don't come up for sale very often because they are great little businesses and the owners generally have a list of people who have offered to buy from them over the years, so in a lot of cases there is no need for them to publicly list them. In addition, I find a lot of the facilities that do end up listed want far too much money and they generally get those prices from investors who just don't care how low the cap rates are. 

So with that I would develop a big list of all the local storage facilities you can find and start sending mailers/stopping in to visit and see if you can make connections with the owners and go from there.

My firm passively invests with some of the top US self-storage operators. We are seeing an uptick in rentals at facilities with online portals, especially those near colleges. 

My advice would be to start smiling and dialing to find small mom-and-pops that are interested in selling their facilities.  It will take a lot of calls, but it should pay off if done in large quantities, consistently. Mailers would go hand-in-hand with calling. 

Thanks for the advice given, very helpful!  I also get the impression from what is listed on the various platforms (loopnet, etc.) that prices are way too high. 

Originally posted by @Clemens W. :

Thanks for the advice given, very helpful!  I also get the impression from what is listed on the various platforms (loopnet, etc.) that prices are way too high. 

Yes, many listed properties are listed such that they aren't a "deal".  That said, if you are diligent, you can find some great deals...the truth is though, its more about "creating" deals than finding them.  Identifying hidden potential and using creative deal structures can be what makes difference in many cases.  You will also be wise to farm OFF market properties!

 

Originally posted by @Clemens W. :

Thanks for the advice given, very helpful!  I also get the impression from what is listed on the various platforms (loopnet, etc.) that prices are way too high. 

It seems good deals don't make it to public listings, unless you lowball something that has sat on the market too long. I'm sure there are some clever tricks the pros know, but it might be effective to simply brute force call/mail every possible property that you'd want to buy if it was for sale and see if you eventually get one to sell.

As others mentioned here already. No different than any other asset class, the 'good' deals are usually scooped up before hitting the Loopnets and CREXI's of the world. Storage owners are just like other asset owners in sometimes they'd rather do things easier and sell off-market.

In addition to calling owners and sending out letters as recommended above, I wouldn't discount developing broker relationships in the market you are looking to purchase a self storage facility.  My husband and I purchased our 158-unit self storage facility through a broker.  We lost out on another facility that we bid on and the listing broker from that deal circled back around to us several weeks later, because he knew of another facility in the same market that was for sale (but not as widely publicized at the time for some reason).  The numbers worked for us, and we are happy owners of it today.   Not saying this will be the primary way to find good deals, but it can definitely be used in tandem with the other lead generation methods.

Faith Hill

I’m of the opinion that there are always opportunities.  We just may have to resort to other acquisition strategies to find those deals.  That’s what I’m doing in MD.  However, I have no experience in Self Storage yet.  Just single family houses so far.

@C, if you promise to buy me and my family dinner at Pappadeaux's next time I'm in DFW.  Otherwise don't read the following:  I'll trust you.

DFW being so big, pick the side you live near.  Then look out 40 minutes.  

1.  Stay away from Climate controlled units.  Leave this to the Big REITS and larger investors.  Their SEO and leveraging is far greater than yours ever will be.

2.  Deal- your looking for a property that has a large RV/Vehicle/Boat storage portion, or extra bare ground.  This property will get valued with the parking lot/bare land price.  You will convert it to storage and increase the revenue stream.  Can't disregard the lost revenue of the Vehicle storage, but the original storage should have covered all ancillary costs and most of the land.  Your new buildings should only take about a 35% occupancy for total cash flow break even.  This might be 50% given the loss of the parking revenue.


DO NOT buy!!!!    Use the following for discussion purposes only

Look at Loopnet for the Arlington Stor More property.  No price given.

a.    As you see in the picture there are three storage facilities right next to it.  You have to answer the question, is there more capacity/market.  Even if there is not, offer different products.  Tell the other locations, you would like to buy them (price control, increase the prices after you buy them " you just made 30 % more the day you buy them").

b.  There is extra land that goes with this property. Plus there is bare ground next to it.

c.  Take an inventory of both sizes and numbers.  Based on the pictures looks like mainly 10/15 ft units.  "30" buildings could have some 20 splits.  You might then build more 20's.

d.  You might do vehicle ground storage.

e.  Build larger storage bays with 12 wide versus 10 wide; 10 tall versus 8 tall;  this will bring a different customer.

f.  Build Contractor Incubator buildings 25wide by 50 deep. With 14 x 14 doors and a walk thru.  You will get some race car guys.

g.  Love the road, it has a middle turn lane, so you catch customers both ways.

h.  See all of the Lakes around you.  Offer the following product:  1.  RV/Boat storage, 2.  Cargo Container storage, 3.  RV rec parking away from the storage.  Make it top notch: a.  water, sewer, dump station, wash station, tire covers, monthly check up service (tires, doors, plug in, propane tank fill, inside motion sensor alarm, etc).  No one in Dallas or Fort Worth wants to drive their RV or Boat back to the city, even if they have the zoning.  Make them a Brand name.  Example:  don't know your last name.  Clemens- Bardswell; Clemens- Waxahachie; Clemens- Cedar Creek; Clemens- Tawakoni, etc for each lake.  Why?  So customers will have a preconceived quality of your product, also when you sell, it will bring more.    REITS won't go after this market, until you build the brand, outside of the corporate think tank.  They won't do the leg work.  Locals won't think that big.  Go with your location features, Lakes.  Develop a cookie cutter Brand model, then its just work and financing after that.     Hey, someone tell me there isn't already something in the area like this and I just wasted a lot of "ink".  

Key is to offer more/"different" products than your other competition.  Make your deal, don't chase the same deal everyone is looking for.  "Clemens Lake Properties", sounds great.  There are a lot of lakes around DFW.

Start small and make your Big mistakes early. 

Great thread. 

I got an off market Self storage in my hands. 136 units grossing close to 10k/mo, mile away from university and close access to highway and highly transited roads. he showed me the historic rents and he's practically always had them at 98-100% occupied 

owner will let it go for low 800k. 

We do commercial multifamily so this is new territory, I know the expenses are a lot less than in multifamily but never done the underwriting. 

What do you guys think?

@Julian Sanchez Lots of assumptions to be made based upon the info you provided.  Is it worth pursuing?  I would say worth getting more info.  "Grossing close to $10k" sounds like Seller marketing.   With massive assumptions as well as no verification of numbers it could be ~8% cap-ish.  Based upon experience, it could be ~5%-ish.  Possible at 8% not serious at 5%.  Depends on your goals as well.


@Scott Krone

yes I verified the income, it is $9,795.00/mo to be exact

I see a gauge of 1/3 in expenses, using that metric it's a 9 cap and I know multifamily in that area to be a 7 cap.