Self Storage- Deal 10; Look at Home first And Wealth Creation
Was asked by a person to look at two different Self Storage properties about 2 hours away from them as their first time investment. Wasn't to excited, since I would prefer they look close to their home, so they could manage and learn the business versus using a management company. Took a look at both and advised against them, in general.
I asked have you looked in your home town. They said it was overbuilt already. I decided to do a market analysis for them.
1. The town only had 75% of the storage units that it should have for their population.
2. The three major storage facilities were on the West outskirt of town.
3. There is really only one major facility of the 3 and it is a National firm. Normally a play I go for is to own 60% of the market then, I can raise the price $10 per unit each. Which is about a 30% increase in profits and cash. In this instance, you can do that right off the bat because the national firm is already high.
4. The major population was to the North and East of those storage units.
5. Preliminary zoning review showed all of them were in Commercial zoning.
6. There were bare ground both on the North and East main access road in Commercial zoning.
Summary:
Read a lot about looking out of state or far away. Take a look near home first. Its easier to manage and you know the market better. Especially if your new to that type of investing. Like they say it always looks greener on the other side of the fence. But that might be because its your first time to look, and its hard everywhere.
Hope to hear from that individual again.
Wealth Creation:
You know I have engaged with about 5 people and given them info and direction; and they have "disappeared".
It takes 3 things to "Create" wealth:
1. An Idea or product.
2. Financing
3. Entrepreneurship, or willing to jump off the cliff.
Maintaining Wealth:
They say most wealth is usually lost by the Third Generation. Given the three items above. Ideas/products get outdated. Financing or wealth gets spent on non producing assets or lifestyles. Entrepreneurship or "Hunger" gets lost. Was talking with a friend of mine who is well off. We both have sons. He said the thing he wishes he could teach his sons is "hunger". He used to work at a hamburger joint during college and took the wrong orders home for food. Although this is hunger, he meant in a wider term, such as a car for high school, new shoes, not having to worry whether you could pay for the next semester of college, having just a grey and a brown suit for your first white collar job.
Most of my posts, I always start or end with "Start Small and make your Big Mistakes early".
I think this might be why I haven't heard from these folks. They are trying too big of a project at first. Its hard to "Jump off the Cliff" and make the investment. If your starting in storage a great size is 25 to 50 unit location. This isn't a very good "Financial" decision, but you learn everything you need to know, so you can make bigger leaps later. My first location was only 35 units, and I was scared enough, but I knew I could take the "hit" if it turned out bad. Now I know 90% of all the issues, back then only about 60%.