Storage Unit Question

3 Replies

I'm invested currently in residential real estate, 3 homes. Looking at making the cross over to self storage. Was wondering if someone experienced could take a look at a potential deal and see if I'm missing anything.

it's a 27 unit facility, here's the financials. 

"
27 units total

All are rented except owners unit.

3 - 12x30 units
12 - 10x30 units
12 - 10x20 units

Current rent roll.

3 at $115
9 at $105
2 at $90
2 at $80
10 at $75
One unit is the owners unit

Taxes $4400
Special balance of 26k
Insurance $200/month includes liability insurance.
Electrical $66/month

My wife and I do the property management ourselves. Snow removal and mowing. Renting/showing units.

"

Now where I'm struggling with this, is I'm showing a yearly income of 28560 if maintaining 100%, which I know isn't feasible. I'm showing yearly expenses at around 26400. 

so am I looking at this wrong in that the units are barely making the payment now and the cap % is awful? Or am I missing the bigger picture in that I'm also getting an acre of commercial land and the room to build an additional 27 units. I'm just used to residential real estate where I can cash flow 2500 a month, not 200

Forgot to add some other information, hes asking $359k OBO, it's been listed awhile and hes reduced a few times. Also, he is willing to do contract for deed. Which might be the only way I could get into something like this now because I have 4 total houses on my debt/income ratio and I'm not bank friendly on paper

It has to be a good deal for you. How much is the property assessed for currently? Usually the one like this I’ve looked at that someone built years ago are assessed very low when compared to what they will be once a sale goes through. How are you going to run them and what will your expenses be associated with that? 

So the property will max out with 27 more units on it? Is there any upside in the rents in the local market? 

How much will you have tied up in this and what’s your return on that going to be? That sounds like a lot of money for 27 units without really breaking it down.  What will the cost to build those new units be? 

If you can get into it with very little down and a low interest rate it might be a way to get started, but it seems like you’d be buying a job at this price. 

I hope you can work something out some everyone wins. I’m looking at a similar but larger deal and wondering similar things. I’m looking at developing because the current prices just don’t leave any room for cash flow and it’s hard to find available properties.  That comes with a whole new set of challenges though!  

Best of luck

Adam

Originally posted by @Adam Holbrook :

It has to be a good deal for you. How much is the property assessed for currently? Usually the one like this I’ve looked at that someone built years ago are assessed very low when compared to what they will be once a sale goes through. How are you going to run them and what will your expenses be associated with that? 

So the property will max out with 27 more units on it? Is there any upside in the rents in the local market? 

How much will you have tied up in this and what’s your return on that going to be? That sounds like a lot of money for 27 units without really breaking it down.  What will the cost to build those new units be? 

If you can get into it with very little down and a low interest rate it might be a way to get started, but it seems like you’d be buying a job at this price. 

I hope you can work something out some everyone wins. I’m looking at a similar but larger deal and wondering similar things. I’m looking at developing because the current prices just don’t leave any room for cash flow and it’s hard to find available properties.  That comes with a whole new set of challenges though!  

Best of luck

Adam

I agree with you Adam on it appears I'm just buying a job. Assessment I don't believe it's ever been bought or sold so it would have to be appraised I'm sure. Yes it will max out at 54 units and I feel the rent hes getting us the ceiling.

the only thing I'm clinging to on this deal is the contract for deed, and the fact he's had them listed awhile and has had to drop price already so I feel he would be willing to deal. I just can't wrap my head around storage being a better investment then residential real estate but I do it's minimal maintenance as a plus.