Question About Self Storage | Need Some Advice

4 Replies

I am looking at a self-storage unit and wanted to provide some of the details I received below in hopes of getting some feedback:

One of the value adds they say is there is room to build more on the land. I dont know how much it would cost to build a 50 unit addition.

Is the sale price good for the gross rents? I am trying to not look at is as a single family home. Thanks

Price 320,000
Size breakdown:Small (5x10): 16 doors - $45 per monthMid-Size (10x10): 30 doors - $60 per monthLarge (20x10) : 2 doors - $85 per month
Full capacity income per month: $2,690
Enough space to build at least 48-72 more units. In place is an established website that handles most of the reservations.
Customers sign up online, a gate code is auto-generated and client can use it immediately. No on-site staff, as it’s a pretty low-involvement,
turnkey setup.

Value add:Quick: Convert two Large into four Mid-Size which increases monthly income by $70.
Future: Add 48-72 more units.After addition of 72 units, monthly income is approximately $6,725 without any rate adjustments.
Expenses:Monthly: JEA (Electric) $112SEO (Not necessary anymore now that it is rented up, we would cancel) $125Website $50Insurance $20 (We pay quarterly but it averages out to $20 per month) Mowing: $40 - $80
Annual: City Property Tax: $1033County Property Tax: $1233

So it looks like NOI is about $25,500 or 2,120 per month. At 6% CAP that price should be around $425K for as is. Right now drive-up construction is around $40 to $50 per square foot....which is higher then it was before at about 25 to 35. All these numbers depend on your area if they are higher or lower. It also depends on how much land costs in your area to see what is a good deal for purchasing future value, etc.

Daniel, so what your saying is at $320k purchase price, thst is good for this deal? Also, the space to build additional units is already factored into the initial purchase. 

If the expenses/income are accurate, deferred maintenance is accounted for and if 6% CAP rate is what is the going rate in your area, then yes. If your area has it more like 8% CAP rate, if a rural area, low traffic, etc., then the price will be ok. It depends on a number of things. Plus don't forget, the moment you buy it, your taxes might re-set to purchase price so expenses might go up. This is all based on numbers and I have no idea about this particular situation or your area, each market is different. I suggest to get more feedback and to research your market to better understand the valuation points.