Self Storage Case Study # 2 - Introduction Only
Its been a long time since I've posted anything to this blog and since my wife has heard enough about this deal over the last 6 months, I thought I would force someone else to listen to me. I can't stop talking/typing when I get this excited about a deal!!!:)
Mini Storage Project #2
Overview of Property: 117 Storage Units (roughly 12,500) square feet plus one rentable office and 2 small apartments. Good Location on major thoroughfare through rural town on the border of suburbia. Tertiary market at best but just 15 minutes from home. Comes with additional one acre of land to expand upon as appropriate. Currently 100% full physically but only 57% financially occupied (meaning almost half the units are not performing). Breaks even at day of closing given my purchase price, expenses and initial debt load. Current rents are 10-15% below market rate.
Purchase Price: $350,000
Improvements: $40,000
Closing Costs: $20,000
Project cost: $410,000
Source of funds: $304,000 first mortgage, $80,000 contribution by equity partner in exchange for 19% ownership: My contribution of signing for the loan and $26,000 out of pocket earns me 81% ownership and all cash flow (Investor will receive preferred rate of return on $80,000 which is included in debt service below instead of percentage of cash flow)
Financial Projections: As is Year 1 Year 2 Year 3
INCOME: 57.60% ramp up 88.00% 5% rent inc.
Gross Revenue $89,550.00 $88,350.00 $88,350.00 $92,767.50
Collected Rent $51,600.00 $57,137.00 $77,748.00 $81,635.40
Retail Profits $600.00 $600.00 $600.00 $600.00
Late Fees $300.00 $600.00 $600.00 $600.00
TOTAL INCOME $52,500.00 $58,337.00 $78,948.00 $82,835.40
TOTAL EXPENSES: $17,476.00 $27,085.00 $27,035.00 $27,035.00
Net Operating Income $35,024.00 $31,252.00 $51,913.00 $55,800.40
Projected Value after Year 3: $613,800 based on a CAP rate of 9%.
Only thing left to do is make reality match these numbers!!!! Wish me luck and check back for updates along the way. We will close later this month and plan to hit the ground at a full SPRINT!!!!
I hope this humble little blog of mine inspires someone to consider self storage investing. Without exaggeration, it has changed my life beyond what I can explain here!
Comments (18)
Hey Guys,
In order to work all the bugs out of my system, I am looking for 10-15 people who want to learn about self storage for FREE.
I am looking for people who are serious about learning How to Invest in Self Storage to Beta Test the Self Storage Coaching Program that I am launching in the next month or so.
This Content Centered Educational Training Program Includes:
- 2 Phone Calls with me Every Month
- 1 Webinar with Me Every Month
During Each of These Three 1+ Hour Long interactions, my only objective is to teach you and everyone on the call/webinar as much as I possibly can about storage.
Additionally, I will give you the opportunity to submit questions to me before each call/webinar so that I can cater the education toward the areas that you need the most help with.
Comment below or message me privately if you would like to learn more about investing in self storage and I will be sure to get back to you.
Mike
Michael Wagner, over 6 years ago
I am interested in your system if there is an opening still. I have poured over real estate and self storage units seems like one of the best investments in the market at this time.
Thanks
Bruc
Bruce Harding, about 6 years ago
hi Michael:
I'm be interested in joining your training program if you still have free spot! I currently own a storage facility similar to size of this one you have. feel free to message me!
Look forward to hearing from you
Brandon
Brandon Yuan, about 6 years ago
Hi Michael, I realize this was posted 7 months ago however I'm am interested in learning how to start up my own storage unit business. Does your offer still stand for teaching ?
Happy New Year,
Angelina
Angelina, almost 6 years ago
Nice article about self-storage good works, much appreciated. We help self-storage community with a <a href="https://www.6storage.com">management software</a> , free customized website, digital marketing suite and rental centre.
Farah, over 6 years ago
Good Question,
The lender allowed the contribution. A portion went to purchase price and closing costs and a portion went to improvements. I used an SBA loan and so only partners with 20% or greater ownership are required to sign for the loan. It should be noted that I had an existing relationship with the bank and so that played into their decision to let me have so "little skin in the game". Its not likely that a first time storage investor would be given such a liberty but that just goes to show how important relationships are in the RE world!
Michael Wagner, over 8 years ago
Hey Mike, you had a mortgage on a property (I assume a commercial loan) and you had an $80,000 contribution from a partner....where does that come in to play? The lender allowed a contribution from a partner to the loan?
Or was this $80k outside or closing for renovation/additions?
Brandon Gentile, over 8 years ago
Great job on being persistent! Should be a great opportunity.
Trevor Probandt, over 9 years ago
Man, this seems like a great deal! Congrats!
Frankie Woods, almost 10 years ago
has anyone considered using shipping containers?
David VanSteenkiste, almost 10 years ago
Hi @David VanSteenkiste ,
Sorry for the delayed reply. I have not used storage containers myself but I've looked at facilities that use them and they can be a good short term solution. Even well painted ones tend to look a bit tattered and so I feel they are best as fill in storage way in the back of a facility. The big manufacturers do make similar products (that cost about 2x what a storage container does but they look like traditional units and can be placed on easements and setbacks and expensed and/or depreciated more quickly than a "real Building". They are also not taxable as they are not Real Property. I have considered these many times but have never gone through as I've stuck to adding traditional buildings. I feel shipping containers would work best in an underserved area where they wouldn't face too fierce competition from traditional storage. Just my two cents. All the best!
Michael Wagner, over 9 years ago
What has made you not go for purchasing the containers that are movable similar to shipping containers? How much do they cost? Do you know over what year period you can depreciate them at?
Account Closed, almost 9 years ago
Ed France, almost 10 years ago
@Ed France undefined,
Development is certainly an option. The one major downside that I see with development is the cash flow crunch that inevitably occurs in the first several years. Depending where you live you could spend hundreds of thousands of dollars on land/storm water drainage systems (NY is particularly bad in this area). That being the case, you have to build a certain amount of buildings right from the get go in order to have a financable project once stabilized. In other words, the project has to be big enough to justify the initial costs of development. Your looking at probably $35-$40 per square foot to build ground up exclusive of land. And you are probably going to need 15,000-20,000 square feet to make it financable. Then you have to cover the monthly operating expenses until you get to break even. THis isn't to say that development isn't a good idea. IT can be but it is a longer term play in my opinion. My preferred strategy is to find a poorly run facility that can be "fixed" and has future development potential. This way you can buy a facility that is closer to or at break even (as compared to zero net income that ground up developments bring) and fix the operational inadequacies. Once you get stabilized you get to "play" developer as you add new buildings. And if you add just one acre (in NY) which is enough for 12000-15000 square feet, you avoid the storm water regulations that make development from ground up so expensive. Essentially, "completing" the development of facility allows you to get in with cash already coming in and then lets you skip some of the most costly steps required in ground up development. Its the best of both world's in my eyes.
Michael Wagner, almost 10 years ago
Awesome job in getting the deal accomplished! Good luck in advancing forward with your project. Crazy as it may sound I have worked in real estate for many years as a broker and mortgage officer, but I am relatively a new investor and I sincerely appreciate post that start my creative juices churning! I'm excited to hear all your future updates.
Yahni Bryant, almost 10 years ago
HI Al,
Best of Luck as you dive in! Scott's course has great information! I found this deal by having my letters returned to me. I, as Scott, suggested sent letters to the three nearest counties but the ones for this facility got sent back. SO I stopped in and talked with the manager. It was a convoluted situation. They guy running it was in the process of buying it but hadn't closed yet. I told him I wanted to buy it and was disappointed that I missed the boat but I offered to help him get his feet wet when he took over as owner if he needed any help (with auctions etc). Then I called him monthly for 18 months to see if he had closed yet. It really did take that long. During one of those calls I mentioned that I would be interested in buying it if he decided he wanted to flip/wholesale. He called me the day after he closed. We got a cup of coffee the next day and we had a deal. He made 50-60K on it which I would have really liked to keep for myself but as you can see there is plenty of meet left on the bone for me so what he made is really inconsequential to me.
Michael Wagner, almost 10 years ago
Michael, I'm trying to jump in the mini-storage biz here in Sacramento. Bought Scott Meyer's course and have been sending out letters. Hopefully I can follow your progress. Wishing you the best.
Tell me, how did you find this deal?
Al Williamson, almost 10 years ago
Hey Al,
Its been a while since you commented here about self storage. Just wanted to touch base and see if you were ever able to put Scott's course into action?
Mike
Michael Wagner, almost 8 years ago