All Forum Posts by: Brad T.

For this deal, I would use the average rent to calculate the deal.  I would say the reasons below are part of the variation.  You would be surprised how much rents can vary even in the same building.

- Lazy property manager that hasn't raised rents fast enough, maybe they don't want to lose good tenants, maybe they don't want to find new ones

- Some units have a better view, are upgraded, or have nicer features of some kind

- Maybe some include water or heat and some don't?

- Time of year leasing as you mentioned

Good luck, @Chris Shepard!  Very motivating goals and plans!

Hi Eric,

You got it! That is why this makes so much sense. Just add some expenses like maintenance (5-10% of rent), taxes (since they will go up for your rental a bit), added insurance, and electricity. You should still be over 15% ROI. Imagine if you refi your rental and only have to put 25% down on the garage, you can probably get 60% or more ROI!

Best of luck!

Brad

Great idea, Eric! I have been considering the same strategy for future rental purchases. I like the idea of having a captive audience of tenants and the mix of apartments and storage units. It should be a pretty easy ROI calculation.

From my very limited knowledge of storage units, smaller units rent for more dollars per square foot, so they should have a better ROI.

Also, I don't know about your area, but in Michigan, the taxable value and state equalized value are 50% of the actual value of the property.  So if you have a $100K market value property the taxable value and state equalized value will show up as $50K.  

Maybe your 170K assessed value is really $340K market value?  Still way under the listed price, but closer.

Off the top of my head, you are missing the below items.  Obviously, you need actuals once you find a property.

- Maint and Repair, 10% of income is a good starting point

- Vacancy and credit loss, if the property is run well, 5% is a good starting point

- Utilities

- Advertising

- Legal (evictions, lease advice)

- Tax prep

- Property management placement fees (usually 50-100% of one month's rent)

Great question and one that I have struggled with also, Nick.  So far, I like the way Axiometrics defines the classes best.  It lets renters determine the class by how much they are willing to spend to rent the units.  You can use a website like rentometer.com to check where a unit ranks.

A Class = Top 20% of rent price in it's area

B Class = 20-80% of rent price in it's area

C Class = Bottom 20% of rent price in it's area

Welcome to BP, Lisa!

Thanks everyone.  Your info has been a great help.  The best guy I have been working with has given me a quote of 8% of collected rent plus 50% of one months rent per new lease.  I think he will do a great job and I feel this is fair compensation.

Very exciting, good luck Jo!!