All Forum Posts by: Joshua Watts

Well in a 1031 you have to sell  to exchange up that's not what I wanted to do I want to keep my original property and add this self storage facility to my portfolio of properties. 

I got this question a few times in my inbox and thought I would share with all. It is a really good question. See below. @Brian H. 

I know there are many factors that play into this... but is there a generally accepted idea of how many square feet of storage sits on an acre? How much land is too small to start with? Is 2 acres plenty? 1 acre? Much more than both?

There is 45,500 sq feet in an acre and rule of thumb is that you can get 50% coverage if you have the idea peace of land. (single story) With that being said the modern new construction self storage should be a minimum of 50,000 sq foot to be economical. So the rule of thumb is you need about 2.5 acres of land to build a new self storage facility and have economy of scale. Again this all is rule of thumb but at least you can start looking and having an idea if the project would even work. I have seen smaller new projects and smaller self storage going completely automated.   

 Lets start with existing facility, I would look at the existing facility occupancy and the occupancy of other self storage near by. If that checked out I would then start looking at per capita and if the area is growing. I would be happy if the occupancy was in the 80% and the per capita was in range and the area was growing at least some. (but I really looking for rents to low or just mismanaged) As for a new construction I would shy away unless I more or less could not even rent a self storage unit in the area due to the fact that everyone was full or close to full. It has to be late cycle and self storage is not bullet proof. And if someone says it is they are probably trying to sell you something.

Check out insideselfstorage.com they got all kinds of information and will have someone in your area that can do a study. (cost about 5k) Also check out betcoinc.com they provide the building parts for self storage (they are out of North Carolina) but that is just one company there are lots of them. If I was just starting out I would not build for ground up I would buy a facility way before I tried to build one. As for sq foot of other facilities just look up the property taxes it will get you real close and if it is indoor storage (like a conversion old kmart use 70% of the building as your rentable sq foot).

@Brian H.

I glad that you enjoyed reading my post. I have another post that you might enjoy also about changing a strip center into a climate controlled facility. But now to your question about determining occupancy percentage for already existing facilities. If you are wondering about occupancy on the competition 1st just call and tell them you are building down the road and just want to know if they will share information. Sometimes they will. Other than that you can drive the facility and just take a look how many locks are on the doors. I (with help from many of my friends) have took it one more step further and called them "needing" to rent self storage. If you get serious about building you will ultimately need a feasibility study completed and they will provide that information.

Your other question was about how close one self storage facility can be to another. The answer is it depends. The larger the town and closer the self storage facility can be. In a larger city the self storage facility might serve only a 1.5 mile radius and in the suburbs the radius could be 15 miles. There is a rule of thumb that each person will rent 8 to10 sq foot, so you can look at population of an area and start seeing if the area in underserved. And again a feasibility study will show you all this.

Hope this helps......

We use web self storage by u-haul. ($49 a month?) It is a lot cheaper the site link with that being said site link is a good product. Web self storage did a upgrade 6 months ago and there were some roll out issues but other than that it works fine. We have 3 different self storage offices and it has worked for us. 

@Brandon Patrick

Hi Brandon check out my post about self storage and you can get an idea of my experience. I have "overpaid" for potential upside but with that being said not anywhere close to your deal. I have paid 7.7% cap rate when self storage in the area was selling for a 9.0% cap rate. I did add on slightly but most of my potential was increasing the rents. 2 years latter I am sitting with a 14% cap rate and making $20,000.00 cash flow per month at 100% financed over 20 years. So it can work.

But with that being said from your numbers of NOI of 156K and the asking price of 3 million you would be paying a 5.2% cap rate. At that kind of rate you can buy something brand new in a large city with management. But lets go ahead and look into this a little deeper. Not counting adding on (because that is going to take more money) and you did buy the place and you were the best management ever and you were able to increase rent 50% over the next year your NOI would be $234,000.00. That would mean your cap rate that you paid for the building is 7.8%. Let me tell you at 7.8% you would barely be able to service your debt.

This is a long shot and I would have to check your market but if I thought I could increase rents 50% by better management and have potential area to expand I would be at a 8% cap rate. Which at 156k NOI my offer would be 1.95 million. Yes they may not take it but keep calling back every month or so, you never know I had to call ever 3 three month for 2 years before I got my big deal. At sometime the sellers life is going to change (maybe soon being 70 years of age) and you will be there if you keep calling. Good luck.

@Steve Vaughan Thanks Steve for your comments I am glad that you found my post informative and inspirational. (spelling?) You can do it also just start small and grow from there.

@Lance Langenhoven Those are some very strong proforma cap rates that you have in the works. I hope the project ends up working out for you. Anyone that is out there that does not understand capitalization rates need to look it up and study on it and understand the math behind it. After you have a few homes and start expanding into larger projects (more than a 4 plex) cap rates is everything when trying to find out if it is a good deal. If Lance gets his 21% it will be through the roof on cash flow if he gets a 6% bank rate and a 20 year amortization rate or he can choose not to take the cash flow and pay down his bank loan really fast (that is if he even has a loan). 

@Justin Frank

Good luck keep in  Touch 

A 10*10 would be around $75 in my area. Which is .75 cents per foot but a 10*15 would be 90 which would be .60 cents and 5*10 would be $50 which would be $1 per foot. So maybe my .50 cents guess might be little low. I might be more like .60 cents. ......Man I wish I could get .90 cents per foot!!! I might by me a plane...