All Forum Posts by: Jonathan Towell

@Nate B.

You might check with your local self storage realtor expert to see what cap rates other self storages are going for. 30 units is on the smaller side, so it might be harder to find comps.

At 8% cap rate, your facility would be worth $315,000 at your projected NOI. So, you could sell it for a quick $20k. Or you could do the work to get it full, then sell it to net around $72k (assuming 8% cap rate is good, and not including expense to fix the place up if necessary).

@Nate B.

Does your $700-$900 net income projection include your debt service? Or is that net operating income (NOI)?

I agree with @Christopher B.. Networking is key. We try to buy lunch for at least one investor a week. We use the time to ask questions, hear their stories, get advice, and ask what they are selling.

I like this deal as well.

For us, the most important criteria is the exit strategy. If things go bad, and the property needs to be sold, can you sell it quickly? It sounds like, due to your discount, you'll be getting about 13% equity in the deal on day one. You ought to be able to sell the duplex for under market value and still come out on top. That is a good exit strategy in my book.

I highly recommend Dwolla. It has features specifically for landlords (recurring rent, etc.) Best part... it is free.

@Carrie Hallensleben

The deed was switched to our name. The title company had to call a few different attorneys to find one that would write up the correct paperwork. I wish I had more information about how that worked, but I don't because we kind of just delegated it to our title company.

The way we read most "due on sale" clauses is that the lender has the option to call the note. In our experience, lenders won't call the note if they are receiving payments on time. That said we had investors on standby in case the note was called.

The seller called his lender and asked them to drop taxes and insurance from escrow. We then purchased insurance and named the seller as beneficiary.

Every month the seller sends us confirmation that he has made his payments.

We took time to build a relationship with this seller. Everything is in writing, but this maneuver does involve some detailed mechanics which makes the relationship important. Also, we arranged this as a short term deal with the goal of exiting via refinance after 3-12 months. I might think longer and harder about doing this kind of deal with longer terms.

@Brandon Gentile I saw the one we got on Loopnet. We met a broker at the facility the next day and quickly had an offer in.

I think one of the most important criteria is location. Our facility is in the middle of town. It is really hard to find enough land to build in town, thus all the newer competitors are on the edges of town. 90% of our customers are in our zip code. We are one of the closest facilities to Texas Tech, and not too far from Lubbock Christian University. If I were in the market for another self storage, I'd start by looking at a map and finding a facility in town, but with few competitors nearby. Self storage is a hyper local business.

I would highly recommend a professional inspector for your first few deals. However, it is much cheaper to go ahead and get the house under contract before you bring in the inspector. Make sure your offer includes an option period (which usually comes with an option fee). If you wait until after the property is under contract, then at least you are only bringing the inspector in after you've agree to some basic terms with the seller. That means, you'll be inspecting far fewer properties.

As you gain experience and cash reserves, the professional inspector may become less important for every deal.

My wife and I bought our first house to live in at 23. It ended up working out OK. But, if I could do it all over again, I would have purchased a duplex, triplex, or quad. I would have lived in one of the units and rented the others. Then I would have repeated the process every 1-2 years until I was all tapped out on FHA loans. I recommend that to just about every young, aspiring real estate investor I meet.

Congrats on all your success so far. I'd love to be in a similar position in the next few years. Since I'm not, I don't feel qualified to give sound advice. Nonetheless, I'll just think out loud...

1. I'd recommend "The One Thing" by Gary Keller. It sounds like you're in a good spot and can do well either way. "The One Thing" might help you decide how to prioritize your time.

2. Maybe instead of focusing on one or the other, you focus on training leaders who can lead both parts of your business.

Anyways, I'd love to hear what you decide and how you decide it.