All Forum Posts by: Michael Wagner

Generally speaking you can fit about 15000 sq ft. Of traditional drive up access storage per acre. So you should be looking at a 22-23k sq. Ft. Property. Development costs should run around $30-35 per square foot for a basic facility with fence, office and basic ammenities including a standard amount of Earth work and basic driveways. Of course climate controlled and multi level properties will drive costs up and can easily escalate to double the cost or more. The cost of land is not included in the ballpark numbers above.

Good advise above....this is pretty straightforward "rehab" for a neglected storage joint.  The door hasps are most often either 2 or four bolt hasps and cost about $16 a piece online.  Can swap em out in less than ten minutes.  Overhead door company can adjust and lube springs and probably install weather stripping on bottom of doors thought thats a pretty easy DIY (or handyman job too).  Perimeter baiting (boxes with poison) are pretty standard operating procedures for mouse control.  Also, include in your lease and your move in instructions  a WARNING against storing food.  Good Luck!

I couldn't agree more. Storage is the most funadamentally sound mortgage backed asset on the planet! I love it! I have a small blog here on BP that some might find helpful. It's called "All Things Self Storage". It's a bit dates but I plan to revive it in the coming weeks!

ESS call center and management software should be rolled into the 35% operating expenses. Also a small property like this will probably run close to 30% which will help your numbers some. May be so e hidden potential if current rates are considerably below what other comparable properties are charging...?

The 8% seems high...should be able to secure in the 6% range on a property that is relatively stable.

I echo the question about how many square feet this property is.

Industry standard operating expenses will be in the 30-35% range.  If you run really lean you can hum along at 26-28% using remote management strategies but I personally would still use the 30-35% to be safe.  Those rates are VERY low.  Compare them to what nearby facilities are charging to get a better idea of what you will be able to charge after improvements.  Very few markets have rates below $0.50 per square foot per month as long as the property is clean enough and well run though most of my experience is on my side of the Mississippi:)!

See here for a overview:

https://www.biggerpockets.com/member-blogs/3915/27972-analyzing-the-financials-of-a-self-storage-facility

@Wesley E Harwood, I agree that your expenses are too low.  Industry standard is 33% and that is what you should use when doing your analysis.  I have a good track record of operating at a 25-28% expense ration but Even with that historical performance I use 30-33%.  I rather be "pleasantly surprised" than disappointed. Another thing I noticed was that your average unit size if 279 square feet.  That is HUGE relative to the norm.  That could be either a good or a bad thing.  If you can convert some of the over sized units to a number of smaller units (ie- a 10 x 40 to four 10 x 10's) you will increase rent per square foot considerably.  If the units aren't reconfigurable, you might have found your reason for low rates and low occupancy with no easy way to fix it.  

As you know, these properties are valued based on their NOI. As it sits this one is valued around $320K or so. Of course with the low occupancy, you have to factor in alternative valuation methods like price per square foot which would push value upward maybe as high as $400-$450 (just below cost to replace) IF there is substantial upside. Not factoring in your expansion, I see a stabilized value in the $750K range. As such, I might be willing to pay $375k to $400 or so assuming that your pro-forma NOI is based on good market specific assumptions.

Hope that helps some.

Mike

 Hi Courtney, 

Hard to say what the cost of conversion will be as that depends on the current condition of the building shell. The conversion kit itself will  usually be in the $7-10 per rentable square foot range (you'll lose 25% of building space to hallways etc). The rest of the costs will be electrical, fire suppression if needed, insulation, new/repaired HVAC etc....that could be quick and easy at $5 per square foot or as much as an additional $25 plus....

Sorry I can't be more specific but your question is one of the many that fall into the "it depends" category.

Mike

 Hey Courtney,

Radius is a valuable tool but like any tool, it has its limitations. 10 sq.ft per person isn't great relative to the "national average" but there are markets that support TWICE that. You'll want to call the competitors in town to get a sense for how full they are. IF they are all full, that you might be onto something here. I LOVE properties that can only be described as a "defunct mess":)!!! Your goal is to figure out if the mismanagement is the primary cause of the low occupancy. With proper management, my guess is you can turn the property around....but I know nothing about it so can't say to what extent and how fast. I don't see too many red flags from your brief description but I do know that MOST new investors would pay TOO much for a property like this. Do you have the property under contract yet? What is your price per square foot to purchase? What is the POTENTIAL NOI once filled back up to say 88%? A property requiring this kind of turn around should probably be bought (and rehabbed/converted) for no more than HALF of what it will be worth in 18-36 months once you get it turned around.

Just some things to think about.

@Jason Black,

I use Easy Storage Solutions for 3 of my own properties and 5 that I am a minority partner in.  We like them for their simplicity and cost as well as very good customer service.  PLUS they have a call center with backend access to the software so they can serve as a darn near perfect replacement of an onsite manager.  I've not used Sitelink myself but from what I recall way back when I looked at them, they had great "Enterprise" level functionality but were more than I needed.  Perhaps they have a "lighter" version now or you may be gearing up to the enterprise level?

As for the Kiosks, I am not personally a huge fan.  They were nifty 10 years ago but with the advent of smart phones and online web portals, they don't offer nearly enough in my eyes to justify the cost.  We manage all our properties with ZERO employees and ZERO kiosks.  Why shell out $8K-$20K plus monthly maintenance on a kiosk, when your customers all carry the functional equivalent in their pocket...that they pay for:)?!!!

Hope that helps some!