All Forum Posts by: Michael Wagner

Look up David Feriancek with Stearn's Bank out of Minneapolis.  I've used him to fund two storage facility projects. He may be able to help.  They are a national lender.

I agree with both previous posters that either seller financing or a master lease are your best bets.  Of course, they could also agree to accept less money as properties such as this are valued largely on the income the produce.  When income is as far below optimal as you present in this case, it is often necessary and reasonable to pay above what an income based approach would yield for a valuation.  If the above are not viable, perhaps you could address a potential bank's concerns by placing say 6 months of payments into escrow to cover your debt service during the ramp up period.  Also, find out what the accounts receivable are.  If collections are an issue you can count on collecting a portion of those either from the customers or from an auction that will take place 2-3 months from when you take ownership.  I usually break down the estimated collection of accounts receivables by age.  For example, I expect to collect 90% of anything 1-30 days past due, 75% of anything 31-60 days past due, 50% of anything 61-120 days past due and 25% of anything beyond 120 days past due.   This is often a significant number that could cover 2-6 months of debt service (probably on the lower end for a facility of this size).  As they say, every little bit helps.  Keep us posted, it sounds like you have a real opportunity to create a good bit of equity (especially with the future expansion possibilities).

As an aside, be sure you have identified why this facility is struggling and determine if you can fix it.  How's the competition?  Current supply in the market?  If its simply a management thing, then you are good to go but if there's 7 other class A facilities that make this place look like a dump, you might not be able to get it to where it is competitive. IS the population stable, increasing, decreasing....?

It sounds like you have a potential opportunity.  As long as the "mess" is a fixable "mess" you can stand to force a lot of value out of the property.  Just be sure to buy based on its current value (which is a factor of its current physical and financial condition). I've bought two facilities that were certainly classified as "a mess" when I bought them and today they are worth 4X and 2X what I paid for them respectively....and it was just a matter of fixing the "mess". One word of caution would be to make sure that the "mess" is indeed fixable.  If its not, you may end up feeling like your in laws currently do...not wanting to deal with it. @Scott Meyers is a great resource to learn from.  I encourage you to check him out on here and elsewhere. I took his course before buying my first facility and found it more than worthwhile! I'd be happy to answer any questions you might have as you move forward.  All the best, 

Mike

Great thread!

I vote for Option 1....except don't pay off the car at 3%.  Pay it off as per terms and keep the car for 200K miles---theres more satisfaction driving a 2002 civic with 200,000 miles and a Million in the bank than there is driving a 2016 Mercedes with Pennies in the bank. Then buy used in the future.

Pay off the Home improvement and the credit card.  Those cards are then free to use again (to fund your next deal if needed---likely at 0% with a transaction fee).  I have no problems with leverage is it is a great accelerant for growth but from what you describe, it seems you are a bit over leveraged. I agree with others that you need to "stabilize" and protect what you have acquired before the house of cards tumbles.  I'm not picking on you here.  I did the exact same thing and was fortunate enough to stabilize things before things blew down.  I didn't even know I was too leveraged until I had the luxury of hindsight.  

Keep in mind that A million Dollars of RE free and clear can make you as much money as 5 Million leveraged to the hilt (numbers for illustrative purposes only)...the difference being the Million Dollar portfolio has 20% of the headaches as the 5 Million Dollar Portfolio.

I too read Lifeonaire and agree that it was a bit corny.  It was also life changing for my wife and I.  The simple truth is that most of America (myself included up until recently) are living as victims of the world around us.  Without realizing it, we strive for "success" without having ever defined success for ourselves.  We unconsciously pursue society's version of success because its easy to do.  Money and Things are easy to measure so they serve as a good thermometer and tell us how we are "doing" relative to others. The downside being that those things never bring the feelings we hope they will.  Even when our ship comes in and we "make it big", our happiness is short lived and soon replaced by discontent.  We are stuck waiting for our next and bigger "ship to come in".  This isn't to say we are making bad decisions, we are just not aware that there is a better way to live.  

This book helped me shift gears from an "its never good enough" mindset to a much better one.  Now that I have a VISION (which my wife and I formulated at a Lifeonaire event), I could not be happier.  My wife and I live a very comfortable life on a combined 10-15 hours per week of "work" and spend the rest of the time with our two young children.  While we could certainly make more money if we spent more time at it, we have chosen a different path. We used the Lifeonaire message to consciously plan what we want our life to look like and make decisions that create that life for us.  

Boiled down, one of the many valuable messages in this book is that regardless of what we say, our priorities are evident in how we spend out time.  Many folks will list Family ahead of Career on their ordered list of priorities, yet when we look at their weekly schedule, we see that they spend 40, 50, or 60 hours per week at work and 5-10 hours with family). That was me before Lifeonaire.  The opposite is now true and for that I am forever grateful!  This book helped us realize that we had the power to change and that "i work so much to support my family who I love" is a backwards way of thinking.

Great tips so far.  I too like Sparefoot and spend about $200 per month on Google Adwords Express to "ramp up" when we put a new building up.  I also use Craigslist, renewing ads every three days or so.  

With a facility like the one you describe I would work to get on Sparefoot from day one.  They have a second payment option where they take a percentage of each month's rent for as long as the customer stays.  Its steep but you will be making more than if the spot were empty.  So the strategy should be to use them in ramp up and then remove units from their inventory as you get close to (75%---guess) full on that size unit.  Then you fill the rest by yourself at full street rates and gradually squeeze sparefoot out as thier customers move out and you refill without their help.

There are other self storage aggregator sites worth looking at too.  www.usselfstorage.com www.selfstoragelocator.com are two that come to mind.

I don't know your market at all but I am willing to guess that you will be pleasantly surprised by how far you will get just by answering the phone!!! 

NO need for yellowpages.

Hope some of that helps.  Good Luck!

My answer would depends on the specific terms offered.  Both methods of acquiring are viable.  The master lease has less risk from the standpoint that if the property fails to perform you can walk away more easily.  It has greater risk from a legal standpoint....can be mitigated by having an ironclad option.  You just don't want to enhance the facility to the point where the owner could then wiggle out of the option.  The strategy you choose will likely be based on what the seller prefers...not because you let him force you but because he will make his preferred option "more affordable" by prescribing better terms to it.  If I were you I would try to get firm terms for each of the two strategies and then negotiate from there.  IT will become clear which has the most room for you to profit.  Keep us posted!

Mike

StorageFirst is a good national insurance company.  Your insurance will not cover the contents of the buildings.  Because you dont have access to your customers belongings, you do not create a bailment and therefore insurance is much more affordable than traditional warehousing insurance.  I pay around $2500 on a 12,000 square foot facility.  Think it comes with half a million of liability.

Hi James and Welcome to BP.

I focus all my RE efforts on Self Storage.  I can't compare to the numbers you mentioned in your post but from a lifestyle standpoint, I have been fortunate enough to experience the "hands off" benefits associated with this type of investment. My families modest lifestyle is paid for in roughly 10 hours of work per week and more than half of that is done at our house (bookkeeping etc.).  We have two facilities and LOVE everything that storage has done for our family.  Check out my blog here on BP for an introduction to this awesome industry if you are so inclined.  

All the Best,

Mike

Your best bet is to check with your state's self storage association.  Im willing to bet they have a templated lease for SS.