All Forum Posts by: Michael Wagner

Here's a few quick answers:

A few questions:

What is the typical vacancy rate for this type of storage in the DFW area? I'm not help hear regarding this market.  I'd suggest you call those who will be your competitors to get a gauge on it.

Are there any zoning requirements when installing a small office on the lot? Almost certainly.  And I'd ask why even put an office on site.  Rentals and paperwork/payments can all be handled online.

What level of security is needed from most insurance companies? For example, is there any significant advantage to having a security guard?  I think the more important question is what level will be required by your customers!  Your insurance company won't care as you will not be insuring the things stored there...just the value of the improvements you make and against liability.

Are there any permits needed? For construction of the lot, yet.  To run the business, probably yes again but state and city regulations vary.

Thought I'd add some data here for May.  Our rent collections are better than average so far this month...

You've gotten some great advice above.  I LOVE small rural towns for storage and have done quite well in the VERY small towns that I've operated in.  As others have pointed out, a facility of this size won't tap into the "economies of scale" that medium to large properties benefit from.  And you will want to take the link below (from a blog I host here on BP) with a grain of salt as it is meant to be nothing more than a general overview of operating expenses:

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

You may also appreciate many of the other articles if you are just getting started in this industry.  
 

I've invested every $500k I've ever had in self storage and anticipate doing the same forever more.

Pretty much business as usual for us.  Collected 92.6% of rents due for April which is pretty standard for us.  We've seen an uptick in occupancy in April over March but that very well could just be the "spring uptick" that we see most every year.  Long story short, we haven't seen any negative consequences as a result of Corona. 

59.2% of our customers are on auto credit card debit.  We collect about 3% via good old fashioned checks.  No cash, The rest come in as "manual" credit card or ACH payments online or over the phone. 

My gut tells me that we MIGHT be less affected by our current circumstances than some. We intentionally invest in secondary and tertiary markets in areas with strong enough supply and demand numbers in an attempt to add us a bit of extra "insulation". I'm viewing this is a real good TEST of the strategies we've been using over the last 9 years or so.

Hope that helps some!

I agree with @terry hale. Self Storage is ALWAYS attractive but even more so in times like the ones we are experiencing right now!

Here is a wesbite with all the lien laws for each state:  

https://storageauctions.com/page/state-lien-laws

I do not operate in MA but lien laws tend to be similar from state to state (with nuances of course).  Everywhere I operate allows us to cut locks once the proper lien notifications have been issued.  That said, we prefer NOT to do that and instead have the customers check a box that describes whats in the unit when they sign the lease.  99 times out of 100 they are storing "household goods" so that's what we use!

Also be sure to check out any state regulations on holding auctions at this time.  Some states have banned them altogether while others allow virtual auctions but not onsite auctions...and others have been mum on the issue.

One thing I always caution people on is what I call a "so that" mentality! We all fall into it at times and I believe the better we are at recognizing it, the better off we will be. I see it in you post above when you say that you want to start in SFH or multis SO THAT you can get into commercial or storage. Does that mean what you really want to do is commercial or storage? If so, why not start there!? Shortest way to anywhere is a straight line. Now, you may have VERY legitimate reasons for formulating the path you outlined above and if those plans are founded on valid truths, there's no reason to change. I often see new investors formulate "so that" plans because they think it's the only way. I know this because I've been guilty of it more than I'd like to admit.

@Heath Jones, you are absolutely right.  While stabilized assets are valued almost exclusively on income, non-performing property valuation includes "other" considerations that appraisers are all well versed in (cost to construct, land value, replacement cost, comparable sales, etc).  

Clearly it would be great to buy them at a true CAP but as you've already seen, the is not always possible. To land on an offer price, I reverse engineer everything. Starting with the Projected stabilized value, I simply subtract my "required" profit, needed repairs, any working capital to cover negative cash flow, etc).

For example, my ROUGH criteria is that I want to double the value of a property.  So if the stabilized value is realistically thought to be $800K and the property needs $50K in work and $30K in working capital, I could offer $320K to the seller. I'd be all in at $400K.

Yes, I've seen 8-9 caps in the small markets that I operate in right now. I've heard that banks are tightening valuations by half a point compared to a month ago because if everything going on. To your question though, any bank with experience lending on storage will have established practices for determining value. I have been known to "help" less experienced appraisers understand the nuances of valuation in our industry when providing them with the financials and property your;). And don't worry that the owners don't know what a cap rate is. They don't need to;)