All Forum Posts by: Neil Henderson

@David Hildebrandt This is a repost from another thread where someone asked a question about evaluating a self storage market. 

These numbers are very much 10,000 foot view and more rules of thumb than absolute gospel so take it all with a grain of salt.

- Self Storage is a very localized market. Meaning, your market is 1, 3 and 5 miles in your basic urban environment. Those measurements grow and shrink as population density decreases. Rural area markets are more like 5, 10 and 20. It’s your Trade Area and it basically depends on how willing people are to drive to your business.
- Is the property on a main road or side street? Highly visible on a street with high traffic counts are preferred.
- In a residential, industrial or commercial area? Residential and commercial are preferred.
- Is the market high growth or stabilized? Storage is a Transition business. Typically does well when people are moving in and out of town or moving in and out of houses.
- Is it near high-density housing/apartments? If it’s in a neighborhood with large houses with lots of garages, it might struggle to draw customers, unless they’re storing large RV’s and other toys. General rule of thumb is you want at least 25% of the housing within 1 mile to be high-density. The kind of housing that is light on storage space.
- Current population growing or declining? I prefer growing populations but because storage is a Transition business, money can be made in declining markets.
- Market Description:
1. Undersupplied? Demand > Supply
2. Oversupplied? Supply > Demand
3. Equilibrium? Supply = Demand
- Watch for concessions (I.e. 3 free months with rental)
- Calculate the Supply Supply Index
Net Rentable Square Feet/Population = Square Feet per Person (7.5 to 7.8 sq ft per person is generally considered to be equilibrium. Less than that it’s undersupplied. More than that and it’s oversupplied.)
- Ideal Market Demographics as defined by the Self Storage Association
- 5,000 people within 1 mile radius
- 40,000 people within 3 mile radius
- 80,000 people within 5 mile radius
- Median income of $45,000 or more
- Traffic count of 10,000 cars/day
- 25% of housing is high-density

@Erik Hemingway has a couple of conversion projects under his belt and is killing it. However, I'm not sure how active he is on Bigger Pockets.

Good luck and keep me posted about your progress!

Congratulations @Justin Fraser Always inspiring to read these kinds of success stories.

@Mary Jay I feel your pain!

I have a 9-5 job and 1 child at home plus a spouse and I know how hard it is. I can't imagine how much harder it is as a single parent. Those precious moments in the morning before my son wakes up are gold and I admit, sometimes I'm not as excited to see him as he is to see me when I've had a flow going.

The best piece of advice I've gotten is to:

1. Focus on 1 aspect of real estate investing. Despite what it seems, real estate investing is very often a team venture. Focus on what YOU can bring to the table for another investor. Can you bring/raise capital? Can you bird dog for someone? Can you analyze deals for someone? 
2. Find a partner. This is something it took me way too long to come to grips with. Attend as many REIA (Real Estate Investment Association) meetings in your area as you can. Network with other investors in your area here on BiggerPockets. Don't immediately ask to partner up but find out if you click. Find out if your interests align and then find a way to add value to them. Be careful! Partnerships are like a marriage. Take your time in the courtship and make sure you write up a Partnership Aggreement that details the division of labor.

Good luck! You can do this!

Many of the opinions seem to make the argument that high income or high net worth (i.e. Accredited Investor) doesn't necessarily mean the investor is a smart investor. They could be a total numb skull who inherited the money. My aunt is a probate attorney in California, trust me, this happens more often than any of us would like to admit. 

That said, as others of pointed out, the definition of Accredited Investor really has very little to do with the investor's level of knowledge or skill investing, but more to do with their ability to absorb a significant loss of an investment. If they lose $50,000 on an investment, that's at most 5% of their total net worth, assuming they just barely qualify.

Most sponsors I've dealt with qualify their investors on their Accreditation status AND temperament, risk tolerance, alignment of interests, etc. Just because a person has the money, doesn't mean they are a good fit for every investment, or every deal sponsor. 

@Gary Schiefelbein It depends on how passive or active you want to be. If you are an Accredited Investor, you could place that 100K with an experienced sponsor in a real estate syndication in any number of asset classes (Large Multifamily, Self Storage, Mobile Home Parks, Assisted Living Facilities). You could even split it up across a few operators and/or operators. 

If you want to be active, then you're probably looking at a small multifamily property.

Good luck and congratulations.

There are professional property managers who handle storage facility management just like rental properties, however, @Lesley Resnick does bring up a good point. A facility of this size will have difficulty covering the cost of a management company so keep that in mind. Unless you plan to manage it yourself, you're going to have to hire someone to manage the facility, even if only part time. 

Self Storage is very much like Large Multifamily.

@Brian Mangum

What numbers? I think it's safe to say there is zero income coming off that property. The value is going to be based on the value of the land.

Some random thoughts:

- Certainly worth talking to the owner and see what he has to say.

- Make sure the land is indeed zoned for storage.

- Doubtful a bank will finance this, so that's why he's offering seller finance.

- The small population is a concern, but that depends on what sort of storage is available in the area. It's a rural area so I'd say the Trade Area is more like 10 miles.

- Is there any growth happening in that area at all?

@Colleen Goldstein I'm 99% positive self storage is eligible for 1031 exchanges. I would've heard much gnashing of teeth in my self storage community had that come about.

@Michael Wagner is absolutely correct. This was very much a 10,000 foot view of analyzing a self storage market.

There’s a lot that goes into it but I’ll give it a 10,000 foot view shot: - Self Storage is a very localized market. Meaning, your market is 1, 3 and 5 miles in your basic urban environment. Those measurements grow and shrink as population density decreases. Rural area markets are more like 5, 10 and 20. It’s your Trade Area and it basically depends on how willing people are to drive to your business. - Is the property on a main road or side street? Highly visible on a street with high traffic counts are preferred. - In a residential, industrial or commercial area? Residential and commercial are preferred. - Is the market high growth or stabilized? Storage is a Transition business. Typically does well when people are moving in and out of town or moving in and out of houses. - Is it near high-density housing/apartments? If it’s in a neighborhood with large houses with lots of garages, it might struggle to draw customers, unless they’re storing large RV’s and other toys. General rule of thumb is you want at least 25% of the housing within 1 mile to be high-density. The kind of housing that is light on storage space. - Current population growing or declining? I prefer growing populations but because storage is a Transition business, money can be made in declining markets. - Market Description: 1. Undersupplied? Demand > Supply 2. Oversupplied? Supply > Demand 3. Equilibrium? Supply = Demand - Watch for concessions (I.e. 3 free months with rental) - Calculate the Supply Supply Index Net Rentable Square Feet/Population = Square Feet per Person (7.5 to 7.8 sq ft per person is generally considered to be equilibrium. Less than that it’s undersupplied. More than that and it’s oversupplied.) - Ideal Market Demographics as defined by the Self Storage Association - 5,000 people within 1 mile radius - 40,000 people within 3 mile radius - 80,000 people within 5 mile radius - Median income of $45,000 or more - Traffic count of 10,000 cars/day - 25% of housing is high-density