All Forum Posts by: James Seely

@Matthew Stapleford. Looks like there is sales tax on self storage. https://www.tax.ohio.gov/sales_and_use/information_releases/st200311.aspx

I use Easy Storage Solutions and their site has the ability to customize the text/email that goes out when a tenant is late.  With that you could put a link to the site where they could login to pay. 

I use CBI Bank and Trust out of Coralville.  The commercial lenders there understand investing and are more flexible than most other banks I've worked with.  If you need a contact name let me know.

@Dave Peirce the Cedar Rapids Meetup is Wednesday Sept 18.

I'd be interested.

Sounds like a great week!

@James Fisher - ACH is the automatic withdrawl of funds that a business can perform on a tenants bank account.  Mostly in my area we collect a monthly check but the facility we were buying had many of their customers on ACH.  The lease the sellers had in place stated that the ACH withdrawl would happen between the 1st and 5th each month but in talking to the sellers they had agreed to pull those ACH funds on the 1st and provide that money at closing (also to happen on the 1st).  They decided not to pull the ACH funds on the 1st but didn't tell us until closing.

So we were expecting a nice check at closing that included the rents for the current month (ACH and otherwise) but received next to nothing.  In the grand scheme of things it was more frustrating that anything, we certainly didn't need the funds to keep our heads above water.  The difficulty was we didn't have much of the customers ACH info and it takes time to setup that info and actually receive the funds.  That can cause confusion with the tenants when they have a pull on the 15th and the 1st of the next month.  On top of all of that the sellers gave us the banking information to setup ACH for the some of the tenants but not for all the tenants.  

Long story short...  Having the sellers collect automatic payments on the 1st when you are also closing on the 1st gives you a month to get all of that ACH info setup and ready to go at the beginning of month 2.

There seems to be a good niche in small town self storage.  I've purchased a couple of self storage facilities in a town that has a population of 1000 with 160 total self storage doors.  We are often full and sometimes have a waiting list! The nearest city (100,000) is 15 miles away and each small town around us has their own self storage facility.

Both deals were different but here are a few things i would make sure to do.

- Look for ways to increase sales.  Is there room to add more units, add outside storage, sell boxes and locks, Uhaul rental.

- Compare the proforma to actual rent.  Sure they say they are getting $80 for a 10x10 but when you look at the real numbers you see a range of prices from $40-$70.  Make sure to negotiate price down based on that.

- On the purchase contract be sure to write in that the ACH withdrawls should be made by the seller with a check delivered at closing (assuming the draw is on the 1st and you are purchasing on the 1st).  The last facility I bought the sellers decided not to do that even though we had discussed it and it made for a painful first month.

- Both of the facilities I purchased were taking a loss as far as the IRS knew.  This can make it difficult to know what the true expenses are.  Find someone in a nearby area that owns self storage and find out what their actual expense numbers are.  This might be difficult if they see you as a competitor though!

- Make sure it's not in a flood zone

- Our state has sales tax on self storage.  Make sure the sellers aren't including sales tax in their sales numbers and if they are adjust the purchase price down to account for that.

- Factor in any increase to property tax.  If the property taxes are currently based on $100,000 value and you purchase the property for $200,000 your taxes could get doubled.

Let me know if I can answer any specific question and good luck!

James

I like the idea behind this and tried doing something similar on the last deal I did... Just be sure to check with your lender before you write an agreement this way. When I questioned the bank about doing this they stated they would do 80/20 LTV on the property but 50/50 for the customer list and different LTV's on the other items we thought about separating out. Obviously not an issue if you are going in with all cash but becomes an issue if you are trying to leverage as much as possible.

Good luck!

@Jessica Gettle  I have a couple of 60 unit storage facilities and would be happy to answer any questions you have.