All Forum Posts by: Serge S.

@Brandon Hall you know my answer ... both:) Considering that RE deals are far and few in between though, I would focus my energy on creating business income that will support future RE deals when and as they come. Continue looking at property and underwriting deals to get better at this aspect but manage your time wisely where you are not blindly looking at everything. On the RE side, your time is most likely best spent getting to know the local players that can help find you the deals rather than driving around town looking at everything. Build your business, grow your clients and business cash flow and be ready for deals to find you. How to find time for it all with a W2 job, now that is the bigger question. 

Honestly 88% occupancy seems very high on anything close to D class. You will get killed on unit turn costs. In a bad area, screening for quality tenants is near impossible so you end up taking what you can get. You get into a cycle where tenant moves in, doesn't pay within 3 months. Then you evict and the turnover is 4-5x the cost of any rent collected. This is the vicious cycle of death. I have had such properties run 70-90% expense ratios and this is with good self management. Some properties simply will have no chance to cash flow. 54% is very optimistic and this is what I run with B class property with good screened long term tenants. 

@Matt R. yeah in CA land is at a premium on the coasts. This part of AZ is rural and the land has little value comparatively. I'm not sure running CL feelers will be a good gauge of demand here as it would for apartments. Self storage users are booking and searching online. This complex has literally no advertising and cannot be found online. The owner funded it and repossessed it in what looks like a private loan. She has been unable or unwilling to run it and wants out. 

I searched the competition and units these size look to rent for between $40-$100. There is quite a bit of economic growth. The RV/parking storage is uncovered so I'm not even sure they could rent. Nobody wants to park anything outside when its 110 degrees. I'd probably have to build some sort of structure.

I think the play here would be to build some sort of industrial warehouse space and expand on the storage if the demand is there. I'd have to dig in more on figuring out the highest and best use. Hoping some self storage investor experts can help with guidance on how to underwrite such an investment.

@Michael Noto yeah I've also been interested in self storage. My initial take is that its overplayed as to how passive it is. Its clearly a business and that is ok with me. My problem is understanding how to accurately underwrite these deals. Not sure how to best project occupancy, rates, discounts, overhead and maintenance. This is a deal where I might be able to trade out of a few SFRs where my basis is $120k and I'd be buying for just about land value with room for expansion. All of which I like. With only 80 units though, nearly every which way I underwrite the numbers, payroll and fixed costs eat up any profit unless its either expanded or the RV/Boat/Car spots are fully utilized. 

This is another roll of the dice project it seems. As @Brian Burke says, might as well go to Vegas and bet on red:)

I ran across an interesting little self storage opportunity. 

This facility consists of a paved lot with 80 concrete block storage units and a 160x200 open gravel lot (about 100 spaces) for autos, boats and RVs. 10’ tall concrete block walls surround the 5 acre premises with wrought iron around the front. Built in 2001.  Each unit has concrete flooring, with lockable metal roll-up security doors. The inside is drywall finished and has a security alarm system wired to each unit. Updated in 2007 with new stucco and paint, new roof and asphalt.  Owner is out of state and cannot manage it. Zoning: Light Industrial.  There is potential to run other types of businesses with this compound on 5 acres. Only 10 units are rented right now as there is no management here anymore and owner is out of state.

UNIT SIZES:

1-10, and 17-26 are 9x14

69-56, 54-49, and 34-47 are 9x9

the two corner units 48 and 55 are 19x9x11

27-32, are 4x9

11-16, are 14x4

It is located in an area close to where I have substantial real estate holdings and the area is in the midst of escalating population and economic growth. Price right now is $295k but the owner is pretty desperate and will take closer to $200k. The area is somewhat rural and I cannot project what occupancy would look like so it would have to be underwritten to low occupancy. 

@Brian Burke I know you own self storage, thoughts on how you would underwrite something like this? 

When I look at this, I wonder how such a small facility could support payroll and what the exit strategy would look like. Maybe it needs to be expanded to a larger facility but no telling if demand is there. I like the low purchase price and using this experience to learn self storage but not sure how viable it is financially.

Would love to hear thoughts from some of the expers.

Typical cost is $1/sq foot for maintenance (recoat and remediation) and $2/sq foot for a refoam. Tear down and new plywood is extra.