Storage facility. Not a first tier facility. Gravel parking. No electricity, all drive up.
87 units. 67 K revenue when full, 57k NOI. Owner says it is 95 percent full. Most rates are 15 percent below market and only major unit in town.
6.5 percent interest rate, 25 year term, 25 percent down.
Paid 475k for facility.
Good luck.
What I learned while working at a storage unit was, that it takes why more time and money to run one. But that was a nicer one than your gravel/no electricity unit.
Storage facility. Not a first tier facility. Gravel parking. No electricity, all drive up.
87 units. 67 K revenue when full, 57k NOI. Owner says it is 95 percent full. Most rates are 15 percent below market and only major unit in town.
6.5 percent interest rate, 25 year term, 25 percent down.
Paid 475k for facility.
Good luck.
What I learned while working at a storage unit was, that it takes why more time and money to run one. But that was a nicer one than your gravel/no electricity unit.
What were you doing each day? We're there a ton of units? A lot of turnover? Was it gated?
Storage facility. Not a first tier facility. Gravel parking. No electricity, all drive up.
87 units. 67 K revenue when full, 57k NOI. Owner says it is 95 percent full. Most rates are 15 percent below market and only major unit in town.
6.5 percent interest rate, 25 year term, 25 percent down.
Paid 475k for facility.
Default on storage units is higher than any other real estate sector. I hope you like dealing with other people's abandoned junk. It's not nearly as "sexy" as Storage wars portrays it to be.
What I learned while working at a storage unit was, that it takes why more time and money to run one. But that was a nicer one than your gravel/no electricity unit.
What were you doing each day? We're there a ton of units? A lot of turnover? Was it gated?
That was a good 10 years ago. Probably 300 units, gated with code access for customers.
No idea what the turnover in numbers was. But it was a lot more work than I thought it would be. Calling people for missed payments, follow up calls on people who asked for prices, lots of paperwork, accounting work, dealing with customers (nothing bad really).
And keep in mind you are only making money with customers who pay. Once people are behind there is not much you can do. You can evict them and auction off the crap but that's more legal work than it's worth the money you are making off their stuff.
BTW, renting a storage facility, filling it with all your trash, especially the stuff that costs money to dump at the landfill, then abandoning it without ever making a payment is far cheaper that disposing of it properly and without the risks of dumping it illegally. It's even more attractive with the "free first month" or other move in specials. The standard storage facility contract cannot go after people for unpaid fees as their stored property is the collateral. You can make threats and damage their credit, but can never garnish or get a monetary judgement against them, you get to keep their trash. Congrats!
Being a landlord is a bad enough hell to be in, I cannot imagine wanting to be the landlord to their trash... on purpose!
What were you doing each day? We're there a ton of units? A lot of turnover? Was it gated?
That was a good 10 years ago. Probably 300 units, gated with code access for customers.
No idea what the turnover in numbers was. But it was a lot more work than I thought it would be. Calling people for missed payments, follow up calls on people who asked for prices, lots of paperwork, accounting work, dealing with customers (nothing bad really).
And keep in mind you are only making money with customers who pay. Once people are behind there is not much you can do. You can evict them and auction off the crap but that's more legal work than it's worth the money you are making off their stuff.
Hoping automatic payments and back end software will help with a lot of that stuff. But yeah, going to be some headaches. Not sure any worse than a tenant whose basement has flooded or furnace has gone out. Risk is spread out over many more units and not a ton to really go wrong with physical structure.
Nobody has even analysed this purchase. It’s a pretty poor ROI. Seems like you paid twice as much as you should have.
What makes you say that? Could you itemize your analysis?
from my calculation, if the NOI that OP provided takes into account all the expenses including prop taxes, utilities, maintenance, operational costs, and the debt service is around $32000 / year, that would result in $25k / year cash flow, which is 20% CACROI. Obviously expenses are always higher than the seller estimates but near 20% ROI in todays market is great.
Nobody has even analysed this purchase. It’s a pretty poor ROI. Seems like you paid twice as much as you should have.
What makes you say that? Could you itemize your analysis?
from my calculation, if the NOI that OP provided takes into account all the expenses including prop taxes, utilities, maintenance, operational costs, and the debt service is around $32000 / year, that would result in $25k / year cash flow, which is 20% CACROI. Obviously expenses are always higher than the seller estimates but near 20% ROI in todays market is great.
Yes. We ran the numbers every way possible, including worst case scenarios. Above is close to what we think is actual case with about a year of cleaning up prior owners books.
Do people even actually think before they talk anymore?
The best play is always an older motel that people don't really want to stay at anymore, but works for weekly/monthly rentals. Most of the people looking for that sort of housing can't pass credit checks or pay deposits. Can be an entirely cash business, and they'll pay more to stay at your place than they would if they actually got an apartment. You can also take goodwill/garage sale microwaves, dishes, etc, and charge additional fees to make those available.
The best play is always an older motel that people don't really want to stay at anymore, but works for weekly/monthly rentals. Most of the people looking for that sort of housing can't pass credit checks or pay deposits. Can be an entirely cash business, and they'll pay more to stay at your place than they would if they actually got an apartment. You can also take goodwill/garage sale microwaves, dishes, etc, and charge additional fees to make those available.
Consider that by the time a real estate investment "opportunity" has made its way to you, it has already been passed up by everyone in your local area who actually knows anything about real estate investment. If this thing was going to cashflow with minimal effort on the owner's part, someone more connected than you would have bought it before you ever became aware of it.
Doesn't mean you can't make it work. You'll have to do your own financial analysis with real numbers (do you have the last 3-5 years of financial statements to work from to make projections?). But it does mean that you'll probably have to be willing to put in labor, make changes, or take on risk that no one else who considered purchasing the thing had the appetite for.
You'll need to run the actual numbers with realistic projections to have any idea whether it will work. No one who knows what they're talking about would advise you can "analyze (your) real estate purchase" using just the information you've provided.
Consider that by the time a real estate investment "opportunity" has made its way to you, it has already been passed up by everyone in your local area who actually knows anything about real estate investment. If this thing was going to cashflow with minimal effort on the owner's part, someone more connected than you would have bought it before you ever became aware of it.
Doesn't mean you can't make it work. You'll have to do your own financial analysis with real numbers (do you have the last 3-5 years of financial statements to work from to make projections?). But it does mean that you'll probably have to be willing to put in labor, make changes, or take on risk that no one else who considered purchasing the thing had the appetite for.
You'll need to run the actual numbers with realistic projections to have any idea whether it will work. No one who knows what they're talking about would advise you can "analyze (your) real estate purchase" using just the information you've provided.
We cold called over 8 months every self storage in a 40 mile radius and searched Google for buildings that looked like self storage. Struck out on everyone but they took down our number. Got this as a call back from owner 6 months later.
28000 annual cash flow on 118000 initial investment assuming 95 percent occupancy. That's a 23 percent return.
If that's a poor ROI, then I will take it. Also, it's a 25 dollars per rentable square foot. That's fairly cheap..
How hard are you going to have to work for that 28k?
Very hard. Sliding doors will fail and need work or replacement. As I said, I thought self storage was a genius business model until I worked at one. And it was not just the place I was working at. I read their trade publication as well. Probably the first 15-20 years of a new facility are smooth sailing but you better sell before the upkeep takes over your little profits.
I work in commercial real estate development, both on the professional side and the personal side. I think both run the numbers and you have good points. 20-30 years ago it was much, much easier to find and buy property and make it work. In 2022 the internet and many other factors like REIT’s and hedge funds have made it incredibly difficult to find properties and opportunities before the big guys or, candidly, even the middle guys.
The good news though is that the finances are always the finances and your initial numbers look good. I’m not familiar with the operational particulars of storage facilities, so can’t comment on that. Would be interesting to know your longer term plan for the facility, as well as what you have in that plan for OpEx and CapEx facility maintenance costs as the units age.
BTW, renting a storage facility, filling it with all your trash, especially the stuff that costs money to dump at the landfill, then abandoning it without ever making a payment is far cheaper that disposing of it properly and without the risks of dumping it illegally. It's even more attractive with the "free first month" or other move in specials. The standard storage facility contract cannot go after people for unpaid fees as their stored property is the collateral. You can make threats and damage their credit, but can never garnish or get a monetary judgement against them, you get to keep their trash. Congrats!
Being a landlord is a bad enough hell to be in, I cannot imagine wanting to be the landlord to their trash... on purpose!
Absolutely. We used to rent a small one and fill it with used car batteries, old fluorescent lamps, half full cans of paint, yard chemicals, etc, then just abandon it.
Do you make $28K/year with you having to run it without an employee? Damn, that sounds really rough and crappy. Seems like a lot of work you have to do to make $28K/year.
