Two days ago we closed on our first self storage property. Here’s why we bought this deal & why we want to buy as many as we can in the next few years 👇
Self storage facilities in rural markets are dinosaur businesses. Paper ledgers, fax machines, no software or revenue mgmt, and lots of handshake deals. This presents an opportunity for high upside with proper mgmt.
The facility: 19.8k sf. 123 units. Built in the late 90s. 97% occupancy, and rents haven’t increased since it was built, no joke. Rent a unit by signing a paper lease & mailing it to the owner
The rents at this facility are 40-50% lower than nearby facilities, which all are also completely full. As @sweatystartup once said…raise your damn prices!!
Appraisers market study had average occupancy of storage facilities at 99.7%. What?!!?!!
Any who…
Sale price: $410k ($20.7/sf). CapEx: $33k. Bank is financing $350k (79%). $93k equity. 4.15% rate, 20 YR AM, 3 YR lock, 12 month interest only. Current monthly revenue $4,500. $36k in NOI -> 8.8% cap rate going in
The plan: Increase revenue by raising to market rents & transition what was a paper centric business to completely online. We are also installing a perimeter fence with barbwire, motorized gate, and full LED outfitting. This will help with remote management of the property
Projected monthly revenue: $8,300. Annualized NOI projection: $69k
Value at 7.5% cap (market): $920,000. $477k in value creation based on project cost of $443k
Refinance ♻️: 12-18 months from now, secure new loan at 70% LTV: $644k, pay off original note of $350k, cash out $294k. Retain ownership of a cash flowing, well located asset while tripling our initial investment of $93k (3.16x). Buy more storage with the proceeds.
This is the narrative of properties we are looking to buy. Small, inefficient markets with mostly mom & pop owners. We’ve owned the property for 48 hours, and we’ve received tons of positive feedback from current renters, and have already booked a new renter😸
Big s/o to #retwit for the abundance of free, valuable info. Some of my fav follows: @sweatystartup @fortworthchris @moseskagan @MarcSGIlbert @TheRealEstateG6 @hunterjones23 @Karl_Luminus @Heston83 @roblabonne
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