On Sep 3rd we closed on a 120k sf glove factory built in 1890 in Gloversville NY.

Has 50k sf of self storage inside and is cashflowing $8k a month.

We used none of our own cash and received $50k on closing day.

A thread on creating $2 million out of thin air in 18 months...
First saw the property on Loopnet in mid 2018. I ignored it. Who wants to try to operate a building in an old factory in a dying NY town.

A few months later I reached out. Broker sent me financials. They were good. $25k a month in revenue and $10k in expenses.
So I visited the property and took this footage. It was old. Needed a new roof. Probably environmental issues. Full time manager. Only accessible to customers 9am-5pm M-S. No autopay. A lot of folks paying 1/2 market rent.

I loved everything about it.

But I knew they were going to have trouble selling this thing no matter the profitability, so on July 1 2018 I made a low offer. $750k + seller pays for new $250k roof + environmental work.

Countered at asking price + $100k credit towards roof.

I ignored the response.
Broker called me back mid September of 2018. Make another offer, he urged.

I got more aggressive - $1MM + seller pays for roof / environmental.

Declined. Countered with $1.2MM but they'd give you a new roof and do the environmental.
The next day I offered them their price, but said they'd need to hold $300k of paper in the form of a second mortgage. 5% rate, 20 yr term.

They agreed and we signed a deal.
I convinced my bank to loan me 67.5% LTV at 3.5% with 12 mo interest only.

They replaced roof. Did environmental. A few other things that came up in inspection.

Appraisal came back at $1.85MM.

My bank: $950k
Sellers: $300k
Purchase price: $1.2MM
On closing day we learned the property had a house on it. There is a tunnel right into the 2nd floor of the factory from the upstairs dormer. Needs $75k worth of work to be livable. Likely not worth it.
So we closed last week.

Changes:

New security system ($12k)
Automatic / wifi overhead doors ($5k)
12 hr / 7 day access
No office (keeping manager on team though)
25% rent increase to get every customer up to street rate
9,000sf of additional storage built in building
Our projections for yr 1:

$360k revenue
$108k expenses
$252k NOI (~20 cap)

$57k interest
$37k principle

$158k in cashflow
Then what? Sell it? How much will someone pay for it?

Let me tell you why I don't care how much someone will pay.

If I sell it I'll have about $3.5MM in capital gains. 25% of that will go to uncle sam. And I'll be left trying to figure out what to do with the remaining 2.5MM.
And I don't need to sell it to realize 80% of that gain while keeping a money-making asset and not having to redeploy any capital or give a chunk to the government.

Here's how:
At the 18 month mark we plan to be around $40k a month in revenue on $9k in expenses for an NOI figure around $370k.

Then we'll go back to our bank and get the thing reappraised. We expect it to be valued at about $4.5MM.

The bank will lend me 75% of that value to us.
As long as our monthly operating income covers the debt by 1.5x or more, we'll lever up, taking $3.375MM in new loans on the building.

After $1.25MM goes to clear seller financing and original loan, we'll have $2.125MM in cash go into our checking accounts.

And the best part...
We still own the building and its $150k a year in cashflow.
We paid no taxes.

In the sell scenario: We trade our building for $2.5MM cash.
In the ReFi scenario: We keep our building and get $2.125MM cash.

I'll take #2 all day. And thats our plan with every building we buy!
And if you'd like to hear this story and a few others, including how I got started in real estate, check out this episode of The Sweaty Startup Podcast:

podcasts.apple.com/us/podcast/how…

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More from @sweatystartup

23 Sep
I'm convinced that 99% of new business ideas are over-complicated.

YOU DON'T NEED TO BE DIFFERENT TO WIN.

Its about getting your slice of the pie. Go after a big pie and get your slice!

Don't try to invent your own recipe to a new pie and make it from scratch.
Its not about you and what you want to do and your ego and drive to change the world!

Do the common things uncommonly well and you can win.

In a lot of industries (home services) if you simply answer the phone and show up you can get your slice!
The passion projects are markets filled with selfish and delusional people.

The ones who love what they do so much they don't act as rational actors.

They'll stay open too long and with prices too low and smile the entire time.
Read 6 tweets
17 Sep
I'm convinced a lot of my success in life can be attributed to taking the path of least resistance.

I got a lot of advice like "do what you love, log 10,000 hrs, become an expert".

Horrible advice.

Instead, look at every decision like this:

What are my odds of success?
How successful is the person in the 50th percentile?

Pretty darn successful? Decent work / life balance if you do it right? Good opportunities from there?

Lets do it.

Unknown, broke, hoping for a big break? Or rich but throwing down 80 hrs a week and divorced?

No thanks.
The ability to put down the ego and realize I might not be in the top 5% of this field. Ever.

The ability to make unemotional decisions driven by logic and rational thinking vs dreams and desires and selfishness.

And being okay with not changing the world on day one...
Read 7 tweets
17 Sep
Spotted while snooping on Google Maps at storage facilities...

Two random people being kind to each other! Image
My partner makes fun of me but you really can get a feel for a town and its culture by driving the streets on Google Maps. Especially the gas stations.

By the time I get to the facility to meet the owner I know my way around town and how it feels. Weird I know! Image
I always check out the businesses downtown. And the amount of people out and about, parking spots taken, etc.

No scientific data here folks. But if you're looking at out of state RE, I think this practice is worth it. ImageImageImageImage
Read 4 tweets
15 Sep
Even better. Buy an 8.5 cap deal, keep debt as your own equity as if investors are buying an unlevered asset, send investors 8.5% every year, and you own 70%.
Investors are thrilled to get 8.5% risk adjusted return in cash virtually tax free for a few years with bonus depreciation.

You take the risk, get the deal, sign the note, do the work and get most of the upside, as you should.
Then turn that 8 cap into a 12 by operating it really well. Value goes up 50%.

ReFi, offer your partners a buyout at new value, if they stay in you get all ReFi money (your 70% grew).

If they want out you get equity and they lock in their 20% IRR and reinvest in next deal.
Read 11 tweets
15 Sep
In December 2017, after 5 yrs, my wife and I got tired of our 600 sf apt in Boston MA for $2,500 a month.

So we made a list of what 20% of our activities that brought us 80% of our joy and set out to find a city that had all of those things.

Here's what we did...
I made my list:

Craft beer / cycling / music scene
College vibe / sports
Fishing / hiking
Affordable country club (golf)
Lakes / Mountains nearby
Entre community

She made hers:

Restaurant scene
Beach within 5 hrs
Yoga
Coffee culture
Family friendly
Live music
Our criteria:

Less than 1:20 from major airport + city
55+ in January
100k+ ppl
New build 4 bedroom for under $300k, less than 12 minutes from downtown
East of Mississippi River

I was investing every single dollar I had to my name into self storage so we needed to live cheap..
Read 12 tweets
14 Sep
So I got serious about Twitter on April 12th 2020. Since then:

I’ve raised over $1MM and met with over 100 future investors in my real estate deals.

Made over $20k consulting folks on self storage.

Met several folks int in buying my biz.

& so much more.

What worked for me..
First of all I tried the mainstream advice and built my own blog, podcast, email list, YouTube. Spent 2 years. 500k downloads. Some success.

Got more value out of Twitter in 30 days.

If raising money or in business THIS is the platform.

Okay let’s go:
1. Stay on topic.

The most valuable folks here are here to learn. They curate their feed. They want business and interesting discussions.

No fantasy football. No gifs. No pop culture. No one liner jokes.

Be an expert at what you do. Mix in family 1x a week or less.
Read 28 tweets

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