Thread by @sweatystartup

There are probably 50,000 small mismanaged self storage facilities in the USA.

Too small for REITs, too small for institutional investors, too big and scary for single family investors.

Thats a perfect storm in my book!

My 10 year plan:

Buy 100+ of these at an 8-9 cap for $100,00,000. Make sure I own at least 50% of the upside.

Group them together with management co. Increase NOI to $10,000,000.

Sell to institutional investor at a 5.75 cap.

Sit on beach.

How I find deals:

Loopnet, Crexi, ListSelfStorage, Broker outreach, cold calling owners.

What I look for in a deal:

Mom-and-pop operator who hasn't raised rents in 5 years with 95-100% occupancy. Mostly drive up, older facilities in small towns or suburbs.

How I figure out what its worth:

I look at the market and what the market rate should be. I estimate how much I can raise rents and how much I can save by not having a full time ee.

I run cashflow projections based on an 8.5% un-levered yield (cap rate).

Then I make offer.

After I buy:

I raise rents up to market rent on day one. Often 20-40%. Some customers move out. Most stay. I get new customers.

I replace employees with software.

One year later its a 10 cap.

Repeat! Repeat! Repeat!

Update... after working through this a bit more I think there are only 25-30k mismanaged smaller (sub 30k SF) facilities.

What a bummer!