On Sep 3rd 2020 we closed on a 120k sf glove factory built in 1890 in a small NY town.
Has 45k sf of self storage inside and had $14k a month of net operating income at closing.
Let's breakdown this deal.
A THREAD on creating $2 million out of thin air in 18 months...
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First saw the property on Loopnet in mid 2018. I ignored it. Who wants to try to operate a business in an old factory in a dying NY town.
A few months later I reached out. Broker sent me financials. They were good. $24k a month in revenue and $10k in expenses.
So I visited the property. It was old. Needed a new roof. Full time manager. Only accessible to customers 9am-5pm M-S. No autopay. A lot of folks paying 1/2 market rent.
We've used "seller financing" on two self storage deals in the past year.
And it raised our cash on cash return by 20%+.
And lowered the amount of capital we needed by $500k.
Here's a THREAD about a deal of mine and how this magical debt structure can work.
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My method is simple. In the late stages of negotiation I submit two offers:
One at a lower price.
And one at the exact price the seller wants but with him holding back 10-20% of the purchase price in the form of a 2nd mortgage (with a second position to your bank loan).
Contrary to popular belief seller financing rarely includes the seller holding back 70-80% and acting as your bank.