Help valuing a self storage facility

[Brandon M.]

I have come across an opportunity to purchase a small self storage facility that on the surface looks to be a good deal. The problem I am running into is the owners are close to 70 (ready to retire, this is why it is for sale) and they have not been keeping very good records and are not very sophisticated. They don't seem to do anything electronically and are having trouble getting me a lot of financials. I have asked for rent roll and tax returns, they are getting me 2009-2012 returns because they haven't filed 2013 yet. As for the rent roll, they don't seem to have monthly records. I personally don't even know how they know who has and has not paid.

I still want to purchase this property if at all possible, so I am wondering if anyone else has any experience with something like this. Also, I am wondering if there is any other way to value the property other than the rent rolls?

[Brandon M.]

@Chris Martin - Thanks for the post, I did actually go through with it. After going back and forth I got the owners to accept $120k purchase price with seller financing. $40k down, $80k financed. 30 year amortization, 3 year balloon, 7.5% interest, $1000 monthly payment. I knew I would need to carry some of the mortgage payment out of pocket until I could get the cash flow up. Fast forward almost 3 years later and it was the best decision I have made. The property now has 42 units total (a few of the units had 2 doors so I divided 1 big unit to make 2 smaller ones). I constantly stay between 85-100% occupied. I did have to do some maintenance/repairs, including $20k for a brand new shingle roof. The previous roof was leaking and causing damage to the drywall ceilings, which was causing a few tenants to move out. I have averaged about $2500 monthly gross rents for the last 2+ years with just a little bit of work/effort. I went to a bank last year to do a cash-out refinance to pay off the previous sellers. The bank had the property appraised at $220k, and that number was actually lower than true value simply because the appraiser couldn't find any other comps very close at all so he went very conservative. True market value if I tried to sell it would likely be $275-300k. So the bank loaned me $150k at the same $1000 monthly payment, so I paid off the sellers and pocketed the rest of the money. 

Long story short now I own the property with zero of my own money in the deal (and actually more money in my pocket) and I still cash flow the property about $900-1200/month after all expenses.  This was one BRRRRRRRRR method that turned out very well and likely will be one of the best investments I ever made. 

Hope this didn't come off as bragging, was not meant that way at all, just sharing a success story of stepping out boldly when you find a property that is truly a deal. 

I am glad to share any more details or answer any questions. Hope this helps!