Negotiating Contract for Purchase of First Self Storage Facility

[Jarrod Weaver]

Would like to get your thoughts on the purchase of a 32 unit storage facility on a .29 acre parcel located in a small town (+/- 3,000 people) 50ish miles outside of Austin, Texas. The current owner inherited the property 10 years ago and has done almost nothing with it.

Occupancy has been a miserable 39% with no marketing and very little maintenance. A faded 24" x 36" sign is attached to the end of one unit that is nearly illegible. The grass/weeds are cut about once a month but no trimming/edging leaves grass and weeds growing tall in front of the roll-up doors. The local guy who has been representing the facility and cutting the grass gets $25/month and a free unit

Income for the past 2 years has been roughly $5,500 ($458/month). Pro-forma income could be as high as $14,400 ($1,200/month). Pro-forma expenses are $5,110 annually. As-is the estimated NOI is essentially ZERO - leaving no room for debt service, profit or anything else. Assuming occupancy can be brought over 80% it would bump monthly income to ~$1,000 which will yield $426/month profit. Better yet, the NOI would be ~$8,112. Assuming it could be sold at a 10% cap would yield a targeted gain of somewhere in the range of $40,000-$45,000.

My target purchase scenario would be either a short-term owner finance deal: $25,000 Purchase; $1,000 Down; $250/month; 24 Months; $20,000 Balloon, or, a long-term owner-finance deal: $30,000 Purchase; $1,000 Down; $245/month; 180 Months.

It's a pretty skinny deal but looks like a decent opportunity to make something out of nothing. Being able to do this with the involvement of my two teenage sons may be the highest value.

I look forward to your thoughts...