Mini-Storage Unit Analysis

[Alex Anderson]

Hey Guys!

I'm looking for some assistance in how you would analyze storage units. I am looking into purchasing a mini-storage unit in my local area and this will be my first segue into Commercial investing. I currently own residential investments.

Purchase Price: $459.000

# of units: 76

Annual Income	$49,000.00
Vacancy Factor (7%)	$3,430.00
Adjusted Income	$45,570.00
Management Fee (5%)	$2,278.50
Reserve Requirment (4%)	$1,822.80
Net Operating Income	$41,468.70
Cap Rate	9.50%
Total Value	$436,512.63

additional expenses: 

annual taxes: $12,908.38

biz ins: $1,871

telephone/internet: $599

utilities(lights): $677

[Daniel Miller]

@Alex Anderson 

Alex, that is not a good deal. I paid $465,000 for my storage facility. I bought it in 2012.

A couple things...

1) The taxes seem really high.

2) Physical occupancy is around 85% for the Milwaukee area. I would go by that number and not the 7%. Self-Storage has higher vacancy rates than multi-family.

3) Self-Storage is very management intensive. You can expect a management fee to be in the 10-15% range depending on your city. There are consistent move outs every month that needs to be filled. There are 76 accounts to keep track of. The management fee is way too low. 

4) The subject property has the distinction of being unattractive to big REITs. They want a NOI that can support a full time salaried manager/team.

5) Utilities seem really low. We pay half of what you report annually, monthly in utilities.

Last year my facility did $97,000 in Gross Revenues and our expenses were $40,000. There are many miscellaneous expenses associated with storage. 

This does not look like a good deal to me. I would check the square footage of the property. How much are you paying per square foot? If it's greater than $60 per square foot that's too much. 

Also, I know Milwaukee is actually underserved in the Self-Storage Market. There is pent up demand. Other major self-storage players could come in and develop (if there is land available) and completely saturate the market. This in turn would drive down your occupancy, average rents, and increase the time it takes to flip a unit over.