How much should I offer?

[Craig Garrow]

Looking at a 19 unit self storage facility here in town. Asking price is $55,000 with gross potential rents of $13680/year. Property tax runs $2600/year and insurance runs about $600/year. Estimating snow removal at around $1500/year. I also happen to know that the property needs some excavation work done to improve the driveway, which I estimate will run $10,000. That being said, I am going to make an offer somewhere around $35,000 using seller financing. Does this seem too low?

[Scott Meyers]

Craig, 

More Factors here than what you have listed, but for a QUICK Evaluation in Self-Storage: 

1. We value commercial RE based on NOI and Cap Rate

2.  Industry Norms for Storage:  Expense Ratio of 30-35%, so 35% of $13680 is $4,788

3. Your APPROXIMATE Annual NOI would be $8,892

4.  Apply a Conservative Market Cap Rate of 10%, and Your ESTIMATED Value would be $88,920. 

Now, this does not take into consideration the current occupancy, Deferred maintenance, Age of the property, amount of land, upside, supply index of the market, and getting the ACTUAL Expenses, rather than using an industry average of 35% as I just did in our little exercise.  etc. - All factors that will determine the value to you, and the value to a potential buyer upon your exit. 

I'm Sure many others will weigh in on this as well, but on the surface, it looks like you may have a potential deal on your hands.