Realistic ROI from self storage facilities

[Marcus Perkerson]

I have about $70,000 to invest in a self storage facility. Could someone let me know the ROI I might be able to achieve? I have a background as residential landlord. I'd like to remove residential tenants from the equation. Thank you in advance for any information.

[Jon Holdman]

I'm confused. In one post you want to become a wholesaler. In another you want to buy notes with your $70K. Now you want a storage facility? Are you just considering a bunch of alternatives?

The mini-storage I've invested in has been a terrible investment. And that's with a guy who's ran several of them before. $70K isn't enough to be more than a passive investor in a large group. All told, there was about $900K in cash and a $1.8 million loan into our deal. That's 281 units plus open storage. ROI last year was nearly zero and its maybe averaged 3% over the last few years.

[Loc R.]

That's good real world input, Jon. Sorry to hear that it's been a dog for you and your partners.

[Rich Weese]

Here is some more REAL world input
Jon- That one really sucks.
Markus- I don't know what you can get for 70K.

I bought 550 units here in FL 7 months ago. I paid not much more than the assessed value of the LAND! I paid a little over 2 million for it . I bought for the future.
It throws off a nice cash flow and has room to improve. I'm currently about 70% occupied but ONLY generating 50% of the potential rent due to concessions. The upside is amazing and I'm willing to wait.
Location location location. I have over 70,000 vehicles pass by daily. It is NOT like rentals. True, you eliminate residential tenants, BUT it is a real business with employees, taxes, etc etc etc. Good luck. Rich

[Marcus Perkerson]

Sorry if I caused confusion. I an considering alternatives at this point. I have found 3 self storage facilities that sell in the are of $250,000 to $350,000. I believe I can get them for a little less. With $70k-$100K down I believe I could purchase them. But, I am not sure about valuing them to determine the purchase price. Any suggestions would be appreciated.

[Rich Weese]

These must be VERY small or VERY old facilities. Remember, the magmt , advertising etc is the same-whether 50 units or 500. Something to consider. Rich

[Daniel Yoo]

I've got a 500 self-storage under contract.

My analysis is 46.5% ROI before debt service. 34% ROI after debt service.

ROI is dependent largely on financing in my opinion more than the actual financials of the property. Putting down 35% down as opposed to 15% will skew your ROI significantly, all other financials being equal.

[Rich Weese]

Congrrats Daniel- Tell us more. Please do extreme due diligence. I don't believe your #'s are accurate. Current occupancy? State? Age? The occupancy NATIONWIDE is less than 60%. What are you thinking yours is? I'm looked at a couple here in FL that were showing those #'s on the surface. Understating expenses, and overstating rent roll and occupancy, by lots. Good luck. Rich

[Daniel Yoo]

Well, its a combined package of 4 self-storage properties here in TX, with a consolidated occupancy of 82%. The properties are free-standing, steel beam construction and about 20 years old. The expenses are on average 20% of Income.

[Daniel Yoo]

Originally posted by Marcus Perkerson:
I have about $70,000 to invest in a self storage facility. Could someone let me know the ROI I might be able to achieve? I have a background as residential landlord. I'd like to remove residential tenants from the equation. Thank you in advance for any information.

Marcus, how's your search going? Have you successfully found any self-storage deals with a good ROI?

[Daniel Yoo]

Rich, quick question- from your experience, what's the average net cash flow per unit per month you're getting on your self-storage property? I've been looking at numbers and unfortunately, they're not anywhere near $100/door/month like in SF or MF. Is that right? Thanks.

[James Harkness]

Most of the units rent for less than $100/month from my experience. Some of them are 5 by 10 foot spaces. I dont think it is realistic to expect 100 bucks a door.

[Daniel Yoo]

True most units are under $100/month. Although, the property I'm contracted on has units that go for $140-$165 for a larger sized unit.

What I'm looking for is the industry average of net cash flow per unit per month.

[Rich Weese]

Daniel- sorry for the delayed reply. You're in for an uphill fight for SO many reasons.
4 projects and total of 500 units? This will be a mgmt nightmare. Also, hard to share advertising budget when they are in different locations. @0 years old is a dinosaur as well is probably security, surveillance and computer software if there is any. Someone asked me to take a look at a project in FL. It had 8" curbs into each unit! Liability and access problem.
You can't use a per door # or you'll get screwed. We have al the way from 5X5 cube up to 40X70. We have outside vehicle, inside non a/c and inside a/c also for vehicles. Same size spot ranges from $95 to $250 standard rate.
One last thing- if You have 82% occ. I'm thinking one of the following
1. Half the tenants are billie bobs family
2. Rents have been reduced too much
3. There are no doors on units ....
4. The seller has doctored #'s.
The nicer, newer buildings aren't anywhere close to 82% Something is wacko. As I posted before, do your due diligence---at least twice! Good luck. Rich

[Daniel Yoo]

Rich, if you had a home study course, I would buy it in a heartbeat!

Thank you, thank you, your insight is one of the most valuable resources here on BP.

I'll be doing a thorough due diligence (twice) and see what's going on here. Thanks again!

[Rich Weese]

Daniel- If I wasn't too old, I'd take you up on that home study course! I'm trying to help you be comfortable with what you buy BEFORE you pull the trigger. Sometimes, the best deals I made were ones I DIDN'T buy. Good luck. Rich
p.s. I had a broker contact me yesterday about a facility I looked at a year ago. Additional 300K reduction to start.

[Douglas B.]

As always, excellent advice from the knowledgable BP community. My wife and I suddenly had the thought that maybe we should switch our focus from duplexes to storage units. This is the first thread we found! Thanks everyone for telling us the reality of things.

[Shital Thakkar]

Hi,

What was final outcome of this discussion? I am comparing Apartment Vs Self storage for investment and found this thread. As discussion sounds few years old... anyone purchase self storage and how was outcome?

[Emmett Foster]

Originally posted by @Jon Holdman:

I'm confused. In one post you want to become a wholesaler. In another you want to buy notes with your $70K. Now you want a storage facility? Are you just considering a bunch of alternatives?

The mini-storage I've invested in has been a terrible investment. And that's with a guy who's ran several of them before. $70K isn't enough to be more than a passive investor in a large group. All told, there was about $900K in cash and a $1.8 million loan into our deal. That's 281 units plus open storage. ROI last year was nearly zero and its maybe averaged 3% over the last few years.

Wow...Thanks for the insight.. I was under the impression mobile parks  didn't do  that well I guess its the storage one that are terrible.

[Jacobus Bor]

My experience 

1 investment 200 thousand in self storage in Germany have been receiving 

average cash-flow of 10% over the 7 year history and that does not include 

the asset value of my 200 Thousand dollars today estimated to be around 

500 thousand 

[Mitchell Bradshaw]

"average cash-flow of 10%" after debt or before? and per month, week, year? what dose that equate too? Can you give an example? I'm looking to invest but i need to wrap my head around cash flow per month to live off of. Thanks for your help!

[David Richardson]

Thank you everyone for all the great insight. I was also looking at storage units as an alternative to flipping homes but I see that my ROI is higher and more stable in flips than in the storage units based off what you have all shared. Thanks

[Charles Kao]

@Marcus Perkerson Hard to say depending on what you want to do. I am sacrificing some return to fully automate my facility with just maintenance staff we are closing in January and am coming in with 10 percent down. Should perform at a 10.5 cap without even raising rents or value adding.

[Michelle Spencer]

Well for all you out there I run a storage. Went from 76% to 90.3% in 3 months. Wish management would be paid better. We run you business.

[Henry Clark]

@Michelle Spencer  What do you plan to invest in?  What is your Real Estate Strategy?