Thoughts on mini storage investment?

[Lukas Zupan]

Hey guys, this is my first question posted, so hopefully it's in the right place!

I am really new to the real estate game, (mere months) and so far have only partnered with local investors who flip and hold SFR's... Despite only working the residential side of things so far, I have been trying to educate myself on all matters commercial as well, and at least be familiar with terminology and the differences etc...

So to my questions really, I recently met with a gentleman who I talked with (a commercial builder and investor) who said he has designed and built several mini storage facilities (primarily outdoor space). We got started talking and he told me about a deal where from land acquisition to turnkey build costs the whole project would be wrapped up in 3.5 million. Now, from what I've learned leveraging single family property acquisition with a 15 year note, or even a 10 year note is like...really amazing. The cashflow as he illustrated for this type of investment for the specific factors on this facility would proceed to net 90k/mo. Now from all i've learned...Those numbers are...insane. Like, too good to be true insane.

Does anyone have experience with the mini storage market who can give some incite? I really don't know much about it at all except when people say "oh, its a cash cow" "oh, its recession-proof" etc... Are those kinds of returns even remotely feasible? Is there any credibility to these numbers? And also, any ideas on the best way to finance a deal like this. Would you have to go in with the lender as equity partners, or would someone be willing to simply gain 8-15% simple interest on their money...?

Thanks everyone,

Lukas

[Adam Robinson]

Some thoughts on Storage as we own some and are putting some ground up 3 and 4 story infill deals together currently:

• There is consolidation going on with larger groups strategically buying off some of the "mom n pops" with that, these large owners have VERY professional management.

• Storage has become an Internet search and SEO game more and more, and the big REITs have armies of analysts that spend all their time managing the search marketing efforts.

• If you are going to invest in a deal, I strongly recommend you get a larger management company, large regional firm at minimum to manage the property and internet marketing efforts.

• Locations is very important, you should be very convenient near other retail uses, BUT you do NOT have to be MAIN and MAIN due to most customers initially finding their facility through mobile and internet searches.

• There are plenty of areas overbuilt, but also plenty of under supplied areas, the critical analysis is within that 3 mile radius.

• @Terry Campbell and @David Thompson make great points and I would recommend investing a small amount as a passive investor in a syndication that has a good track record. the learning experience you will get is priceless, since storage is quite different from SFR flipping etc, I would make sure you are well educated and putting 50k into a syndicated deal will educate you faster than anything.

• Banks won't finance a deal without a 3rd party feasibility study, and they usually calculate the Sqft / person in the area, to make sure its at a certain level.

• its a great asset class to own, you just don't have the headaches of some other asset classes.