Offering on a small Self Storage Facility

[Alan Daniels]

Happy 2020 to all!

I've run into a mom & pop storage facility and they are retired in upper 70's (age) and willing to sell, realizing they won't be around forever.  Owner is getting older.  He currently spends about 20 min/week just stopping by to check on things.  I'm struggling putting a # together to offer - ideally 2-3 offers.  One cash offer, one owner finance, and one traditional financing.  Owner is open to owner finance if the down payment is substantial enough; again, older and want the money sooner rather than later.

-The property is on one of the top 5 busiest & well-known roads in the city, along with 8 other storage facilities (all bigger and more up to date) within 2 miles.  6 within 1 mile.  It is 3 miles from my home.

-It is less than 1 acre with no room for expansion at all, unless you go vertical.

-Owner states he brings in b/w $36k-$40k per year or $3000-$3400/month.

-Some room to increase rents, but not much at all.  Stated 75% of customers have been with him for 10+ years.

-Owner owes nothing on the property.  Has had it for over 50 years.

-No website; no books; rent roll is a notepad; no signs; no advertising; can barely see it from the road, and still at 90% occupancy.

-43 Units and 9,165 sf

-Less than 1 Acre

-I know that this will not profit very much relative to other storage facilities, but $1000+ in cash flow/month sounds very appealing from that perspective.

-This would be my first storage facility offer.

-If I don't buy it, nothing will happen with this site per owner.  Owner is not putting this "on the market".  I saw him on a ladder and just pulled in and talked to him.  As I was walking up before anything was said, he said "what, you want to buy the place?".  He said he has no other discussions going about selling with  anyone else.

Hurdles:

The trouble I'm having is valuing the future & potential of this property in order to come to an offer I can work with.  I can't find any relevant trades within 30 miles in determining a fairly accurate cap rate to work with.  This is about 30-45 minutes south of Atlanta.

Please pick this apart and share any/all thoughts. It is greatly appreciated!

Cheers!

Alan

[Michael Wagner]

Storage Values are based on income. A small property like this would likely trade at a 10 CAP...meaning you take the NOI and multiply by ten to get a rough value. If its bringing in $3K per month, that will yield $36K per year...The industry rule of thumb for expenses is 33% but that might be low given that the property is so small. Assuming you can do it for that though, the NOI would be $24K and the resultant value would be $240K. I'm not saying that's what you should pay but it will give you a place to start.

One thing to look it as why you don't think you can raise rents.  He's only bringing in $3.60 per year per square foot in rent which is WAY low for most every market I have ever looked at.  Even in very rural markets, we can usually get $6 per square foot per year. Of course the very robust competition you mention might mean the market is over-saturated and thats why rents are so low? Just something to look into.

I know of another property for sale in your neck of the woods if you want to reach out privately.