Are you investing in self storage?

[Nathan Gesner]

I'm surprised there's not a category for self storage. In my opinion, it's as lucrative as mobile home parks and easier to come by.

I would love to connect with others that are investing in self storage facilities.

[Gerald Pitts]

Love this. I commend you for pulling the trigger based on having just enough experience, and not over analyzing.  Now you can educate more / optimize. 

[Yaro L.]

@Nathan Gesner Appreciate your input, I've looked and analyzed a deal recently for a very small facility (70 units) about 9k sq ft of space in New Jersey with cap of 10% (but thats before the tax reset and needed capex). Space is currently "97 % occupied" but I am skeptical of the numbers and also there are two bigger storage players in the area which I am concerned about. Given the unfavorable analysis of population within 3 / 5mile radius, the numbers were too appealing.

Lastly, the current owner is valuating the asset on pro-forma basis and I know for a fact with needed capex and upgrades, I will be overpaying.  

This would be my first storage facility, currently own several SFHs and Commercial office spaces. 

[Zach Quick]

@James Edward add some color, because that certainly hasn’t been the case for most.

[Paul Moore]

@Nathan Gesner thanks for the feedback and congratulations!  I'm really happy for you.  You are doing this the right way.  I'm jealous that I never managed a SS property - that certainly gave you a great start.  Great job finding that deal!  If you can replicate that process you'll be doing very well.  

I'm trying not to self-promote but rather be helpful here... if you (or anyone) wants a free eBook on investing in self-storage, that includes quite a few value-add ideas, just reach out to me directly.  

[Paul Moore]

@Account Closed.  I truly understand your concern, and SS could get overheated.  But when it does, for Self-Storage, it will happen on a hyper-local basis.  So I can show you, for example, why Nashville is badly overbuilt. But I can take you to a section of town in South Nashville that is desperate for new storage space. It's the same in other cities as well. 

We co-invested in a large SS facility in a tiny town in Texas (ever heard of Beeville) from a mom-and-pop seller that turned into a home run for our investors.  Almost doubled the value in 19 months and the multiple on invested capital is about 4x. Even if Dallas or Houston were overbuilt, it has no effect on Beeville since renters and supply are very local.  

[Scott Krone]

@Nathan Gesner @Griffin Schermer @Austin Hurwitz @Zach Quick @Tracy Selfridge @CJ M. @Steve Cheslock @Ola Dantis.  We have been active in the self storage market since 2013.  It was at that time, we began our migration out of MF to self storage.  We develop and convert underperforming assets into self storage, as well as acquire existing B and C class facilities.  I have sent a connect request.  Enjoy connecting with fellow self storage advocates and operators.

[Jamie Brayton]

@Nathan G.

We opened a large self storage facility in 2020 in the Albany, NY area (Rensselaer, NY). It was a conversion project.

I would also love to connect with self storage investors. It feels like very unique asset class and I think we still have a lot to learn about the operations side.

[Henry Clark]

@Account Closed

Look back over my posts.  You responded to one of them with the same concern.  I noted three locations within 30 miles of you that I would happily build self storage that are for sale on Loopnet.  Also one of the locations was already cash flowing for the asking price, with the existing buildings even before you built storage.  All of the above people would jump at a chance to have "free" land as a starting point on a Self Storage investment.

As mentioned above, Self Storage is a localized business. Your lucky, your in an area where there is more demand to build Self Storage. If your interested read my post Checklist 101 on Self storage, then I will work you through the numbers and thought process. There are two different markets and products, Large REIT and mom/pop. If you can find 4 large REITS side by side with 70% occupancy after 5 years; I would love to build between them all and would expect to have 90% occupancy. You have to understand the two different product offerings and business models.

With your background as a contractor, I would also do Contractor bays.

If your just yanking our chains, then you got me.

[Don Spafford]

I'm curious to know what is the cost to build one? There are several new ones being built in my area. I have been looking to get into this space for some time as well. But wondered if it may be easier to just build a new one rather then fix an old one. On that note, someone in my area recently purchased one with seller financing, interest only for the first 2 years I think, they are increasing the rents dramatically and will easily be able to refinance it, basically a BRRRR on a storage facility. I've looked at buying some long-distance but not knowing fully the operations on it, I would find it hard to trust to put someone else in charge of running it for me. I recently bought a book on the subject but have not had time to read it yet. I would definitely jump at the chance to partner on one. I've looked into @Paul Moore's syndications, but I am not eligible yet as a fully accredited investor and even with that I would prefer to be an owner in one, not just an investor.

[Stephen Stokes]

@Nathan G.

I am very interested in this topic and always happy to connect with other investors.

[Ross Bowman]

Originally posted by @Nathan Gesner:

I'm surprised there's not a category for self storage. In my opinion, it's as lucrative as mobile home parks and easier to come by.

I would love to connect with others that are investing in self storage facilities.

 Not yet but I'd love to. It's on my list, as it really fits my investor profile. 

I love real estate, but kinda hate houses.

[Nathan Gesner]

Originally posted by @Don Spafford:

I'm curious to know what is the cost to build one? There are several new ones being built in my area. I have been looking to get into this space for some time as well. But wondered if it may be easier to just build a new one rather then fix an old one. On that note, someone in my area recently purchased one with seller financing, interest only for the first 2 years I think, they are increasing the rents dramatically and will easily be able to refinance it, basically a BRRRR on a storage facility. I've looked at buying some long-distance but not knowing fully the operations on it, I would find it hard to trust to put someone else in charge of running it for me. I recently bought a book on the subject but have not had time to read it yet. I would definitely jump at the chance to partner on one. I've looked into @Paul Moore's syndications, but I am not eligible yet as a fully accredited investor and even with that I would prefer to be an owner in one, not just an investor.

I'm not an expert but I suspect it's probably the same as most investments: cheaper to BRRRR than to build new. The property I'm buying has been poorly managed for years. There are 157 units total. 30 units are occupied by the current owner, another 40 are sitting vacant, and I counted at least 20 that are delinquent. It also has two houses and an apartment which rent for more than 20 storage units.

My offer was based on 2020 net income with 70 units unrented and a lot of major delinquents (three months or more). I should be able to double the net income within 12 months. I'm optimistic that I can nearly triple the net income within 18 months.

Maybe someone with more knowledge can answer what it costs to build new. A quick Google search shows a price of $30 - $50 per sq.ft. but I don't know if that includes the land, permits, utilities, and other incidentals. My facility is 17,000 sq.ft. so it would cost $510,000 - $850,000 to build a new facility (I would expect the higher end for my market).

[Jason Merchey]

Yes I do. CubeSmart, Public Storage, and other REITs - the easiest way to do so.

[Eric Michiels]

Great thread. Enjoy learning about self-storage. I was actually reading on finding Self Storage owner who might be interested in selling. Thanks for sharing @Nathan Gesner and starting this post. 

[Henry Clark]

Below is a cost template you can use.  Change to fit your scenario.  Can't attach excel files on BiggerPockets. 

An erected unit usually runs around $3,200 per 10x15 10x20;  Steel is going up.  Add you per acre cost.  Using a 2 acre site, Fence- $20,000, Auto gate $20,000, Road???- rock, concrete, asphalt, Security $10,000, Electric/lighting $8,000; Other $10,000;  This is in the countryside so no engineering cost.

Below is a layout. Adjust to the shape and size of your property.  This will help you determine the number of units.  Get on sparefoot and look up your "drive up" prices.  Not climate controlled.

This is an example, for discussion only.
	Layout Phase 1, 2 acres
	Assume the 4 acres is square.										Setbacks- front/side/rear													Assume roads are not allowed on this.
											Driveways- 25 foot
	295										Buildings-15/ 30/40 foot
590											Turnarounds- 50 foot
	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5	5
10
10						Entrance
10
10
10						Gate
10
10
10
10
10						Units							Splits											Splits												Splits											Splits
10				15		1					15					15						20						20							15					15						20						20
10						2
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10
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10
10

This is an example, for discussion only.
A. Project Cost estimate from ground up.
B. P/L revenue stream
C. Valuation Buy/Sell
Adjust all of the above to your local market and situation.
	A. Self Storage Project Worksheet
	Drive up Storage
			Notes:
Land	$200,000		4 acres at $50,000/acre
Survey	$7,000		Site, elevation and building layout
Fence	$30,000		Black chainlink
Gate system	$25,000		Automated rolling 20ft
Engineer			if needed; $30,000 to $60,000
Dirt work	$15,000		Slight roll, no dirt brought on site
Building demo			if needed, $15,000 to $60,000
Electrical- site	$7,000		building lighting and office if needed, LED.
Electric poles			if needed; $2,000 per pole. First is free if nearby.
Security	$10,000
Storm drains			if needed; $50,000 to $150,000
Water			if needed; $5,000 just plumbing
Water line			?? if an extension could be $10,000 up to $150,000
Fire Hydrant			if needed, $3,000
Sewer			if needed: $5,000 plumbing
Sewer Line			if needed; $10,000 up to ????
Buildings	$1,180,800		Phase 1 2 acres
Office			if needed, plain storage unit 20x30; $25,000 insulated.
Office setup			if needed, $5,000- computers, printers, HVAC, frig, cabinets, etc
Footings			if needed. ??????
Roads
Gravel			if needed, ?????
Asphalt			if needed, ?????
Concrete	$676,133		6 inch Cubic yards, framed, poured, sawn,
Retention Pond			if needed, part of dirt work cost, less land for buildings
Landscaping	$5,000		I like trees and bushes. Less sterile
Road Sign	$15,000		For highway 55mph billboard sign
Total	$2,170,933

[Aamir Shamsi]

Hi @Nathan G. ! How many cold calls did it take to find that deal? Great to hear... I'm currently making my start in wholesaling and I triple dial 1000 calls a day on FSBO, Probates and expireds. Thanks!

[Nathan Gesner]

Originally posted by @Aamir Shamsi:

Hi @Nathan G. ! How many cold calls did it take to find that deal? Great to hear... I'm currently making my start in wholesaling and I triple dial 1000 calls a day on FSBO, Probates and expireds. Thanks!

I called about 15 storage facilities. The one I'm buying started with me showing up for an auction. I introduced myself to the guy cutting the locks and asked if they were considering selling in the near future. He said about six months and they would be ready. I waited four months and then called and emailed them. No response. Then I called them again a month later. They responded a few days later and said they were ready to negotiate. It was that easy!

I also called another facility and the guy answered on the first ring. I introduced myself, told him I was looking for people interested in selling storage facilities. He said he hadn't given it much thought but would be willing to entertain a discussion. After a couple weeks of talks, I made an offer. He thought it was better than he was hoping for and just wanted to run it by his CPA. Then he ghosted on me. I suspect his CPA explained the tax implications and he opted to keep the steady income instead.

I was surprised to get two responses out of so few calls. I certainly wouldn't expect that to be a normal level of response.

[Jerry Camon Jr]

Currently im not but I love to start

[Jim Kittridge]

Glad to see a discussion on storage. We're building a 50,000 sqft facility with room to add another 20-40k of CC. It's a fun space to be in.

[Nicolai Grebencio]

I'm new to real estate but I've been thinking of investing in self storage. I'm starting to have second thoughts after talking to a realtor. He's saying that it will be really tricky to convince banks to finance something like that for someone who doesn't have experience in managing commercial properties. Do you think he has a valid point and I should look into maybe SFHs/multifamilies first? 

[Mike Meisner]

I'm interested in hearing more about the problem of financing for new commercial real estate investors. Is that a widespread thing, and if so what sort of terms can we get? Does it depend on the value of the loan, like a $500k deal vs a $1.5m?

[Scott Meyers]

Hey All!

Yes, I'm investing in Self Storage and have been for 15+ years. Also, been helping folks learn the business for the past 12.

Self Storage has been very good to me and my family and I highly recommend it.

Yes, it is a simples business model with basically No Toilets, No Tenants, and No Trash.  However, it can be at times a bit hard as the low-hanging fruit is gone and there's a lot of eyes (including institutional money) on the sector.  But if you're willing to get off the beaten path and turn over a lot of rocks, you will be successful.

If I can be of any help, please reach out.

Scott 

[Drew Petro]

We would love to connect with other investor / operators in self storage. We currently own 2 small facilities (9,000 sq ft and 15,000 sq ft) and love the asset class. Simple to self-manage,  automate 75% of the operations process, and less headaches. Also, much easier ways to "force appreciation" and valuation through rent raises and fees. 

Feel free to connect with us if you are an investory in the self storage industry!

[Aly W.]

Originally posted by @Paul Moore:

@Nathan Gesner thanks for the feedback and congratulations!  I'm really happy for you.  You are doing this the right way.  I'm jealous that I never managed a SS property - that certainly gave you a great start.  Great job finding that deal!  If you can replicate that process you'll be doing very well.  

I'm trying not to self-promote but rather be helpful here... if you (or anyone) wants a free eBook on investing in self-storage, that includes quite a few value-add ideas, just reach out to me directly.  

Hi Paul, I just reached out with a message about your eBook, thanks in advance!

[Paul Moore]

Hi @Aly W.. Thanks for reaching out!  My new book is out and available at www.Biggerpockets.com/storage. I’m excited to connect with everyone who wants to discuss this topic and I will be doing a free call most Wednesdays at noon to discuss self storage and other commercial real estate investing topics. You can PM me to get the free conference line number