Self-Storage Opportunity - requesting guidance

[Alex Hymanson]

Hi! Evaluating a self-storage opportunity and would love folks' input on a few questions that I have, below. Really appreciate any insights that you can provide!

Questions:

- Commercial Loan - what are the best terms to target? The purchase price will likely be <$500K if that changes anything.

- Value add - How much does it cost to build additional storage units? These currently aren't fancy units.

- Value add - When building additional units, what steps should be taken to determine how many can be built? Is it based on town zoning? Surveys? Something else?

- Value add - How much does it cost to convert Non-climate controlled units to climate controlled units? Is there typically an ROI?

- Value add - What other types of value add is typical for self-storage?

[Bruce Lynn]

@Alex Hymanson  you should read the book...Storing Up Profits.  Might be for sale here on BP or for sure can probably find on Amazon/Ebay.

You should also connected with @Henry Clark and https://www.biggerpockets.com/users/paultmoore

It seems like you are focusing on one property.  I'd look at 100 similar properties if you can.  Plenty of opportunities.  Some people seem to get locked in to one place they find, or a place a friend or family member is selling without really evaluating the available market.

In a small town in East Texas I would think your biggest risk is a big player coming to town that can absolutely crush a smaller player.  Think if someone like Public Storage builds next door.  They perhaps can build cheaper than you can, finance cheaper, operate cheaper and to get it leased up, offer things like 1-2-3 months free rent.  What if they build just outside the city limits, so they are not paying city taxes?     

One thing also to consider is how far away it is for you.  Probably a 3 hour drive most days.  So when you need to go check on things, rent units, meet contractors, etc, you're jumping in the car for 6 hours, spending 1hr there, and I'm thinking after a full days's work.  You can do it, but it gets old after a while.  I've done this so many times it is crazy, so speak with experience.

Also in small towns trades can be tricky.  Sometimes only one person to help you and they're not quick, or not cheap, or you just don't like the way they work?  Add AC and you need a good HVAC tech...if they come from the next town, again their availability may be limited and they may charge trip charges.

Do you know this town well?  Do you know the city people for example at building/zoning department?  Is it growing or shrinking?  What are your demand drivers?  Some cities like Longview seem pretty strong, but other cities are dying.  Which one is this one?  What are your tenants like/mix?  Businesses?  Individuals?  What is occupancy and rate and how does that compare to your competition?  What are delinquencies like?   Do you understand the lien sale process?  Is there someone local who handles these sales?  How many units do they require to auction off contents?  If you need 10 minimum and have to hold those non-paying tenants until you get 10, what does that cost you in your financial model?

Probably plenty of opportunity in some small towns, but others can be a lot of work.

Good luck and best wishes.