investing in self storage facilities

[Dan Goeckel]

Are there experienced owners of store and lock facilities on BiggerPockets that could help my wife and I understand what is a good deal? I understand price point and if there is "meat left on the bone" in the area but we would like to understand how it would relate to the price you would pay to make it "worth it". IE: If a facility is for sale and say a 10'x20' unit leases for $85 and a similar facility down the road leases for $110, that's good and so is if it is under leased, but what else should we look for? Should we be on site, hire, cap rates, CoC....

Thank you in advance for your input and advice!

Dan

[Henry Clark]

@Dan Goeckel

1.  Our deal metrics for our storage from a financial perspective:

a.  Payback in 8 to 12 years.

b.  Finance 20 to 25 year terms.

2.  Stupid money test:  How hard is it for someone else due to zoning and land/price point availability to build next to you?  Given the exact same two properties, the one where no one can build next to me, is more valuable.

3.  Your location: 

a.  Does it have any extra land to expand on? 

b.  Does it have rental parking spots that can be converted to storage?

4.  Lets do the location you mentioned, just from a financial standpoint.  Change data with your Boots on the ground knowledge.

a.  Cost method, 

     Buildings-  22  10 x 30 units.  if these are typical roll up doors,  roughly $141,000 assembled on site.

     Land- making this up, you change.  1 acre, $50,000

     Security-  $7,000; take out if non existent, add in if you will put in.

     Electric-  $7,000

      Fence and gate- $25,000

      Road- $50,000 if concrete; $10,000 if rock.

     Lets say total of $280,000;  again take out and change based on your knowledge.

b.  Revenue method

     22 units at $140, 12 months at 90% occupancy.  $33,000 revenue.

     Interest- ??? or your cash in.  Small either way.

     Property tax- $3,000; change as needed.

     Insurance- $2,000

     Electric- $1,500

     Depreciation- not the land.  Say $6,000 per year, for 30 years.

Income= $20,000 x .3= $6,000 tax; $14,000

Cash flow, with depreciation added back= $20,000

c.  Payback= $260,000 your number / $20,000 = 13 years.  

Summary:  If you wanted to just get into Storage, this would be okay.  I would recommend a closer location like in Muskegon, SpringLake, Grand Haven (just for fun, because I worked and lived there for a while); or closer to you.  Oh, I forgot snow removal and lawn, plus management.  Your 13 years becomes more like 15.

Especially ok if it has extra ground to build on.

5.  Competition:  Two methods to look at.  

a.  Pull up sparefoot and put the town in.  Then click on the 10 x 30 on the side.  No one in Tipp City, rest about 6 to 20 miles away.

b.  Pull up Google Tipp city Self Storage.  Click on the map and move to Earth view.  Look at your location and see how easy access it is, how much closer or farther to the customers, versus the other competition in town.  What is its strengths.

Summary: 

Unless your about to do the deep dive into Self Storage, I would take a pass on this.  Even if the numbers are good.  This is a preference for me, because I like to focus on one type of investment versus several.  Helps me get my failures out of the way faster, versus learning new issues in different investment types. 

If you are about to jump into Self Storage, I would do my first one closer to home.  Walk over and talk to Shurway.  Looks like they were established in 1988.  If the kids didn't stay, they are probably ready for retirement.  Even if you don't buy this one, I would use it as a test to come up with how you would price a unit to either build or make an offer.  Portland has a market for about 250 units.  See how many they have and if there is any other competition.  I like this because the town is to small for the big boys to come to, thus it is a safer investment.  Also if it is the one and only, it dominates the market.  Plus they have extra ground to build on.