31 Unit Self-Storage Purchase Deal

[Tom Kaz]

Evening BP,

I've recently been learning/researching about self-storage and came across a 31-unit storage facility in a suburb of my hometown that I can secure for 215kish (pending contingencies/financials of course). The location is located in a more rural area but smack dab in the middle of town and there are numerous new subdivisions around being developed. The story behind the sale of the facility is personal (passing of a spouse, shes selling assets). It's fairly close to were i live and it seemed like a very nice (brick and steel units, with a paved top) site in a great location of town (traffic counts daily on two near by roads were 5k on the road its located and 10k on a cross road. 

I would use a SBA 5 loan to purchase with 20% down.

Currently the only advertising for the facility is a sign that hangs on the back of it, no internet or social media presence and it operates at 85-90% occupancy according to the seller with minimal advertising besides the hanging banner, and the numbers for rents seem pretty solid with room to increase and add some value. Here is a break out of the facility:

4 12x36 $170 monthly
2 12x40 $200 monthly
14 10x20 $115 monthly
11 6x10 $65 monthly

-only expenses are electric for one main LED spot light and taxes (10k but will fall to 6-7k after the sale according to the town assessor, then tax rates will follow a performance based evaluation) 

-also has some outdoor parking spaces for 1 SEMI/RV and a couple small double axle boats/trailers. I dont think there is much room to add more units which seems like the only downfall, but i figured starting small would be the ideal thing to do as i would be self-managing. The only competition seems a couple miles on the outskirt of town (with higher prices according to their website), but not right smack in the middle like this one. 

Based off the information provided, does this seem like a legit deal or am i over committing. Im up for the challenge and think i can get it at 100% no problem. 

[Charles Kao]

@Tom Kaz

I tried a 504 loan and it took 8 months and then they still said no. I then took the appraisal, feasibility study and enviornmental to a bank with a conventional loan and they got it done in 23 days. 504 also has 2.5-3 points and higher prepayment penalties and higher third party fees so doing a conventional 20 percent down is barely more and way less of an inconvenience. The 504 rate is awesome

but the SBA is damn slow and if your lender has not done them and is not a preferred lender they could easily screwup the deal. Alot of lenders use a underwriter that is preferred but it adds an unnecessary middle man and any experienced lender will only do 7A because CDC does not have to underwrite and you can get the 10 percent down without prior experience in storage.