One Self Storage Facility - $1.5 Million in Profits

[Michael Wagner]

Investment Info:

Other commercial investment investment in Syracuse.

Purchase price: $330,000
Cash invested: $40,000
Sale price: $1,800,000

This was our very first storage facility that we purchased in 2011. It was originally called Autumn Acres but I wanted to name it something more geared to storage and we called it Store More Pay Less Storage. The property sat on 11.5 acres, 5-1/2 or so that were wetlands and completely unusable. There were 3 buildings totaling 10,000 square feet; 74 outdoor parking spots and then a lot of wasted space in general. The owner was an elderly woman up in age and the property was just neglected. Going in, we took the numbers with a total grain of salt. Although the property was capable of generating $131,280 in revenue, she was only collecting just under $51,000. And although the property was 50% full physically, financially it was less than 50%. Her expenses were 80% of what was actually being collected, leaving only $20,000 in profit. We projected to get rent up considerably in the first year and our first year was actually much better than anticipated. The first year our NOI came to $47,234 ($30,000 more than at purchase). The second year we did even better with $90,000 more than projected. We added 2 buildings and the projected income then jumped by $50,000. By years 2016 - 2018 the numbers just increased. The revenue was at $220,000 - $225,000 and after expenses our NOI was at approximately $160,000. We sold for $1.8 million, which is 11 times the NOI. This makes for a cap rate of about 9% which is great (though I suspect I could have sold at an 8-8.5 CAP had I held on longer. We owed about $800,000 on the property but selling for $1.8 million will put a million in our pockets before taxes. And I was able to move a vast majority of these sale proceeds into an Opportunity Zone Project that effectively deferred all of the capital gains taxes.

What made you interested in investing in this type of deal?

It gave me the opportunity to get out of landlording and into something that generated wealth more efficiently for me.

How did you find this deal and how did you negotiate it?

It was listed and I sought to buy it at or near replacement value. The owner's bank was pushing for a sale (short sale) to avoid taking it back and they were represented by a broker who knew the industry well. As such, I didn't steal the property but paid just about replacement cost ($30ish per square foot).

How did you finance this deal?

$40K of my own money (extraced from my multi-family portfolio)
$60K privately
$250K bank loan