How to Quickly Calculate Cashflow

When you are standing in front of a self-storage property, you often need to decide rather quickly whether or not you are going to make an offer. Whenever you make an offer, you make it contingent on inspections, due diligence, financing, city approvals as needed and a feasibility study at the very minimum. However, in order to decide on whether or not you should put in an offer in the first place or how much you should offer, you need to know how much the property cashflows and if it has a return on investment that works for you. So how can you quickly do that?

There are several ways that you can quickly determine how much a property has the potential to bring in. In order to know the answers, you need to have researched the area before you look at the property. Most self-storage facilities within a 3-5 mile radius rent their units for a similar amount. There is some variation, but you can get a pretty good average for what a 5x5 or a 10x10 or a 10x20 etc. will rent for. Once you know those numbers, then you can apply them to the property you are looking at.

Now that you know the average rents within the area, you can look at how many units your facility has and apply them to your property. If the average 5x5 unit rents for $60 and a 10x10 rents for $88 and a 10x20 rents for $225 and you have 20, 50, and 30 respectively, then your cashflow for the property would be about $12,350 a month or $148,200 a year. If you assume that you will only have an 80% occupancy rate and that the average expenses for your property are going to be between 30% and 40% then you would be able to count $71,136 as your net operating income.

Now you can deduct your mortgage payment and investor payments to see if there is any cashflow left. If the property still looks interesting, then you can move forward with an offer. If there is no way to make the property cash flow, then it is time to move on or put in an offer amount where you can cashflow. Don’t be afraid to walk away from a property or put in an offer that works for you. The worst thing you can do is pay too much for a property. Come up with your investment strategy and then stick to it. Don’t worry if a seller tells you know, it is better than not asking. If you don’t ask, you will never know if they might have said yes. As always, happy investing.