All Forum Posts by: Christopher Brown

Extra Space.  They've done a great job: their projections from two years ago have been spot on; they pushed occupancy til we were stabilized and then pushed rates, and their pricing algorithm seems really effective; their communication has been really good both from national office and from my district manager; and they've managed personnel at the site well.  

They are expensive (esp. their payroll and marketing), and they required I put in a big chunk of cash to get the site up to their specs (signage, office space, lighting, fire extinguishers, etc.).  But it's paid off and the results have been outstanding.

Ha - yea, I guess that's not a totally unfair summary!  Absolutely send me a DM - happy to share my experience...

I'm a first time self-storage owner; I bought an underperforming site 2 years ago, brought on 3d party management who doubled NOI, and now I've got 3x as much equity in the property as I put into it ($650k cash into a $2m purchase, which is now probably worth ~$3.5m). I have the opportunity to sell now at a big profit or to maybe pull cash out with a refi, and I have been doing some hard thinking about what to do with the proceeds (factors are the usual: self-storage market cycle, cash flows, cheap credit, other asset classes, etc.) or whether to just ride my current cash flow for a bit longer. But that is a question for another thread...

What I'm wondering in this thread is how to choose a storage broker if I decide to sell and trade up to a new deal. The broker I used to acquire my current site was terrific. I found him by accident; I was new to storage and just cold calling people about listings, I called his partner about a listing and left a message, this guy called me back and said "that deal's gone, what are you looking for," and off we went. He was young but relatively experienced, had a very conservative valuation approach and talked me through the ins-and-outs of storage as an asset class (I've been in SFR for 20 yrs but this was my first CRE buy), and to his credit just kept telling me "that deal's too expensive, it's not right for you." I am an immediate fan of any salesman who tells me not to buy something. He wasn't just looking to close a deal but genuinely finding one that made sense for me and my goals.

The complication is he's at a small regional firm.  My intuition is that means his reach on the buy and sell sides is more narrow than that of some of the larger storage brokerage groups (Marcus & Millichap, Mele, etc.).  I've received cold calls from a couple of those larger places looking to represent me in selling my place and finding me a new, bigger one, and again, my intuition is that they'd have access to a wider network with more buyers to maximize value on my sale, and more sellers to get me into a deal on the back end.

I had a meeting with my original broker and his partner this week to talk all this through and they responded to my concerns.  Their pitch was that all the brokers basically have the same databases of players in the field, the buyers will find the deals, and they'll get the same value for my place as any big shop.  On the buy side, their niche is regional, so they'd have access to plenty of sellers in their part of the country, and have done some deals outside their region.  (I'd be interested in a national search, and my current property is not located in their region.)

If I decide to pull the trigger and sell my storage site, I need to decide how to proceed with representation.  I'm still a relative novice in storage, though I've got my feet under me pretty well, but I know I would still really value the "hand-holding" and genuine attention to what's in my best interests that I'd get from my first broker.  I have the impression, from my couple of calls with the larger brokerages, that they wouldn't be quite as discriminating in valuing new deals on the buy side, but that they have buyers lined up to buy my place and could get great value for it.  I also have the impression, talking to both the big brokers and my last guy, that everybody's first move is to bring new deals coming on the market to their own repeat buyers, and to bring me the properties they represent with their sellers.  The network sizes, in other words, seem to have real meaning in terms of how many people see my deal and how many deals I will get to see.  But in the internet age, maybe everybody sees everything?

TL/DR:  Anybody have any perspective on the relative merits of national v. regional self-storage brokers they can offer me?  I want to continue to work with my guy but worried about leaving $ on the table and not having access to the same quality deals on the back end...

I use Tom Kangur of Kangur & Porter for real estate legal stuff here in Winston.  He's done four closings for me and always been on top of everything.

I bought a self storage facility in 2017 as the second leg of a 1031 exchange.  It won't have positive rental income for tax purposes for a couple of years (expenses will eat up most of it while we get the occupancy and rates up).  As I understand it, there's no immediate tax benefit for me in the short term of paying for a cost segregation study as there is no positive net rental income against which it can be deducted (and I'm over the AGI cap for deducting against ordinary income).  And I'd like not to pay the cost to do it until such time as I've got positive income on the property.  

But in the meantime, how do I (really my cpa) do the cost segregating for this year's tax depreciation schedule?  Is it literally just guesstimating how much each depreciation category of the facility is worth (by replacement cost or market value)?  Or should I just start with the straight 39 year schedule for everything (since it won't matter for this year) and then amend when I finally do the study?

Facility was built in 2004; I paid $1.95m for it. Taking into account my exchanged property, my basis in the new property is about $1.1m (which I gather has to be the basis for any new depreciation schedules).  I intend to hold it long term.  The study will pay for itself eventually, best I can tell.

I'm in the process of buying a 10 acre parcel in Lewisville, NC (the west edge of Winston Salem) that was farmland and on which I will build my personal residence. The seller has offered to finance the deal. We haven't gotten to terms yet. Anybody familiar with market terms for seller financing in this area (or generally)? I know we can agree on whatever we choose, but wondering if there is a common structure to seller financing? I see reading around that generally short terms with a balloon payment at 5 or so years are common. Are they generally amortized on a long schedule? How much over a bank rate might I expect to pay? I can do a HELOC for 4.25% and interest only payments through my local credit union (though I won't qualify for the full purchase price there)...

Thanks for any help.

I'm in the process of buying a 10 acre parcel in Lewisville, NC (the west edge of Winston Salem) that was farmland and on which I will build my personal residence. The seller has offered to finance the deal. We haven't gotten to terms yet. Anybody familiar with market terms for seller financing in this area (or generally)? I know we can agree on whatever we choose, but wondering if there is a common structure to seller financing? I see reading around that generally short terms with a balloon payment at 5 or so years are common. Are they generally amortized on a long schedule? How much over a bank rate might I expect to pay? I can do a HELOC for 4.25% and interest only payments through my local credit union (though I won't qualify for the full purchase price there)...

Thanks for any help.

I'm working toward closing the downstream leg of a 1031 exchange. My wife and I owned the exchanged property in our own names as joint tenants. For mortgage swap eligibility-related reasons (we don't have the net worth to qualify for the swap as individuals, but do have enough to qualify as guarantors for an LLC as the borrower; the swap is about 40bp better than what the bank can offer us directly), I'm exploring taking title to the new property as an LLC. My QI, @DaveFoster, has walked me through the ins and outs of the disregarded entity rule for 1031s, and I'm looking to see if anyone has had any experience doing this and anything you'd recommend I pay attention to from the legal and/or tax side of things.

Some questions:

• Mississippi, where I'm buying the new property, is not a community property state. From what I've read it looks like that means I can't have a single-member LLC with both my wife and I as members. Do I have to create two single member LLCs, one for each of us, and then have both LLCs take title to the new property as joint tenants?
• When I have my atty incorporate the LLCs, he simply designates them at the time of filing as disregarded entities for filing purposes, and then the EINs will just be our SSNs?
• My QI has suggested that the non-conformity between the old and new titles will (not surprisingly) raise flags for field agents.  Anybody gone through the process of defending a 1031 under these circumstances?
• What else do I need to know/pay attention to?

I'm vetting third party management companies for my self-storage acquisition.  The property has been doing business as a mom & pop independent for the last ten years.  I will be an absentee owner.  I've talked with the three big national 3d party managers (Extra Space, CubeSmart, LifeStorage) and the two big southeast regional players (Universal and Absolute).  Anyone have any experience with any of these guys?  Any views on national v. regional managers?  Ballpark expense projections are pretty much a wash for all five - pretty consistent across the board.  The national companies have upfront costs associated with rebranding the signage and office; some of them pick up some of those costs, and I think I can probably negotiate with the ones who haven't offered yet.  Everything I've read suggests that the technology infrastructure associated with the big guys is the best way to maximize pushing rents and occupancy: dynamic pricing, web penetration, etc.  I hope to hold this property and cash flow, but I'm also wondering about exit strategy as an independent v. national brand...

Thanks Mike and Joel.  

I've been talking both with some brokers and local lenders about the kinds of financing that are available to buyers in my position: lots of cash that I have to get in to the deal (for 1031 purposes) but relatively small deal size and modest net worth. The feedback I've gotten is that a $1.2m or so loan is not that attractive to a lot of the CMBS guys, from whom I could get the longer fixed terms (10/30) at a slightly higher rate (pushing 6% right now). Nor have the brokers gotten a lot of interest from life insurance groups. So conventional - which has modestly more attractive rates but generally shorter terms - seems the most likely place where I'll end up. And I'll just push harder to get the longest fixed term I can get...