All Forum Posts by: Craig Garrow

Hey everyone! I’ve been talking to a good client of mine, and we are thinking of forming a partnership to acquire a couple of small local self storage facilities. We’re hashing out some details, and this is sort of what we’re coming up with: He will pay cash for the properties, and in exchange for my management of the deals, and a very small fee (about 5% of the purchase prices) I’ll get an option to purchase the properties in 5 years for today’s price. We have determined what he wants for a return annually, and we’re going to split everything above that 50/50. He’s 65, and I’m 32, so he’s looking to just get some stable cash flow for a few years, while my payoff would be mainly in the form of sweat equity, with some small cash dividends every month. Just looking to see if anyone has done a deal similar to this, or if anyone has any suggestions or feedback. Could be a home run for me, especially if we’re able to get the NOI up on these!

Following this. This is something I’ve been thinking of doing as well. Also would be interested to see if/how it would affect your property tax since they’re just sitting on your lot, as opposed to being fixed there.

Thanks for the reply, Michael Wagner ! The facility in question is pretty small - brings in roughly $14k per year. I agree though that I’d be doing the same amount of work either way. My thinking would be that I wouldn’t have to deal with the bank now, and we could buy a couple of small deals together, and at which point he’s ready to cash out (He’s about 65 - so I figure 5 years) then I could go to the bank, package up whatever assets we had, and get a mortgage to buy him out. I know you said the terms should always be deal specific, but with him having so much more cash to put in than me, I don’t think 50/50 would be all that attractive for him, so maybe I’d try to get him to go 60/40. Just doing some quick and dirty math, that would give me about 30% on my cash invested.

I have a good client of mine who shares a common interest in self storage facilities and is fairly flush with cash. I currently manage four rental properties for him, and I know he’s a fairly hands off investor, often going on crazy hiking or kayaking trips from weeks to a month or more on end. I’ve been thinking of approaching him with an idea for a partnership and starting to go after some of the Mom and Pop self storage businesses with him. My thought initially would be to put in about 15-20% of the cash to purchase, plus do all of the Management and “boots on the ground” stuff and get a 25% stake in the business. Does that seem out of line? I know taking 100% of the “headaches” off his plate is certainly worth something to him. Any tips or suggestions?

I actually just joined NARPM. Excited about learning from those doing it at a much higher level than me, and networking and educational opportunities seem excellent as well!

Jeff Kehl I thought of that as well. There are certainly some inexpensive parcels around here, but nothing with decent access visibility for a SS business. My thought with this property is if I can expand it without too much expense, although the income is low on the units currently there, it should be enough to carry the property until I can build it out to where I’d like it. Ideally would be doubling the amount of units and adding some boat/camper storage.

Michael Wagner Thank you for the reply! I completely agree. My thought was to add a 25’x120’ building to add 12 10x25 units, and I think it would roughly double the income of the facility. As long as it can be done somewhat cost effectively. The lot is pretty level, so I think it would take minimal site prep. Who would you recommend contacting for the prefab kits? I have e-mailed Varco-Pruden, and Trachte but not gotten anything back as far as a quote.

I called every storage place around town, and that’s in line with what they’re charging (after a rent increase.) Most places didn’t have much for vacancy. This site happens to be on the opposite end of the town as the competitors, which might work out to be an advantage.

Looking at a small 24 unit self storage business on 2.5 acres in our local industrial park. It’s 16 10x10 units and 8 5x10 units. They’re below market on their rents ($32.50 for a 5x10 - should be between $35 and $40) and $45 for a 10x10 which should be between $50 and $55. 22 of 24 units are full, so I doubt anyone would move even with a $10/month increase. Owner and I negotiated two years ago and was left off at a $55,000 purchase price, $15,000 down, 6.5% interest, and a balloon payment in 8 years. Just for kicks, assuming the facility was full with no vacancy, after the rent increase, you’re looking at $1,080 per month, which after mortgage, taxes, and insurance leaves about $480 per month, before any maintenance, lawn care, snow removal, and vacancy. I think there is upside here if I can add more units. The plan would be to build 12 10x20 units that I could rent for about $90 per month and double the total income of the facility, but that will obviously come at an expense. So, my question is, how do I sell the owner on either dropping the price, or try to do a no (or very low) money down deal? The owners are an older couple who aren’t necessarily real estate investors, I think they just owned this for a tax write off. Any help is greatly appreciated!

I shoot for $200.00 per month per door after all expenses!