All Forum Posts by: Kevin Bledsoe

@Fawzi Mudawwar

Fawzi, this is definitely a great concept as the industry becomes more automated and less reliant on Property Managers. I know that Noke and PTI have automated locking and unlocking systems. I believe that their systems are more expensive then $10 - $30 a latch but I haven’t priced it for awhile. You could offset the cost of the locking system if it meant that you could reduce onsite management expense and could charge a little more on a per rents basis.

It’s a great concept and as the cost continues to come down, I think that this technology will be added to existing and new facilities. It sounds like you might have a lower cost option?

@Adam Feick

Best of luck!

@Adam Feick

Adam, so it looks like the issue is that you have is that expenses , with $400 a month in Onsite Staffing, is going to be about $13,500 under your assumptions. The Net Effective Income is only $15,840, so your NOI is $2,340. The Gross Potential Income is $23,160 but that isn't what's actually being collected and that's your upside. So the issue, if I'm reading your numbers correctly, is that the property, at an 8% cap rate, is really worth $30,000. If they were collecting the Gross Potential Revenue then your NOI would be $9,660. At an 8% cap rate you would have a value of $121,009. Maybe you give them $10,000 in value for expansion room.

I’m not sure where this property is located but it sounds fairly tertiary. Cap rates in tertiary markets for a property of this size will be much closer to an 8% cap rate, even with low interest rates.

If all of my assumptions from you post are correct I don’t think that this would be a wise investment at that price. What I usually find is that there are so many buyers making blind calls to to self storage owner’s, telling them unrealistic property values, and they have pie in the sky numbers in their head. It sounds like they probably need a knowledgeable broker in this space to give them the real number or maybe this is what they have into developing the property.

You can add revenue management, tenant insurance, collect more late & admin fees but those things won’t fill the revenue void.

If I misread your assumptions on revenue and expenses feel free to correct my numbers and redo the math problem.

Hopefully this all makes sense and best of luck!

@Adam Feick

Adam, are you going to self manage the property or will you need to have pay a local person sweep units, check locks, collect any in person payments and be on call for renters who aren’t capable of completing an automated rental process through your website?

Patrick, I've personally brokered more than 100 self storage properties and managed more then 100 self storage properties in my portfolios in the Northeast, Mid Atlantic and Midwest. Yes, the industry is still dominated by private owners but that percentage is changing as private equity groups and REIT's move into secondary markets. REIT's like National Storage Affiliates are buying in secondary and tertiary markets to take advantage of more favorable cap rates and stronger returns.

The best advice that I can give any buyer who's interested in entering the self storage market is to have your team ready. Have your lawyer, environmental company, lender, site inspection company, consultants, title company and management company ready to go prior to making an offer. I would spend the time and money to attend shows like Inside Self Storage or the Self Storage Association trade shows. It may be in your best interest to attend a state self storage show and reach out to professionals in the industry who can offer advice.

Most of the nightmares for inexperienced buyers comes from the fact that they're not ready to enter this business model and haven't taken time to learn all the rules and regulations. Self Storage is a wonderful business and it's not that difficult to create substantial profits from many acquisition opportunities as long as you've educated yourself first.