All Forum Posts by: Michael Wagner

Cap rates will Cary widely based on the market and asset quality. Generally speaking Class A properties in major metros will trade around a 6. We operate smaller class B/C properties in secondary and tertiary markets where they are trading at an 8 to 9 CAP. My goal is to buy at a 10 but, of course CAP rates go out the window when your talking about a low occupancy, value add play. In those cases, I try to buy at 50% of the projected stabilized value at a 9-10 CAP.

Financing, again will depend on the deal and your relationships with the folks with the money. Banks are admittedly skittish of low occupancy properties though they can be convinced. That gets easier once you have a track record of successful turn arounds! We often use private money for 12-36 months and then refi into more conventional loans.

Typical LTV is 75-80% for conventional loans. 80-90% for SBA loans. Rates are In the 4.5 to 6 range. DSCR is typically 1.3 or better but with experience some banks will look at stabilized DSCR rather than at purchase.

You might find some value in a little blog I host here in BP:

https://www.biggerpockets.com/...

I am admittedly biased but I would encourage you to take a hard look at Storage.  Its funny that what you presented as your investment objectives are almost exactly what I am projecting on my most recent storage conversion project.  My initial budget was $1 Million (ended up at $1.15MM because...well it involved construction :) and conservatively it should Generate around $200K annually in cash flow.  While I realize that looks like it falls a bit short of your admittedly aggressive targets, it doesn't factor in the fact that this project was completely un-leveraged.  And it also doesn't account for the projected $1.5 Million in equity that will be realized.  Of course, its making ZERO dollars today and will be 1-2 years before the cash flow materializes.  You'll want to decide if you want to buy turn key (which I think would be quite hard to get to your desired returns) or if you have the bandwidth to take on value add properties. To me, purchasing an existing under-performing storage asset and turning it around provides the perfect balance of risk mitigation, cash flow (eventually) and equity!  

You might find some value in this case study. Note however that it is quite dated.  I have since expanded and sold the property for $1.325 Million. Over 4 years the facility made a total of $1MM in profits...It never got to your $20k per month mark in cash flow alone but the cash flow plus equity got us there....and it didn't require a full $1MM investment.  

https://www.biggerpockets.com/member-blogs/3915/48076-self-storage-case-study-2---update-14-months-after-purchase

You might find some value in this little blog I host here on BP:

https://www.biggerpockets.com/...

Here's a little blog I host here on BP.  I recommend you start with the older articles first as they focus more exclusively on nuts and bolts storage stuff: 

https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage

You might find some value in this little blog that I host here on BP!  I'd recommend you start at the oldest posts and work forward as they will walk you through the nuts and bolts of storage investing!

https://www.biggerpockets.com/member-blogs/3915-all-things-self-storage

Hope that helps some!  Storage is a Great Industry.

 I like to use somewhat of a hybrid....I do mailers as the shotgun approach and then cold call/visit sites where my mailer is returned as undeliverable.  The idea being that these returned mailers indicate an owner that is "harder to find" and has been hit by less solicitations.  As such, spending the extra time for a cold call/visit feels more justified to me. 

Though wise to note the trends that you do, I think the risks are easily mitigated. For one, the consolidation you mention is far less an issue than the national articles would have you believe. Though it is happening, over 80% of storage facilities are still of the mom and pop variety. I focus primarily in tertiary rursl markets where the big guys don't play.

as for you example, I would caution against letting news of "national trends" and one example of a saturated market cause you to turn a blind eye to the thousands of underserved markets where consolidation has not, and likely never will emerge.

Here's a blog post hosted right here on BP that may serve as a good intro for you: 

https://www.biggerpockets.com/...

I've always done letters with a 3-4% response rate. Have had students use postcards and also did very well! I don't think there's a right or wrong...just testing...and hitting owners with one of each a couple months apart would likely be a good strategy.

You might find some value in this blog post I did here on BP:

https://www.biggerpockets.com/...