All Forum Posts by: Michael Wagner

I might be biased but I'd suggest that generally speaking, storage is the winner.  Its got a far better income to expense ratio than Multi-family. And it also has advantages over warehousing (no bailment = lower liability and insurance costs)!

Investment Info:

Other commercial investment investment in Syracuse.

Purchase price: $330,000
Cash invested: $40,000
Sale price: $1,800,000

Purchased in 2011. The property sat on 11.5 acres, 5-1/2 or so that were wetlands and unusable. 3 buildings totaling 10,000 square feet; 74 outdoor parking spots. The owner was elderly and the property was neglected. Going in, we took the numbers with a grain of salt. Although the property was capable of generating $131,280 in revenue, she was only collecting $51,000. Expenses were 80% of what was actually being collected, leaving only $20,000 in profit (before any debt service).

What made you interested in investing in this type of deal?

It gave me the opportunity to get out of landlording and into something that generated wealth more efficiently for me.

How did you find this deal and how did you negotiate it?

It was listed and I sought to buy it at or near replacement value. The owner's bank was pushing for a sale (short sale) to avoid taking it back and they were represented by a broker who knew the industry well. As such, I didn't steal the property but paid just about replacement cost ($30ish per square foot).

How did you finance this deal?

$40K of my own money (extraced from my multi-family portfolio)
$60K privately
$250K bank loan

How did you add value to the deal?

Simply put, we answered the phone and serviced out customers the way we would want to be serviced. The first year our NOI came to $47,234 ($30,000 more than at purchase). The second year we did even better with $90,000 more than projected. We added 2 buildings and the projected income then jumped by $50,000. By years 2016 - 2018 the numbers just increased. The revenue was at $220,000 - $225,000 and after expenses our NOI was at approximately $160,000.

What was the outcome?

We sold for $1.8 million, which is 11 times the NOI. This makes for a cap rate of about 9% which is great (though I suspect I could have sold at an 8-8.5 CAP had I held on longer. We owed about $800,000 on the property but selling for $1.8 million will put a million in our pockets before taxes. And I was able to move a vast majority of these sale proceeds into an Opportunity Zone Project that effectively deferred all of the capital gains taxes.

Investment Info:

Other commercial investment investment in Syracuse.

Purchase price: $330,000
Cash invested: $40,000
Sale price: $1,800,000

This was our very first storage facility that we purchased in 2011. It was originally called Autumn Acres but I wanted to name it something more geared to storage and we called it Store More Pay Less Storage. The property sat on 11.5 acres, 5-1/2 or so that were wetlands and completely unusable. There were 3 buildings totaling 10,000 square feet; 74 outdoor parking spots and then a lot of wasted space in general. The owner was an elderly woman up in age and the property was just neglected. Going in, we took the numbers with a total grain of salt. Although the property was capable of generating $131,280 in revenue, she was only collecting just under $51,000. And although the property was 50% full physically, financially it was less than 50%. Her expenses were 80% of what was actually being collected, leaving only $20,000 in profit. We projected to get rent up considerably in the first year and our first year was actually much better than anticipated. The first year our NOI came to $47,234 ($30,000 more than at purchase). The second year we did even better with $90,000 more than projected. We added 2 buildings and the projected income then jumped by $50,000. By years 2016 - 2018 the numbers just increased. The revenue was at $220,000 - $225,000 and after expenses our NOI was at approximately $160,000. We sold for $1.8 million, which is 11 times the NOI. This makes for a cap rate of about 9% which is great (though I suspect I could have sold at an 8-8.5 CAP had I held on longer. We owed about $800,000 on the property but selling for $1.8 million will put a million in our pockets before taxes. And I was able to move a vast majority of these sale proceeds into an Opportunity Zone Project that effectively deferred all of the capital gains taxes.

What made you interested in investing in this type of deal?

It gave me the opportunity to get out of landlording and into something that generated wealth more efficiently for me.

How did you find this deal and how did you negotiate it?

It was listed and I sought to buy it at or near replacement value. The owner's bank was pushing for a sale (short sale) to avoid taking it back and they were represented by a broker who knew the industry well. As such, I didn't steal the property but paid just about replacement cost ($30ish per square foot).

How did you finance this deal?

$40K of my own money (extraced from my multi-family portfolio)
$60K privately
$250K bank loan

Your lease is what protects you from liability.  Your fears are understandable but not well founded here @Chip Stroz!  Proceed into this awesome industry without worry!

Storage valuation is based on income. To get a ballpark stabilized value, simply take income minus expenses (typically 33%) and then multiply. For traditional facilities of 15k square feet or more, we would multiply the NOI by 10-12.5 to get a value. The property you have is unique and may not fit that model exactly but this should give you a place to start from.

 It varies based on size of facility and i would bet the prices have creeped up a bit since I joined but the software ranges from $39 to $109 per month (based on number of units).  SEO is around $100 per month. Call center is $1.50-$2.60 per unit per month depending if you want full service or "roll-over" services.

Yes, I am a big fan of ESS (Easy Storage Solutions)!  Use them for management software, online rentals, call center and SEO

Hi Daniel,

Storage is definitely a great asset class.  And as per your request to be blunt;), I'd encourage you to spend some more time dialing in your plan.  Financing land at 1.6 Million and building out 15K square feet of storage is going to leave you very much on the wrong side of zero.  Generally speaking, new development projects will need to be at least 25K (or more square feet) in order to absorb the cost of land and earth work.  With land as valuable as you are looking at, you'd need to be built out far beyond that before you will be profitable.

Additionally, I have to assume that being a dentist keeps you somewhat busy (One of my students is a dentist).  And so I wonder if learning TWO (storage AND construction) new very different skill sets simultaneously is the best way to break into the world of residual income?  I don't mean to discourage you in any way!  But prudence always wins out.  With all that said, have you considered buying an existing facility, optimizing it and then expanding.  This way you learn storage first, create some of that residual cash flow you are looking for and then tap into the equity windfalls that are created through development/expansion?  Just an idea to consider!

As for companies that will vet markets, there are many.  I've had good luck with Bob Copper at self storage 101. Scott's 3 day event (there's on in Orlando soon I think) is a good experience as well.  

Hope that helps some!

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February 16th at 1 pm