All Forum Posts by: Michael Wagner

Hi Matt,

You are not wrong at all to weigh the benefits of having one or two larger investments over 70 SF scattered around town. There are many benefits that come with such a strategy- which you obviously are aware of so I won't belabor the point. There are also drawbacks though. Remember that there is a cost and a benefit to all strategies. Very generically speaking, larger buildings usually come with increased barriers to entry such as more capital (or the need for partnering-which can be very good or very bad), an increased emphasis on your past "experience" as an investor, more complex asset management (especially if you are talking about something that is both REI and a business like Self Storage or other commercial endeavors). Fundamentally, the analysis of the investments are the same and the idea that larger properties are "the same but with more zeros" as you might have heard before is not outright wrong but it does oversimplify the comparison.

In my humble opinion, you should take a step back (and forgive me if you've done this already behind the scenes) and begin with the end in mind. Where do you picture your self in 5 or 10 years. Are you looking to just increase wealth with minimal involvement or are you looking to develop as an investor and make investing your eventual full time gig? Once you start to create a picture of what you want your life to look like in 10 years, you can better pin down a strategy for getting there.

Another important thing to do right away is start to ask the hard question which is.......why?
In my experience the most successful people have a BIG 'why" behind everything they do.

Wish you the best and welcome continued discussion.

Here's another vote for direct mail. I'm not actively buying residential properties anymore but about 2 years ago I used my counties website to generate a list of out of state owners who were also behind on taxes. Mailed out the postcards 1 time and I kid you not when I tell you I get calls to this day about them. No clue why someone holds onto my postcard for 2 years but they do. Did buy one property from the mailing. Also a big fan of craigslist--be sure to refresh ad frequently!

Joe Smith: Better late than never right? My understanding, and please bear in mind that I am far from a CPA, is that SS is generally depreciated over 39.5 years just like other commercial real estate. That being said, there are many components of a facility that can be depreciated faster (Fixtures, equipment, parking lots etc).

A full analysis of depreciation can be ascertained by getting a cost segmentation study done. Generally speaking this will only make sense for larger, high value facilities. The study itself can cost $20K , so the tax savings garnered through the accelerated depreciation need to be hefty enough to justify this upfront cost.

Hope that helps!

I've spent the better part of the last two years working with Storage SBA Loans and Thought I would share a little known fact here even those this thread's been idle a while. Perhaps someone will find it helpful. Most folks (including SBA lenders) will tell you that an SBA loan cannot be refinanced with another SBA loan. Please know that this is categorically false. In order to do so, all one must do is find an SBA bank that is willing to do the refi based on the merits of the deal and take the terms offered to the SBA lender with the current mortgage in place. Give them right of first refusal. Their only option will be to either do the refi for you at those terms or lose you to the other bank. If they say no, simply ask for a denial in writing and go back to the willing bank. Regardless, you'll get to refi an SBA with an SBA.

@Bryan Pigott

Thanks for sharing the links! I've yet to dive into ground up development. What has been the biggest challenge during development...town approvals, market analysis, something else?

Mike

I know this an old link so rather than offer my insights relative to the questions already posed, I thought I would bump the link and offer to answer any questions that remain or resurface. I am passionate about storage as it is the investment vehicle that set me free from the J-O-B and I love discussing it with anyone who's got an interest. Fundamentally speaking it is a phenomenal investment with numbers to die for. More specifically, it requires (like all REI) a solid understanding of the operational expenses and local market. It also, to a greater extent than many other types of REI, requires well thought out and highly scrutinized marketing campaigns. Cost per lead and cost per conversion are very important to this business. Its not mailbox money but if you are willing to do the work there are plenty of markets that are under-served (despite the myth that the whole industry is overbuilt: bear in mind that this business is one that markets to a 3-5 mile radius so a market that is overbuilt could be as little as 10-20 miles from a market that is grossly under-served). Look forward to re-igniting this conversation.

Mike

Hello,

I am relatively new to BP but have been investing in real estate since 2007. I started in residential but have since transitioned to self storage and focus solely in that area now. I am seeking an equity partner on a facility that I currently have under contract.

Here are the basics and I am happy to provide interested and qualified investors with a full proposal:

Property is a 210 unit storage facility (65% occupied) with an additional +-36,000 square feet of warehouse space.

12 month trailing income = $191K
12 month trailing NOI = $78K

Contract Price = $585K
Pre-purchase costs = $35K
Repairs = $70K
Total project cost = $690K

I have already secured $540K (a combination of personal contribution and to a greater extent, seller financing) and am seeking remaining 150K (20% of project cost). I am offering 25% equity stake in exchange for this investment.

I do all work including management of facility's day to day operation.

Facility needs fence and electronic gait along with deferred maintenance and face lift. Also needs operational overhaul (which I have experience with; I previously purchased a storage facility for $330K and increased value to just over $1 Million in 18 months)

Projected Value within 18 months = $1.1 Million based on conservative 10 cap valuation.

Exit strategy is to refinance within 3 years and buy out investor. Additional phases of expansion possible beyond what is presented here (conversion of warehouse to climate controlled self storage/ addition of more typical self storage units) and investor will be granted first right of refusal on those opportunities demand renders them prudent.

Interested candidates should be able to demonstrate adequate sophistication when it comes to real estate investing and should be able to contribute entire amount sought as we are not seeking to pool funds.

I look forward to answering your questions and filling in any gaps.

Kind Regards,

Mike

I began in residential buy and hold, duplexes to quads with a couple singles. Have since transitioned to self storage and focus solely in this area now. Always looking to network with folks who are interested in investing in self storage.

I'm active in self storage which is a real estate based business so it offers great opportunities for folks who already have a good understanding of what it takes to operate rentals. The underlying principles are the same as apartment rentals but with far better expense ratios and much less headaches. Storage does bring with it the need for strong customer service and attentive management as it is much more service oriented than is apartment rentals.

As with any investment, the market is of critical importance and so I, of course, recommend getting smart before diving it. Its not rocket science but its not mailbox money either. Happy to discuss with anyone interested in investing in this area.

I've been investing since 2007. Did so in singles to quads part time until 2011. Physical therapist by day. Purchasing a self storage facility in Sept. of 2011 is what finally allowed me to quit the J-O-B. Currently purchasing second self storage facility. Great investment class that deserves the attention of any serious investor. Expense ratios are highly attractive. Happy to discuss self storage with anyone who's interested, I love networking with folks interested in this niche area of REI.

Mike