All Forum Posts by: Michael Wagner

Terry Duff, how did this play out? Interested in an update.

I know this is an old post but I wanted to contribute my two cents. Self Storage can be a fantastic investment. After 5 years of being a landlord part time (with 25 apartments), purchasing my first self storage facility in Sept. of 2011 is what allowed me to finally quit my J-O-B. Facility has since tripled in value and we are under contract to purchase our second facility. Its not mailbox money by any stretch (ie-there is work involved) but it is a great investment for anyone who has a good understanding of the fundamentals of RE. Always looking to network with folks interested in self storage so feel free to reach out.

Mike

Thanks Bill,

I really appreciate your input. The tax hit is certainly an important consideration that I neglected. Have to rethink that for sure.

I could surely "pay him interest" and then "take it back as rent" but beyond that, my issue with your suggestion to keep it simple is that the 'lender' is looking for security beyond a simple second mortgage despite CLTV being only about 50% of PRE-expansion value. His rationale in requiring more security is that the value of a storage facility is so heavily based on income and banks are known to run them into the ground during and after foreclosure so his second position would become vulnerable--not that either of us actually anticipate a foreclosure. The rents and leases are already pledged as collateral to the first position mortgage holder. With that, do you have any suggestions on how else to securitize his 'loan"?

Am i right to say that a Sale and lease back would not protect me from pre-payment penalty to current first mortgage holder?

This property is within an LLC.

"Lender's" rent credit will only be $833 per month or 10K per year which equates to only 6% of gross rents at facility. Would you agree that this makes the concerns with refinance less of an issue as it would be quite easy to prove value of rented space based on price per sq footage received throughout the other 95% of the facility?

So thankful for your willingness to talk this through with me!

Mike

Wondering if anyone can offer some insight on this? Ever seen something like this?

I own a self storage facility and am looking for a way to expand again as demand is high. I am looking to do this creatively as my current mortgage has a prepayment penalty for the next 18 months that I would like to avoid paying.

So here's the plan:

I have a customer who is willing to provide me with the 100K I need to put up my new building. We have agreed that 10% is a fair return and I will pay him back in full 18-24 months (when i can refi without penalty). Obviously he would prefer something more 'secure' than a second mortgage in case default were to occur (which we both acknowledge is highly unlikely). To address this I have proposed that we structure this "loan" such that his payment to me is considered pre-payment for a 25 year lease. Essentially he gives me 100K and earns interest in the form of free rent until the time at which i "buy-back" the lease for 100K. This way his lease would survive a foreclosure and he would retain his rights as lessee for 25 years to offset the 100k (250,000K in rent value). Or, he could always try to sell his lease to the foreclsoing bank so that they could better market it for resale. I'm Hoping folks have some insight on this concept. feel free to poke holes.

Thanks,

Mike

I've used Scott's Self-Storage Investing products to successfully buy a self storage property and triple the value in 18 months. I am currently negotiating to buy my second deal and while I am realistic that not every deal will be a home run like the first one, I can say without hesitation that Scott's program is legitimate and self storage is a phenomenal industry with unbeatable expense ratios. Simply put, I would recommend that any person with a good understanding of the fundamentals of real estate investing look strongly at self storage.