All Forum Posts by: Scott Meyers

I Echo Joe Fairless's sentiments, we have a small window to take part in the biggest property grab in our lifetime. I don't like leverage - not 1 bit. That's why we're syndicating our deals as well. No Bank financing whatsoever.

With this structure, if money is tight during lease-up or during development, nobody gets paid. But once we are stabilized and humming along, we all share in the cash flow and profits from the sale.

Much less risk and it sure beats paying a bank even in the months when the income is lean!

Just my $.02

Anibal,

On the property with the lease expiring in April, I would review the rental payment policy in the rental/lease agreement, and if you have the opportunity to terminate the lease for non-payment, etc. then begin to do so and rent it at the market rate.

As for the month to month leased property, I would simply let them know you are not going to renew their lease in March and then clean it up and remarket the property at market rates.

I think you already knew these answers, maybe just looking for confirmation....

Good Luck

Hi Micheal

From Someone who now buys ONLY Self Storage, and does so with private money, I think it's a great idea. That's our business model. And as Eric said, you'll need to contact an attorney to guide you, as what you are describing would need to be filed under Reg D with the SEC. You'll need to pick a type of fund (504, 505..) and then have all your investor/partners complete the necessary paperwork to determine if they are accredited or non-accredited - which also determines which type of fund to create. It will cost the group approximately $10,000 - $15,000 to have an attorney draft the PPM, Subscription agreement, operating agreement, and any LLC's.

Don't let all of this scare you however, it's just a bit time consuming is all, and if you don't plan to lever it (add debt through a bank) you're far better off in the long run in terms of overall costs of funds.

Keep us posted and good luck!

Cheers,

Brandon and others,

I fought the "partner" route through syndication for years. I Had a bad experience in one of my partnerships in the past and thought "why would I want to bring in 5, 10, 20 partners?

I've been in commercial real estate for awhile and I can invest in Self Storage Facilities without help. But when I looked at the incredible opportunity we have right now in this market, I decided I wanted to buy up all these undervalued pieces of commercial real estate that are becoming available, and I wanted to buy them all RIGHT NOW, while this small window of opportunity is still open.

Besides, when you have cash (a syndicate) you can buy commercial properties for pennies on the dollar from banks and sellers - especially those that have a low or 0% cap rate, and are unfinanceable. If you've done your homework, and you are confident that you can turn them around and stabilize them once again, you, Brandon, are in a sweet spot with very little competition.

For what it's worth, take a small break from flipping, and educate yourself on syndication, and start talking to the high net worth individuals in your circle of influence about what you want to do. You'd be surprised at how many folks have cash on the sidelines that they would rather invest in hard assets with someone experienced like yourself vs. investing in the stock market with people they have never met.

I could go on for hours - but as you can see by the responses from other syndicators and promoters on this post, we do not regret doing the heavy lifting to get this part of our business off the ground.

Deciding to syndicate is the second best decision I have made in my 20 year career in Real Estate, 2nd only to the decision to sell all my houses and apartments to focus all my efforts on buying only Self Storage Facilities.

Keep us posted on your progress...

Scott Meyers

Dan,

Although I haven't seen the P & L to determine whether it's truly a 6% cap rate or not, you're right - a 6% Cap rate doesn't excite me unless there's a TREMENDOUS amount of upside in the deal.

I never tell my students not to buy a deal, unless I see a potential pitfall that maybe they should have seen, so I won't tell you not to either. If you like the deal and location, and a 6% return are satisfactory, then by all means go for it.

However, You may want to do a little research however, into some comps of other facilities in the market (within 180 miles) to see what cap rates they have sold at. Perhaps you can educate your seller that his price isn't really in line with the market. It may be worth a try. I'll bet he doesn't have too many people beating his door down at a 6 cap, so I don't think you'll lose the deal by taking an extra day or so to do a little research into the market.

If you can do this tactfully, you may help him come to the natural conclusion that his price is a bit too high, and shave $10 - $20,000 or more off his asking price.

Let me know what you find,

Scott Meyers

Bradford, yes, seller financing, seller carry back, same thing - I just should have used the standard term.

And regarding rents, I'll bet $100 that if you asked the seller why he didn't raise rents, I'm sure he'd state "because I want to stay full"........... His loss, our gain.

Hey Brandon, we've owned thousands of Self Storage Units over the years, and so I thought I'd give my $.02..... 1st of all, What is the trailing 12 Cap Rate on the facility? If it's strong (10% or greater) then give him his price and figure out terms that will work for the both of you.

As for the SBA, with the SBA 7a, they will allow a seller carry back of 10%, but you will most likely need to also invest 5-10% as well. It depends upon the strength of you, the property, and the bank's underwriting criteria (sorry to be so vague, but the SBA and the banks that underwrite them aren't exactly predictable).

Regarding your comment about it being maxed out in income - I respectfully disagree - RAISE RENTS! the beauty of Self Storage is that our leases are month to month, so we raise rents about every 7-9 months, depending upon the property.

Also, It sounds like you have room for expansion, but it just isn't zoned for it? In virtually every deal we've been involved in, once the parcel has been zoned, it's zoned for life. You simply need to have town approval for expansion. By the way, if they don't want permanent structures, I'd look into portable storage units that are considered personal property, not improvements. By the way, you can lease them and depreciate them over 7 years, and since they're portable, you avoid property taxes.

Keep us posted!