Don’t want to put your own money into real estate investing? Tune in as Stacy Rossetti discusses how she got an owner to sell and finance his facility for her. Owner financing allows you to pay the owner monthly with income from the facility rather than putting your own money into the down payment. She also discusses self-storage deal analysis so you can start taking that one step closer to success. Tune in to learn more about the importance of effectively communicating with owners so you can take a leap of faith in this industry.
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How Stacy Got An Owner To Seller Finance His Facility To Her
For everybody that doesn’t know me, we own twelve storage facilities. Eleven of those are under the Miss Lillian Self-Storage brands. Lillian is my daughter. We named the brand after her essentially. You can always come to MsLillians.com and then check us out if you’re like, “Who’s this Stacy bloke? Is she telling the truth?” We buy in secondary and tertiary markets. We buy in small markets and typically facilities that are $1 million or less. Our sweet spot in 2021 has been $200,000 to $700,000 facilities. I’m the grassroots of storage investing. I’m not going to talk about my $150 million deal. I’m maybe talking about how you can buy your first deal that’s a couple hundred thousand dollars. Get your foot in the door. That’s what we do.
The reason we like the smaller ones is that we like to travel and do things. We’ve been traveling in our RV. Work is not super important to us. What’s important is experiences in life and spending time with our daughter. You’re never going to see me have a $150 million portfolio or anything like that. There’s nothing wrong with that. If you want that, I can get your foot in the door but then you’re going to have to move on up to the bigger people.
Third Facility: Fairburn
The facility I’m going to talk to you about is the Fairburn location. This is the third facility that we bought. We have the Google picture of it. I tried to look for pictures of it and I can’t find any pictures of it. We had to have a picture of it. These are the pictures that we gave to our website guy. Our website guy, his name is Guy. He’s our Marketing Coach for StorageNerds.
Once you join StorageNerds, you’ll be able to meet him. He comes in and teaches every quarter. What he does is set up the whole website. He’s an awesome person. All my students use him. They all come in and set the website up. Having a website, especially if it goes through ESS or storage, the way they work is to charge you per facility, not only for the back office feature but also for the landing page of each facility.
Luckily, we have one brand. If you’re a storage facility owner and you have Chattanooga storage, Nashville storage and different brands for every single one of those facilities, you have to have a website for every single one of those facilities. ESS and storage are charging $150 a month for the back office and then $150 a month for the landing page, give or take. It’s around that $250 to $300 page. It depends on what size facility too. The bigger the facility, the more they’re going to charge. The smaller, the less but on average, around $250 to $300 is what I’m hearing if you do both of those options.
We did that for many years until we met Guy and then Guy said, “There’s no reason for you to be paying all.” We were paying $1,000 to $1,500 a month for that stuff. What he did is build the website for us. You could see Miss Lillian’s website. We have that one website with all of our landing pages on it. He came in and connected the back office software to that website. I don’t know how he does this but this is what he does. We paid him an upfront fee to build the website and then he connected everything for us.
The first 90 days of buying a storage facility are always super nuts.
All we have to pay for is storage in each of the facilities for the software. We have saved thousands of dollars by doing this. Think about when you buy your facility. Do you want to brand them? A lot of people I see in groups and stuff says, “Every city has its name and stuff.” When you do it that way, then you’ll have to pay either storage or ESS for the website in the back office or build a website for that one and then have the back office, which is going to cost you $1,000 plus the monthly fee.
Mission: Self-Storage
I’m so grateful that we even did brand it because by branding it, we have one page, Miss Lillian’s Self-Storage, with all of our landing pages hooked up to storage and it has saved us so much money that way. That’s an afterthought while I’m sitting here and looking at my website. We are in the process of the new facility that we bought. It is called Mission Self Storage. I love this name because we are on a mission.
I’m on a mission to raise capital, buy storage facilities, teach as many students as I can and help them to get successful. I’m on a mission to have my daughter grow up to be an amazing person. I have a lot of missions in life. I feel like Mission Self-Storage is the perfect name for a storage facility. That is going to be the new one. Eventually, I’ll be able to show you Mission Self-Storage’s website as well too. It’s in the process of being built.
Here’s the facility. This is Fairburn. It’s a good-looking facility if anybody knows where Fairburn, Georgia is. We have a mini portfolio of storage facilities in the South Atlanta area that are going to be worth quite a bit of money. I’m so excited. We’re thinking about selling this portfolio. We’re in the process of getting it ready to sell. This one is the Fayetteville location. This is Fairburn. This is Noonan. This is Franklin. This would be a great little mini portfolio for somebody to buy. I would consider this primary market because when I googled my competitors, my competitors are U-Haul and Extra Space Storage.
This is a big populated area. Franklin is not going to be as populated but these three, if anybody knows this area, I would consider this primary market. When you see CubeSmart, Extra Space Storage and U-Hauls next to you, I would consider them probably the primary market. I essentially lived in Peachtree City so I was like, “Let me go drive around, talk to as many owners as I can and see who wants to sell.” That’s how it started. I would drive around. In every facility, I would stop in.
What I did was I was driving and I would call them, talk to the owner and see if they wanted to sell. I’d be like, “I’m right outside your storage facility. I was wondering if you’d be interested in selling.” In the Fayetteville location, we found that one on the MLS but the Fairburn, the Noonan and the Franklin one, I found those by driving for storage.
After I found the first one, I was like, “This is good. I’m going to go buy some more storage facilities.” I went out and started driving around. The next one that I picked up was the Noonan one. The next one that I picked up was the Fairburn one. I started creating this little mini portfolio. That is what this looks like. The picture is from 2021. It doesn’t honestly look much different. We’ve power washed it but we haven’t done a lot of work.
That’s the type of manager that we are. We’re cheap. If it doesn’t need to get done, then we’re not going to do it. I don’t know how people do so much CapEx and then make money at it and stuff too. We don’t do a lot, honestly, to manage our facilities. We come in and power wash it. With this facility, this gate is fixed. When you look at this facility, it’s cleaned up because when we bought it, weeds were everywhere and stuff. It does look a little bit better but essentially this is what it looks like.
I was talking to somebody, I can’t remember who it was, at some REIA meeting or something. Somebody was like, “There’s a storage facility right around the corner from my house. It looks pretty dumpy.” I was like, “Where? Tell me.” He says, “Fairburn.” I was like, “It’s right where I live.” He was like, “You should go over there and take a look. I don’t know the name of it or anything but there’s a pretty dumpy one there.” I drove over and took a look at it. I pulled up and parked right in this area. There was a sign that said, “Rainbow Storage.” It was super faded out. You couldn’t even read the name and the phone number had only seven digits.
When someone has seven-digit phone numbers, that’s a good storage facility. You’ve got to keep trying to get ahold of that owner. It only had seven digits so I knew that it was an older facility. I called the owner and he answered the phone. I was pacing and walking back and forth. Little did I know, before I talked to the owner, that this was part of it as well too. I thought it was going to be this building and this building but it ended up this building was included. In this building, we had to put a new roof on.
I called the owner and he answered. He said, “This is Ernest.” I said, “Ernest, this is Stacy.” He said, “Stacy, how can I help you?” I said, “I’m interested in your storage facility.” He said, “Good. What size unit do you need?” I said, “No. I’m interested in buying your storage facility.” He was quiet for a second. He said, “Where are you?” I said, “I’m in front of your storage facility.” He said, “I’ll be there in five minutes.” I waited for five minutes and he came over in an old pickup truck. Ernest was an old man.
He drove over in his pickup truck and met me. I said, “Ernest, how are you? I’m Stacy. I’d like to buy your storage facility.” He said, “Let’s chat for a few minutes. I’ve been wanting to sell this.” We talked for a while. We walked around. He talked about his story. If you read every single episode, you are going to be getting my theme here. Listening to the story. He’s telling me how he built it. Ernest was a businessman. He owned car washes. That’s what he did.
Work is not really super important. What’s important is experiences in life and spending time with family.
For some reason, back in the day, it was a thing to do car washes and storage facilities. I see a lot of these. He had car washes all over the Central and the South Atlanta area. He was like, “I used to do car washes. I started getting into the storage business. I decided to build the storage facility. I bought this property and built this car wash right here. This used to be a carwash. For twenty years, it was Rainbow Carwash.”
“For many years, we did carwash through here but then everything started breaking and stuff. It was annoying me. What can I do with this thing?” He didn’t build this for a long time but this was there. He’s like, “What can I do with this piece of property? Let me do some storage facility.” He came out and put the doors on and the bays on here. This storage facility is made out of concrete.
Back in the day, this was a good-looking storage facility. This whole lot is a square-perfect 1-acre lot. He was like, “I tried to utilize this space as much as I could and be smart about it.” He stopped doing the carwash and then made this into a storage facility. He said, “For a while, I was trying to figure out what I should do with this building here. Should I rent it out, put bays and rent these out as units? In the end, I decided to rent it out to this guy who’s a mechanic.”
This guy that rents this building out is a mechanic. He uses these bays for his business. There are four bays. He works on cars and stuff. The funniest thing is he’s still a tenant with us and has been a tenant with this guy for ten years where he was paying $800 a month. Ernest never raised the rent. He always paid $800. In this thing, you should be getting anywhere from at least $1,500 to $2,000 a month. I was like, “There is no way you could do $800 a month.”
I was already excited about buying this storage facility. This is the perfect size for me. This was 60 units. It’s the perfect size for us to get started and get going. He told us about the 60 units and also said, “This is included.” I was like, “Exciting. Even more money. Awesome. I love it. I’m in. Let’s do this. I can get a loan. I want to buy this thing. What’s your price?”
He said, “My price is $225,000.” I was like, “Perfect. I’m in. Let’s do it. I can purchase this. Let me go talk to a private lender or see if I can get a bank loan. Can you give me a couple of days to try to figure out where I can get the money from?” He was like, “No. If you buy this thing, I have to be the bank.” He is the very first person that I’ve ever talked to where he initiated that he wanted to be the financier of the deal.
Be The Bank
That was back in the day when I was not even thinking about owner financing. He initiated it. I would like to say thank you to Ernest because of him, we have so many different owner finance deals that we’re doing. Also, my students are doing so much because of him. Thank you to Ernest. Ernest said, “If you’re going to buy this from me, I want me to be the bank.” I was like, “That’s cool. How is that going to work? What are the terms going to be?”
He said, “I want a $225,000 purchase price. I want $25,000 down and 6% interest for 12 years.” I was like, “I’m going to do that. Let’s do it. I got to figure that out. It sounds good to me.” It’s back in the day when I was like, “That sounds good if you want to owner finance to me.” Essentially if I go to a bank and get a loan, it’s going to be 6%. I was going to pay this thing off in twelve years. This sounded awesome. I said, “I can come up with $25,000 and then we can close this thing in 30 days if you want to do that.” He was like, “Let’s do that.”
I’m telling you, I drove over to the facility, called him up, talked to the owner and met him in front of the storage facility. I talked to him for maybe an hour and a half and then we got the facility under contract. Another thing too that was awesome was when I said, “Can you tell me how much money that you’re making per month? I would like to know what your income is.” He said, “I got all that for you.” What he did was he opened his car, reached in and pulled out his ledger. It was one of those binders that had graphic lines.
He opened it up and said, “This is all my tenants. This is everybody that has been paying and when they hadn’t been paying.” He showed me right then and there on his ledger. It’s a good deal when they’re pulling out their ledger. When he pulled that ledger out, I was like, “This could be such a good deal.” After that evening, I went home and talked to Pete about it. He was like, “Another storage facility? We’re going to do another one?” I was like, “We have to come up with $25,000.” He was like, “We’re going to do that too?”
I want to go over the numbers and show you on the deal analyzer how it worked but essentially, the point is finding, funding and running them. For this facility, it’s driving for storage, going, meeting the owners and talking to them. There’s something about meeting an owner face to face that puts the owner at ease. I highly recommend that you go out, meet the owner, talk to them and go over to the facility, that’s the best way to get any deal, especially if they like you. They want to make sure that they’re going to hand this baby over to someone that they can trust. In this deal, we got it owner-financed.
I have gotten residential properties owner-financed before as well too but it wasn’t something that was in my game. I wasn’t pushing it. Once I started getting into the storage investing world and talking to all these mom-and-pop owners, I started realizing that a lot of storage facility owners are open to alternative investing and alternative ways of doing deals and creative deal structures. If you’re only putting an offer in that is a cash offer or just an offer, then essentially, you’re missing out on a lot of different opportunities to be able to get the owner to finance the deal for you. Let me show you on the deal analyzer how this deal works out.
When you think about buying your facility, figure out if you want to brand them.
It’s 60 units. What we’ll do is measure the size because I don’t know how big the deal is. That’s what it looks like. This person here is still there. He doesn’t want to go. We told him that he has to pay $1,500 a month. We said, “We have to double your rate.” When we bought the facility, he had a 2-year lease and another 1.5 years to go. For 2 years, we had to honor the $800 that he was paying. We let him know that as soon as the two years were up, his new rent was $1,500 a month.
If he couldn’t afford that, then he would have to find something else to do because that’s what we were going to be charging. That happened several years ago because we purchased this quite a long time ago but when his rent went up to $1,500, he decided to stay. We probably could get more but come on, be nice people. We moved his rent out from $800 a month to $1,500. We made another $700 on that by doing that alone. This is where the Fairburn location is.
This is the 1-acre lot in this big square. All his cars are there. He has a lot of bad cars. We’ve asked him to clean that up as well too. He’s cleaned it up well. We fixed the fence. The fence was knocked over. We fixed that. He’s a mechanic so he’s got a lot of cars. We could always get rid of this building here and these cars, then maybe add another unit or something on, maybe a couple of buildings on there. We could do that if we wanted to but we hadn’t done that.
That’s something that when we sell the portfolio, the next owner would be like, “We could get rid of this and add another building and stuff like this.” We haven’t done that. What we’ve done is hold onto the thing, stabilized it and cleaned it up. I have a student that’s looking at a facility in the Northeast that we’re trying to get in the contract. It’s also a storage facility that looks like this, except it has two buildings. There’s also a carwash. I told her, “You should knock that carwash down and add some more building.”
That’s what you should do. This one happened to have this mechanic here. If the mechanic was not there, we probably would have knocked this building down here and then add more buildings. I’m going to measure these buildings because I’m not sure what the square footage is. You can right-click and measure. It’ll give you an accurate size. This one right here is 3,742.
If you don’t know, I’m right-clicking and then measuring. This comes out to 3,000. That’s 6,700 square feet. That’s pretty big, honestly. Let’s go to the deal analyzer. If you want to get into storage investing, you have to learn how to run commercial deal analysis. Whether or not you’re using my deal analyzer, somebody else’s deal analyzer or your deal analyzer, you have to learn how to run deal analysis. You got to know whether or not it’s a good deal.
I’m on Google Maps. I’m zooming in on the building that I want to measure. I’m right-clicking on the corner to measure distance. I’ll show you the deal analyzer to get the unit mix and add everything up. If you want a guesstimate of how big your facility is, then you can always measure it this way. I’m right-clicking on every corner to measure the distance. This is coming out to 3,730. Let’s say I have 6,800 square feet. Let’s go to the deal analyzer.
Just so everybody knows, this deal analyzer is only available to StorageNerds students. You do get a deal analyzer inside the course but it’s not this one. It’s a different version. It’s a little bit more basic because these inputs are not in the sheet and we are going to be updating the course. I’m here in my studio. I’m not traveling. I’m going to be recording new videos, putting updates in the course and stuff like this.
That’ll be done soon. Buy it and get all the updates as well too. Ariel and I are going through the course. It’s like, “What else can we add? What do we need?” Another thing is she’s going to be sending out a feedback link on the course for anybody that purchased it. If you did purchase the course and you have some feedback on what you think we need in the course, let them know and I’ll make some videos of it.
Deal Analyzer
Here’s the deal analyzer. Let’s take a look at this. I’m going to run the numbers. This info tab on the deal analyzer is essentially your input. We have two inputs. We have financing inputs and then an inputs tab. When you’re running a deal analysis for a storage facility, anything that you see in yellow is what you need. When you see something in yellow, that means that you need to be asking the owner for that information or gathering that information somehow. That’s something that you need to be doing. Everything else is formulas. It’s running numbers. Let’s talk about the market cap rate.
This area is a primary market, which is between 4% and 6%. I don’t know what cap rate would this area be. I would say it calls for at least a 6% cap. I would shoot for a 6% cap. If it’s in a secondary market or a tertiary market, then the cap rates are going to be higher. This is South Atlanta. You’re in Atlanta. Fairburn is five minutes from Atlanta. I would consider this to be at least a 6% cap when I’m running the numbers for this. We have the total income and we can calculate that in a minute as we can run the numbers to see what we get.
The unit mix is 59. Let’s change this to 60 because I think it’s 60 units. We have to change this total square footage here to 6,700. We’ll put that it’s full. Let’s say it’s 8% or 10% vacant. I don’t know what the property taxes are but I’m going to guess it’s probably around $3,000. It’s around $3,000 if I remember correctly but if I can’t find it, then we’ll put $3,000 in. What you can do for property taxes is google the address and then look on Zillow or something like this for the property taxes.
It is highly recommended that if you can go out and meet the owner and talk to them and go over the deal and the facility, that’s the best way to get any deal.
You can go to the county record if you want to do that. I’m going to change this to $3,000. There are no utilities at this facility. Nothing. There’s no light or anything at night. Utilities are super low. We’ll keep it at $600 to be on the safe side. The insurance is about $1,200. Typically, these types of facilities in Georgia are going to run you about $1,000 to $1,500 a month.
The facility itself is insured under our commercial property for our storage facilities. The mechanic place is insured by different types of insurance. We have two different types of insurance for this. Keep that in mind if you decide to add a commercial. A lot of times, commercial insurance will not do mixed-use together. At least, that’s what we’re finding out. Maybe there’s somebody out there you know that can do that but we haven’t found that yet.
Let’s figure out what the income is for this facility. There are 60 units and all the units are outside access. They’re 10 x 20 and 10 x 10 but let’s say it’s 60 10 x 10. Let’s do that so we can do a quick calculation. We’re doing the price. The price is $80. That’s exactly what it is. On average, it’s 6,000 square feet and we’re making around $4,800.
You need a unit mix to run a deal analysis. That way, you can add up all the different units to figure out what your total square footage is. To guesstimate on this one, to give you an idea, we have 60 units that are 10 x 10. We probably have bigger 10 x 20 and stuff but I don’t want to get into that. We won’t do that. We can look at the competition and see what we could be charging this for.
If we go to Miss Lillian’s Fairburn, let’s do Fairbairn storage. We could see what the competition looks like and see what they’re charging to see if we’re on par or not on par. There are a lot of storage facilities in this area and you can see Miss Lillian’s is right here. Katie’s Storage. I tried to buy this one. The storage facility owner here was a jerk. It was a woman thing. He thought I was the biggest idiot. He did not want to talk to me at all.
I went in and tried to buy his storage facility and he was talking to me like I was a stupid idiot. It pissed me off. Let’s see what he does. Does he even have a website? Let’s see what he’s charging. This is our competition. There are no prices here. Put the prices on. What else can we do? Extra Space is one of our competitors. Not a lot of storage over here on this side. Let’s see if there’s something.
Here’s Union City Self-Storage. Let’s check that one out. StorageGA.com. Here we go. They have something in Peachtree City too. For a 10 x 10, they’re charging $1.30. We have the competition tracker sheet too so everybody can see it. This is the competition tracker sheet that we keep track of all of our competition. Let me pull up Fairburn and we’ll look at this. That’s how I look up the competition. I google it and see what everybody is charging. There is Compass Public Storage, First Extra Space and Storage Depot. What they’re charging for their 10 x 10, on average it’s $83. It’s $1.83 a square foot. It’s crazy. In $1.99, $2.06, $1.31.
The other guy was $1.30. I’m going to shoot for $1.30 to be on the safe side. You take an average of the competitors and see what you could be charging and where your prices should be. This is a smaller storage facility but the truth is that when they’re smaller like that, you can still charge the same amount of money. I’m not 100% sure why people charge less because we beef up our prices.
Let’s do competitors. Income was 48 x 12. Let’s add this calculator. We’re almost done here. 4,800 x 12. Let’s say $57,600 is what we’re making. Even if that’s $0.78 a square foot, should we be up to $1.30? I don’t know. We should be up higher. When you look at this competition, you can see that 10 x 10 in the area are going for non-climate control with super high prices. What price should we be? We should be at least testing to see how high we could go.
On the deal analyzer, I changed the income to $57,600 and the competition price to $1.30. We can do $0.99. We’re going to raise the rent to $0.99. We bought this facility for $225,000. You can change it all the way across. We got 6% interest. I’m going to do owner financing at 6%. We did a 10% down and a 12-year loan. The monthly payment is about right. $1,976 is what we’re paying. Our actual cash-on-cash return is 87%. Our net to mortgage is 37%. We’re shooting for a 10% cash-on-cash return. We’re getting an 87% cash-on-cash return. That’s a good deal.
Let’s say our goal is to get it to $0.99 a square foot. What that’ll mean when we’re selling the property is that there’s a lot of upside for the next buyer. I look at deals all the time and nobody ever wants to buy a deal where you can’t raise the rents because you’re as high as you can. The question is what can you push the number to? Can we get it to $0.99 a square foot? I’m pretty sure we can. With this number right here, I’m not 100% sure if we’re charging $0.80 a square foot or not but let’s say that we’re charging $0.80 a square foot.
We want to get it to $0.99 a square foot. We bought it for $225,000. We already bought it at a 15% cap rate. To get it to a 22% cap rate is what we’re going to do and then sell it for $150,000. Remember, I did not include in this the $1,500 a month. If I added $1,500 a month to this so $1,500 x 12 is $18,000. That’s another $18,000 that we’re making a month. That brings the NOI to $69,000 after we get it to $0.99.
We’re at a $50,000 NOI and a net of $30,000 a year. That increases the valuation to $1.1 million. Now that I’m looking at this, we need to make sure that we’re at least $0.99 a square foot. I’m going to tell my husband, “Look to see what our price per square foot is for the facility.” It was over $0.80. I’m not 100% sure what we’re charging. I wonder if we have any prices here. When it says get pricing, that means we’re full.
When you go to the website and it says, “Get pricing,” that means there’s no availability at all. We’re full here. We should be raising the rates. I always tell my husband, “You should be raising the rents.” Does my husband listen? I don’t know. We bought it for $225,000. When we bought it, it was valued at $900,000 because of that income. Let me go back. I didn’t put that correctly. Let’s do $800 x 12 is $7,200. We’re almost done here. I got another thing that I’m doing. I’m going to run through the pitch here but I want to make sure I finished this up.
$7,200 is where I was. When I bought it, it was already valued at $700,000. Maybe when I bought it, it wasn’t a 6% cap. It was a 7% cap. The valuation didn’t change when the cap rate went up. It’s fun to play with the numbers and look at what your facility is worth. This thing is worth a lot of money. You saw it. We did not do anything to that facility. I have to do the fund pitch but I wanted to give you an idea of how much money you can make with these little tiny facilities as long as you get out there and start talking to owners and asking them to owner finance.
When they come in and owner finance, you can see how much money you can make. Now that I’ve updated it with the $18,000 that we’re making, the cash on cash is at 145%. This is a very good deal. You can make a lot of money with tiny facilities. That’s why you got to get out there and talk to owners, even in tertiary markets. Even in small secondary markets, you should be talking to owners. I appreciate you hanging on to the very end. I’m going to jump on my funds. Stacyrossetti.com/Fund. I’ll see you next time. I’ll do another case study on another deal. Take care.
