When you’re planning to buy a self-storage facility, there are many things to consider. You need to review, research, and analyze the market and how you can get cash returns on your investments. Listen to your host Stacy Rossetti as she shares her experience in the self-storage industry. She discusses the deal analysis and knowing your numbers. How can you get those fantastic deals? Tune in to learn about auctions, portfolios, and much more.
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Should I Buy A Self-Storage Facility In A Low Income Area?
I’m in Georgia and it’s rainy day to day. It’s been raining for the whole weekend pretty much. I’m not missing much by doing a webinar. I should be out grilling but it’s all rainy and stuff, so nobody’s grilling in Georgia now. What about you, folks? Where’s everybody at? I would love to hear and tell me what you’re doing. Are you like hanging out or what did you do? Spend time with your family or friends? Let me know where you’re at, who you are and also, if you’re a student, I would love to know that you’re a new student or an old student and if you own any facilities, put that into the chat as well, too.
Let me make sure that everybody can chat. Michael’s here. He’s in Sarasota. Good. Introduce yourself. I would love to hear where you’re from. Rob is here. Rob is a brand-new student. Welcome, Rob. You grilled wings out in the thousand-degree Florida heat. Looking forward to Fayetteville. Rob just joined us Storage Nerds. For everybody that’s here, hopefully, you all know that the Storage Nerds doors are open. If you do need a mentor or a coach, somebody to give you a thumbs up on whether or not it’s a good deal or not, somebody to help you run the analysis or to walk you through the whole process, then apply for Storage Nerds at StorageNerds.com.
The doors closed and they will not be opened again until 2023. I only opened my doors a couple of times a year for two weeks then that’s it. I focus on getting those students, helping them to get that facility under contract. That’s what I focus on. Welcome again. I have been teaching people how to invest in self-storage for several years now. I, myself, also invest in self-storage together with my husband. His name is Pete, so you will hear his name a lot.
I’m the one that’s responsible for finding and funding the storage facilities. He is the one that is responsible for running them. For instance, we’re having a two-day bootcamp coming up on September 24th and 25th, 2022 for all my students. He’s going to come in and spend like a day and a half showing everybody how he manages his facilities. He’ll get into things like storage. I’m going to show you storage because we’re going to go over one of my deals.
I’ll get into storage to show you a little bit of it but he does like a deep dive and shows you how to set it up, how to utilize it to its fullest because the truth is that if you want to get into storage, then you should make it as passive as possible. The way that you make it as passive as possible is by utilizing everything that the software offers you. The truth is, this software nowadays offers so much. What I see time and time again is that if facility owners use software to manage their properties, they are only using it to put tenants in and to manage the tenants.
On the back end, you can manage like your auctions. You can manage your pricing and your revenue. You can manage your maintenance. There’s only so much. You can manage mailings, emailing, and texting. There is so much that you can do but most storage facility owners do not take advantage of this, at least the ones that I see in the secondary and the tertiary markets. Maybe in a primary market, they utilize it better, these big companies and things like this but mom-and-pops tend to not utilize this software.
If you’re interested in how true property management works inside the storage industry, then you should be coming to this bootcamp coming up on because not only will I teach finding and funding facilities but my husband will also be teaching the management part. That is coming up. StorageNerds.com is the website where you need to be going and applying for that. The door’s closed. I’m pretty much full.
I’m looking at my calendar now. The door’s closed. Right after this, you can go to StacyRossetti.com/Fund. That is where I’m going to be pitching my fund. If you’re reading this presentation and you’re like, “This is way too much work. I want to like give somebody my money and let them handle it.” Essentially, that’s what the fund is for. That’s what funds are.
When you sell them as a portfolio, it’s stronger.
It’s like you don’t want to get into the nitty-gritty of owning something but you want to make money and reap the rewards of somebody managing the facility for you, that’s what the fund is for. The Self Storage Fund of America, I pitch it every Monday, so you’re more than welcome to come, read, and see if it’s a good fit. It’s a 506(c) Reg D fund, so you have to be an accredited investor. That’s the only thing. It is not a big deal but you have to have a net worth of $1 million or you have to make at least $200,000 or $300,000 depending on what your income is.
The goal is for all of us to get there. That’s why you’re here. That’s why you’re reading. The goal is for me to help you get to that point where you can invest in funds. You could hand stuff off to people and let them manage your money and you make money on the backend. That’s how it works. For everybody also, I teach people how to get their first deals that are $1 million or less, so smaller facilities.
The first facility that everybody buys within my coaching program is pretty much $1 million or less. I had one that was $1.3 million, but typically everybody’s $1 million or less. The second facility could be $1 million or more. I’ve got several students that are on their 4th, 5th, and 6th facility now. They’re rocking and rolling and everything. I focus on smaller secondary and tertiary markets to get your foot in the door and get you an idea of how to run commercial deal analysis. This is what I do.
We’re going to do a deal analysis. Remember that over the past weeks, I’ve been going over all twelve of my deals. I own twelve facilities. I can’t remember which one we’re on. We’re going into one of the first deals that I bought. This deal that I’m going to get into is not a very big deal. I can’t remember even how many units. It’s 59 units. It’s not a super big, huge facility or anything.
Remember, this is like when we first started out and this one was brought to me by one of my realtors, Richard. If you follow me, you’ve heard of Richard before. I’ve been working with Richard for years now. If it’s anything from the MLS, I buy it from him. It’s from Richard. All the property, all the houses I used to renovate and he still, to this day, anytime that there’s a storage facility that comes on the market for the MLS, he always sends me there.
Typically storage facilities do not get sold through the MLS. They’re being sold like on Crexi and LoopNet. That’s the commercial MLS. Every once in a while, you’ll get some realtor that was like, “Let me put it on the MLS.” Most of the time, these are like smaller facilities, $1 million or less. Rarely do you have huge large facilities that are going to be put on through the MLS in your state.
Essentially when I say the MLS, because I’m in Georgia. Richard can only look in his MLS area. It’s like the Atlanta Metro and wherever his area goes to. That’s why he can see. He has a way of seeing all the Georgia. He’s looked around and tried to send me stuff but typically, he gets up and if there’s anything that comes on the MLS in the Atlanta area that he subscribes to, he sends those to me. He sent me this facility. It’s in Warm Springs, Georgia. It’s like a little tiny town.
A lot of people ask me, “Can you buy storage facilities in small towns?” I teach that you want to be focusing on secondary and tertiary markets. A secondary market to me personally would be a population of 25,000 to 100,000. It’s like a secondary market, like a mid-sized city range. You have the tertiary markets which have a population of 25,000 or less than 25,000. When I bought this storage facility, this town has 340 people in it. Now that’s just the town itself.
We can look at the population and see if they’ve grown or declined. A lot of people ask me, “Can I buy something in a super small town? Is it worth it or not?” I don’t know. We’ll look at it and see. We’re going to use my new deal analyzer. We’ll look at it. We’ll run the numbers and see if it’s worth it or not. It could be worth it if the price is right on the front end and what you can increase the rates to on the backend work.
That’s the key but let’s check and see. We’ll see. I have the assumption that this is a good deal but I haven’t run the numbers. Pete manages that on the backend, so let’s run the numbers and see what it looks like. It’s 59 units and I bought it for $100,000. This must’ve been about a few years ago. I’ve been doing this for years. Remember, my first year I bought one. In my 2nd year, I bought 1, and then in my 3rd year, I bought 2. This is 1 of the 2 that I bought.
I tell everybody that I talked to, “Slow and steady wins the race.” It’s not easy to buy storage facilities, especially getting started and good ones, unless you know how to syndicate, get out, and partner up. Still, it’s difficult for commercial real estate. This is not like wholesaling and you could like do this and that. This is slow and steady wins the race. Let’s create our portfolio and build that up.
I bought this for $100,000 from Richard. I’ll tell you the story behind this storage facility and I’ll bring up some pictures here so you can have a visual. If I can find something in Warm Springs. I’m going to pull up my website as well too. I’m going to pull up a visual because it might be better to go onto my website. It looks like a storage facility. I like the color scheme on this. You can tell me what you all think. This is it and this is not all of it but this is one little section of it.
Let’s look at this one here. You can see there’s the orange over there. This one’s brown. This must’ve been like in phases. I’m guessing that maybe it was in phases because I don’t know why they would do brown and then orange. Here are these as well, too. It’s got a small door but these are 10x10s. It’s like a weird thing. You open it and they’re like bigger units, too. This is that one small one. These are 10x20s.
This is good that we’re looking at these. This is what I teach my students as well. You can visually look at a storage facility and you could tell how big it is. You can also measure this on Google Maps but you could see this as a bigger door and it looks like it’s pretty long on this side. To me, this looks like a 10×20. Sometimes in the middle, there’s a wall right here that you can take in or out. You could build it. I was talking to my husband, too.
We were driving and talking about something. He said, “Oh, no.” That’s what it is. We bought the one that we closed on a couple of weeks ago and he’s got some weird-shaped sizes that are like 20x40s or something like this. He was like, “I’ll get in there and build some walls and add different sizes and stuff.” I was like, “Really? You can do that?” He’s like, “You could do that on any size. You can get in and rearrange it if you want to because it’s all metal framing. You have to get in there and put the walls up.” I was like, “That’s interesting.” I told them to take some videos of that when he does change those out.
We’ll post those on YouTube for everybody to see how he does that. This is that and let’s see what else. This is this one. That’s it. Those are the three buildings. It’s those three buildings. There’s not much else to it. Let me pull up the address. Let me do Ms. Lillian’s Self Storage. It should be on Google Maps. It’s on Google Maps. Here is Warm Springs. It’s in the South of Atlanta, in the country. Warm Springs is a famous town. If anybody knows Warm Springs in Georgia, Pine Mountain is a beautiful area to live in and visit. It’s like a tourist industry. This whole area is a tourist destination.
We brought everything up to market value such as what we did.
A lot of people come to this area to do RV parking, camping, and stuff, which is one of the reasons why I did end up buying this. The story behind the storage facilities, the husband owed two storage facilities. One of them was in Manchester. Manchester has about 4,000 people in it. The Warm Springs population is going up. I bought it back in the low days here. I bought it when it was at its lowest. It’s increasing. Lots of people are moving out to Warm Springs.
Let’s see Pine Mountain. I’ve been there before. I can remember. I’ve been camping there. Check it out. I was like, “Let’s go down there and camp and check this area.” It’s not that far from each other. When you’re thinking of 1,700 people now, this area is slowly growing. It’s country and they’re Shiloh down here as well, too. There’s a good amount of people in this area. It’s like 10,000 people.
There are not that many storage facilities in this area, honestly, unless they’ve been built in the last couple of years. The husband owned both of them and then he died. The wife inherited them when he died then she ran into the ground, essentially. She held onto them for several years and tried to manage them. This one in Manchester is bigger. It’s 150 units or something like that but it was in the downtown Manchester area.
It was right next to this rail yard. It was right next to this industrial thing. It was in a weird area. I don’t know if she ever sold that facility in Manchester. She had it listed for a ridiculous price. She wanted to sell me this one but I told her that I could not pay for that. I would pay half of what she had and let her shut it for $600,000. I told her I would pay like $250,000 or something for it. She said no to that one. I wonder if she ever sold that one. I’m not sure if she did or not but I did pick this one up.
This one here is the one where it’s like 50 or 60 units. We’ll look and see here in a minute. This little tiny downtown area of Warm Springs. Here it is. There’s the one building then here’s this building in the middle and here’s this building. This is essentially the lot right here. This is it. It’s totally fenced in and it’s gated but it doesn’t have an electronic gate. We never put an electronic gate. The way that she was handling this facility, it had a gate that you could push open and it had a lock on it. It had a circle lock with the code on it. If anybody paid, then they would get the code. She would switch the code every single month.
It’s basic. There’s no electricity out here. There’s nothing out here. It’s a super basic storage facility in a little tiny town in a little tiny area of Georgia. I get the question all the time, “Can you buy something like this? Is it worth it to buy something like this?” It’s worth it if the price is right. That’s my answer. If any of you have any questions too, make sure that you post this into the chat as well.
Is there a rule of thumb of how many units can be built on an acre of land and generally how many storage units a million-dollar facility would have been a secondary and tertiary market? No, but on an acre, if it’s a square piece of land then you could put 50 units. Half of an acre is 50 units. One acre is 100 units. I’m going to pull up storage here in a minute but I did find one storage facility in Georgia that was perfectly built, essentially.
It was a two-acre lot. It had 200 units on it. It was like row and row. It was a perfectly built two-acre lot. Essentially, you can go off of that but typically, I never see that because people don’t do that properly. On average, if you had a two-acre lot and measured it out and it’s where it’s away from the road and stuff, that amount of road then you can calculate inside of it. That’s a setback.
The setbacks of a two-acre lot are usually 10 feet from the road or something like this. You’d probably have setbacks on all sides. You have to calculate how much space you have within that area to build on. On an acre on average, it’s 100 units but it depends on the setbacks of how it is. For instance, in Atlanta, your setback is not 10 feet. A ridiculous amount of feet is what it is. It’s like 50 feet. I can’t remember how much it is. It’s a lot. Think about that as well, too.
If you have any other questions, put them in the chat. That’s the best way to go honestly. Let’s stick to the topic though. Josh asks, “Why did you not do automatic gates?” It’s because I’m cheap. It’s not in the budget. This one at Warm Springs, essentially, had had this for years and never had automatic gates. When we bought it, it was 100% full. It was full of other people’s crap and nobody was paying. Out of whatever number of units that it is, half of those were probably cousins and family and stuff like this. None of them were paying at all.
They were typical storage facility mom-and-pop owners. They were losing money left and right. That’s why she wanted to sell it and what she said was, “I’m not doing this well. I can’t keep up with it. Essentially, I need to hand it off to somebody.” She wanted to sell this facility that we bought. She wanted to sell this for a lot of money, $200,000 or something. It was ridiculously priced on the MLS. I went and looked at it. I ran the numbers and looked at them. I said, “$125,000 seems like a good number.”
I was talking but then I had my lender go out. I was talking to my lender about it. I was like, “What do you think about this facility? Should I buy it?” He was like, “I wouldn’t buy it for any more than like $100,000.” He said, “Try for $100,000.” I said, “Okay.” I told the lady, “I’ll buy this for $100,000 but that’s as much as I’m going to buy this for.” She agreed to it. It worked out in that respect. If it weren’t for my lender, I would have offered $125,000 and he offered $100,000, which goes to show that even if you think that you’re giving the price, you could always try and see what the owners say.
I did not put a gate up because it wasn’t in the budget. We still have not put a gate up. Now the gate, the way that it goes, you don’t see it in these pictures but it’s like one of these ones that you push and it rolls or has got that wheel on the bottom. It rolls over. When we first got this facility, the gate was in disrepair and we were fixing it here, fixing it there and stuff. In the end, we’re like, “We got a new gate and we fixed it.” It’s still the same thing. We have not put an electric gate on there or anything like that. It’s not in the budget.
This is not one of those facilities that have an automatic gate on it. There’s no reason for us to have it. I was going to say, this guy that lives here is our lawn guy. He mows the property. He came to us. We were having a hard time finding a lawn person. He’s lawn guy there and he was like, “I’ve noticed you, folks. You haven’t been keeping up on this yard.” I was there one day. I was like, “We’re having such a hard time trying to find somebody.” He was like, “I’ll mow it for you.” I was like, “Really? That’d be so awesome. Please do that for us.”
That was years ago and he’s been mowing the lawn ever since keeping it up now, mowing it, and trimming it. We had a whole bunch. It was a lot of bushes. It was all super bushy up here. He came in, trimmed all those down, and cleaned everything up. He was doing a good job and we pay him on a monthly basis. I can’t remember what it is but it’s a typical amount of money that you would pay like a lawn person, too. There’s a lot of grass. You can see, this is grass. This is not gravel. This is not asphalt. You got to mow it all the time. He comes out twice a month, mows it, and cleans it up.
Let’s see what else about this facility. Let’s get into storage then let me make sure I got all the questions. Somebody’s asking, “How much do you have to pay for the boots on the ground?” The boots on the ground is the same person that manages our other four facilities sorted in the area. If you know me, you know that I have 1 in Fayetteville, 1 in Fairburn, 1 in Newman, 1 in Franklin then there’s the Warm Springs 1.
In a secondary market, we’re raising our rents every six months. In a tertiary market, it’s anywhere from six to nine months.
One of our boots-on-the-ground person manages these five. That’s their little portfolio. We try to create many portfolios and we’ve got facilities all the way from up here. You see where Pete sat right here and he was up here and then we’ve got facilities down in this area as well, too. We’ve got one person to manage this facility. We’ve got 1 person in Florida, 1 person in South Florida, 1 person in Central Florida, South Central, 1 in Atlanta, and then 1 person in the North. We’ve got five boots on the ground people. That’s how it is.
We’re in the process now of buying a couple of facilities over in this area. We’ll probably have to get a different boot on the ground over here as well. Also, we’re looking at facilities over in this area as well, too. We’ll have to get a boots-on-the-ground person. Our goal is to create many portfolios of 300 units. It could be probably 2, 3, or 4 facilities. That’s how it is for us. That is how we do it.
When you sell them as a portfolio, it’s stronger than like if I sold this one facility for Warm Springs by itself, I would not be making that much money on it. If I can build 3 or 4 within a 30-minute or 1-hour drive and have 400 units, that makes it so much stronger, especially bigger players and stuff. They love bigger portfolios.
Numbers In Storage
Let’s get into a StorEdge. I wanted to show you what this looks like if I can, so you know where it’s at. Here are the numbers in StorEdge that I pulled up. This is our Warm Springs facility right here. This is as of now. Remember rent is due on the first and 40% of them have not paid by now. Typically, this is going to be your job when you first buy a storage facility. The first week of the month is like, “You haven’t paid. I need your money.” You’re texting and you’re trying to get everybody to pay. As you can see, as of now, we’re 76% occupied.
I looked here. There are six units that are vacant now. I’m going to tell you why there are six units vacant because we raised the rates. We almost doubled the rates. From every facility that we doubled the rates on, we took them from pre-COVID rates to market rates over the course of the last few years. We brought everything up to market value essentially.
We had a handful of people leave, which isn’t that big of a deal, honestly because we’ll get those back. It takes a little bit of time to get those back. There’s one unit right here. I see it’s black. It’s complimentary. That’s the owner’s unit. That’s probably where all the stuff is to take care of the facility like when DJ, the boots-on-the-ground person that goes there. He goes there when he needs stuff like a blower and whatever. I don’t need to show what he does or what he needs there, latches and stuff.
Tertiary Market
You could see we have 32 tenants. Out of these tenants, you can see that 2 of them moved in and 1 has been there a little bit longer. Seven of them have been 6 to 12 months. Thirteen of them are 1 to 2 years and then 7 of them are 2 years plus. This is the one thing about the tertiary market. They do stay quite a long time, honestly.
Essentially raising rents in a tertiary market is different from a secondary market. It is different from a primary market. In the primary market, whenever they feel they could raise the rents, there’s no rhyme or reason. It’s like, “Market values up. Let’s raise the rent.” We raised it months ago. We can raise it again or they could say like, “We raised it last month. We’ve got to raise that again.” They could say, “Let’s do it every six months.”
In a secondary market, we’re raising our rent every six months. In a tertiary market like this, it’s anywhere from 6 to 9 months, just so everybody knows. This is not like pushing and pushing for increases. This is slow and steady wins the race. We’ve got a lot of past due that I’m sure all of our team is calling, texting, and emailing. We’ve got it all set up to remind everybody but the truth is, most people wait until the last day.
I can’t remember how we have this setup. I don’t know if I can even look it up because I have no idea how to look it up. We probably charge $10 or $20 for a late fee as of maybe now or something. There’s one guy, Barry Brown, that has gone to auction and then Sierra is going to auction. This one’s going to auction. We’ve got a good handful that is going to auction now. I’m not sure what the story is because I don’t handle all that.
These are auction preps. They’re prepping and they’re getting everything ready to cut locks and get everything out. I’m sure the auction has been already processed. For the auction to process, from the day that you start it until the day that the auction takes place, typically, it’s a minimum of 30 days, if not longer, 60 days. The way an auction process works is you have to notify the newspaper and then they only have like certain days that they do auction notices.
You’ll go and say, “We’re going to do an auction on August 23rd,” and they’ll say, “You should have notified us by the 7th of August if you wanted to do the 23rd.” It’s like, “Great. When is your next auction?” “The next auction that we’re going to have is September 18th.” It works like that, especially in these little tiny towns. It’s not like you can be like, “I’m going to auction tomorrow.” It takes months for the process to go through.
Maybe in bigger cities where primary markets, they might be doing auctions. They may be posting out auctions all the time. Typically, middle tiny towns, especially little tiny towns like this or tertiary markets and some secondary markets, too, they’ll maybe post an auction notice maybe once or twice a month and that’s it. That’s why the auction process is super important to be on top of it because if you miss that date, then you’re screwed until the next month. It essentially is how it works. That’s that.
If there are any questions on the auction process, we go super deep. Pete will go deep into the auction process and how it’s handled in the bootcamp on the 24th and the 25th. You’ll be able to learn all about that. I’m honestly not the best person to be talking about anything management because he handles all that. I do the best I can to show you, at least to give you an idea of how it works. All I know is that it takes a long time to do auctions. We try to be on top of it. I wish I could figure out in storage how you could see what we’ve charged. I know he increased the fees. Let me see if I can figure out how to find the fees.
At one point, if you were late by the 8th, that was $10. When I was running it before Pete came in, this is how we did it. On the 8th, you got charged $10. That was just for being late. On the 15th, we overlocked you and it was $25. On the 23rd of August, we’d started the auction process and that was another $25. You could have like a total of $60 of fees. Pete has added a ridiculous amount of fees. He has fees for everything now. Honestly, when you own storage facilities, you make a lot of money on the fees, which are not even as accounted into the deal analysis.
You can sit there and say, “I’m going to have this many people or anything like this late. This is how much money I’m going to make.” You don’t do that on deal analysis. You do make a lot of money in fees if you set it up right. He’ll go over all that in the bootcamp for all the students. He overlocks probably like in the first week of the month. When you’re late, whatever day he says that is a late day, if it’s like the 6th or tomorrow’s the 6th, then everybody gets overlocked on that day. We don’t wait and go out.
Most people wait till the very last day.
As soon as we considered them late, they’re overlocked and they get charged for that. We start the auction process every month for everybody. We email out and let everybody know, “You could sell the pre-prep.” I’m not sure how the process is but the pre-prep and emails go out through StorEdge reminding them, “You are now in the auction process preparatory phase and we are getting ready to put you down as going through the auction.” A lot of people start contacting that way and that’s a fee for putting them into the pre-prep phase.
Once they get into the auction phase then we have to start doing certified letters and stuff like that, that’s a whole other fee on top of that as well, too. He’s set it up now where there’s a fee after fee and then email reminders and text reminders about that as well. That’s why I wanted to get in to show you the storage stuff. It looks like, “You have 40% of people not paying or whatever it is that we had,” then essentially, these are typical in the first week. Honestly, another thing is you never want to ask somebody for their numbers in the first week of the month.
You don’t want to know up until now because, in the first week, it’s going to look horrible. Ask for their numbers in the 2nd or 3rd week. Let me see those numbers up to the 15th or the 20th of the month because typically, by the 20th of the month, 95% of all people have paid. You only go to an auction for a few people. That’s how it works.
I was going to see if I could show the fee but let me see. Here are all the fees that he has. He has an admin fee. He’s got a whole bunch of fees. He has cleaning and scrubbing fees. These are all the fees that he set up, chargeback fees, NSF, and incomplete contract fees. If we can’t get the people to sign their contracts, then we start charging them for that as well, too. Do you want an invoice? It’s a $3 invoice fee. We’ll cut the lock, move out, online payments, past due, reservation deposit, and security deposits, so these are all the fees that he has here now.
When you come to the bootcamp, he will show you all that. On top of that, we have in coach accountable in our coaching software. He gives you a list of all the fees. He gives you the emails of what he uses. Essentially, you’ll have to get into your software and set all that up, then you’ll have to set up all the emails to go with all those like reminders and stuff. You have to do all that. It’s a lot of work.
He gives you all of our emails and stuff as well, so then you could copy and be like, “This is good.” StorEdge gives you ESS and all these software. They give you a generic email but you have to get in there and tweak it. It’s good to get an idea of how it works and what we’re doing internally inside StorEdge. Let’s see what else we got here. Past due, yield management. Yield management is where we do all that. Yield management is for the pricing and stuff.
Let’s get in here to the website and then let’s click on get pricing. What does it look like? A 5×6. How much does it cost? Here they are. A 5×6 is for $36. A 10×10 is $75. A 10×14 is $98. A 10×20 is $115. We do have a little couple of little areas that we can do parking on. Let’s do the average of this because I want to see what the price per square foot is.
It’s got $36 plus $75 plus $98 plus $115. We got to divide that by 4, so $0.81 a square foot is where we’re at. In a tertiary market that has a fence that you just push the gate, the national average is $0.88 cents a square foot. This little tiny facility is $0.81 cents and we just raised the rates. I don’t know what we raised it for but we raised the rates quite a bit. Out of those, most people stayed, and now, we have six that are vacant that we have to fill out.
We will be getting them in at $0.81 cents a square foot. The point of this episode is to talk that even though you’re in a little tiny area, you can still charge close to what the national average is. The only state that I see super low prices in is Missouri. For some reason, I see almost every state across the country, all deals because we have all of our acquisitions people. Missouri, for some reason, is super low. It should be way more. It’s at $0.30, $0.40 cents a square foot and it should be way more. People need to start charging more money in Missouri. That’s my personal opinion.
I’ve looked at cities all across the country and you are okay to charge a little bit higher than what you think you can charge in little tiny towns. We’re at $0.81 cents a square foot and we’re getting slowly getting filled up. When we bought this facility, it was filled with people’s crap and nobody was paying. It took us truckloads. We did an auction everywhere. It took us a couple of months to figure out who the owners were. We couldn’t even find half of the owners. We ended up going to auction for most of this stuff, emptying all the units out. There were a good handful, maybe 6 to 8 doors that are completely broken that we had to fix.
We got all the bad tenants out. It took us probably at least 4 to 5 dumpsters worth. We tried to get people to come to take stuff for free. In the end, our boots-on-the-ground person, Pete, and a couple of other people came in and dumped everything and trashed it all. It took several dumpsters for them to do all that with all of the units that were filled, which is completely typical, honestly, with all these facilities. Almost every facility that we have bought is like this even the one that we bought in Blairsville.
This is a $1 million property. The owner himself has so many units full of his own stuff. He’s sitting there and dumping his stuff. That was one of the things that we told him. I was like, “You’ve got to get all your stuff out,” and we’d be close weeks ago. He’s still trying to get all his stuff out. He probably won’t have all that out until like the end of the year. We offer to pay him to get all that stuff out. I was like, “Why don’t we pay you to help you get all this stuff?” He’s like, “No, I need to go through everything.”
On this Warm Springs one, essentially, we got dumpsters. We’ve dumped everything. We auctioned every thought because we tried to get everything out. It was a lot of work, honestly. It took us a lot of work, time, and effort to get that done. After we started slowly filling it up, we used SpareFoot to fill it up. We put a sign-out but we use SpareFoot. In that area, there are only a few facilities that come up for SpareFoot.
Deal Analysis
We were one of the ones that got that filled up pretty well. This was back a few years ago. I’m not sure how SpareFoot is doing now. We use that. Now, let’s look and see what we’re doing here. We’re slowly filling it up again after we raised the rates and trying to make some money on it. I bought this facility for $100,000, so let’s try to see what we’re making on it. We’re going to do like deal analysis on it so you can get an idea of what it is that we’re doing.
First things first, I’m going to measure the square footage on this. We’ll click this building here and we’re going to measure this. I’m right-clicking. I’m going to measure the square footage. That’s 1,500 square feet. We’ll do two buildings. That’s 3,000 and this one’s a little bit skinnier. That’s another 1,000 square feet. It’s 4,000 square feet. Let’s get back into the deal analyzer and we had 4,000 square feet. How many doors is it? It’s a smaller facility.
Let me see if I can figure out in storage what it is. It’s got 45 doors. I’m making $3,645 a month times 12, so $43,740. Let’s put that in the deal analyzer. I’m going to put that as what the number is full and then the vacancy, we have six units vacant. What’s the percent? It’s said 76. We’re going to say 25% vacant. We bought it for $100,000. This changes to an eight cap. Let’s say we bought it at an eight cap. We don’t know what this price per square foot is. We don’t know what this number is yet because we don’t know what the competition is.
It takes a long time to do auctions.
This is where you put the number where the competition is going to be like and what you’re going to be able to increase the juice. We can’t look at that. We can only look at the current and potential. These numbers look about right. There are no utilities there but I’ll leave that there. Insurance and property taxes are about $1,200. When you get into the deal analyzer and all my students that are going to show up to the mastermind, you’ll be able to see this.
This is a formula. That’s the numbers. This is correct. We’re paying about $1,200 a month for this. It’s valued now at around $320,000 at an eight cap. Its potential, if we fill it up, is $444,000. It’s a pretty good deal. There are 45 units, 4,000 square feet. We do have some 5x10s or a couple of weird sizes. That’s why the number comes out a little bit different but typically, most of them are 10x10s or 10x20s. It’s that one row in the back has a couple of 5x10s there. It’s valued at $320.
The potential if we get it full is at $444. You could see that at $100,000, our cash on cash is at almost 50%. We borrowed the money interest only. We got a zero down payment. My lender gave me $100,000 with 10% interest. It’s a five-year loan. There’s no amortization over five years. We’re paying $833 a month. Our cash on cash is 832%. Our target net after the mortgage is 59% or 60%.
Honestly, this is a pretty good deal. We’re doing pretty good on this one. We need to get it filled up again because we did raise the rates up. Can I sell this for a lower cap rate? I’m not sure. If I sell this as a package, I totally could sell this for lower cash. We may throw this into the one that we’re going to sell. If we can get a filled-up, it’s worth $500,000. I don’t know if we could raise the rates or not. You can leave this there.
I’m saying it’s worth at least $500,000 at a 7 cap or at an 8. What would you all do? What do you all think? Is it a 7 cap or an 8 cap? I don’t know. What’s the name of the program that you use to manage your tenants? That’s called StorEdge. We use StorEdge but there’s a lot of software out there, so I would get demos of all of them and pick whichever one you want. StorEdge is the best because it’s the one that you can use to automate everything. I’ve done demos of every software out there and StorEdge is one of the very few that you can automate everything in. It is more on the most expensive. Even the most expensive ones out there don’t do what StorEdge does. I love StorEdge.
Jason says, “Will some areas have online automated auctions?” When I say automation, all of our auctions are online now. In the beginning, when we did all those. StorEdge automates all of your auctions and they use a storage auction company to do that online. It’s automatically connected through API and it’s managed that way. When you saw all those auctions coming up, that’s because StorEdge is managing all that for us. We have to say, “Auction this one,” and it does like whatever it does, which Pete we’ll get into, Jason, for the bootcamp.
“Is there a resource that shows which markets are secondary and tertiary? What’s the determining factor?” For me, it’s population. That’s secondary and tertiary. I’m huge on population and the square foot per capita is based off of the population of the area and the total square footage. It’s your total square footage of the entire area divided by the population of the area. The key is trying to figure out what the total square footage is because some of those are on Google Maps and some of those are not. That’s the hard part.
“Do you charge a daily late fee when they don’t pay on the first?” We do not charge a daily late fee. We charge once a week. He has some fees that he comes up with. Ariel posted about the show. She posted about Storage Nerds, about the course. If you don’t want to have a coach, you want to DIY, Do It Yourself, I highly recommend that you do the course.
As of now, we updated the deal analyzer to version 3 deal analyzer in the course. You don’t get this deal analyzer that you saw because this is version 4. Only my students get this in the mastermind but you will get version 3, which is what all my students used up to when I release it. You do have that. She put a link in for $1,000 off the course.
If you want to, DIY, Do It Yourself, and you don’t want to come and pay all the money to get a coach, then I highly recommend them to do that. She posted that link out. Any other questions? Boots on the ground is typically a $200 a month. It’s not that much money until you start getting big like me then you start paying a lot of money. For this type of facility, you could probably pay $200 a month and somebody will be your boots-on-the-ground person.
“I own an 80,000 square foot warehouse in Maine. What’s the possibility of a JV with someone or a company to convert it to self-storage?” Post it out in the Facebook group. We have our Facebook group, Super Simple Self-Storage. Everybody should be a part of this, make sure you join. Post that question as, “I have this thing. I have this building. Would anybody be interested in partnering?”
What you could do now, too, is start getting quotes on that proposal. The proposals are free on how much it would cost. The thing is that steel’s coming down. I got to jump off but steel is coming down. In 2023, steel prices are going to be a lot better. That might be something that you may want to hold off on until this time in 2023 but start looking at prices and start preparing so that when you do find somebody who would be interested in working with you, you’d be like, “Here is my proposal. This is my presentation. These are the numbers. This is what we’re going to do.” You look like what you’re talking about. I will see everybody at the next session. I got to jump off at the pitch, StacyRossetti.com/Fund. If you want to be like a passive investor. I’ll see you soon.
Important Links
- StorageNerds.com
- StacyRossetti.com/Fund
- Crexi
- LoopNet
- Ms. Lillian’s Self Storage
- SpareFoot
- StorEdge
- Super Simple Self-Storage – Facebook group
