It’s time to learn more and deep dive into the self-storage space! Stacy Rossetti takes a look at a mismanaged property to see how it can be made profitable. She does property analysis, takes a look at the property’s occupancy rate and physical condition, and draws up a plan. Stacy also fields a few questions from the audience too! Tune in and learn more about this interesting asset class.
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Case Study: Justin’s Self-Storage
I want to say thank you so much for reading. If you’re from Austin, then we’re family because I’m from Austin, Texas too, which is the best city in the country in my personal opinion but too expensive to live there. I lived in Atlanta for a long time, so I’m super spoiled in the prices of things. Georgia is cheap and then Austin is expensive.
Taking A Deep Dive Into Self-Storage
We will be in Austin in February 2022. We’re going to go hang out with my family but also, we’re interested in investing in self-storage so we’re going to do what I call market research. We drive for storage, go talk to owners and see if anybody wants to sell. I am interested in all of Texas but all of the storage facilities that we own are in Florida and Georgia. Most likely, we’ll stay in that area but I’m in Austin all the time so anywhere in the Central Texas area for me would probably be a good area to invest in because we’re there a lot.
The good thing about storage is that if you run and manage your facilities properly, you could be anywhere in the world and manage them. That’s what I teach my students as well too. Most of you know this. I live in an RV and we travel full-time. I’m in my bedroom. My bed is right here. I could reach out and put my shoulder on the bed. That’s how my life is. Everything’s small.
One of the reasons we wanted to travel is I wanted to prove to all my students that you can live anywhere in the United States or the world if you want it to be because I do have a student that lives in Jamaica. He has a facility in Tennessee and buying one in Florida. If you manage your facilities properly, you can be anywhere in the world and manage them. That’s truly passive income.
We closed on our eleventh facility and I’m excited about 2022 because we have three facilities under contract and most likely, we’ll get the fourth one under contract. I’m excited about that as well too. We don’t have issues finding properties. Luckily, I have an amazing acquisitions team, which is one person and his name is Chris. We’re thinking about expanding it too because we don’t have any issues with finding facilities. The reason why we don’t have issues with finding facilities is that we talk to owners. The more owners that you talk to, the more chances you have of finding a facility that you want to buy. That’s what we do.
What I love about Chris, and I’m also very good at this, is it’s all about connecting with the owner. The owner wants to know, like and trust you. We’ve talked about this many times during these sessions. You can always go back and read them. If the owner knows, likes and trusts you, then they will sell you their property but if you’re not the type of person to connect with somebody, then you should hire somebody to do that for you. Have an acquisitions person or a partner do that.
If you’re not the type of person to connect with somebody, then you should hire somebody to do that for you.
I hired Chris because I was getting tired of talking to the owner. I have had many people tell me that Chris is a very good person to be acquisitions because he’s very personable. He’s not pushy. He tries to get to know the owner and connect with them so I’m proud to have him on my team. We put an amazing property under contract. I won’t do that one because we are going to do a case study. The property that we put under contract is $1 million. I talked to the guy on the phone.
Usually, I do Zoom with everybody. I said, “Let’s hop on Zoom and I’ll introduce myself.” He said, “I don’t know Zoom.” I’m like, “He might not want to do that.” We got on the phone and had a four-way conversation because his wife got on the phone as well. The owner told me, “Chris is a good person to have you on your team. You should be very proud of him because he does a good job.” When the owner tells you that, you know he’s good.
Chris and I have been discussing, adding more people and building out an acquisitions team. Not for me because I don’t want to have one million properties but to wholesale too and maybe find properties for my students and help my students to find properties. We’ve been talking about doing that for a little while and it’s starting to come to fruition so I’m excited about that. If you want to find properties, you should be talking to owners.
Taking A Look At A Case Study
Chris did not find the property that I’m going to talk to you about in this episode. Out of the 10 properties that we’ve bought or have under contract in 2021, Chris has found 8 of those and then another student in the StorageNerds coaching program has brought me 2 other deals. We closed one of them. One of my students brought me that deal and then I bought it from him. That’s one of them and this is another one.
I wanted to share with you the deal. You can go through the process of me trying to analyze a deal, look at it and see what you think. It’s a case study. Another thing I wanted to remind everybody about is the Monday sessions. Every week, you’re going to have to register. It’s a new link. When I started this, we had one link and then the same people were being reminded.
We decided for 2022 that you need to register for every session and you can only register for three at a time. Go to StacyRossetti.com to register for this. You can register for all three. You’ll get emails for all three and then the next one will come up so you’ll have to register for that. The link will be changing every single time. That way, we’re only emailing and reminding the people that want to show up and come to these things so we’re not annoying people. We already got so many emails so we decided for 2022 that we’re going to chill out a little bit.
We are going to look at self-storage. This is in Augusta, Georgia. One of my students brought me this deal. If I can find the money, I’m going to buy it. This is a good deal. This is my type of property. If anybody knows me, I am the mom-and-pop guru of storage investing so I’m not going to teach you how to find $2 million, $3 million, $4 million, $5 million, $6 million or $10 million facilities. I’m here to help you get your foot in the door.
Eventually, you might want to go buy big facilities. The reason why is because these are the types of facilities we buy, honestly. I’m going to teach you what I know. I’m not going to pretend to not know how to do super huge facilities. I’m going to go to Google Maps and see what this facility looks like. 2218 Rosier Road is the address. I did a pitch to a group of people that were interested in investing in it. We’ve been over this a couple of times.
If anybody is interested in this deal, let me know. If you want to lend on it, you can message or email us at Questions@StacyRossetti.com. I can always share this folder with you so you can take a look at it. There’s a 30-minute video where I am going over the deal. You can watch that. It’s good practice for you to see how I’m pitching and describing my deals to others so I can raise money. Essentially, me doing a case study, there are a lot of different things that you can learn from this. One of them is how I pitch my deals and the other one is how I look, find or fund them. We don’t own this so I’m not going to talk about management yet but this is a good case study for you.
A Deep Dive Into A Property
At one point, this whole property was owned by one person. You will see a lot of this in storage investing. Storage runs into RV parks, both RV storage, car washes, laundromat and commercial retail space. We have another facility under contract that’s almost exactly like this one that we’re buying that I’m going to pitch.
This facility is not even an acre. It’s a little bit less than 1 acre. This facility was built in 1994 so it’s not that old but whoever built this facility, utilized the space well, which I love. I love when I see storage facilities on being the space being utilized properly. On the property, there is a carwash and an easement that comes in the carwash and through one area of the place.
That’s how I know. What I’ve figured out over time is that there is this easement that comes in and the reason why is because at one point, this was owned by one person and then he sold off this commercial building, carwash and storage facility. He probably thought he could get more money by selling it piece by piece but truth be told, most of the time, you can get more money when you sell the whole thing.
This property has 116 units. It is in Augusta, Georgia, which is a town of 200,000 people. It’s not a major metropolitan. It’s a nice, big city. When you want to invest, think about where are good, small to medium-sized cities in your area, state or wherever you’re interested in investing that you can invest in and look at to find properties. Augusta is one of those cities that is also a very good area.
It is one of those cities in the state where it has never gotten huge. What you can do when you look on Google Maps is exactly what I did. You can go to Nearby and then put Storage. That will show you some of the competitors. In this whole area right here, there are not a lot of storage facilities. There’s one over here that is eleven minutes away. Another one is 4 minutes away. I put all these down as competitors.
You can come in, do storage nearby and see who the competitors are. This is like A&A storage. That’s a typical name. Everybody has A&A storage. A&A storage is here and another one is Self-Care Storage. Self-Care Storage is a nice, big facility but it’s all outdoor so it’s a good comp. Public Storage is here as well too and this is a nice big facility but a little bit bigger.
When you start getting stuff under contract, it’s good to look at the competition. One’s Economy Self-Care, which looks run down, and I don’t even think this EMove.com is the right website. I’m not sure if this is an abandoned facility or what. I was looking at and I was like, “Here’s the phone number right here.” You can give them a call but it’s an older one. It’s got brick walls and stuff but somebody may buy this. If you need to wholesale a property or want a property, this is exactly the type of facility that’d be a good one to hold on to and maybe fix-up.
Once you start looking at your competition, you might find something else. The rule for us is once we get one under contract or close on one, we need to find 3 or 4 more storage facilities within a 30-minute to 45-minute radius of that facility so that we can create many portfolios. That’s what we do. Getting on Google Maps, playing with it and looking at all the facilities, even if these are the only ones that you can find. It’s good to look and see what’s out there.
If you want to look at the as-is income, then you should be looking at income-producing properties, not mismanaged facilities.
The truth is I’m thinking that in this area here where there are a lot of storage facilities around the perimeter, are there any storage facilities that are all up in here? A&A storage is right there. It’s hiding in the back of a commercial building. That’s what it looks like right there. Are there any other ones there? Those facilities are not on Google Maps or what I call the hidden market. Targeting those is an important part of the process as well. You can go into the regular Google Maps and then look to see where everything is in terms of where your facility is. I like to spend a lot of time on Google Maps playing around and trying to get to know the areas before I go out there, try to look and check it out.
Let’s get into the folder. I love my Google Drive folders. It’s always super organized. I don’t have one folder with 1,000 files in it and the files are labeled 1, 2, 3, 4 or 5. We try to keep our folders and files named properly. We try to keep everything super organized. Why? Number one, I have to decide on whether or not I’m going to purchase this property. When I’m putting every piece of information into this folder, I want to have it easily accessed and labeled so I know what I’m looking at.
Number two, what I feel is the most important thing that I need to know about whether or not this property is a good property to buy is exactly what your lender is going to want to know. What I do is pitch these deals to my lenders and then share the folder with my lender. The people that have expressed interest in partnering with me or lending me the money on this deal are the ones that are shared with this folder.
Finally, if I decided to wholesale this deal or decide that this deal is not for me, like for instance, that Economy Self Storage, I wouldn’t buy that one because it’s a little bit too small for me, I would probably put that one under contract and then wholesale that facility to another buyer. To find a buyer for that property, that buyer needs the same information that I have in this folder.
Essentially, this folder is a very important folder to have. You want to be as organized as you possibly can so that whatever you decide to do or whatever your exit strategy is for your property, you can share the folder with that person, then they can look and decide. I got into a habit very early on in my investing days to be as organized as I possibly can in my Google Drive because otherwise, it gets too many documents where they are all scattered everywhere and it’s a bunch of craziness. Be as organized as you can.
Let’s get into the property info. What I did is I use LandGlide. If anybody doesn’t know LandGlide, it’s an app on your phone that you can use to search the property information. The storage facility is right here. It’s AA Augusta Storage. The property lies here. These are the borders and the easement. This is where the people come into the facility. You can find that in LandGlide.
On the left, you can put your parcel number or address in and then you search it. This is where it says county link. That is where you can click on that and it pulls up all the public data of that property. The owner sent me the taxes. He wanted me to know how much it was. They pay $2,500 a year in taxes, which is not too bad. It’s an acre of property but it’s based on the value. For 116 units, it’s only appraised at $225,000 so he pays taxes on that.
This is the unit size breakdown of what he has. It’s total of 116 units, 5×5, 5×10, 5×15, 10×10, 10×15, 10×20, 10×25 and 10×30. This one was built a little bit older age but not too old. The reason I know is that there are a lot of 5×5 and 5×10. Typically, you want bigger units but back in the day, you needed smaller units so that’s why there are a lot of smaller units. We’ll get in there and see if we can make some of these 5×5 into 5×10 or maybe put 10×10.
The most important thing is that a 5×5 or a 5×10 do get the highest amount of money for them because the price per square foot is so high versus the bigger that you go, the less money that you make on your facilities. In hindsight, looking back at what the owner was thinking, I understand that because he was like, “I’m going to get a whole bunch of small ones, fill those up and make as much money as I possibly can.” That’s how that is. That’s why you’ll see a lot of storage facilities that have smaller units and the question is, “Can you enable those into different sizes? Do you think you can leave it and get those leased up?” This is what the parcel looks like on LandGlide. You have a strip of land and then you have the back office here. There are climate-controlled units as well.
This is the public data. You can see the address. There’s also a picture here and a little bit of information. It’s owned commercially. It’s got some stuff on it like typography. It’s got the total square footage of the property. It’s 0.8 six acres. It’s built in 1994. Each of the unit sizes is 16×50 and 50×450. It also shows you what the last purchase was for and these kinds of things for a market value. In 2020, it was purchased for $200,000.
These are the pictures as well that came up in the public record. I copied these and put them into my picture so I had them. There are a lot of great-looking pictures. The appraisal was done in 2020. They give you a lot of information in public data so you want to look at it. It’s 1,650 square feet for this building and then we’ve got this 54×50 building, which has some climate-controlled in it. It has got 3,600 square feet. That’s the long skinny one and 400 square feet for this little building that was there.
It does give you quite a lot of information. Some public sites don’t give you a lot of information but Georgia is good about that. I like that about them. Here are some pictures of the facility. We’ll go through it quickly so you could see what it looks like. I took these pictures off of the county website and the ones that the owner sent me. You’ll be able to tell the difference.
When the owner bought it in 2020, he let it go down the tubes. That’s what happened. This is a severely mismanaged facility. There were a lot of kudzus in the back but it was even worse. The owner did clear all the kudzus as it was supposedly cleared. People are dumping their trash and doing whatever. My job is to come in and fix it up.
There’s a nice gate in the front though. The owner did fix the gate so that’s a good sign. He was trying to clean it up but he got in over his head. It’s nice. It’s not too bad. It just needs some TLC. I love when it’s like, “The property is not bad. It just needs some TLC,” which means it needs to be cleaned up. Honestly, it needs to be managed properly. That’s what it is.
There are some more buildings. It is coming all the way over to 114, 115 and 116. That’s the final one. This is the front of the gate where you drive in and one little building in the back. The inside of the buildings as you can see it’s being dumped and nobody is caring for it. In this space is where all the climate control is.
These are the outside units. With the doors, you’ll see this a lot on storage facilities where they have an opening and then you walk in and that’s where you can do the climate control or more climate control. That’s one way for you to be able to put more units in. That was pretty good. This will be where the self-storage sign is.
The owner had a sense for the price work-related. All kudzus had been done, also the electrical work on the gate. All the fencing had been fixed and that was $5,000. It’s the initial cleaning. He came in, spent another $8,500 on fencing the entire property and then some disposal fees. He did some removal of debris clean-up. He had a lot of work done. There are some more. All the doors have been fixed because there were a lot of doors that weren’t working. He did that. This is the energy bill. It’s only $144 a month. He sent me that as well too. The plat shows the egress. He wanted to show that because I asked him about that. I said, “Is there an egress or easement?” That is why he put that in. That’s all the work that has been done.
Analyzing The Competition
Here are the competitors. I took a screenshot of all of the competitors and their websites. There’s one which is probably Public Storage. They have many units. If you went to this website, you were like, “I need to rent a unit.” “What would you do?” I’d be like, “There are way too many units. I can’t figure out which one I like.” There are a lot of different sizes. It must be a thing in Augusta, Georgia. Here’s another one. This one doesn’t have too many units right here, just a couple but you can always tell the units. Here’s more and more of the competitors with their units. I put that into the deal analyzer.
What I was doing is analyzing the competitors. If I click on the Public Storage website for Orchard Street, then it comes up to the website. You can get in and see what sizes they have and what they offer. You could see small 5×5, 5×10 and 10×10. It’s going all the way to 10×10 but they have way more than that. When I’m analyzing the competitors, I’m only looking at apples to apples. I’m not sitting there in the deal analyzer and putting every single one of the units in. What I’m doing is saying, “A&A has an outside unit of 5×5 and they’re charging $32 a month.” I’m going to put that on the sheet. They have 5×10 outside units so I’m going to put that at $43. I’m not going to get in and do all kinds of crazy stuff. That is how I look at the competitors.
Taking Aim At Cap Rates
Finally, we can get into the deal analysis. This is the spreadsheet that I run my numbers on and look at everything. The purchase price of this facility is $395,000 and it’s only making $32,000. I ran it at an eight cap. The question is, “What is the cap rate in this area?” I don’t know. I ran it at an eight cap because I feel comfortable in an eight a cap but typically in cities like Augusta, sometimes it could be 5, 6 or 7 caps.
A severely mismanaged property is a lot of work, and you have to have a strong gut and patience.
I haven’t put anything in the loan and interest rate yet. We could put 4% and then 240 months maybe. That’s a typical interest rate. I’ve made $32,000 in 2021. It’s 116 units, 11,000 square feet and 25% full. Honestly, this thing is not worth anything at all. It’s barely making $32,000. It’s not worth a lot of money so the question when you look at a deal like this is how much money can you make?
When you analyze mismanaged facilities, you don’t want to look at the as-is income because if you look at the as-is income, you are never going to buy a storage facility. That’s for sure. If you want to look at the as-is income, then you should be looking at income-producing properties and not mismanaged facilities. What I do is I look at the value add on the backend. There’s no room to grow or expand on this property here. The only thing that we can do is raise the rates.
With a $32,000 annual income, it’s 11,000 square feet and the average rent per square foot is only $0.32 per square foot. What we want to get to is a minimum of $85,000. I know for a fact that it should be right around this number because this is the type of facility that I buy regularly. It should be making at least that much money. What I did is I compared the competitors and looked at what the competitors were charging based on their websites. That’s where they came up with the $0.70 per square foot.
My goal when I purchased this property is to get it from $32000 to $85,000 annual income in a year. There is no real CapEx or initial cleanup. When I buy a facility, one of our stipulations is that all the trash is going to be gone. The units are going to be cleaned up. Everything is going to be good. We might have to do some auctions but it’s only 25% full. There’s not going to be a lot of time and effort to get this thing vacant or leased up. Everything is going to be all cleaned out. He has already been through that process. I did not put a lot of CapEx or initial cleanup on this. I feel like as soon as we buy this thing, we should be able to start marketing it properly and getting it leased up.
The property taxes we know were $2,500. The utility is $1,200 and the insurance is about $1,500. This is the opportunity right here. At 116 units, 11,000 square feet and $0.70 a square foot, we should have a value of around $781,000. We’re taking it from a 2 cap to a 16 cap. Most of the mismanaged properties that I buy are going to be between negative 2 and 4 caps. The goal is to get them to the highest possible cap rate that I can so that I can sell it at an 8, 7, 6 cap or whatever it’s going to be in the next three years. That’s how I look at it.
For a severely mismanaged facility, you’re going to buy it somewhere in the zero cap rate or horrible cap rates. You’re going to want to get it to the highest possible cap rate that you can and then sell it at the typical cap rate in that area. $781,000 is what I have as an 8 cap. These are the expenses for our company right here. If I went and got a mortgage on it at a bank, which I can’t but if I went to go at a bank, the mortgage would be about $35,000. The property maintenance is about $6,000. That’s for our boots on the ground person. That’s how much it’s going to cost. The staffing is for our office manager and our phone person, which are two separate people in our company. The software is property management software.
Marketing is how much you’re going to pay and charge in a year to get your leads and lease-up. We’re giving ourselves a little bit of money for that as well, too. Based on what the interest rate is going to be, I don’t know if it’s going to be 5% at 36 months or if it’s going to be an 8 cap at 36 months. I’m not sure so I can’t run the numbers based on that but that does not change what the value of the property is going to be.
What I wanted to show you is the unit mix. I put all the units in. This is what is at the facility. There are 5×5, 5×10, 10×10, 10×15, 10×20, 15×30, 10×25 and 5×15. This is what he has as his unit mix. It comes out to a little bit over 11,175 square feet. I got his prices right off the website. He has them at a normal rate but he’s not leasing and managing them so it’s not getting leased up. He has them at around $0.60 in square feet. He has them at $30, $42, $73, $90, $106, $125, $145 and $158 mixed up the unit. We are going to be increasing the rate to $0.70.
Even if it’s a mismanaged property or 25% full, we are going to be charging the rate that should be charged based on what we found from the competition. Our prices are cheaper than the competition. We’re going to push it up there and then what we’re going to do is make sure that we are marketing the property properly. He’s not doing any marketing at all so we will start doing that immediately. We do that by creating an online presence and doing online marketing.
This section is where you could add new construction but we can’t add anything so we don’t do anything on that section. This is what it’s filled to. He should be making about $4,000. Remember that on the info page, he is only making $32,000 but what he should be making based on his occupancy rate is $4,000. He should be making around $48,000 a year and only making $32,000. What I hear is that the economic occupancy versus the physical occupancy is very different. To me, that means that it’s not managed properly. He’s not doing what he should be doing. That is the unit mix.
I went and put the competition. I put Secure Care, Public Storage, AAA and Augusta Lock all here. I didn’t fill in all this information but you should get all this information. Do they check a credit check and cash? I haven’t done that yet. I went through and analyzed all the units that we have here. I analyzed what the competitors are doing as well too. We can see Secure Care has a 5×10 for $43, a 10×10 for $71, a 10×15 for $88, 10×20 for $110, They have no 20×30.
Planning For The Future
The only company that has a 20×30 is Public Storage and they charge $144 a month. For the 20×10, they charge $115 a month. We’re looking at all of the different facilities, comparing them and then running numbers based on their average. That’s what the purpose of looking at the competition is. It’s very important for you to be analyzing your competition so that you know what you should be doing and where you should be in terms of pricing because that pricing fits into what your opportunity is going to be. Are we going to be at $0.60 or $0.70? Where are we going to be in the next months for this property?
We ripped the Band-Aid, get it done and over with. We get the ones out that don’t want to pay that much. The owner has not raised the rent in a couple of years and even before COVID, which is very typical. Once you start looking at the numbers, you’re going to want to learn how to look at the whole vision but based on a purchase price of $397,000, we’re going to have a cap rate of 16%. We can sell it at an eight cap. Our NOI is going to be around $62,000.
I don’t want to minus the mortgage from that because I don’t know what my mortgage is going to be. Am I going to partner with somebody who has no mortgage at all or is somebody going to lend me the money and then I’m going to have debt on the property? It’s half a dozen of the other. All that entails is what is the risk level of your lenders. Some of my lenders want to have a lien on the property and some of them just want to partner. It depends on that but you will be looking at your gross potential rent minus all of your expenses. That’s what creates your NOI.
That’s the property in a nutshell. Is this something that you would buy or something that you would not buy? I’m going to remind everybody that the StorageNerds doors are open. I am taking applications. I have the availability to do calls. I’m looking forward to talking to as many people as I possibly can. If you are interested in the coaching program, then make sure that you please go to StorageNerds.com and apply.
If you read this when the doors are not open, then you can get on the waitlist and wait for the doors to open again. Once you do join, you do get access to my deal analyzer, which is also good so you could practice putting the numbers in and try to figure out everything while looking at the picture as a whole. We tried to make the deal analyzer as easy as possible for the students because you don’t want to make it overly complicated. It’s not that difficult to analyze a deal once you get the hang of it but I feel like sometimes people like to make it super overly complicated.
If you have a piece of property that you already know that you want to build on, your next steps are going to be making sure that it’s zoned properly so calling the county, talking to them and letting them know, “I want to put a storage facility on this property. Is this okay?” You need to get the thumbs up first from either the city or the county depending on where you want to build that.
The second step is that you want to get somebody that does metal fabrication and builds storage facilities. Find somebody to do that and then they can do a proposal for you. They can lay out how your property is going to look. They will give you your price per square foot and the cost so that you can analyze how much your land and the storage facility cost and in the end, what it’s going to be worth once you get it up running and leased? The prices are so expensive so the next question would be is, is it worth it?
You don’t do upgrades. You do value add.
In investing, you never want to ask why. People do things to do things but essentially, he does not want to manage this thing. He thought he wanted to get into self-storage investing and then in 2020, he decided that it’s too much work. A severely mismanaged property like this one is a lot of work. You have to have a strong gut and patience. It’s not like buying an income-producing property.
When buying an income-producing property, you could buy it and within 1 month or 2 months, you’re making money on it but for mismanaged properties, they need TLC. If it’s slightly mismanaged, it’s only going to take a couple of months. If it’s medium mismanaged, it’s going to take half a year but if it’s severely mismanaged, you could be working on this thing for 1 year or 1.5 years.
We buy many severely mismanaged properties and they take us 1 year and 1.5 years sometimes to get those things up running and leased up. It’s a lot of work, especially for us because we have so many facilities. Our boots on the ground person only have so much time to go around, fix stuff and do stuff. We lease-up as much as we can and then fix stuff. That’s our process.
Honestly, we are slow. We’re not pedal to the metal type of people. I’m a typical self-storage investor and I’m slow. That’s why I love self-storage investing because you can be slow and you’re still making money. This is how bad do you want to make your money. “When stuff is dumped like that outside, can you throw it away? How do you handle that?” We’re going to throw that stuff away when it’s like that. There’s no way to figure anything out. If there was a unit that was locked and wasn’t being paid, you’d have to go through the auction process. What people do is go into the unit, take out what they want and leave everything else everywhere.
It’s 75% vacant, 25% full. I do offer the analyzer but only to my students so you have to join StorageNerds to get access to that. I target cap rates at negative 2 to 4, which is opposite to most people in the industry. I like severely mismanaged facilities. We have also bought income-producing properties because we offset. We’ll buy this facility here, go around and try to find maybe a more income-producing property that’s 75% full. That one will offset the cost and it’s going to cost for this one as well. That helps us along the way.
Everybody thinks that the purchase price is tied to the current income but if you’re going to think that way, then you’re passing up a lot of good deals. Typically, for me, on a mismanaged property, I like to triple my value. This one is maybe double if it’s an eight cap. Is Augusta an 8, 7 or 6 cap? I don’t know. For me, I ran it at an eight cap and I’m only doubling the value but if I can sell it at a 7 or 6 cap, then it’s going to be way more than that.
I honestly feel like if I hold onto this for a minimum of three years, it probably will be. We like to double the value of the property. A lot of times, we’re tripling the values when we’re buying mismanaged facilities. You cannot do that for income-producing properties. That’s why you’ll hear in the storage investing world a 1.6x or 1.8x because it’s almost doubling but not quite. If they’re like, “I 3x that thing,” that’s what they’re talking about.
I’ve got lots of links here if you’re interested in joining the coaching program, getting on the waitlist or buying the course. You can buy Super Simple Self-Storage at StacyRossetti.com. There’s not an issue with selling your property. People are paying ridiculous amounts of money for properties. I don’t think that you’re going to have an issue with selling their property. That’s my personal opinion but take it with a grain of salt.
The truth is that one person wanted to build. We need more storage facilities, especially in secondary and tertiary markets. We may be oversaturated in primary markets but in secondary and tertiary markets, as long as you do a feasibility study and make sure you’re going to be okay, we do need more storage facilities.
I’ve got a great deal with seller financing. I’m buying that sucker. I’m not going to pass that thing off. You need to ask the owner if they’ll seller finance because a lot of them will if you ask them. If you don’t ask, you’re not going to know. The physical occupancy is when the owner is like, “I’m 100% full.” You ask the owner, “If you’re 100% full, how many people are paying? What’s your monthly income?” They say, “I’m full but only 75% are paying.” Physical occupancy is how much are you full and economic occupancy is how many people are paying. There’s a big difference between both of them. The bank is going to look at economic occupancy versus physical occupancy.
Stacy said, “This seems like a very good deal if you can get a 16% cap rate. Can you speak to what upgrades you’re going to make to get it?” I’m only going to increase the price. That’s it. In commercial real estate, you don’t do upgrades. You do value add. That’s another word for it. My value add is going to be increasing the price and then if I could, I would add on but I can’t so I’m only going to increase the price.
We went over in Google Maps to find storage facility owners. I went over into the deal analyzer to calculate. It’s run at $0.32 a square foot and I want to get it to $0.70 a square foot so the as-is price is the total square footage divided by the income. You want to get that as high as you possibly can. Cap rate is going to be what your property is valued at based on your location and then how much income you’re making.
There is a whole bunch of things going through that. I do a lot of videos on this on YouTube. You can also join StorageNerds or buy my course to get deep into the stuff. Going forward, you should sign up and talk to me through StorageNerds at StorageNerds.com. Let’s chat to see if the coaching program is a good fit for you.
Time For A Q&A
I appreciate everybody coming out. If you have questions, go to the public Facebook group and put your questions there. I will answer those and everybody else will chime in as well too. If you can, search Super Simple Self-Storage. You’ll also be able to find the group at StorageNerds.com. We’re all there to help you and answer your questions. I appreciate it. Take care and I will see you at the next one.
Important Links
- Questions@StacyRossetti.com
- LandGlide
- EMove.com
- StorageNerds.com
- Super Simple Self-Storage
- YouTube – Stacy Rossetti Teaches
- Super Simple Self-Storage – Facebook Group
