How do you get storage facility owners to sell? The first, most simple step is to talk to them! The more owners you talk to, the more chances you have of finding one who wants to sell. Listen to this episode as host Stacy Rossetti gives practical guide on negotiation, owner financing, and deal analysis. For instance, you should use Zoom to negotiate with your owners and sellers. Then you can move on to physical interaction because face to face is still the best way to build rapport. Don’t miss this episode!
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How To Get Storage Facility Owners To Sell
For those of you that are new, I’m Stacy Rossetti. I have been investing in real estate since 2011. Around that time, we started looking for our first property. For many years, I wholesaled and renovated properties. If anybody knows anything about wholesaling and renovating, put in here that you’re a real estate investor so I know that you know what I’m talking about. I did a lot of renovations. What happened was I got pregnant and as soon as I got pregnant, I started freaking out because I had not focused on passive income at all. Essentially, if I stopped working then I would have no income. That freaked me out.
My husband and I got together and decided that we were going to let me start focusing on passive income. Our ultimate goal is to spend as much time as we possibly can with Lillian. Lillian is our daughter. Our storage facilities are named after her, Ms. Lillian’s Self-Storage. You can go to MsLillians.com and check us out. We’re in the process of buying our twelfth facility and hopefully, it’s going to close. I keep talking to the attorneys and they keep saying, “Tomorrow,” and that has been going on for months. I’m dying here. Sometimes properties take forever to close. This would have had some major title issues, which they got all figured out. It took a couple of months.
There are all these little things coming up. Also, the attorney is not very good. Make sure you find a good attorney to close your deals because when you have a bad attorney, it’s hell to close your deals and you have to be on top of everything. We’re closing on our twelfth facility. It looks like we’re getting number thirteen under contract, which is cool. I’m excited about that. Chris is my Acquisitions Person. He has been working with me. He’s doing great and he finds a lot of properties for us. He told me that it looks like we’re getting numbers 14 and 15 under contract. He’s got two more properties. I’m so excited.
We’re going to start the New Year with a bang. The goal is to buy as many facilities as we can in the year. In 2021, I said I was going to buy 10 facilities and I ended up buying 6. I can’t put a number on how many facilities I’m going to buy but we’re going to buy as many facilities as we can until my husband tells me no more. He has his good days and bad day. My husband, Pete, manages our facilities so you will read his name a lot as well. He does a good job managing our facilities. He’s good at it so I’m glad that he took over that because I’m not that good at it, honestly. My job in the company is to find the money. I’m the one that raises the money.
Chris is our Acquisitions Person. He finds the properties for us. Pete, my husband manages them together with Bonnie, who’s our Operations Manager. Patrick is our Customer Support and Darryl is our boots-on-the-ground person. We have quite a number of facilities and doors but that’s it. It’s five of us now. As we grow, we will get more people. The one thing I love about investing in self-storage is that it doesn’t take a lot of people to manage them, especially for everybody here that wants to get started. A lot of people want to buy smaller facilities to get started, which is what I teach and do as well anyways.
The more owners you talk to, the more chances you have of finding one who wants to sell.
Wholesaling Self-Storage
It doesn’t take a lot of work or people to manage these things. I call ourselves the lean, mean self-storage investing machine. Let’s get started. The truth of the matter is you don’t need a lot of money to get into real estate investing. You need courage and grit. You need to be like, “This is the thing I’m going to do.” It takes a lot of work on the front end to be able to do this but it doesn’t take a lot of money. The truth of the matter is that if you don’t have a lot of money, you should be wholesaling self-storage and real estate. Wholesaling self-storage is one of my most favorite things and I love helping my students to do this as well too.
Buy An RV Park
If you’re not on my email list, make sure that you get on the email list by going to the Stacy Rossetti website and signing up for the webinar. You will be on the email list. I posted out an RV park for sale, which has nothing to do with storage at all. I get that but it’s in the same family. The hottest industries are mobile home parks, storage and RV parks. Everybody wants to do that. Before we get into our main topic, I’ll tell you this story. One of my students, Carrie is doing awesome at calling owners. I tell all my students, “You should be talking to at least ten owners a week.” The more, the merrier. The more, the better because it is all a numbers game.
Educate The Owners
The more owners that you talk to, the more chances you’re going to be able to find a deal with somebody that wants to sell. The more owners that you talk to, the more you’re going to find people that want to sell. You have to get out there and start talking to the owners. This is what Carrie did. She’s very good at this. She listened to what I said and she started calling owners. She only had a certain amount of money to be able to pay to be in the coaching program. She’s like, “I have to get a deal within this time slot because this is all my money. I’m going to get out there and do a deal.” She has done well for herself. She’s got a couple of deals that she’s working on. One of the deals is this RV park.
She happened to call an owner of a storage facility and said, “My name is Carrie and I’m trying to get ahold of the owner. Are you the owner?” He said, “Yes, I’m the owner.” She said, “I’m trying to buy my first storage facility so I’m calling all the owners in the area. I live up in this area and I’m calling to see if you’re interested in selling.” She’s very good on the phone because she’s vulnerable and is herself. When you’re talking to an owner, you want to be as authentic as you possibly can. I had a student that I had a coaching call with previously. He said, “Should I present myself as this professional business person when I talked to owners? Should I have a professional letter done? Should I do all these things?”
The truth of the matter is that when you are your authentic self or a real person and you can connect with these owners, they eat that stuff up out of your hand. What Carrie does is she’s like, “I’m trying to find my first facility and get one under contract. I’m calling as many owners as I possibly can and seeing if any of you want to sell. That’s all I can do.” She talked to this one owner and the owner is like, “I’m not ready to sell but if you’re interested, a friend of mine around the corner wants to sell their RV park.” She’s like, “I’m interested.” She didn’t get a storage facility but she got an RV park.
She called the RV park owner up and said, “I talked to this guy around the corner. I was trying to buy his storage facility. He’s saying that you’re interested in selling your RV park. Would you be interested in talking to me about it? I’m trying to get my first deal under contract. I want to do a commercial deal. I want to do a storage facility, a mobile home or an RV park. I would be interested in talking to you if you’re interested.” He said, “I have been thinking about selling so let’s talk.” They started this relationship by talking on the phone. He talked on the phone forever and told her his whole backstory about how he built the RV park.
It’s a little tiny town in Texas but it’s right in the middle of where all the wind turbines are. She started building this rapport on the phone and he said, “I like you. If you’re interested, you can come down here and I’ll show you around. We can discuss whether or not this is a good deal or not.” She said, “I’m interested.” She drove over to his place one day, met the owner and took her around. It’s a tiny RV park and it’s situated in the middle of all the wind turbines in that area. He gets his business from the people that go and work on the wind turbines. A lot of times, they will go there, stay there for a couple of months, do their maintenance or whatever they do and then they leave.
If you don’t talk to owners, you won’t get a deal unless you go through a commercial broker.
He said that’s what he has been doing with this RV park for the last couple of years or so. He was interested in selling it. She came to me and said, “Is this a good deal?” We ran the numbers on it. Honestly, the truth is when you learn how to run commercial deal analysis, you can run it on any type of commercial property but you have to learn how to run commercial deal analysis. She had the spreadsheet and we put the numbers in, ran the analysis and came up with an offer. He accepted the offer. He wanted one number and then we offered him a different number but it was almost around the same thing. She put it under contract so we’re going to be pitching it.
If anybody is interested, you are more than welcome to come on, listen to the deal and see how we pitch. Anybody is welcome to join. You never know you might be buying an RV park. We sent that email out to our list because I have a list of 20,000 people. Within 30 minutes, we had 50 people sign up for that thing. That’s the power of cohost selling. That’s what I do with my students. I’ll walk them through the deal and help them get the deal. If they want, I can help them to sell it as well too and we partner on the deal. We will see if we can sell this RV park. I’m excited. I haven’t sold an RV park yet so we will see if we can work that out. The whole point of this conversation is talking about how to talk to owners.
I noticed even with my students that you have this fear of calling and talking to owners. What I want to talk about is like role-play. You come up with some ideas or suggestions of what you think an owner would say when you pull them up and then I can help you to overcome your fears. That way, you can get out there and start calling some owners. I say this over and over again to all my students. If you are not talking to owners, you are not going to get a deal unless you’re going through a commercial broker or going to Crexi or LoopNet and paying a ridiculous amount of money for these deals.
I had a student. He emailed me and he was like, “Stacy, I need some help with this amazing deal. I’m putting it under contract. I want to get your thumbs up so I know that this is a good deal. It’s a storage facility. It has been on the market for 200 days and I’m not 100% sure why nobody’s buying this. This is a great deal because what I did is I ran the numbers with your deal analyzer and it looks like it’s a good deal.” I said, “Send me the deal.” It was 164 units for $2 million. If you don’t know this, you will know this. You can go onto Crexi and they will give you the NOI of that deal. They will give you the number of units, total square footage, annual income, expenses, property taxes and basic information.
Crexi has a calculator that calculates the NOI for you. If you don’t know what NOI is, it’s net operating income. It’s not your annual income. They calculate it out for you, supposedly. Every time I have run numbers on Crexi, their cap rate is not right. I don’t know how they’re coming up with their numbers but it’s always not right. I always tell my students, “You don’t want to go onto Crexi or LoopNet because the prices are ridiculous. It’s bad.” This is another case like this. He sent me this thing. It’s $2 million for 164 units. Automatically, I already know that $2 million for 164 units is too expensive. I pulled up the deal analyzer and ran the numbers.
What Crexi had said is the cap rate was 7.82% whether or not you understand that or not. My student wrote me an email and said, “Crexi is saying that the cap rate is 7% to 8%. Why is this thing sitting on the market for 191 days? I don’t understand why this thing is not being put under contract. I want to put it under contract.” I ran the numbers based on what Crexi is giving me. You have no idea whether or not this is true because a lot of times online, it’s all a bunch of crap anyway. I ran the numbers based on what they gave us. The 164 units were 25,000 square feet. I can’t remember the annual income but I came up with the cap rate at 5% and it was valued at $1.4 million.
That’s $600,000 off what my student wanted to purchase this thing for. I wrote him back and told him, “This property is worth $1.4 million.” When it’s 100% full and it’s doing great, it’s going to be worth way more than that but it’s only worth $1.4 million. You don’t want to buy a $2 million property when it’s only valued at $1.4 million because every single month, you’re going to have to pay the mortgage on that facility. Where are you going to get the money? It isn’t coming in through the income. That’s for sure. It’s going to take you 6 months to 1 year to start making enough money to pay the mortgage and all your bills for that facility.
On a smaller facility, that’s a couple of hundred thousand dollars or $500,000. If you have to come out of pocket $500,000 a month, that’s doable. I buy properties where you have to come out of pocket for the first year a couple of hundred thousand dollar properties. That’s doable but you can’t on a $2 million property come out of pocket a couple of thousand dollars a month. Who wants to do that? Nobody wants to do that. I said, “$2 million is not a good deal. Put an offer in for $1.4 million.” I never heard back from him. The question is, “Is it too late that he already put it under contract for $2 million?” I hope not. The property is only worth $1.4 million.
When you’re buying these big facilities then you want to make sure that you’re putting it under contract for what it’s worth so you don’t have to come out of pocket thousands of dollars every single month. That’s why I don’t go onto Crexi. It’s because the numbers are crazy for 90% of the deals. Every once in a while, you might find a diamond in the rough but most of the time, it doesn’t work. On super huge deals where you might buy $3 million, $4 million, $5 million, $6 million or $10 million, maybe those numbers are okay. I don’t look at big, huge and monstrous deals. I look at deals with $3 million or less.
Run Your Numbers Properly
For me and most of us out there in the world, with Crexi and LoopNet, it’s very hard to find good deals. You have to keep an eye out and know how to run your numbers properly. Do not trust the numbers that they are giving you. Learn how to run your numbers. It comes back to finding and talking to the owners and getting them to work with you. We’re about to put a property under contract. I’m excited about this deal is $1.1 million. He wanted $1.2 million but we offered $1.1 million and also owner financing. Let me run through this deal with you so you can get an idea of how I do my deals and get owners to work with me on my numbers.
Chris found this deal. I’m not going to tell you where it is because we don’t have it under contract yet but we should be able to get it under contract. I got two good deals. I’m so excited. Chris found this property right by calling owners. His job is to call every owner in the state of Georgia and the Panhandle of Florida. That’s where we focus our business. We’re looking into Texas so he’s calling people in the Texas area as well. He called this owner up and the owner said he is interested in selling. Essentially, the conversation went something like this. I know Chris because I trained him. Chris is very good on the phone and I have had many owners tell me that Chris is a good person to work with.
Owner financing means the owner can be the bank.
You have to have this personality where you’re being authentic. Chris is good at being authentic and being who he is. Chris calls him up and says, “We have a couple of storage facilities in the area and we’re looking to pick up another one. Are you the owner? Would you be interested in selling the property?” The owner was the one that answered and said, “I have been thinking about selling my property for a while but I haven’t done it yet. Another guy called me up and told me that he wanted to buy my property but he didn’t rub me the right way. In the end, I decided not to work with him.” That’s a typical answer or something that an owner would say.
“I have had offers before but for some reason, I connected with you. You’re the reason why I’m going to sell to you.” This is what they have said to Carrie, me and Chris. I hear this over and over with my students. Most of the time, these owners want to connect with you. The way that they connect with you is that you build rapport with them first on the phone. The first thing that you’re going to do is talk to them, meet them face to face, build even more rapport and connect with them. On top of that, it’s also like, “I’ll show you the way that I do it as well,” which I call virtual negotiations. I live in an RV. I don’t live in the area that we buy in so I do virtual negotiations.
Chris called and said, “We’re interested in your facility.” The owner said, “Do you want to rent something?” He said, “I want to buy your facility. We’re interested in buying it.” He said, “I’m very interested in selling. I haven’t come across anybody that I have been willing to work with. I had somebody that I had talked to previously but he rubbed me the wrong way so I decided not to work with him.” Chris said, “We own a facility, a little ways away from yours. We’re looking to pick up more in this area. I’m calling all the owners and introducing myself. I’m the acquisitions person for the company. They own 10 or 11 different facilities and we’re looking to pick up some more.”
He said, “I’m open to discussion. I’m interested in talking because I have been thinking about it. I just haven’t been pushed across the line.” This is how they talk, honestly. If they’re thinking about selling, this is how the conversation is going to go. If they don’t want to sell, the conversation is going to go, “I’m not interested.” If they say, “I’m not interested in selling,” then you say, “Is it okay if I send you an email? You can keep my contact information. Can I send you a letter?” Usually, we say something like, “Can I send you a letter or email with all my contact information? If you ever do decide to sell, we would be ready to buy because we are looking for facilities in this area.”
They usually say, “Send me a letter or email.” We have some people that want letters or emails. You ask for both because you don’t know what their way of conversation is. That’s a no. I was talking to another student. She said that she called an owner up and the owner said, “I have been thinking about selling but why would I sell it to you when I could list it with a listing agent?” When they say something like that, your answer is going to be, “If you list it with a listing agent, it’s going to cost you 10% or more to close the property. If you come through to me, you’re not going to have to pay the listing agent to sell your property. There are no realtors involved at all. You’re going to save 8% to 10% on your property.”
That’s how you get them with the listing agent because he had that question so we discussed it. If they say, “I’m interested and open with discussing it,” what you’re going to do is say, “All I need to know is a couple of things so that I can run my numbers and we can give you a good offer.” He said, “Tell me a little bit about the facility.” “The facility is X amount of units and X amount of square feet. This one here that we’re going to buy, there’s storage plus commercial property as well.” It’s storage plus mixed juice. It’s a different scenario. He said, “There are 50 units in storage. There’s commercial property. We have eight different businesses that we rent out to as rentals.”
Chris said, “Give me all the income that you get. I need to know the annual income for your storage facility and the annual income for your commercial property. For me to run the numbers, I have to have those separate.” You don’t want to combine your price per square foot and your commercial property. It’s going to be two different types of numbers. He said, “I don’t have all that but I could put that all together. Chris said, “Why don’t I send you a quick email of what we need from you and then you can work on giving us those numbers? What we need from you is going to be the total square footage of your facility, income of your facility and the number of units of your facility.”
“On top of that, it’s also each of the commercial properties that you have, the size of those and then what you rent those out for on an annual basis so we can run those numbers. I’ll email all this to you.” Chris got his email address. The owner is 74 years old and he said, “I’m going to get my property manager to fill this all out for you. Email me what you want and I’ll get my property manager to do that.” He emailed the list to him and asked him all the questions of what he needed from the data. He asked him the square footage, the prices and everything. The owner 1 or 2 days later emailed him all this stuff back.
You know the owner wants to sell when he sits there and figures all this out. We got a one-page email where it was like, “This is the storage information and everything that you needed from the storage. These are the commercial properties and everything that you needed from the commercial properties.” In total, he makes around $90,000 per year. He makes some money from the storage and the commercial property. He said he wanted $1.2 million for the facility, which is honestly what it should be worth. I have facilities that are making between $90,000 and $110,000 and they’re worth right around $900,000 to $1 million. It’s the same amount of money.
I looked at the $90,000 and knew that was what it is. When you think about it in that way, that’s not a mismanaged facility. That’s an income-producing property. I could go to the bank and get a loan. If I had 20% to put down, I could get a loan from a bank because it is an income-producing property. When you dissect and look at those numbers then you notice that he isn’t charging what he should be charging. That’s one thing that he told Chris too. He said, “I haven’t raised the rate since COVID. I felt bad so I never raised the rates.” He hasn’t raised the rates since 2019 but he should be charging way more. That’s where the opportunity is on this property.
Buy Mismanaged Facilities
Most of the time, I buy mismanaged facilities because I like to buy cheap facilities, manage them properly and make a lot of money on the backend. That’s what I like to do. This is an income-producing property but he’s charging his rates way below what he should be charging. There’s a lot of room for increase, especially in the area that he’s in because it’s a very fast-growing area. On the commercial side as well, he’s not charging what he should be charging. His rents are super low. He should be making way more money than he’s making, especially now. It’s very hard to find rental income of any type especially where he’s at. It’s hard to find that so he should be charging more.
I already knew when I looked at that one page and the numbers. I was like, “There’s a lot of opportunity for this deal.” I got excited so I talked to Chris. We had our weekly meeting and went over the deal. I told him, “I want to put this stuff under contract but the first thing that we need to do is to send them an offer letter.” That’s what we did. We sent an offer letter and the offer letter stated a cash offer and an owner financing offer. I always do at least two offers if not more. He already said, “I want $1.2 million.” I told Chris, “Make an offer for $1.1 million. That is our cash offer. Also, we’re going to make an owner financing offer.”
Face to face is the best way to build rapport.
Owner financing means that the owner can be the bank. Instead of me going to the bank and getting a loan from the bank, the owner can also be the bank. The property is free and clear. He doesn’t owe any money on the property so he can be the bank. On the commercial side, especially on storage, if it’s an older property, most of the time these properties are free and clear. No matter what, you want to make an offer and an owner-finance offer. What it does is it plants the seed and gets them thinking like, “I never thought about that.” I told Chris, “Make a $1.1 million cash offer. Tell him that we will pay $1.2 million if the owner finances it for us.”
We gave him a scenario that I would put 10% down and the interest rate would be 4.5% on a loan that was fifteen years. The term of that loan was $1.2 million so he would make an extra $100,000 on the deal just on the purchase price. I put 10% so that’s $120,000 down. I would pay 4.5% interest and do a fifteen-year loan. If you want to do a balloon, you could do a balloon in five years. That gives me five years to increase the rent, make more money and then borrow against that. He wrote it up in a letter like, “We’re interested in the property. Here’s our cash offer, owner finance offer and terms.”
He called him up and said, “We’re sending you a couple of offers. Take a look at them and let me know what you think.” I also told Chris, “Please set up an appointment with him so that we can get on Zoom. I want to meet him and let him know that I’m interested in this property. We’re a real family-owned business and we’re looking at purchasing the property.” The only thing is that we’re in New York and he’s in Georgia. The only way that we can meet is on Zoom. Chris did that. Essentially, what happened was Chris set the appointment to go over there and take lots of videos and pictures. He had already been there once but on the day that he had been there, it was rainy so nothing came out well.
He was going to go back and take a lot of good pictures and videos, talk to the owner and get the contract signed. He set the appointment and we had a Zoom meeting with the owner. This is something that everybody should be doing. If you find a property that you want, if you can, go there and talk to the owner because face to face is the most important thing. It’s the best way to do it. If you can’t do it like us then do a Zoom meeting. I have done several Zoom meetings with owners trying to get them to sell. We had a Zoom meeting. The owner was there plus his property manager, which we found out was his girlfriend. We met and he’s a super nice guy and so is his girlfriend.
We talked on Zoom for an hour. Essentially, what we did on Zoom was look at the satellite view of Google Maps. I pulled up his storage facility and he gave me the whole history of his facility and all the properties all around it. He had been living in that area forever. This is very typical of owners. He gave me the history. He was telling me about this new highway that’s coming around. It’s going to put us on the frontage road. He has given us the history of him talking to the state and the county, all the permitting and all the stuff that he has been doing over the past. He started with the facility and then added all these buildings on. He has a whole bunch of buildings everywhere.
He spent a good 15 to 20 minutes telling us all the histories. We have been learning about the property. We’re asking him questions, getting to know him, sharing our thoughts on everything and asking him about the permitting process and all this stuff that we’re doing. We asked him things about the commercial property and the roofs. He put brand-new roofs on these things and HVACs in all the places. That’s one thing that concerned us about the commercial property. It was like, “When is the next time that we’re going to have to put roofs and HVACs on there?” He had put new roofs and HVACs. After we talked about all that, we warmed up to each other.
I started talking to him about the money. I said, “We have given you two offers. Which one are you interested in?” He said, “I want the cash offer.” They always want the cash offer. I said, “We could do the cash offer but wouldn’t it make more sense if you did the owner finance? You’re going to be making some money on this deal. You don’t have to pay a couple of hundred thousand dollars in taxes. Why don’t we come up with a scenario where you don’t have to pay that for the next couple of years? We can come up with the down payment and then you pay taxes on that down payment.”
“Over the course of the next 3 to 5 years, you defer those taxes and that will give us a couple of years to stabilize the property, increase rents and do what we need to do so that we can borrow at the highest amount of money that we possibly can.” He said, “I’m open to that.” I said, “Essentially, what you have to do is to come up with the down payment. How much money do you want down?” They’re in the process of building their retirement home. He said, “I need some money for my retirement home.” I said, “Come up with how much money you need for that retirement home and then we can base the rest of the money on what’s left on the terms.” He said, “I’m going to need 15% down.”
I said, “That’s fine. We can do 15% down. I need to know what interest rate you would be okay with. I owner financed another property and closed on it. The owner gave me 4%. Typically, between 4% and 5% is what I’m going to pay the bank. Why don’t I pay that 4% to 5% to you instead of paying it to the bank?” He said, “I’m open to that.” What I learned about talking to owners is it’s not only connecting with them and being honest and authentic but it’s also educating them on the whole process and stuff. He said, “I’m open to that. Let me talk to my CPA. I’m going to meet him and we’re going to go over the contract, the numbers and what I should do. We will come up with a scenario for you.”
I said, “That sounds good.” He’s supposed to talk to his CPA, come back and tell us what he thinks. He may be like, “I only want a cash offer.” Some CPAs don’t understand owner financing. If they don’t work in real estate, they don’t understand owner financing at all. His CPA has done some other real estate stuff. He builds houses. I have a feeling that his CPA is going to be open to it. I was like, “Go talk to your CPA and see what your CPA says.” A lot of times, when a CPA understands real estate investing, they understand that owner financing is one of the smartest ways for you to sell your property because you need to defer all those taxes off.
I said, “Do you have any concerns about anything? We’re interested. We want to get this under contract but we would like for you to at least be a little bit open on working together so that we can get a better loan later instead of now.” He said, “I’m open to that.” He said the only concern that he had was that he was 74 years old, he has some health problems and he’s not 100% sure how long he’s going to live. That’s why he doesn’t want to do a 10, 15 or 20-year loan. I said, “That’s fine. Why don’t we do a 3 to 5-year loan? In 3 to 5 years, we have a balloon. I want that to be amortized over 15 to 20 years.” That’s what we came up with.
He’s going to come back to me with what his down payment would be, interest rate and terms of the loan. It’s what he would want. We will agree or not agree and see what happens. I’m going to buy it either way because it’s a good property in a good location. We will see if I can get them to owner finance it or not. Sitting there, talking to him on Zoom and connecting with him where he could see me and I could see him helped a lot, honestly. When we emailed over the letter that had the offer of $1.1 million or the owner finance, he was like, “I want a cash offer.”
After he started talking to us, getting to know us, trusting us and understanding that we know what we’re talking about then he started to warm up to us and think like, “Maybe we can do something different.” That’s the power of virtual negotiations. You should be taking advantage of Zoom not just to learn and educate yourself. Everybody is on all these webinars all the time. You should be using Zoom to negotiate with your owners and sellers. Pretty much every owner that I have ever talked to doesn’t get on Zoom often. They’re 60, 70 to 80 years old. They’re not going to be Zoom people but they will try to figure it out for you because they understand that it’s better to talk face to face to each other, even if it is virtually.
You want to learn how to do owner financing because will only allow you a limited number of deals.
Answering Quick Questions
That’s what happened. I’m excited about this. Supposedly, we’re going to get his terms back. Maybe he will say, “I only want $1.1 million,” but maybe he will get some offer back. I’ll let everybody know what he says. That’s one of our deals. Let’s answer some quick questions. It says, “Would you buy a storage facility at a 5% cap? I thought it’s better in the double-digit rate.” I would never buy a storage facility at a 5% cap. Personally, that’s not me. That’s primary markets and bigger companies. I like to buy storage facilities at double-digit cap rates.
I’m higher than a 10% cap on every facility. Most of them are up to 20%. When you buy a mismanaged facility, there’s no income. The cap rate is horrible but you look at the opportunity and the opportunity is on the backend. We ran this at a $1.1 million purchase price. The cap rate is 9%. I already know that I can increase that thing. If it was an income-producing property, I would shoot for a minimum 8% cap but shoot for double-digit cap rates. If it’s a mismanaged facility, you’re not going to buy it at a good cap rate but on the backend, you should be at high 10% to low 20% on your cap rates.
“Never buy commercial without cashflow not supporting it.” That’s not true because I buy mismanaged facilities all the time. We bought a facility with 121 units for $275,000 but it was making $400 a month. I overpaid. Essentially, if you base that on income, it’s worth less than $50,000. I paid $275,000 but once we get that thing up and running and manage property in a year, it takes about a year or so to do that then essentially that thing’s going to be in the 22% cap rate. It’s okay for you to buy properties that are not cashflowing as long as you know that on the backend, you will make that money.
Also, you have to know with a mismanaged facility that you’re going to be coming out of pocket. To run that facility is costing us a couple of thousand dollars a month but in the beginning, it was only making $400. Immediately, we started making money. We make money but we’re not cashflowing. In the first leg, maybe 3 to 6 months, we were coming out of pocket on that property. Now, that thing has tripled in value, 121 units should be right around $900,000 to $1 million.
Those are the types of facilities I like where you can buy them for$ 300 and not only double but triple the amount of money. Doubling is good. Tripling is better. I am looking at a property, which is worth about $900,000 to $1 million. I won’t quite triple the amount of money but I can half than double it. Everybody always talks about this in the storage industry like, “Are you 2Xing or 3Xing it? You can 3X that sucker.” 2X is typical. 3X is better. You will start seeing a 1.8X or 2.3X. That’s how much can you double or triple the facility.
“Are banks open to income-producing properties if you bring in the numbers?” Absolutely. I could take this property that’s making $90,000 right to a bank and get a loan. You know that banks are asking for 20% to 25% down. They want a lot of money down and your interest rate is going to be around 5%. Calculate it that way. Terms are usually twenty-year notes but sometimes they have balloons. There’s a 20-year note with a 5, 10 or 15-year balloon.
“What are the advantages of owner financing for buyers? Is it a lower down payment?” The advantage of owner financing is that does not count against you if you need to go to a bank and get loans. I’m not doing too many deals with banks. If you do 2, 3 or 4 deals with a bank, they’re going to be like, “You’re overleveraged. You can’t do any more deals.” Banks will only allow you to do so many deals with them. It doesn’t matter if it’s one bank or the other bank. They’re going to look at all your assets and say, “You’re overleveraged because you’re doing too many deals.” That’s why you want to learn how to do creative deal structuring and owner financing is part of that.
Owner financing is one of the many ways for you to structure your deals like equity partnerships. I’m partnering with somebody and we’re doing a deal together. There’s a whole bunch of different ways. In commercial real estate, you have to learn how to do equity partnerships and creative deal structuring because banks will say, “You are overleveraged. You can’t do that deal.” I have a student who only wants to buy income-producing properties.
He doesn’t want to buy mismanaged properties because he wants cashflow. He has bought one facility with the bank and is getting a construction loan and adding to that facility. On top of that, he has another facility under contract and it was a different bank. He went to a third bank for another facility and the bank was like, “You’re overleveraged.” That’s what happens. Banks don’t want you to have a lot of loans out so you have to learn how to do creative deals.
“Is it worth it to build 50 more units for almost the same price I bought the property for? Building is super expensive.” The price for building is going to go down in 2022. Let’s say, “I want to build.” You’re not going to be able to build until spring or summer of 2022 because everybody is busy anyway. The only thing is that you’re going to lock those rates in. I would look in 2022 after the holiday. If you want to build, I would start running numbers and getting proposals in 2022. You might have to wait a couple of months to build. Supposedly, the price of steel is going to go down in 2022.
We have one guy coming into the StorageNerds coaching program. He comes in once every six months. He works for a steel manufacturer company and what he does is build storage facilities. He comes in and gives us these updates on a regular basis. He came in and said that 2020 has been the busiest time he has ever had and the prices of storage are still going through the roof. The reason why it’s okay is that on the backend, the prices for rentals are offsetting that. You do want to look at how much you are going to be able to make versus how much it’s going to cost. You can make a decision and decide if you want to build or wait and hold off until the prices come down.
“How many units do you typically look for with a self-storage facility?” It’s 100-plus. I’m the teacher that’s going to tell you to ask yourself, “How much money do you think you can come up with?” In your mind, you have this idea of what you can come up with. If you can’t come up with anything or very little then you should be wholesaling self-storage. If you could come up with some money, let’s say it’s $50,000-plus, I would calculate that as 20% down. Let’s say you buy an income-producing property and it’s 20% down. You can buy it for $300,000. That is what you think.
You don’t think in terms of how many doors. You think of, “How much money can I come up with albeit through me and my savings or partnering other with other people?” I don’t put any money into my deals. I partner and manage most of the time. I only have one deal that I put money into. It was only $25,000. That’s it. You could do this if you don’t have any money if you learn how to do creative deal structure and structure your deals. That’s something that we talk about very heavily in the StorageNerds coaching program.
I always go over all my deals and we talk about this in the boot camp as well, which is coming up on January 22nd and 23rd 2022. You have to be a student in StorageNerds to go to the boot camp. The doors for StorageNerds will open up on January 4th, 2022 and I will be doing strategy calls. If you’re interested in talking to me then that’s when the doors will open and you can ask me questions about that so everybody knows. I would like to remind you to go to StacyRossetti.com, go to StorageNerds and check out the coaching program. The doors are opening on January 4th, 2022 and I’m looking forward to talking to everybody.
If anybody is interested in the coaching program, you need to get on the waitlist. Once the waitlist opens, all those people on the waitlist will be notified. You will be able to set up an appointment with me, we can discuss the coaching program, you can see if it’s a good fit for you and I’ll see if it’s a good fit for me as well. I want serious people. I can’t work with people that are tire kickers. That’s what the call is for. If you’re serious like, “I want to buy a storage facility,” then you should check out StorageNerds and talk to me after January 4th, 2022.
In the meantime, if you’re interested like, “I need to start and get started now,” then you should check out my course, which is called Super Simple Self-Storage. That’s going to be taking you from A to Z and all things. It’s an online course that you would go through and then you can get out there and start calling owners and looking for storage facilities. What I teach is how to do all that plus everything else. Finally, don’t forget to go to and join the Facebook Group, which is StorageNerds.com. That is where you can post all your questions and we’re there. Everybody will chime in and answer. It’s how to get started or if you have any deal analysis, you could post that as well.
I’m here every Monday night. I teach. It’s live content. There are no replays available but it is live content. We will have something completely different to talk about. I’m going to teach. What I do is listen to my coaching students throughout the day because I do coaching calls on Mondays. Whatever they’re having issues with, I go over that on the Monday night session as well. I appreciate everybody. Thank you for reading. I look forward to the next session. Take care.
