As a real estate investing newbie, we aim to raise money until we achieve financial freedom. However, investing in self-storage or any commercial property is expensive. Fortunately, Stacy Rosetti is here to share the process of acquiring $20 million in transactions in ten years as she walks us through the purchase of her 12th storage facility. Some important lessons are learning to leverage other people’s money along with finding the right timing in the market. If you are eyeing a facility, don’t give up after calling once because it takes time for some people to sell. Curious to hear more insights from Stacy? Tune into this conversation and find out the strategies behind how she moved from being a newbie to acquiring millions.
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Real Estate Investing Newbie To $20 Million In Transactions In 10 Years & Purchasing Our 12th Storage Facility
It is the last week of the twelve-week session of Stacy Rossetti’s case studies of all her storage facilities. We’ve been through all. We had 11 weeks to go through all my 11 facilities. We are going on to the last facility. We are closing on another facility as well. As soon as we close it and get it up and running, then I’ll add that one to the case study.
If you did not get to watch all twelve sessions of the case studies, then you’ll be able to see them in the course called Super Simple Self-Storage. We are adding all twelve of them to the course. If you own the course already, you will have access to those to re-watch them when you go in. Give us a week or two to get those up. We’re trying to get those all edited, and then we’ll have those ready. If you want to buy the course, then you’ll be able to go back and re-watch all of them.
Self-Storage Fund Of America
I buy facilities that are small facilities. They’re $1 million or less. I’ve always bought $1 million or less facilities. I’ve been doing this for a couple of years. I’m here to help you get your foot in the door. There are three different types of areas in the self-storage investing world. There is the $1 million or less section. That is where people like you and me are trying to get our foot in the door. We’re trying to buy our first facility. We can afford maybe $50,000 or $100,000 down. This is how much money and how many facilities we can buy. Maybe it’s $300,000 or $600,000, or something like this. This is like the newbies-get-your-foot-in-the-door part of investing in self-storage with $1 million or less.
The truth is that investing in any type of commercial property is expensive. You have to know that $50,000 or $100,000 is only going to get you so much. You have to learn how to leverage other people’s money. That is why I wanted to move from the $1 million to the $3 million facilities. What I did is I went out and I started my fund. It’s the Self-Storage Fund of America. That fund buys $1 million to $3 million properties. That’s the purpose of that fund.
After five years of buying smaller facilities, I decided that I wanted to go out and start raising bigger chunks of money. I wanted to be able to pool money together. That’s why I started the fund. I started raising all this money, and then we were able to raise enough money to purchase the first facility in the fund. That’s the facility that I’m going to go over in this episode. This is facility number twelve for us and the very first facility where we purchased something and gave up most of it.
When you are the asset manager of a fund, then you’re giving up a lot of that equity and profit and giving it to the investors. All of the other facilities that I’ve bought, all eleven of those, were all privately funded by private investors that handed me over $300,000 or $400,000, and then I went out and bought the facility. Since we have this fund, I give up 75% of the deal. Keep that in mind as I go through this deal.
Blairsville Property
How did I raise $1 million to purchase this facility? I started out raising money and learning how to raise money for all my other facilities where I raised enough money to purchase 11 facilities over the course of 5 years. I started working on my fund. It took about a year for us to launch the fund. We launched the fund this 2022. I then raised enough money to buy this facility that I’m going to go over in this episode. Honestly, $1 million is the perfect size for us. I’ll go over the numbers and stuff in a second. I’m giving you the backstory.
A lot of people think, “How is Stacy doing all these transactions?” It’s a process. When I started out, my very first facility was a teeny tiny facility. Like you guys, I worked my out went way up and I got bigger. $1 million or less is a great pool and a great part of the industry to be in. There’s nothing wrong with buying a couple of small facilities, learning how to do everything, and then getting to the point where you can move up to a bigger one.
We had a student showcase. One of my student’s name is Paul. He came into the coaching program a few years ago. His very first facility was $450,000. It was a small facility. He also added more units. He’s got this facility, but then he also, over the course of the last couple of years, picked up three other facilities. He went from $450,000 to $750,000. He went to $1.2 million, and then he closed on another facility that is $1.8 million. He started out with small facilities and worked his way up, which is what we’ve done, too, but we’re a little bit slower. We stayed with the small facilities for so long and then decided to work on the fund.
Now we’re raising $8 million, which is 8 facilities that are $1 million each. We’re not even going for the big guns. We’re just going for smaller facilities. A lot of times in the industry, you will hear that you can’t make any money unless you have $30,000, $50,000, or $100,000. I’m about to sell two of my facilities. My husband was like, “What’s a good offer for these?” We called our competition and told him, “We’re selling. Would you be interested in buying?” He said, “Yeah. I’ll buy.” Within an hour, we had a buyer for them. He’s going to give us an offer, and I said, “Give us a fair offer.”
The thing is I know how to buy storage facilities and make money. If you give me a fair offer, I’ll sell it to you. I love when owners are like this. I want those types of people in my life. When there are owners that are willing to work with you, I want that in my life, so I need to also be that person. I called up our competition. I already know the guy. His name is Todd. He is a great guy. I was like, “We’re thinking about selling two of our facilities. There are two right here. Would you be interested?” He’s like, “Yeah. I’ll pick them up. Let me run the numbers. Let me talk to my partner and we’ll buy them from you.” I was like, “Give me a fair offer and then I’ll be happy.”
We’re going to sell those two facilities because I want to be able to have some cash for 2023. Also, we’re going to be buying a house and all kinds of good stuff, so I want some money. That’s what we did. It was easy. I didn’t want to go to Crexi. Did you see how many facilities are on sale in Crexi? There are 650 facilities for sale in Crexi. Are there good ones on there? Probably. I don’t know but I’m not going to weave through all those. I go directly to the owner. Maybe start looking at Crexi and see if there are good deals. Try to shoot for a 7% or an 8% cap on a facility. I’m not the type of person to get a realtor involved. I like to work directly with owners, buyers, and sellers. That’s my personality. I figured that would be the best way to do that.
Now we have this fund, that’s the progression. I was talking to my coach. I have a couple of private money coaches. I have one that’s been in my life for quite a while. We were talking and he was like, “You’re about ready to do a fund. You should consider a fund.” I was like, “Really?” He’s like, “You’re at that point now.” I was like, “That’s good.” I had never even thought about it, honestly. When he said that, I was like, “I’m going to start a fund.” It took a year and a half for me to figure out how to do it.
Our fund is for $1 million to $3 million. Our PPM says $1 million to $3 million anywhere in Georgia or Florida. That’s what our mismanaged facilities and what our PPM says. There are the $3 million-plus people. These are the people in the industry that think the only thing you should ever buy is $30,000, $40,000, $50,000, or $60,000. I get that. It is easier to manage one facility that’s a huge facility. I get that whole concept, but the truth is there is way too much competition in that sector, first of all. Second of all, not all of us can afford $3 million. We can afford $300,000, but not $3 million.
Facility Number Twelve
There’s nothing wrong with focusing on $1 million or less or the $1 million to $3 million. I have all these different types of people inside the coaching program. The way that I found this facility we’re going to go over is I didn’t find it. One of my VAs found it. I drove past this facility so many times and tried to call this facility so many times in three years. In this three-year period, I drove past it and called. I even had my acquisitions person call. The person either never answered the phone or said, “I don’t want to sell.”
Nick, who’s one of my virtual assistant acquisitions specialists, called and the owner said, “I’m ready to sell now.” It took years. I was like, “I called that guy so many times in the past couple of years.” It took years for him to want to sell. That’s why I say it’s all about timing. People are always going to want to buy facilities and sell facilities. When you think, “There’s not enough out there for anyone,” the truth is that it’s all about timing. You never want to give up and stop calling. You can’t call them once and then not call again. My virtual assistants say, “I’ve called everybody in the state.” I’m like, “Call them again” The truth is that you want to keep calling because it takes time for people sometimes.
That is what happened. Nick called. He happened to call at the right time and talked to the owner. His name is Ray. He is a very nice guy. He still comes to the facility. He comes in and says hi. He lives right around the corner. The owner is having health issues. That was the issue. He’s not healthy so he’s having a hard time managing the thing. Whenever he sees Pete there, he always drives on over and says hi. He talks to him. We still love that. He says, “Every once in a while, somebody will call the wrong number.”
His phone number is one digit off of the phone number for the facility. We reported the number from the facility, so Pete took over that phone number. Sometimes, people call his cell phone because he is giving his cell phone out. He would come over and say, “Pete, I got you a couple of messages.” He hands over some written messages from some people.
Nick found this by calling. You know that I have a team of virtual assistants that do nothing but call storage facilities and ask them if they would like an offer. They do not ask if they want to sell, but if they want an offer. We’ve done $60 million in offers in the last couple of months. We put in ten offers not long ago. I’m seeing more people wanting offers. More people are open to the prices that we’re doing because we’re sticking to our guns. 7% and 8% caps are where we’re at. If it’s a tertiary market, it’s an 8% cap. If it’s a secondary market, it’s a 7% cap. If it’s secondary but more populated, we could maybe do a 6% cap. If it’s a big secondary market, it is maybe a 6% cap.
In Texas, sometimes, we’ll do 6% caps because it’s a little bit more expensive in Texas but we’re sticking to our guns. It’s 7% and 8% caps. Every facility that we’ve gotten under contract in the last couple of months has all been 7% and 8% caps. I see a lot of posts about, “The market is horrible. Nobody wants to sell.” The truth is that this is a numbers game. You ask yourself, “How many offers have I put in?” For every 50 offers that you put in, 1 is going to want to sell. Think about that. That’s how the market is. I’m telling you. You can’t put in one offer and then get upset because you didn’t get it.
Many people say the market is horrible, so nobody wants to sell. But the truth is, it’s just a numbers game.
You have to become an offering machine because the sellers are at a point where they still don’t want to come down a lot of times. You have to find the sellers that want to work with you. I have a student under contract with the facility. He’s an older guy. He’s also got health problems. He was adamant about the price. He wanted $300,000. It was like 60 units for $300,000. It’s not a bad price. He’s producing a good amount of money. I can’t remember what, but we ran the numbers. He also wants to owner-finance.
We’re seeing a lot of owners that are open to owner financing. Maybe they want a little bit more money than you run the numbers for. In the end, it is $20,000, especially for these tiny facilities. We have one guy for whom we put in an offer for $370,000. He wants $400,000, but he will owner-finance. We put an offer in for $370,000. Would you do that deal? I’ll do that. I already told him, “You got to do this deal. It’s a great deal.”
That is owner-finance at 4% or 5% interest. Did you see the interest rates? SBA is 7.25%. If you’re not running your numbers at 7.25% interest and 25% down, then by the time you close, that deal is not going to work. Keep that in mind. You have to start running your numbers. The owner was willing to owner-finance at 6% interest. That is what he said. He wants $300,000 down at 6%. We typically offer 4% and 5% interest rates when we do offers. I’ll show you that in the deal.
He was like, “If I’m going to owner-finance, I want 6% interest.” I was like, “You’re willing to pay a couple of extra thousand dollars for this deal?” He’s like, “Yes. I’m willing.” I was like, “That’s a great decision.” You don’t want to get too picky. The numbers are still going to turn out well. We always shoot for a 10% cash-on-cash return and he was well above 10% cash-on-cash return.
We’ve got this one in Blairsville. This is the first facility in the 506(c) fund that we have. It’s a good one. I’m sharing this fund with my investors. For all of the deals that we find for the fund, I’m giving up 75% of the deal and only getting 25%. The question I have for you is would you do that? Would you do a 25/75 split with investors so you can get a deal done?
The answer should be yes, especially if you don’t have a lot of money to get your foot into the door and get going. What’s the big deal? You’re still going to be making money. I’ll make 25% off of whatever we buy. I’m guessing we’re going to buy 5 or 6 different facilities at $6 million or $7 million and then double the value of those properties at least minimum. 25% of that is what I’m going to get and I’m giving up 75%.
The Sixth Year Journey
I co-invest 4% into the fund so I have to put in a little bit of money. I’m 100% privately funded up until the fund. The fund is the very first time that I’m putting my own money into the deal. I had to put $40,000 in for this deal. We bought this facility for $1 million. I invested $40,000 into the deal. I will get back 25% of that after we get the numbers. I’ll show you the numbers. I wanted to give you a progression.
I’ve been doing this for a couple of years. In the first year I bought one facility, it took us a year to figure out what we were doing. A few years ago, there was nobody out there that held your hand and told you what to do. There was nobody that had Monday sessions so you could hop on and tune in. I had to figure this out with my husband. In the second year, we bought one facility again. In the third year, we bought three facilities. In the fourth year, we bought nothing because we had three facilities under contract. On the day of closing, the owner backed out because it was three different facilities.
In 2021, we bought six facilities. My husband was like, “Are you trying to kill me?” In 2022, we’re on track to do only 2 or maybe 3. 2022 was a hard year, so we’ll only buy two. The truth is I’m not out there to buy every facility. I’m out there to buy really good facilities. I’m going to show you the numbers on this one because this is a very good facility. That’s how it works.
Private Money And Owner Finance
There are a couple of questions. Someone said, “Twenty-five percent of every deal is pretty good with little of your own.” Someone asked, “Where do you get your investors?” That’s a great question. A 506(c) fund is a fund that allows you to promote your fund to any stranger. The SEC does not allow you to try to ask strangers for money. If you’re going to borrow money from somebody, it should be somebody that you’re good friends with. The first investor that I ever had was my neighbor. That’s a good relationship.
I chose the 506(c) because I wanted to be able to pitch it out to you and all these people. You know me. You are part of my email list and my family. I don’t know you, so in order for me to be able to pitch you this fund, I had to have the 506(c). That’s what that is. It’s for accredited investors. I do Facebook ads into an email campaign where I pitch all the time. I bring everybody into my pitches and then I talk to them. The good thing is that when I pitch, I’m pitching not only to people that have money but people that don’t have money. It’s accredited and non-accredited.
Before I had the fund, the way that I found my investors is I asked all the people that I ever came in contact with, talked to, and met through the RIA that I owned or the coaching that I did. I asked all my friends, family, and neighbors. That’s how I found my private money. It was through that up until I got the fund. The fund allowed me to be able to go out to the world and ask strangers for money. That was one of the goals that I had even before I got into storage. I was like, “How am I going to get permission to ask strangers for money?”
Someone said, “I wanted to pick your mind. Instead of selling your facilities, wouldn’t it be better to pull money out of your facilities to be liquid so you can continue doing the cashflow future appreciation? It seems like that would check boxes.” As long as the numbers work, you could do that. If he doesn’t come up with a good offer, then we could do a cash-out refi. That is what we could do. We may do that.
We’ve got twelve facilities. Several of them are owner-financed but most of them are private debt. That is what they are. Those notes are starting to come due. Typically, my notes on my private debt are anywhere from 3 to 5 years. We had one note that came due. The lender that loaned me the money was like, “It has been five years. What do you want to do? Are you going to sell your property?” I was like, “I’m thinking about selling it.” He’s like, “Why don’t you refi? Why don’t we do it again and you could have another five years?” I was like, “Really?” He’s like, “Yeah. I don’t want my money back.” I was like, “Okay.” I’m paying 8% interest to him. Eight percent interest is what everybody is paying on houses.
For me, if I can get 6%x to 8% interest on money, I could re-do private money as well. Maybe we refi out. The properties we may sell, we may 1031 exchange that into some other facilities or some other properties. We may also hold onto the cash and have it available. We’re not 100% sure. We’re trying to figure out what to do. I do want to have money available for 2023 because I think it is going to be so good. Hopefully, you are preparing for 2023. Someone asked, “Where can I get some money to buy some facilities?” It’s either by partnering with other people or having your own money.
There are a lot of facilities in Crexi. The brokers that put the stuff on Crexi don’t know how to run numbers. NOI is not how much you’re going to make. I don’t understand the whole concept of NOI. NOI is important if you pay cash, but NOI minus your mortgage is what you need to be looking at. That’s the key. They post out to $75,000 NOI, but that means nothing.
Someone asked, “Do you think it’s better to start with close to $1 million with a 100-unit net property than smaller ones due to the economy to sell?” That’s what I’m saying. That’s what everybody says. The truth is if you can afford $1 million, go for it and do $1 million. If you can’t afford $1 million, you need to buy whatever you can afford because that’s going to get your foot in the door.
If you can afford a million dollars, go for it and do a million dollars. If you can’t afford a million dollars, you need to buy whatever you can afford because that’s going to get your foot in the door
I have a student named Luther. He’s 22 years old. Everybody knows Luther in the group. He has no money and he has three facilities. He’s been in the coaching program since January 2022. He’s getting the owner to owner-finance these tiny facilities that are maybe 30 to 50 units. He has to come out of his pocket maybe $5,000. He scrapes together this money to do that. The truth is whatever you can afford or whatever you can do, that’s what you should be doing.
If you’re going to tell yourself, “I can only buy something if I have $1 million and then save up,” it’s still $200,000. You might as well say, “I know I can come up with $50,000, let me get out there and look for something. I’ll see what I can find for $50,000. Maybe I could put $50,000 down.” I don’t want to stop anybody based on the money that they have.
You could always wholesale something. I always talk about wholesaling. I teach this in my coaching program. Also, somebody asked, “What’s small?” For all the turnkey acquisitions that we do for all the students, I tell my virtual assistants, “It needs to be 50 units or less unless there is room to add on. There needs to be an acre of land.” We looked at one in Illinois. The owner wants to sell. He wants an offer. It’s a 1.5-acre piece of land and he has 22 or 24 units. There’s one building on this big piece of property. He wants $150,000 for it, which is fair.
You would have to come in and add two more units. You could probably put another 3 to 4 buildings on there at 20 units each. We ran the numbers at $50,000 and $75,000. If you could spend $250,000 plus $150,000 to purchase so you’re all in at $400,000, you’d have a facility worth $900,000 in the end. You would double the value of that property by spending that $250,000. That is as long as you have that land. I don’t ever tell any of my students, “Buy something that’s 24 units and there’s no place to grow.” I always want some extra land. That’s the key.
Blairsville looks like a storage facility, so I don’t know what to tell you all. This is the one that we bought in the fund. It is like an office. The office is down there. There is a little garage area and an apartment up there. There’s a one-bedroom huge apartment upstairs that is included. The facility looks like a regular facility. There’s also a building with climate control inside.
There’s a big piece of land there that we’ve got somebody coming in and bush hogging. With the trees, they’re going to clean it up. We’re going to bush hog it and then we’re going to park boats and RVs there. It’s very secluded. Nobody will even be able to see any of the RVs. This income is not even included in the numbers I’m going to tell you.
There’s also a very nice house on this property. The lady that lives there is always complaining about the house. She’s like, “This needs to be done.” She has been living in this house for ten years paying $400 a month. It is a 2,400-square-foot house with a garage. We heard through the grapevine that this house may be haunted. I don’t know. Maybe she’s the only one that can live there. Somebody in town told us, “We heard that house was haunted.” Maybe it’s haunted. She up-kept it. She also has koi ponds. It’s a super nice house.
The town itself is a tiny town with 718 people in it. Within a ten-mile radius, I don’t know how much is there. I forgot, but it’s probably 25,000 to 30,000 people. It’s a tiny town, but it’s in an area that’s superpopulated. It’s in the North Georgia Mountains. It’s important to know your market and what’s happening inside your market. I know this area very well. Blairsville is North of Atlanta and it’s up in the mountains.
It’s important to know your market and what’s happening inside your market.
We own another storage facility in the Jasper area. We have one already in the area. It’s about a 45-minute drive from Jasper to Blairsville. It’s not too bad. This 575 corridor is booming. There is so much growth. There is so much going on. There are new subdivisions all along this highway all the way up to about Ellijay, and then it starts getting a little bit more country out here. What I’m saying is that the Atlanta movement is North. If anybody knows Atlanta, everybody is moving North. For some reason, everybody’s moving North and nobody ever moves South. It’s the weirdest thing.
We used to live in the Jasper area. That’s why I know this. I’ve been driving for storage and talked to every storage facility in this area. I’ve talked to every owner. For years, I asked them. When my VA calls and he’s like, “I’m ready,” I’m like, “I’ve been trying to call everyone.” Blairsville is in the North Georgia Mountains. It’s touristy, but a lot of people live here. It’s a nice area.
I don’t think we’ve gotten it switched over to Google Maps yet. For our fund, we have a different brand. We have Mission Self Storage. Our personal is Ms. Lillian’s and then the fund is Mission. We have our competition. This is a boat and RV storage. He has no regular facilities here. He’s a nice guy. We met him. He came over and introduced himself. He loves the country. When the competition comes over and introduces itself, that is pretty cool. He and Pete introduced themselves. The one that we’re selling, we know the competition there. They called and introduced themselves. That’s another reason why I love the country so much.
There are five buildings and the house is in the middle. A piece of land is included and this is half an acre. We could always clear this and then we could build more units if we needed to. This is climate control. This is a long, skinny outdoor drive-up. The house comes with a barn. The owner included an ATV in the sale. He was like, “I can’t get this thing to start so you could have it.” This guy is so nice. I love nice storage facility owners. He left the ATV into this. Pete is going to try to fix it so we’ll have an ATV.
There is a house with a koi pond. It’s a good piece of property. You can add another building right there. If you wanted to put the same thing, you could do that because there’s plenty of space to come up. There is an area we’re clearing. That is where we’re going to be putting the boat and RV storage. Overall, the property is $1 million. That is a great buy, honestly.
I’m excited about this property. It’s a great first property to put into the fund. I’m excited about sharing this with all the investors in the fund as well. Let me tell you the numbers. If you have any questions, this gives you an overview. I forgot to tell you. We’re in the process of putting a gate in. We got the electricity and internet done. There were already security cameras there.
It opens up in a way. We’re also putting a gate on another side. There’s no gate there at all, so we’re putting a gate. There’s a fence, but there’s no gate. It’s just open. The electricity got done, so we’re waiting on the gate people to come to finish up. Two gates are for $15,000. Honestly, that’s a pretty fair price for two gates to give everybody an idea.
The purchase price is $1 million. We ran the numbers at a 7% market cap rate. What comes out to $1 million is a 7% cap. The owner gave us the price. He said, “If you can buy this for $1 million, then you can have it.” I was like, “Put that thing under contract right now.” It has 136 units and is 22,200 square feet. It comes out to $0.52 a square foot. He’s 15% vacant. We’re taking it from $0.52 to $0.99 per square foot. Isn’t that crazy?
He owned this thing for fifteen years. He hasn’t raised the rates but a couple of times in the fifteen years. He also had a lot of people that weren’t paying. Economic occupancy was not where it should be. He should have been making more money than this. He’s from Blairsville and a little tiny town with only 700 people. He didn’t want to piss everybody off. A lot of people had been there for a long time. Pete was talking to a couple of people that were tenants. He said that he talked to one guy. Pete, whenever he’s there working at the facility, never tells anybody that he is the owner. They’ll tell him stuff. He says, “I work for the green of the company. I’m here to do maintenance.”
He said that one guy came in to pay his bill. You drive in and you pay cash or check. That is how you pay at this place. The guy was talking to Pete and said, “He was losing a lot of money. He never raised the rent. It was awesome. I can see the new owners are raising rents. That’s because we were getting a great price for a long time.” That’s exactly what he said. Even the tenants know that they’re getting good rates but they’re not going to ever complain and tell you. We’re the bad people. We come in and raise the rates.
Eric is asking, “Are the $15,000 gates electric?” Yes. That did not include the connection to storEDGE. That was another $3,000. I can’t remember how much it was to put the gates in and then the electrical. You also have to buy the connection that goes to storEDGE so that you can manage everything from the storEDGE platform. I can’t remember what it’s called, but that’s also an extra. It’s probably $20,000 total for both gates. It’s about $10,000 per gate so I would budget $10,000.
Ray says we can make some extra income by doing tours of the haunted house for Halloween. Somebody lives there so I can’t do that. She’s paying $400 a month. That place, you could probably rent for $2,000, honestly. It’s a huge house. What are we supposed to do with her? She’s been there for ten years and she’s asking us. She’s like, “Are you going to raise the rent?” We did not include that income at all in the numbers, so we did not put her income in. We didn’t put in the RV parking. That’s going to be an extra bonus on the top once we get everything going and once we raise her rent. We’ll probably raise it to something, but I’m not sure what it’s going to be.
Deal Analyzer
On the deal analyzer, $1 million is what the valuation came out to. It seemed pretty fair to me. You could see the debt service ratio at 1.06%. To get a bank and get a loan may be a little hard to do with $1 million. We’ll look at the numbers and see. As I said in the beginning, you got to start keeping that in mind. If you have to go to a bank and get a loan, you got to run the numbers to make sure that those numbers work at 20% or 25% down at 7% or 7.5% interest. At this time, it was 5% interest. This was back in the summertime.
With anything else here, you can see that we put $50,000 of CapEx in. We got new gates. We may have to put a new AC into the garage area. We may or may not. We may fix it then. There is not a lot of work, honestly. We’re going to bush hog an area to clean up. We put $50,000 in to be on the safe side. There are property taxes and utilities.
Insurance is expensive because you have to add all the different buildings. Insurance goes off on how many buildings you have. We have a lot of buildings. We have the storage, the climate control, the house, the barn, and the apartment. We got a lot of stuff going on, so it’s expensive. Our expenses are $15,000 a year for property maintenance. That includes repairs and things like that. That’s the boots-on-the-ground person plus the repairs.
The staffing is answering the phones and doing all the auctions. The software and merchant fees come out to $10,000 to market the place. We’ve got a website. We’re also using SpareFoot. We’ll use SpareFoot for a little bit, but the goal is to get onto Google Ads and get that going. You can find tenants easier and cheaper on Google Ads than on SpareFoot.
We bought this with cash because we bought it in the fund. We raised $1 million to purchase this facility. For $1 million, the cash-on-cash comes out to 18% or 19% cash-on-cash return. We’re shooting for 19% IRR. Nineteen percent cash-on-cash is what we’re shooting for inside the fund. In real life, anything over 10% cash-on-cash return is a great investment. In multifamily, they’re looking at 6% and 7% cash-on-cash returns. We always run our numbers at 10%. That is what we do for cash-on-cash.
Here’s the cashflow. The income is around $9,700 and it is $3,900 for expenses. We run our numbers at 38%. That’s when you saw all the expenses. The NOI is $5,800 or $5,900, but that doesn’t mean anything unless you have a mortgage. We have no mortgage because we bought it in cash. If you have a mortgage, you’ll want to look at what your net monthly income is. You’ll also want to look at your cash-on-cash return. At $0.50 a square foot, you’re not making any money on this deal.
He was running it all himself, so he was making $10,000 a month. It was probably costing him maybe a couple of thousand dollars to run it himself. He would get up every day and run this facility. For him, he was netting probably $5,000 a month. He was happy. For us, we’ve got all these expenses like people working and operating expenses. We always have to look at that.
The owner’s expenses are not important. Your expenses are important. That’s how you’re running your numbers. It’s based on your expenses. You have bank financing. If you’re going to get a loan, this is what you’re going to get. Remember, we took it from the unit mix. This is how we come up with the square footage. We take it from $0.43 a square foot. If it was full, it was $0.43 a square foot. We’re taking it to $1.04. This is the number that we came up with. We ran the numbers at $0.99 because I was like, “$1.04 seems high. Let’s go at least under $1.” My husband, when he ran the numbers, came up with $1.01 to $1.04. He doubled the rates. We pissed everybody off.
The owner’s expenses are not important. Your expenses are important. That’s how you’re running your numbers based on your expenses.
Some people were paying $20 a month for a 10×10. We then raised the rates to $100. I would be pissed off too. We tell everybody, “We’re the same price as everybody else. Everybody else is at $100, so we’re going to be at $100.” Here’s the competition. We’re somewhere between $85 and $100. Some of the people, if they pitch a fit, we’ll say, “We could do $85 a month, but that is as low as we’re going to go.” Eagle Shops & Storage is at $75, but everybody else was $95, $90, or $100.
This is why competitive analysis is so important. We’re calling and talking to the owners and seeing what they’re charging. There’s a lot of competition in the area. This is within a ten-mile radius. I told Nick, “Find every storage facility within a ten-mile radius. I want to know every facility and what they’re charging.” I know we were going to be buying this one, so I was like, “I want to know this market well.”
The national average for a 10×10 is $0.88 a square foot. We’re not too bad off, but if some of the customers do complain, I told Pete, “Let’s go down to $85 or $80.” The national average is $88 for a 10×10. We’ll do $85 if you stay. We’re doing a lot of negotiations because it does piss a lot of people off. It’s $199 for a 10×30. They were being charged $75. These are ridiculous prices, so we’re pissing everybody off. That’s why we’re looking at all the competition and the unit mix.
In the valuation, we did not put any other income in. We came up with a purchase price of $99,000, but then, we’re taking it from $1 million to $2.8 million. By the time we sell this property, it should be valued at around $3 million. That’s buying it, ripping the Band-Aid, and stabilizing it. Within eighteen months, we can sell it and all of our investors get to share in this profit right here. That’s a 19% cap rate. We’re taking it from 7% to 19%. We’re like, “What does the market look like in eighteen months? Is it going to be a 7% cap?” This area could be anywhere from a 6%, 7%, or 8% cap. Most likely, it’ll probably be between 6% and 7%.
I also have a facility in this area. In the highest peak, I got offered a 4% cap. I didn’t sell it. I don’t know why, but I didn’t. Overall, that’s Blairsville. It’s a great property. It’s that $1 million to $3 million, so it’s perfect for the fund. My very first facility was $250,000. Over five years, I progressed up to million-dollar facilities. The goal for us is if it’s an income-producing property, we’ll double the value, if not triple the value of the property within 1 year to 18 months. That’s where we’re at. You can do that with a $300,000 property or a $1 million property.
Do you have any final questions or thoughts on Blairsville? This is our last case study from my properties. Someone asked, “From your experience, is there a rule of thumb on the cost of fencing?” I can’t remember anymore, but we got a quote. Was it $25 per linear foot? I can’t remember honestly. We had one property that we were looking at fencing. It was two acres and it was $25,000. Whatever that equals, that’s the cost that it was costing. You could divide that. Find out what two acres are and divide it by $25,000.
I’m going to jump on to my fund. I have a quick reminder that it is Halloween. I will be taking my daughter trick or treating. There is no webinar or fund pitch. We’ll then come back the week after and start doing more stuff. Yvonne asked, “Do you recommend climate control?” Yes. There is nothing wrong with climate control. Climate control in a primary market is going to be way too expensive for most people to afford.
For climate control in a secondary or tertiary market, make sure it’s in a budget where people can afford that. People can afford $100 or $150 a month. $200 is pushing it over the next couple of years. I would say climate control in a tertiary market is going to do great. Climate control in a primary market over the next couple of years is going to be suffering. In fact, I feel like primary market storage is going to suffer over the next couple of years because they’re so oversaturated. There’s still so much storage being built.
I talked to one of my students. Over the course of 2021, he was in a super-hot area with not a lot of storage. All of a sudden, there are 3 storage facilities being built within 2 miles from him. Go to Radius Plus and find out if there’s storage being built in that area because Radius Plus shows that. Be aware if you’re going to be buying something what your competition looks like. I appreciate you hanging out with me. You can jump onto the pitch at StacyRossetti.com/Fund. Otherwise, I will see you in a couple of weeks. Happy Halloween. I will talk to you soon. Take care.
