Here’s an update on my businesses and life, if you’re interested.
A quick sponsored note before we jump in:
Tax season is here and my final income tax bill was $0 for one main reason – Cost Segregation Studies and bonus depreciation. DO NOT FORGET TO GET COST SEGREGATION STUDIES DONE ON YOUR REAL ESTATE. The folks at RE Cost Seg have already delivered my cost segs this year and the depreciation is mouth watering. Reach out if you’re in the market – the proposal is free.
Professional engineering reports you can count on, and they do virtual visits to turn them around even quicker. Not sure what a cost seg is? Check out this thread.
We built a self storage facility from the ground up in 2017 for $2.9 million.
Today it’s worth over $11 million.
Here’s how we did it:
The property was a 5.5 acre parcel in an upstate NY town. We began permitting in 2015, we began construction in July of 2016 and we opened the doors in May 2017. 51,400 square feet and has 615 units. 39,000 feet is climate controlled.
Here’s me driving a load of steel in front of the building in 2016:
We borrowed $2.03 million from a bank (back when it was reasonable to take high leverage), raised $500k from investors, and put in $400k of our own cash.
Our debt service was about $152,000 per year.
Here it is when it was done:
And here is my partner and I breaking every OSHA code in the book. That is my 2009 Taurus X I drove until 2021.
We implemented a marketing plan, put up an automatic gate and security cameras. We also setup online rentals and account management for customers. We began leasing units slowly but surely.
By 2019 we had about $50k on the rent roll in the summer and $30k in the off season. See here:
2020 was a relatively flat growth year because of the shortened student season – we were about 65% leased and we were doing $324,116 in net operating income on $542,762 in revenue and $202,208 in expenses.
2021 was an excellent growth year:
In early 2022 (on 2021 numbers) we executed a cash-out refinance at a 6 cap valuation ($7.8 million on $474k of NOI) with $5 million of total debt. We bought out our partners at this time and they earned a hefty return on their initial $500k investment.
Here is our profit and loss statement for all 3 years:
Our new debt service (interest + principal) is $400k per year on the $5 million of debt we took.
2022 was a great year, seeing revenue jump significantly to $912k on $240k of expenses for $672k of net operating income (profit). After debt service it produced $272k of free cashflow.
Note – the property taxes are listed a bit wonky because we got away from an escrow account in late 2021 – they are actually about $50k per year
At a 6 cap valuation, the property is worth about $11.2 million today.
Fun fact:
My dad was the first investor in this building and took a second mortgage out on my childhood home to make the $125k investment. He didn’t tell me about the mortgage… In 2022 we bought him out for $550k…
Onward and upward,
Nick