In this episode of The Nick Huber Show, I was invited to sit down with the guys from Acquisitions Anonymous. Run by great entrepreneurs, in their podcast, Michael Girdley, Mills Snell, and Bill D’Alessandro talk about and break down businesses that are for sale, evaluating if they’re a good investment or not.
This episode is an excerpt from the full video I uploaded 3 weeks ago where we tackle 2 deals. In this video we look at the second deal, which was a $500K rural storage facility. I already underwrote this deal with my team, which makes me familiar with this one. If you’re looking to buy a self storage facility, this episode is for you!
The company states it owns over 17,000 square feet in its listing. But if you dig in and account for parking and a few other things, it’s more like 11,000 to 12,000 rentable square feet. If you have $100,00 to $200,00 and want to make a family money, this is not the deal for you, but this business is good for entrepreneurs just starting out who want to take a risk with storage rentals and who have $1million to $2 million on the side.
Also, when I look at acquiring a self-storage facility and determining whether it’s good or bad, I want to dive in to find out how well it’s operated. I want to know if they’re collecting rent and what the competition is in the area. If there are REITs (real estate investment trusts) in the area, which can be both good and bad, then I can gauge what the true market rates are for self-storage in the area. However, there are two questions that I try to answer: How much can I raise the rent? And what’s going to happen when I raise that rent?
A lot of people ask: Are storage units profitable? And how much can you make owning a storage facility? The short answer to the first question is yes. The answer to the second question is: it depends. What these questions have in common is you need to analyze the possible outcomes of a business deal. If you acquire an asset the right way, it’s really simple to operate a self-storage facility. But if you go into a purchase without doing your due diligence, it could come back to haunt you.
Three Key Takeaways:
- How does a company make recurring revenue? It’s one thing for a company to say that they make recurring revenue, but understanding how they do it can help you determine whether a business deal is a bad one.
- Gauge the market in your area. Ask and answer these two questions: How much can I raise the rent? And what’s going to happen when I raise that rent? Then and only then can you determine if self storage is the right thing at this time.
- If you want to buy self storage facilities, just keep in mind that yes there is money in it, but you just have to be willing to adapt, especially in the economic market we live in.
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