I haven’t been as active on here lately. As some of you know Dan and I are doing big things right now. We’re closing on the big self storage facility refinance in about 2 weeks and will be pulling out about $2.1MM in equity in the form of cash. We were considering selling the property after we got a nice offer this summer but decided instead to go this route.
We’re glad we did because 2019 Q3 was extremely profitable.
We’re looking to buy properties with value add opportunities in one or more of the following areas:
With our remote management capabilities we can target smaller properties than most self storage buyers. Most REITs (Life Storage, Public Storage, Extra Space) target 30,000+ net rentable square feet with the plan to place a full or part time on-site manager. With low on-site labor costs and paperless operation we can achieve strong returns on smaller properties.
Our long term vision is to build a portfolio of self storage properties with healthy and consistent cash flows on a month to month basis. Over the next 5 years we plan to build a portfolio of 500,000 rentable square feet of storage, all operated remotely with a centralized call and administrative staff. We may sell the storage portfolio to a larger player at the 5 year mark if the price is right. We plan to buy storage at about $40-50/sf and the value we project at year 5 is north of $80/sf.
Progress So Far
I’m pounding the phones for off-market deals as well as working Loopnet and other sources. I’m sourcing them, negotiating them and also raising the money and securing the financing for them. We have 5 properties currently under contract and 2 more hopefully tied up soon. We’re closing on 4 of the properties in the next two weeks as well. Three of them are in Erie PA (24,500 SF under contract for $632k) and one of them in Pittsburgh (11,400 SF under contract for $472k). Have a 5th under contract in Tompkins County NY near our main location (10,200 SF + 5 mobile home pads for $387k).
My partner Dan is working on securing bank financing on a few projects as well as focusing on preparing them for operations and giving them a facelift. The Erie portfolio as well as the Lansing NY property have been mismanaged but the Pittsburgh property is already cash flowing nicely.
Putting together the deals
We’re getting creative with the deal structure. We could easily go around buying storage leveraging our own capital 80/20 or 70/30. Meaning 80% bank financing and 25% cash or 75% bank financing and 30% our cash. The small deals above we are doing it this way. Erie and Pitt we secured 80/20 financing and Lansing is 75/25.
The larger properties we are getting creative and I’m working my network to raise some capital on each deal. Instead of putting 25% of our own capital in, we’re reducing that to 10% and raising 15% from outside investors for pro rata ownership. So instead of owning 100% of the portfolio we’ll own 85% but be able to go out and buy 2x as much storage because out $2.1MM in cash will fund a lot more deals. The more storage in the portfolio the more value on the open market.
The best way to follow along is to listen to the podcast and subscribe on YouTube. I’ll be uploading videos as I visit properties, close loans, meet with investors and operate the properties.
Another way is by email. Each time a deal gets close to contract I package it and share cashflow projections with my network of followers/investors/mentors. I also send management and P&L reports for each property under management each quarter.
Join the email list here.
If you have feedback of any kind we’re always open minded about things we might be missing!