Can you make a Profit by buying a small self storage facility? YES!

Several years ago, it was easy. Small self storage sold at 10+ cap rates and loan interest was 4 percent, leaving a 6% spread for profits before facility improvements for additional profits.

But now the word is out how great self storage is. So even small facilities are selling at 6 cap rates when listed. And even worse, that often requires you to increase occupancy, increase rental rates, and increase insurance income. So if you are borrowing money at 7 %, you are not going to make much if any, profits.

The best way to find a small self storage is to look offline. You need to call the owners and knock on the facility doors before they are listed with an agent. The key is to make an offer with lightning speed and get the facility under contract.

Always share the tax advantage of selling with them holding the mortgage, and ask if they would provide a 5 or 7-year loan. Often, a 15% to 50% down payment helps to make this happen. Why not request 4% interest only for the first 3 years?

We use a simple calculator where all you need from the owner is the facility's yearly income. You choose the expenses as a percentage of the facility's current yearly income. Often 35% plus or minus. And you choose the cap rate. Often around 10.

A calculator helps provide offer options based on just 2 items provided by you and 1 item by the owner.

Simply, you choose the Expenses as a % of the gross income and the Cap rate. The owner provides the gross income. You are competing with monthly calls, so you need to be different with your approach. That difference is an offer, subject to due diligence on the same call or day they give you the facility income.

Once the facility is under contract, there will be more due diligence to confirm the facts. Of course, you are assuming the facility is in good shape and meets the industry standards. Your offer may have to be modified if any offer assumptions change significantly or the facility needs repairs to get up to industry standards..

To help things go fast you want to prepare a couple of things now. You should prepare a general letter of intent LOI) and review it with your lawyer and self storage team so there are no delays in making the initial offer. You also want to create your own calculator or at least be able to do the calculations by hand. The advantage of the calculator is that you can make an offer immediately once they provide you with the yearly income. You can even provide a price on the first phone call to help pique their interest.

At Storage Authority Franchise, we help busy professionals own self storage to make a significant second income and a huge retirement nest egg.  Do you have time for a 15-minute introductory call next week? Let's connect.

Cheers

Marc Goodin

www.StorageAuhorityFranchise.com

Marc@storageauthority.com

PS If you are going ot be in LV April 23/24 for the self storage conference let me know and we can grab a coffee together.

As CEO of Storage Authority Franchising, Marc Goodin shares his passion, expertise, and unconventional wisdom with busy professionals to help them develop their own self storage while they continue their careers. He owns 3 self-storage he designed, built, and manages. He can be reached at  marc@StorageAuthority.com or directly at 860-830-6764 to answer your franchising, development, marketing, sales and operations questions.  His best-selling self-storage books are available at Amazon.