How to turn $1Milion cash into 10 million
- 5 days ago
- 2 min read
Answer: Combine your $1Million cash with a 15% down SBA loan and build a self-storage.
A better answer to get to the 10,000,000 cash out sooner is start with $1.5MM cash, which will allow you to build a larger, more profitable facility.
The math takes a couple of pages of numbers and special attention to rental rates and how long you own the facility. Here is the income you need to reach, assuming expenses are 25% of the income.
Net Operating Income (NOI before loan) = Income – expenses = $1,438,560 -359,640 = $1,078,920 NOI pre loan.
Value @ 6 cap rate = NOI/cap rate = $1,078,920/0.06 =$17,982,000.
Profit = Value -invested = $17,982,000 – $7,600,000 = $10,000,000
With these numbers, you can back track into multiple different scenarios that get you to the $10,000,000 cash out.
Every year you own the facility adds to your take-out cash, and every year you own the facility, your NOI typically increases, increasing your sale value.
To get to the $5 to $10Million mark in a more rapid time frame. I would recommend you start with $1.5M so you can build a larger facility, which will provide more profits and a higher NOI. Maybe your $1MM and 0.5 MM from a partner.
WARNING: Many assumptions, such as rent rates, occupancy, rent rate increases, ancillary income, cap rate, land cost, construction costs, insurance, profits, carrying cost, facility size, length of ownership, etc., vary case by case and must be verified for every project.
As CEO of Storage Authority Franchising (www.storageAuthorityFranchise.com), Marc Goodin shares his passion, expertise, and unconventional wisdom with busy professionals to help them develop their own self-storage businesses while continuing their careers. He owns three self-storage facilities that he designed, built, and manages. He can be reached at marc@StorageAuthority.com or directly at 860-830-6764 to answer your self-storage questions about franchising, development, banking, marketing, sales, and operations.
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