Posted by Casey Cavell on October 08, 2009 at 15:10:55:
I love my storage facility in Danville, Illinois, Always Open Storage! I am in the processing of purchasing several more. If you are interested please contact me.
Casey Cavell
www.AlwaysOpenStorage.com
217-443-1000
negatives with storage units? - Posted by adam
Posted by adam on June 05, 2005 at 21:48:27:
were looking at some storage units that a guy has for sale…he has a 101 units, 100% occupied and is wanting to sell as he says because hes been in the business for 40 years and is ready to be done…my question is why? storage units seem like they would be very low maintenance, just pay someone to clean the units and re-rent them every once in a while but i was wondering if anyone who has storage units or knows alot about them could tell me the negatives with storage units…thanks!!
Re: negatives with storage units? - Posted by Pete
Posted by Pete on June 13, 2005 at 01:08:31:
I purchased a ss 18 months ago and am extremely happy with it. Here are some comments
Trachte gives a great free seminar check out schedule at www.trachte.com and insideselfstorage.com has two events yearly with seminars on developing/running sites plus lists of other associations that have meetings.
it is a business and real estate combined check the model he is working now on site manager or someone calls and asks to see you and figure out the cost if they are trying to sell it with no payroll (15k or so) and no management expenses(common) they are overpricing, I call my manager almost daily now and show up at the site at least once a week
there are repairs of 200-400 month
check your cap rate, I’d think 9-10% or highter here
check his rates vs market rates an onsite mgr can make you money if he is low
Ray’s comment about auctions is correct have a procedure in place up front to deal with it, which is calls and auctions. For us, tenants get all call first missed payment, 2nd we send notice and auction start of 3rd month. We make exceptions when asked (only once) or if customer had been paying and has good stuff in unit that is covered by auction and makes payments as promised. Drives me nuts but it works.
if you’re in a major MSA check and double check for new sites call planning board etc.
Good luck,
Pete
Re: negatives with storage units? - Posted by ray@lcorn
Posted by ray@lcorn on June 06, 2005 at 18:17:10:
Adam,
Let me first qualify my comments as someone who has never owned a self-storage project.
I have looked at several SS deals, and once went way into a development deal to build a new SS facility, but in all cases never pulled the trigger to do the deal. I got cold feet mainly because of the management issue Wes mentioned in the post below.
In addition, in two cases where I did pre-purchase due diligence of existing projects, I noticed a consistent trend of high delinquencies in the rent rolls. One well-managed property had a 20% delinquency rate; a less well-run project was over 30%. In talking with other owners and reading trade pubs I found this is pretty much a fact of life in the SS biz… seems that when the tenant’s money gets tight the storage bill can be the last in priority, until the owner forces the issue with an auction of the contents. (There is an upside to this as well… the well-run project above more than made up for the delinquencies with late fees, add-on lock fees, and sales proceeds.)
So management is key, and the larger projects require daily management for customer service and collections, and the routine tasks such as regular exterior cleaning of the parking lots, travelways, etc. as well as the units themselves. Not that there is anything wrong with that, if that’s what you’re looking for. We weren?t, so we passed.
All that being said, you?d think there would at least be a premium in the potential returns as compensation for the management hassles. But SS projects have followed the rest of the RE universe in having what I consider to be pricey valuations. Asking caps are running in the 8%-9% range, and I would be looking for something similar to hotel of 12% and higher.
There is an excellent website on the property type at www.insideselfstorage.com Follow the links to the monthly columns and you?ll find a wealth of info.
ray
Re: negatives with storage units? - Posted by wes
Posted by wes on June 06, 2005 at 07:10:41:
The biggest negative is that they are overbuilt in many areas so the occupancy is low.
Does not sound as though that is the case here since you say this one is 100% occupied.
However, if units are in that much demand, I would make sure someone is not planning a “Mega” storage site just down the street.
Would be a shame to purchase the property and then see your occupancy steadily fall due to a dramatic increase in the available units in the area.
As to low maintenance, a common statement I have heard from successful owners I have known, has been a variation of the same theme. That having management available to take care of the dailey comings and goings at the facility is what keeps people satisfied and “loyal”.
If you purchase thinking you can just basicly let it run on “auto pilot”, it might work for awhile as long as units are in short supply. It will not work as well when the competition shows up (and I would think it will if that facility is 100% occupied).
Re: negatives with storage units? - Posted by Greg¶
Posted by Greg¶ on June 06, 2005 at 22:13:54:
I just want to add to what Ray wrote, that I was looking into self-storage when I thought it was going to be cheap (i.e. a small-scale investment). But by the time you look at security, full-time quality management, advertising, etc. it’s a big investment, and a business rather than a passive investment.
One other thing is that in earlier days they built everything out of concrete block and it would last a long time. Recently the trend has been towards mostly-metal buildings that have a planned lifespan (say 20 years). Much after this and repairs are impractical; time to bulldoze and start again. Something to look into.
Re: negatives with storage units? - Posted by Mike
Posted by Mike on June 11, 2005 at 15:08:23:
I would buy based on how long the current leases were. Also base your offer on what income it is currently producing.
Maybe check out your competition and see what they are charging? You could possibly lower your rents to fill up any vacancies as well.