What would you do? - Posted by Corny Martin

Real Estate Investing Self Storages
1

Posted by PeteNC on September 26, 2008 at 11:59:09:

First what type occupancy you have on all of these?

  1. check the leases and make sure everyone is up to date

  2. take a hard look at what it’s going to take to manage the storage units, that’s my expertise, probably your number one issue, how often can you check them whose going to move them in upkeep throwing out garbage
    minimum once a week but daily is better

  3. what if garage or storefront is vacant will other stuff carry how about both, I’m guessing this could be a big deal maybe not

Good luck

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What would you do? - Posted by Corny Martin

Posted by Corny Martin on September 25, 2008 at 20:20:23:

I have found a couple of commercial properties in which the owners are extremely motivated.

The first one is small C-class mixed use property in an A-class area in a small town. The company is fairly complex (could be an advantage for me in the negotiation). It has 4 uses: 1) 11 residential/apt, 2) 40 self-storage units 3) Retail storefront 4) Automotive garage.

All gross leases.

The owner hasn’t kept good records so there aren’t any tax returns for the last 3-4 years (another advantage possibly). The proforma NOI looks like it would come out to be about $90,000 per annum. I estimate that its probably closer to $80,000 at the moment especially since the owner manages the property himself and I would need to pay someone to manage the property for me. I also expect a little bit of turnover after the purchase.

Since I typically like the spread between current interest rates and my CAP to be a minimum of 2 points. I would be looking for AT LEAST a 9 cap in valuing this property. But a 10 cap would probably be my sweet spot. The complexity of this property is also good reason to look for the higher cap.

My question is what would you all do to set the deal up?

Would you go 2 year master lease stabilize the property and then cash the owner out/sell?

Would you make a cash offer just to see if you could get it?

Would you ask the owner to carry some of the financing like say 15-20%?

What would you do?

I will put the second property up in a second thread.