A Self-Storage Investment Journey – 90 Day Check Up
A 90 Day Ownership Update
A few of you have reached out asking “how’s it going?” regarding the acquisition of our self storage facility in Oklahoma City, OK. I’m drinking coffee this morning on our back patio in Colorado, so I thought I would catch everyone up on our adventure. I’m going to give you the good, the bad and the ugly — complete transparency.
If you’ve read the entire series, you’ll recall that I found this property in SE OKC (Moore) originally listed for $2.5M. It was a super nice facility in a great location, built in 2017 but only 67% occupied. It had an extremely high expense ratio so the NOI didn’t support the price. After some negotiations, we settled in at $1.9M. I have a couple of investors that took a total of 30%, leaving me with a 70% ownership. We paid cash so that took a lot pressure off of us. We had a smooth closing, but I needed to execute the plan if we wanted to have the success I promised the investors. If you are doing these type of deals, it is crucial to take care of the investors regardless of the size of their holdings. You have got to keep them informed and let them know not only the plan, but how you’re doing in terms of executing against the plan. I’ll lose my own money and live with it, but I will NOT lose an investors money. Period.
My plan was basic — eliminate expenses and increase revenue. The expense part was pretty easy, and I covered that in previous chapters. The revenue side scared me a little bit because I didn’t have experience with this asset class. But hard work overcomes a lot, and I got busy. I worked with a company to build “citations” for our website, focusing on local listings. I started building out our Google My Business page and created some PPC ads. I did some Facebook ads and listed in the Neighborhood app as well. I keyed in on a VERY tight radius — no more than 3 miles from my location. That’s where our customers live, so I didn’t want to waste advertising/marketing dollars outside of our customer based. This gave us a lot of bang for the buck. I also signed up for a 3rd party aggregator that buys the first spot on Google listings. This is an expensive option but EXTREMELY effective.
I want to be completely honest here. This has been WAY more hands on work than I anticipated. For the other investors, it’s a great deal because it’s truly passive income. For me, I’ve dealt with a drunk tenant who tore our keypad off the pedestal, a water leak in a unit, a light fixture that was arching, a pissed off tenant who just hates change, another pissed off tenant who just hates people, a tenant who didn’t leave by 10:00 pm and got locked inside the facility, etc… I have a great person to do on the ground work, but they don’t deal with tenants. My call center takes 100% of the calls, but when they have a customer who is screaming at them, they will send them my way. So if you are considering this type of investment, you need to be honest and decide if you want a truly passive investment or if you want to run a business. I think I’ve got most of the kinks worked out, and it’s 95% auto-pilot at this point, but I’m planning a 2 month trip to Europe and I’m not quite sure how I’m going to manage it at this point. Anytime someone mentions “mailbox money”, you need to understand that SOMEBODY has got to be doing the work.
As of this moment, our marketing, website and advertising has paid off and we are 97% occupied. Along with our expense reductions, this creates a really nice NOI and if we can keep our occupancy above 90% for 6 months or so, we will have a valuation of about $3.2M. At that time we have a few choices to make; a) ride the cash flow and enjoy the monthly dividends. b) do a cash out refinance to take some of our chips off the table. This would give us debt, but the cash flow would cover it and still give us monthly income. c) sell. It’s nice to have options, especially when they are all positive.
It’s been a great learning experience and generated some income, which is super cool. Based on phone calls and emails I’ve received, several of you have developed more than a passing interest. In fact, I received a call this morning from someone who has been following this and they provided a tip on a facility that is for sale. I’ve already reached out to the seller rep and made a verbal offer. If I can get it under contract, the person who called me will be an investor and we’ll make a little money. If you have real leads, give me a call. If you want to acquire it yourself, I’ll help you anyway I can. If you just want to be a passive investor, that works also. Thanks to all who have read and I hope you’ve gotten “some” helpful information out of the series….. now, on to the next adventure!