Creative Investment Strategiesmarketing.insideselfstorage.com/2015/pdf/2-6... · Borrow from your...

Creative Investment Strategies

for Self-Storage

Presented by

John Gilliland, President and CEO

Investment Real Estate LLC

InsideSelfStorageWorldExpo.com

Today’s Presentation

What do you need to invest in a self-storage property?

What should you have in place before you buy/develop?

Typical acquisition strategies

Creative acquisition strategies

Case studies

Lessons learned over 17 years

Why Should I Listen to You?

Listed and sold more than 300 self-storage facilities

in last 17 years, valued at more than $850 million

Managed more than 80 stores (top 15 operator prior to 2010)

Built more than 2.5 million square feet of self-storage

Own and operate 15 stores

SSA chairman in 2007; SSAF currently

“We live, eat and breathe self-storage.”

Audience Poll

How many of you are currently owners? Raise your hands:

• How many own one store?

• How many own two to five stores?

• How many own more than five stores?

How many of you are vendors?

How many of you are IRS agents?

Disclosure: I am not a CPA, nor an attorney (no advice).

What Are Your Goals?

Think about why you are attending this session. My guesses:

You want to own a self-storage property.

You want to own more self-storage properties.

You want more time by owning a passive investment.

You want more cash flow/passive cash flow.

You want to increase your net worth.

You want to limit your risk.

You want to limit the amount of your capital you put at risk.

What Does It Take to Get in the Game?

Three main ingredients:

Expertise

You need two out of the three to be successful.

What is the most critical factor in self-storage ownership?

“To get what you never had,

you must do what you have never done.”

Question: “What does it take to get in the business?”

My answer: “25-30% of the purchase price is typical.”

Typical transaction:

Purchase price of $1 million

Down payment of $250,000

Bank loan of $750,000: 5% fixed, 20-year, due in five,

75% loan-to-value (LTV), 1.25 debt-coverage ratio (DCR)

Closing costs of $15,000-$20,000: Transfer tax, legal,

title insurance, miscellaneous

Takes 90-120 days to close once you find the property

Expect cash-on-cash return of 8-12% the first year

I Don’t Have Any Money!

Easiest of the three ingredients to get!

Savesome until you do have money!

Borrow against your assets: house, other property

Borrow from your business or your investment portfolio

Borrow/partner with your parents, family or friends

Partner with someone who has money:

• College buddy, co-worker, friends, acquaintances

• Doctor or dentist

• Local business person

• Form an investment group

Joint venture (JV) with institutional money

Crowdfunding is the latest idea

“54 units in a cornfield”

If you have money and expertise, hire someone with time!

If owning a self-storage property is one of your goals, make the time to make

it happen.

It’s not a matter of enough time; it’s a matter of making it a priority.

Do you own other real estate or business that takes too much time?

Apartments? Employees? Vendors? Customers?

Self-storage is a relatively passive investment once stabilized.

• Management company or manager

Remember: “Sleep is practice for death.”

Expertise

How do you get expertise in the self-storage business?

• National a state associations: Join and go to all functions!

– Education

– Networking: YLG, MSOG, LOG, committees, boards

– Functions

Tradeshows

Metal-building company seminars on development

Internet research

Books, CDs

It’s important to fully immerse yourself in the business

once you make the decision to invest!

Expertise for Hire

Who do you need on your team for a successful transaction?

Self-storage broker (with experience!)

Self-storage management company/consultant

Real estate attorney

Accountant/CPA, accounting firm

Loan broker

Banker

Environmental consultant (conduct Phase I study)

Appraiser

Civil engineer/architect if developing or expanding

Construction/maintenance company

Industry mentor or adviser

Ready for Action

You have committed the time to invest successfully.

You have a team of professionals ready to assist.

You have developed your writtenbusiness plan for action.

• Vetted by your mentor and/or professionals

• In presentation form for your partner and banker

(and wife/husband)

You have determined your price range, geographic range, return parameters,

investment structure and timeframes for action.

Now let’s get started!

Case Study: Moove In Self Storage

Case Study No. 1

Moove In Self Storage

54 units; one 30x220 building; 3,000 in 10-mile ring

Paid $13,200 for the land (cash, no financing!)

Borrowed $90,000 from Tel Mark (Wells Fargo)

to build the building

Filled in nine months; appraised for $250,000

Refinanced out $175,000; paid off first loan

Had $85,000 cash to do the next deal!

Still owned this property which was cash-flowing well!

Management: “satellite”

Case Study: Harrisburg Self Storage

Case Study No. 2

Harrisburg Self Storage

Basement of shopping center, leased premises, no RE

Five-year lease with five-year option, 147 units, 12,000 SF

Sale price: $125,000

Manager is buying the property

100% financing, 6% over six years; installment sale

NOI $34,000; loan pay $25,000; cash flow $9,000

CF year 2: $16,177; year 7 after loan payoff: $52,000

Seller: CF for six years, protected, tough to sell leased SS

Buyer: No money down, kept job, great CF, got his start in SS

Case Study: Xtra Space

and Montgomeryville Self Storage

Case Study No. 3

Montgomeryville and Xtra Space Self Storage

Older properties, undermanaged, two managers, owners using

20+ units, no Internet presence, deferred maintenance

No tenant insurance, late fees waived, few auctions

Market is highly occupied (90+%), great location 40K/D

Sales price $5.2 million, 5.8% cap on actual NOI

Run with one office, satellite store, 1.5 managers

Reduce/reallocate expenses

At stabilized occupancy increase NOI by $300,000!

New value in 18 months? $7.5 million

Case Study:

A Space Center Self Storage

Case Study No. 4

Beautiful, owner-built facility; built in 2003; Beacon Falls, CT

Phase I of 27,000 SF is 95+% occupied, phase II is 39,000 SF

$17 annual rents, competitors full, 21,000 pop in 3 miles (thin)

Sale price of $4.25M: $3.9M for SS (7.6% cap), $350K for land

Issue: Expenses on 27K SF, small market, demand?

Current expenses only $115,000, off-site management, full-time manager

Solution: Build half of expansion (20K SF gross, 17K SF net)

Addition generates additional $202,000 in NOI

Value added $2,700,000 less cost $1,000,000 = $1.7M equity!

Still have 19,000 to build out; full expenses now in place

Total value is now $6.8 million; refi out 75% = $5.1 million

All of your investment is out; property still owned and cash-flowing

$93K per year

Case Study:

Beltway/Security Self Storage

Case Study No. 5

Beltway/Security Self Storage

Nearly 1,000 units, built in early ’80s, managers 73+ years old

No computers, no advertising, no Web, only phone number!

73% occupied; district magistrate did evictions

88-years-young owner; partner’s daughter mid-60s

$6.7 million sales price set; capital gains tax: $3.2M

Trade for REIT stock to avoid tax; no takers

Lease for term of owner’s life; sale occurs within 120 days

Controlled with $500,000 in cash; CF $118,000 in 2015

Owner out of management, great cash flow, exit defined

Lessons Learned

Get your team together first.

Money is the easy part.

Those who act (buy/build self-storage) win.

There is no perfect deal.

The first one is the hardest one.

Control the transaction; be the general partner.

Follow the REITs. They are smart!

Lessons Learned

Brokers can be your friends.

Banks are a tool, not your friend.

Set your “protection” as you ascend the financial net worth ladder. Any

climbers in the room?

Brain damage is the same for a $200,000 deal as it is for a

$20 million deal.

Development is risky.

Perseverance trumps all. You either win or learn!

Contact the Presenter

President and CEO

Investment Real Estate LLC

717.779.0804

jgilliland@irellc.com

www.irellc.com

John Gilliland

Thank You!

Creative Investment Strategiesmarketing.insideselfstorage.com/2015/pdf/2-6... · Borrow from your...

Documents

Transcript of Creative Investment Strategiesmarketing.insideselfstorage.com/2015/pdf/2-6... · Borrow from your...

Borrow & Fill Computations

Borrow Against Your Injury Case Settlement New York

Should You Let Your Coworker Borrow Your Car?

Tutorial 3 Intro to AmasonWeb Server Shizhan Zhu · Prerequisite Valid credit card If you do not have a credit card, 1) Borrow it from your friends 2) Borrow it from your family member

Save for your future...the future, you can borrow from your account. • You may borrow up to $50,000 or 50% of your vested account balance (reduced by the highest outstanding loan

To Borrow or Not to Borrow: Religious Norms and the ... · To Borrow or Not to Borrow: Religious Norms and the Elasticity of Demand for Credit Dean Karlan, Adam Osman and Nour Shammout*

Best to Borrow? A charity guide to social investment

MONETIZI N G S UNSHINE - Squarespace · MONETIZI N G S UNSHINE ... monetizing SUNSHINE ... To capitalize your PV system investment, you are going to borrow money from someone.

Financing Your Small Business How to Borrow Money from ...

Guide to a Westpac Online Investment Loan.€¦ · Because you can borrow money against your existing investments, a margin loan enables you to access money for investment purposes

Investing in Your Future - Binding Financial...borrow money to increase your buying power and through this maximise your returns. Typically, investors can borrow up to 80 per cent

Borrow Lend

Important Dates Where to borrow, where to save, period ... · and let us review your current investment portfolio and goals to see if buying bitcoin is right for you. Surprised? You

Hard to Borrow

How to Borrow From Your Life Insurance Canada Policy

Borrow List

INVESTMENT FEES ARE NOT DEDUCTIBLE BUT BORROW FEES ARE€¦ · Investment fees and expenses • Because investment fees and expenses are no longer deductible, accountants might consider

SMART WAYS TO MAXIMIZE COLLEGE SAVINGS... · While your child can borrow for college, you cannot borrow for your retirement. If you rely on your retirement account alone for college

Build Your Own Or Borrow Non Profit Starter Pack

Keep life in balance. - Morgan State University€¦ · • How you balance income and your expenses ... or borrow a book from a friend. ... will determine your ability to borrow