Self Storage Blueprint for Success
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ABOUT SELF STORAGE INVESTING
All across the United States, entrepreneurs are talking about the self storage business. The word is out that investing in the mini storage business can be very profitable. And it’s not just the experienced investors that have their eye on the Self Storage Business prize. With lower building and management costs than virtually all other real estate investments and a failure rate of around 7 percent, the self storage industry is drawing first-time business owners and investors alike.
The advantages are obvious, easy start up, easy maintenance, low risk, but what’s the catch? Can it really be that easy? There is no catch, but it does require work. An investment in the mini storage business has a lot of potential, but it is an investment and not a hobby. One needs to be prepared to devote time, resources and of course, capital to a self storage enterprise. So when you decide you’re ready to commit to investing in an existing self storage facility, or developing one from the ground up, there are a few things to consider before moving forward:
Build it and they will come.
Before you invest in the land or buildings you will need to do some research into the market in which you desire to buy or build. I also strongly suggest you hire an industry consultant to perform a feasibility study on the project to determine if the project will fly. Even if you have experience in real estate or the self storage industry, an unbiased opinion is invaluable when considering an acquisition or development project.
Location, location, location.
Those three words ring true for all facets of Real Estate Investing – and Self Storage is no different. Many investors have tried to build on a piece of land they already own, or buy the lowest priced piece of land they could find in a given market – but you should never sacrifice a prime location for price. An ideal site is one that has a high traffic count and is highly visible. How Does the Competition stack up? How about the # of competitors? Could the market be somewhat saturated? If there is more than 7 s.f. of self storage per person, you may have a more difficult time stabilizing your facility.
The next aspect to consider is financing. Construction loans are dramatically different and at times can be a bit more difficult to navigate than other forms of permanent commercial real estate financing. Before meeting with your lender, one might want to do some phone work to learn more about the size and scope of loans they are able to make and if they make unique loans for Self Storage businesses.
So what type of building should you build? Pole barn style, all steel, split block, convert an old building? Since your storage buildings will BE the business, a great deal of planning and consulting with the general contractors should be undertaken. In addition, the unit mix and amenities of your site can have a direct correlation to the success of the site. A developer must also plan for driveway space, unit size and placement of the individual doors, lighting, percentage of temperature controlled units and security to name a few. I Strongly Recommend Choosing a builder with experience in the self storage industry who can advise you in all facets of the construction or conversion process. The right building plan will improve your occupancy rate and help you avoid costly renovations.
Advertising, staffing, and the day to day maintenance of your new self storage site should not be afterthoughts. In addition, a great deal of attention should be spent on developing a marketing plan. A simple listing in the yellow pages and a big sign out front won’t fill, or keep your storage units full. Decide on a marketing strategy before you build and pay close attention to altering your strategy throughout the course of the year – with continual tweaks and new messages being tried at all times.
The success of the business post construction lies in your ability to hire and maintain quality managers. Be cautious about hiring friends and family. It’s hard to treat loved ones like employees and hard for them to treat you like the boss. Also, don’t assume that you can do it all yourself. If you want your mini storage business to be a success you’ll probably need to be open a lot more hours than you’ll want to be standing behind the counter.
My Real estate Career began back in 1993 after purchasing a home study course by one of the top “Guru’s” in the country on how to invest in real estate with no money down.
And I, unlike so many other people who buy courses and then stick them on the shelf, actually watched those tapes and read the manual. And Guess what……..it worked! I bought my first piece of investment real estate (pictured below) for $30,000 with $0 money down!
The one that started it all! 8719 E. Catalina
Once I bought this home, I followed the steps in the home study course which showed me how to increase the value and force appreciation in my new investment.
I rehabbed that first house myself and moved a tenant in at $550 per month, which gave me a $150/month in positive cash flow after the mortgage, insurance, and taxes. Shortly after that, I had the property re-appraised and then I refinanced it and pulled out $15,000 which I used to buy 2 more just like it. I was hooked!
Approximately 6 years and 20 rental houses later, I decided to quit my Job to transform my real estate hobby into a full time business. I was married now and my wife and I were expecting our first child. My first full year in the real estate business went very well and we had acquired several more homes and an apartment complex (pictured below).
By now, I believed I had finally made it, I was living the dream!
As a result, I decided to show my friends and family how successful I was by buying a new car, taking my family on expensive vacations, shopping for the latest clothes, and by basically buying and doing whatever I pleased.
I continued to acquire more rental houses and apartment complexes, amassing over 400 rental units, and leveraging ourselves to the max along the way.
Then came the tragic events of September 11, which as many of you may remember, shook our country to the core. In the months afterward, The Fed dropped interest rates to record setting levels to boost the economy and our tenants began leaving in droves to take advantage of all the $0 Down-1st time home buyer programs that were being offered.
As a result, our vacancy rate had taken us below our break even point within a matter of months. In addition, our insurance rates had soared after the attacks, and a statewide property tax increase on all our properties a year later delivered the final blow. I continued to borrow from our credit lines and I maxed out both our business and personal credit cards each month in order to make our mortgage payments, pay our employees, keep the lights on, and provide for my family.
We slashed every possible expense in our business and personal budgets and began selling off our rental houses and apartments in an effort to keep from sinking. At home, my wife began selling everything in the house that wasn’t nailed down on EBay® just to make ends meet, and it was working, but we were still holding our breath every 30 days in hopes the money wouldn’t run out before the month did.
And Then the inevitable Happened. Our family was in the checkout line at Wal-mart one night when our credit card was declined (again). But this time, our debit card was also declined, and my wife and I didn’t have enough cash between the two of us to pay for our groceries. The day I feared had finally come; We were broke! I was a real estate millionaire without a penny to my name. I felt as if I was going to pass out right there in the store. I pulled out another credit card…..declined, and another……declined, and another, until finally, the last card in my wallet was accepted. My wife and I collected the kids, our bag of groceries, and drove home without saying a word. I felt like the biggest failure in the world. I couldn’t even provide for my family.
That night, I did the only 2 things left to do. First, I prayed. I prayed that I wouldn’t have to file bankruptcy and for direction in my crumbling rental empire. The second thing I did was sit down and began to take a long hard look at where I had been, where I was, and where I wanted my life to go. The first place I knew I didn’t want to go was to live with my mother-in-law should I be forced to file bankruptcy and lose everything I own, which seemed to be where I was headed!
So as I continued to think and work through this process over the next several days, I realized that my passion still lied with real estate, and that the main reason I was in this mess was because I was in the business of renting space to PEOPLE. The lost rent from evictions, move-outs in the middle of the night, along with huge collection expenses and extended periods of time with high vacancies during the home sales boom, had literally drained our bank accounts. I then added in the cost to repair, re-paint, and re-carpet each of our 400 units over the years as they became vacant, and that number virtually doubled!
Also, being a victim of 100% to 200% increases in property taxes, insurance, and utility costs over the past 5 years brought me to the conclusion that I didn’t want to be in a position where I was slave to these 3 business partners any longer.
After that, I estimated the cost and hassle of hiring and firing several employees and added up the cost of their theft and falsifying payroll reports which ran into several thousand dollars more in losses and lost productivity over the years, and I became even more depressed at how bad things had become.
My dream of owning my own business and enjoying the benefits of being my own boss and the promise of a better life and the creation of wealth through real estate had become my nightmare in a matter of just a few short years.
So the conclusion was that my dream job was to build a low-risk, high cash flow real estate business without all the hassles of tenants, toilets, or employees. Great! Except that what I wanted, didn’t exist. It was nothing but an Impossible, pie in the sky pipe dream …… or was it?
Well, since you logged into SelfStorageInvesting.com, you’ve probably already figured out the answer to my prayer, so now I’ll share with you the top 10 reasons why I decided to eventually sell all my houses and apartments, and ditch all my tenants and toilets to invest in self storage, and realize my dream.
Top 10 Reasons To Own Self Storage
10Low Barrier To Entry – There are Approximately 24 Million Self Storage Rental units in the U.S., creating a tremendous buying opportunity
09Real Estate – because of the power of leverage,
tax advantages, and wealth creation through
08Demand Projections Are On The Rise: 23,000
facilities, or roughly half of all facilities in the U.S. have been built in the past 7 years.
07Multiple Profit Centers – Retail Centers that sell
locks, boxes, & Moving supplies, Truck Rentals, EBAY© add-it centers, & much more!
06Minimal Collection Losses – The ability to Lock out non-paying tenants, and then auction their stuff to recoup lost rent.
05Low-risk – multiple units in 1 place, so no single move-out dramatically affects cash flow. Also, Self Storage loans have the lowest default rate of any real estate product type in the market, period!
04High Cash Flow – Taxes, Insurance, and utilities are lower than any other property class, therefore, they aren’t
susceptible to large increases. In addition, the $ per sq. ft. is the same as other types of real estate, without the
03No Employees – Manage from afar with a kiosk, or
automated rental unit like the one pictured below.
02No Tenants – Just Stuff! Patio furniture, boxes, books, and couches, Not People, and their
01No Toilets – Just steel walls and roof, gravel or asphalt driveways, and a steel door. When a tenant moves out,
I don’t have to fix any appliances or damage, Re-Paint,
or Re-Carpet and NO TOILETS!
People constantly ask me why I continue to teach. It’s hard for them to understand why a multi-millionaire would take the time to work with those who aren’t. My answer is simple, really. As a result of being spared from going bankrupt and having to move in with my mother in law, I now feel that I have an obligation to help others who desire to become real estate millionaires without the hassles of tenants, toilets, or employees by sharing the mistakes I have made, and teaching them the safe, time-tested strategies for locating, evaluating, acquiring, and managing Self Storage Facilities.
Truthfully, I’m just a simple, Mid-Western guy who has been blessed with a beautiful and supportive wife of 17 years, and 3 incredible children who continue to be my greatest cheerleaders in whatever new endeavor their Daddy decides to pursue. And When I’m not out building and working on my Self Storage Empire, I enjoy traveling with my family, the sport of cycling, wine collecting (and
consumption) and I attend all forms motor racing events here in my backyard (Indianapolis) and throughout the country.
I’m also extremely committed to the charitable work that my family and I are so committed to. We sponsor 4 children through
Compassion International, 3 of whom share the EXACT same Birth date as our 3 kiddos.
I have also gone on business trips where we donated money, school supplies and clothes to a school in Mexico each year for several years, and we do our best to seek destinations for our personal vacations where we can serve others in some way.
More Recently, we embarked on a Mission Trip to work on a reservation in South Dakota with our church. We spent a week at the Ghost hawk campground on the Rosebud Reservation. We assisted in the Annual “Christian Revival” by repairing the stage,
organizing arts & crafts for the kids, and anywhere else we could be used.
We also enjoyed going to the Dominican Republic to build one of 3 houses with CWAM (Companies with a mission) with several families from our kids school on a scholarship from Defender Direct.
So, there you have it, the real me. Now browse my site and let’s see how I can add your name to our growing list of Successful
Entrepreneurs who are enjoying the passive income and freedom that can only be found in Self Storage – Without all the Hassles of Tenants, Toilets, and Trash.
To your success,