Self Storage Case Study # 2 - Update 14 months after purchase
Its been 14 months since I Introduced Self Storage Case Study # 2. Needless to say we have been busy trying to make good on the projections we set forth over a year ago. If you somehow stumbled onto this blog post without having first read my previous post, please take the time to read Self Storage Case Study # 2 - Introduction Only first. It is likely the only way that the following will make sense.
As a brief recap. This facility was 117 unit storage facility with two apartments and a commercial office space as additional sources of revenue. The office space remains rented by the previous owner of the facility while the two tenants in the apartments were evicted and remain vacant awaiting conversion to climate controlled storage at some point. During the last 14 months, we ramped up the existing storage occupancy (physical and financial), added and filled 20 outdoor parking spots and erected an additional 3250 square foot storage building that is close to physical capacity. While our physical occupancy has grown steadily, financial occupancy still lags behind as we have opted for conservative rent raises during our first year of operation. We will accelerate rent raises this year as demand allows. It is also important to note that I self manage this facility which is the primary cause of our expenses running below industry standard.
Revised Financial Projections:
At Purchase Today Year 2 Year 3
INCOME: (Actual) (projected) (projected)
Gross Revenue $89,550.00 $88,350.00 $122,400.00 $122,400.00
Collected Rent $51,600.00 $77,393.00 $97,920.00 $110,160.00
Retail Profits Included in Gross Revenue Above
Late Fees Included in Gross Revenue Above
TOTAL INCOME $52,500.00 $77,393.00 $97,920.00 $110,160.00
TOTAL EXPENSES: $17,476.00 $22,463.00 $27,035.00 $29,744.00
Net Operating Income $35,024.00 $54,930.00 $70,885.00 $80,416.00
Original Projected Value after Year 3: $613,800 based on a CAP rate of 9%
Value Today (14 months after purchase): $610,300 based on a CAP rate of 9%
New Projected Value at Year 3: $893,500 based on a CAP rate of 9%
The above projections are based on the facility as built today. We do have approvals for two additional buildings and plan to seek approval to convert apartments to climate controlled storage. Doing so, if demand allows, will cost approximately $150,000 and should increase Gross Revenue by approximately $50,000 annually and yield an additional Value Add of roughly $400,000.
My honest hope is that someone finds this little storage blog of mine helpful or inspiring or both. Simply put, storage has provided my family with a life that we could not have dreamed of even 5 years ago. Because of storage, my wife and I spend 10-15 hours combined per week to manage our investments and are free to raise our two young children outside of the confines of a traditional job. Cheers to you achieving the same or greater success!