New deal to consider

Hey everybody,

I’ve run up on a new deal to consider.

34 mini storage units: 30 rented, 4 vacant; gross cash flow today of 1020. per month on them. Plus

4 trailers on the property: pad rent totals 360 per month.

The trailers are owned by seller and rent for 400/375/350/325 (1450) including pad rent or 1090 per month gross after 360 pad rent allowance.

I can figure the pad part at 360 month x 12 x .60 /.10 at $25920.00

The trailers are old 86,87,91,92 models and I’d guess their combined value at no more than 4 +4 +5 +5 or 18,000.

The part I’m unsure of is the mini storage values. 1020/month x 12 =12240.00/year gross (nothing for the empty units).

Do I use 40 percent for operating expenses (sounds high -this is a bare bones operation)?

Are these calculated by a multiplier (like the laundry in the other thread) or capitalized? If capitalized, what’s a fair cap rate? 10,12,15,???

Owner is willing to finance and wants 159,000 with 60K down, 5 percent interest with a 72 month straight payoff at about 1775/month.

I’m thinking this is not a good scenario because there are too little reserves. Where is my cash flow on this? Looks like all to the owner for the whole 6 years and if anything goes wrong, it’s out of my pocket.

If I can get a handle on the potential value of the mini storage side, I hope to propose a deal that makes sense.

How does 25 percent operating expenses sound for the mini storage side and a 10 percent cap?

That would give 1020 x 12 x .75 / .10 for $91800 on the mini-storage units plus 25,920 on the pads plus 18,000 for the trailers for a total of $135,720 max. Down and terms to be worked out.

Please help me on this one. Is it even worth considering?