We approached the owners of a small self storage facility about the possibility of buying the place about 2 months ago. We like the area it is in because there are 2 new condo developments in the area, each with about 180 units in each. One of the condo developments is next door, within walking distance, (actually spitting distance) and the other is about a mile away. Also, about 2 to 3 miles away, they are building new houses.
The facility is owned by the builders who put up the 2 condo developments and the self storage place is 20 years old. It has 38 units. There are no utilities to speak of. No management, no sign, and they have done absolutely no advertising with it ever. They pretty much used most of it to store their own stuff.
Originally, when we asked them about it they told us they would sell it and charge us 300,00.00 for the facility, that it was making around 1500.00/month and the expenses were just taxes and insurance which were insignificant. (Around 200.00)month. We told them forget it and walked away. Obviously they were not motivated sellers.
Recently they called and agreed to sell it to us for $200,000.00. Now we were interested. we asked if they would carry back financing. They called back and said they would, but if they were going to finance it for us, the price would be 215,000.00. We told them the numbers didn’t jive, the guy told us to put an offer on paper and send it to him. The good thing here is that they are calling us now. He gives us the actual numbers. 13 units rented, 25 empty, monthly gross of 1085.00, expenses 355.00 (taxes and insurance).
If I’m looking at this right the NOI of the place is 730.00/month. I know we are going to have to advertise to get the place full. So that would mean we would make less. If we fill the park we should make around 3,000.00/month gross. I’m thinking the place is only worth around $150,000.00. If they take back financing and give us really good terms, I’d be willing to pay a little more for the place, say 160,000.00.
I guess the question I have is am I paying to much for the place? Just based on the limited info here. I know you guys haven’t seen it, but just going on what I’ve given you, what would you offer for the place? I appreciate your input…