Now that you have your first self-storage facility, what should you do next? In this episode, Stacy will guide you step-by-step through the process of buying your first self-storage facility and explain all the steps involved. Though the goal is to close the deal, Stacy aims for the period between you getting the deal under contract and closing it. That means when you finally close on your facility, you can take payments. Stacy reminds you to not just twiddle your thumbs for 90 days and get that contract ready. Grab this opportunity to learn how you can get your first self-storage facility!
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A Quick Guide On Getting Your First Self Storage Facility Under Contract
Let’s get started on stage 1. I’m going to take you through stage 1. There are four stages. I’ve done this several times. We had a two-day boot camp with all my students and we went over this. That gave me the idea like, “Let me go over this one more time.” There are four stages of self-storage investing. When you have your paper, you’re going to take notes. You can draw a little diagram. Your goal is to find them and do a deal analysis. Every single one of these steps has a goal. Your goal for this stage is to get it under contract.
You’re like, “How is Stacy buying all these things? How does she get all these things under contract?” This is what we’re going to talk about in this episode. I want to tell you what 2, 3, and 4 are so you can fill out your diagram. Stage 2 is going to be funding them and onboarding them. Your goal in stage 1 is to get it under contract. In stage 2, it’s like, “I’ve got to find the money. How am I going to buy this thing? How am I going to onboard this thing?”
The goal is to close the deal. For us, is the period between which you get it under contract and you close on it. You don’t just twiddle your thumbs for 90 days. You get it ready so that when you close on your facility, you can take payments. This is where you’re taking payment. I talked about this in bootcamp. The good thing about storage is that you’re buying real estate. You’re buying an investment. You get to deduct this. This is a deduction.
The truth is that it’s a business. It’s an investment that’s a business. The goal of the business is to make money. As a storage facility owner, you won’t be able to take payments. What happened to me on my very first deal? When I started storage investing, there was nobody out there coaching. There was one person. I did a bootcamp, but it wasn’t very thorough or anything like that. It was super high level. I had to figure everything out. I closed on my facility. I had come from rehabbing. I’ve rehabbed 100 homes from 2011 to 2016. You close on the deal, and that’s when you and I got started. It was hard to do anything else. You get some contractors out there and that was it.
In the commercial world, my very first deal, I got it under contract. I was like, “I got to close on this facility.” I already had the money because I was privately funded. I didn’t have to start searching for money. I looked for software, and then we closed on the facility. Everybody was calling and they were like, “What do I do? How do I take payments?”
For the first 3 or 4 months of me buying the facility, it was utter chaos because I had not onboarded my facility. I had not done all the steps that needed to get done in order for me to be able to get my people into software, get the contract signed, and for them to take payments. I was one of those people that was manually taking contracts. Once we got the software up, I had to go and get them to do the contract again. They were all pissed off about that. They were like, “How many contracts do we have to do?”
This onboarding phase is eliminating that whole process. That’s stage 2. The goal is to close the facility. Stage 3 is what I call transfer ownership. This is where you’re getting your tenants into your software. Your software is set up and you’re getting your tenants into your software. The goal is for your contracts to be signed electronically to transfer ownership.
You now got your contracts signed. You now get your software set up and stuff. Stage 4 is automation and systematizing. The goal for this stage is online marketing for tenants. Those are the four stages. On stage 4, you’re starting to breathe a little bit. You’re like, “Let me get in there and utilize this software. I need tenants. How do I get tenants?” You can’t just stick a sign in the ground anymore. If you go online to Google Maps, how do people find storage? They go to Storage Near Me. Those are all the ways for you to be able to be on top of that. That’s what that is.
Let’s do step 1 for stage 1. This is for all you newbies out there. You’re like, “How do I do it? How do I get started?” I teach that you should go directly to the owners. If you’re following me, you know that you should go directly to owners because that’s the best way to find the best deals. The truth is that there are a lot of storage facilities for sale out there.
I got sent an email on a property for $3 million, and he’s making $180,000 a year. I know I’m about to sell one of my properties that’s making $160,000 a year. I’m probably going to sell it for around $1.8 million to $2.2 million, depending on what cap rate we come up with for it. In his facility, it is almost exactly compared to mine. He wants $3 million.
That’s a realtor listing that property. You got to keep this in mind. If you’re going online and you’re talking to brokers, a lot of times, those properties are super high compared to that of an owner. If I’m the owner, I know that I’ll probably get around $2 million for this thing. He’s pushing $3 million because the realtor is telling him, “Let’s shoot for $3 million and see what happens.” Not all realtors are bad or anything like that. I’m just saying that this is how the world works.
If you talk to brokers, the properties are super high compared to an owner. Click To TweetIn stage 1, your first step is going to be building a list of facilities to buy. I have ten virtual assistants. They do cold calling. This is one of the many ways that you could do it. The rule for us internally is that they cannot start cold calling. They have a list of 300 facilities to call within the parameters that we’re looking for in certain areas.
Build A List Of Facilities To Buy
You want to build a list of facilities to buy. You need to figure out what market you want to be in, whether it’s primary, secondary, or tertiary. When you figure out which market you want to be in, you get to figure out what the cap rate is going to be. You also figure out what market that you want to be in by determining how much money you have.
For instance, you are not going to buy in a primary market if you don’t have $3 million-plus. Primary markets are super expensive. Typically, secondary markets are $1 million to $3 million, and tertiary markets are less than $1 million. You need to figure out how much money you have to purchase a facility. From there, you’re like, “I only can come up with $100,000. That means I can only buy $500,000 typically.” That’s because you put 20% down. You’re like, “Where can I find a $500,000 facility?”
You start going out into the markets and looking into the areas. You start looking and building your list. It’s like reverse engineering. You want to try to figure out how much you can afford. What that means is are you going to be coming up with the money yourself to buy the facility? Are you going to bring other people in to help you buy the facility? Are you going to raise the money? There are all different kinds of things that you can do in funding. That’s the question of the day. How much money can you come up with? That’s when you determine what market you’re going to be in.
The markets are going to be either country or in the middle of nowhere if you don’t have a lot of money. The thing is commercial real estate is expensive. Even if you’re in the middle of nowhere, you could still find a property that’s $1 million. It is expensive. You’ve got to learn these markets, primary, secondary, and tertiary markets.
I’ve talked a lot about this over the course of the last couple of years. Primary, secondary, and tertiary markets are where you want to be. You should choose which one you want to be. Choose how much money you have so that you can determine where you should be looking, and then you start building your list of facilities. You go either on Google Maps or driving for storage, or going on Crexi, LoopNet, and MLS. Those are all the different ways that you can find facilities. You’re going to build this list.
I would tell my virtual assistants, “300 is the minimum.” When you call and talk to owners, all of them are going to say no except for one. For every 50 owners that you talk to, one is going to say, “I want an offer.” If in a day you call twenty people and they all say no, you don’t want to give up. It takes time. You want to have a huge list that you can call, recall, and follow up on. It’s building this list. However you build this list, that is the first step. I’m coming up with lists that you can farm, either on Crexi, facilities from Google Maps, or whatever you want to do.
Talk To Owners
The second step is talking to owners. Notice that I say not calling owners, not emailing owners, or whatever, but talking to owners. When you build this list, you might be able to get ahold of their skip trace and their phone number. You have their address. You can mail them. You can call them. Remember what I said. For every 50 owners that you talk to, one of them is going to want an offer.
If you’re going to go on Crexi and talk to the realtor, they’re going to give you all that information, but if you’re running the deal analysis and coming up with the right price, it is still going to be a numbers game. You want to make sure that you’re working in the numbers game. That means you’re building the list and talking to the owners. However much time you can spend on doing this, you can spend on doing it.
You want to make sure that you're working in the numbers game. That means you're building the list and talking to the owners. Click To TweetTalking to the owners is the best, not managers because when you talk to a manager, they’re not going to give you any information. They’ll say, “The owner doesn’t want to sell.” You want to make sure that you’re talking to the owners. You can do that by skip tracing to get their information. Google skip tracing, I will show you what it is. It’s a way to get people’s personal information. You call the owner directly and talk to them.
Building the list is easy because you’re finding storage facilities to put it on your list. Another thing about this is that you want to have a very good CRM. You want to have a follow-up because you’re going to have a list of a couple of hundred storage facilities. After a while, it’s not that difficult to put a list of 30 or 40 facilities together. The hard part about building the list is keeping track of it and having a good follow-up system.
Everything in this industry is all about timing. When you call them, leave a voicemail, text them, email them, send them a letter, or whatever the communication styles that you’re doing, you need to keep track of that. Every month, you need to be calling these people. The truth is this whole scenario right here is nothing but timing. Those that are good with follow-up are the ones that are going to succeed in this industry.
One and done, you can’t do that. On the residential side, you can do that because there are millions of homes. In all of your states, there are probably 1,000 storage facilities that you can call or less. In most states outside of Texas and California, there may be 1,000 storage facilities that you can call and see if they want to sell. You can’t do one and done and be like, “I called them,” or, “They never answered the phone.” The truth is storage facility owners never answer the phone. That means that you’re going to have to keep track of that and then call back again. It’s being persistent.
Now, you’ve talked to the owners. When you talk to the owners, you’re going to ask them if they want an offer. You’re not going to ask them if they want to sell their property. If you ask them if they want to sell their property, they’re going to say no. Do they want an offer? Do they want a financial analysis, an analysis of their property, or an offer? A lot of times, they’re going to say yes. We’re giving out offers left and right on properties. You want to make sure that you’re asking the owner for the offer.
You build your list. You start calling. You’re talking to owners. Finally, an owner says, “I haven’t thought about it, but I’ll take an offer. I’d like to see what you’re thinking about what my properties are worth.” It’s like, “Somebody wants an offer.” Number three is you’re going to get all the information that you need from them so that you can run the deal analysis.
The Deal Analysis
We have our deal analyzer. You can buy this deal analyzer on our website if you want to do it. You don’t have to buy it if you don’t want to do your own deal analysis. I want to give you what you need from the owners so you can run a deal analysis. The first thing is you need to get the annual income. It doesn’t matter what their annual income is. The second thing is you need to get the number of units and the total square footage. You also need to get the vacancy square footage. You need to have property taxes, utilities, and insurance. If you can’t get those, you can always estimate and look at property taxes. It’s a public record.
Next is expenses. Our expenses on our deal analyzer are all just formulas. We run our numbers between 32% and 38% based on the purchase price. It’s how we do it on our deal analyzer. You want to have expenses, property maintenance, staffing, software, merchant fees, marketing, and then your mortgage payment. You got to know if you have a mortgage. Your mortgage comes after your income and your expenses. You want to make sure you have that.
We call this the info tab on our deal analyzer. Also, what you’re going to need is you to need to fill out the unit mix. You need to know the unit mix of all your units and the sizes and prices. You got to calculate those all up. You want to see, “Here are 84 units at 8,100 square feet. The total is $3,900. It’s $0.48 a square foot.” You see how you’re calculating the average price per square foot based on the unit mix. You’re also calculating your total square footage based on the unit mix. You have to get the unit mix because that’s going to give you the real number of how big your storage facility is. Everything in storage is based on price per square foot.
Get The Competition
Finally, you’re going to get the competition. This is the most important part because this is going to show you how much money you’re going to be able to value-add that property. You’re going to fill out all your competition. You want to know the name, the phone number, and the website. Are they not the address that they claim their business is on Google? How many miles away are they? Are they gated? Do they have an office? What’s their total square footage? You’re doing a deep dive into your competitors.
You need to know the prices. You compare your storage facility and the competitor’s apples-to-apples. If you have 5x10s, you want to know what the other competitor’s 5x10s are doing, non-climate control or climate control. It may be 10x10s, 20x10s, or whatever it is. You want to do apples-to-apples, depending on what type of unit. Is it a drive-up? Is it indoor, climate, or non-climate? There are all kinds of different types out there.
For your competitive analysis, you’re going to get the average price per unit and the average price per square foot. That’s what you want to know for your facility. What is the average price per square foot? You’re going to take that. Filling out the info tabs, getting the basic information, getting your unit mix, and getting all the competitors are the most important parts of the deal analysis.
Remember, I told you that you’re going to need to know what your financing is. Knowing what the terms are going to be of whatever loan you’re going to get is imperative to you running the deal analysis. That’s why when you see a commercial property for sale, they’re only giving you the numbers up to the NOI because your mortgage comes after the NOI. You want to make sure that you know what types of funding are out there. Is it going to be conventional? Is it going to be SBA? Are you going to have interest-only payments? Are you going to partner? How much money can you put down? How are you going to buy this thing? You’re going to want to know that.
Especially for the bank, we have the bank financing here that we run the numbers. We also run our numbers based on owner financing. We always give owner financing options and some sort of creative deal structure option to our owners. For us, we’re doing cash offers, owner financing, and bank financing offers. That’s how we do it.
In our deal analyzer, our offer letter is automatically created. You could print it out based on the terms that you put in your financing inputs. You can automatically have an offer letter created and send that out. This is going to be your offer letter. Remember, you’re having a cash offer and then a couple of owner financing offers. Something like this is what you’re doing.
You always want to give more than one offer. You want to stand out because owners are getting calls left and right for things like this. You want to make sure that you’re standing out. When you ask an owner if they want an offer, they’re going to expect you to give some random lowball offer. The truth is when you send over a letter that has 3 or 4 different offers on it, they’re like, “I thought I was going to get some lowball offer.”
We like to give fair offers and we like to let the owners know how we do that. That’s why in the negotiation phase, we even have what we call the share sheets. The share sheet is what we can give to the owners to show them how we’re analyzing the deal based on the information that they gave us. We’re like, “You gave us this information and this is how we analyzed our deal. We’re not trying to lower ball you. We’re trying to give you a fair offer, and this is how we came up with it.” That’s why we have the share sheet. That was to give you an overview of the deal analyzer. The point of me telling you this is to help you with the next step.
We now get the info from the owner. You’re filling out the info tab. I call it the basic info. You need to be able to get the unit mix tab and the competition tab filled out, and you need to have your financing inputs. This is how you’re running your deal analysis. You need to get this information from the owner. Once you get the information from the owner, you’re now making the offer.
We have what we call a magic letter inside our deal analyzer. We also have the share sheet inside the deal analyzer. This is how we make our offers. You want to make sure that when you have the magic letter, you’re doing 3 to 4 different offers. Your magic letter should be showing how much money the owner makes. That’s what your offer letter should say. You don’t say, “I’m going to buy this thing for $1 million.” They’re going to be like, “No.” You’re trying to entice them.
Making an offer is super important. You’re making the correct offer, not just numbers. The numbers are one thing. It’s how you present the offer. That’s the most important thing. How do you present the offer? You want to stand out. You want to be personable. They’re not going to sell their property to some stranger unless they know, like, and trust you. How can you present this offer so that they know, like, and trust you?
Negotiations
Number five is going to be negotiations. You’re going to present your offer, and then they’re going to be like, “I don’t want to do this offer.” You’re going to come back and be like, “I’ll move on to the next deal.” No. You’re going to be like, “Can you counteroffer? What is the price that you have in mind? What are you thinking so I have an idea? I’m not just shooting from the hip. If you tell me what you think it’s valued at, then I can look at the deal and see how we can do that.”
“In fact, I’m good at doing creative deal structures. If you want to double the amount of money of what I offer, then would you be open to doing some creative deal structure with me? The truth is right now, banks suck. Interest rates are horrible. It’s hard to put an offer in for something. It may be valued at this price, but the bank is only going to pay for this much because the interest rates are so high. They want such a high DSR. They’re ultra-conservative right now. I would love to offer you way more money, but the truth is the market doesn’t call for that right now. Can you work with me? How can we work together to get this deal done?”
“I would love to buy this property. I can pay this much money. Can you do a second? Would you be interested in partnering with me on the deal? How about you sell me the deal and we partner on the back end or something? Can we do some creative deal structures to get this thing done?” You’re negotiating with the owner and coming up with ways to work with the owner.
This is why I never go through realtors because you can’t do this with a realtor most of the time. I can do this with a realtor because I do that, but most people don’t do that. They put an offer in and then it’s like, “It’s over.” The truth is that if you talk to them, come up with a whole bunch of different ways, and be creative, bills get done. I get so many deals done just because I connect with the owner and talk to them. I give them offers and give them ways to do things.
For instance, we bought a facility down in Florida. The owner wanted $600,000. I said, “I got a guy that has $200,000 right now. What can we do? I need to spend his money. What can we do?” I was like, “Why don’t we partner? Why don’t we figure out how to do this together? I’m going to bring this $200,000 in. He’s going to be my partner on the front end. Would you be interested in financing the back end? You can finance $400,000 of it and I’ll bring $200,000 in from somebody else.” The guy was like, “I probably could do that.”
We sat and talked about it. These negotiations take a little while. They’re trying to get the feel for how people are and stuff. We sat there and talked about it. We went back and forth. In the end, he gave me interest-only payments for two years. Plus, he owner-financed the deal for 4% interest to me. Also, he threw in an acre of land. He was like, “I have this land on the back end. I don’t need this. I’ll give that to you as well.” That’s us negotiating together. Getting to know each other, making the offer, and negotiating. That’s how it works. You got to get good at this. This is important in any industry. For any property, you have to be good at negotiations.
Get to know each other, make the offer, and negotiate. That's how it works. You need to get good at this. This is important in any industry. Click To TweetGet It Under Contract
Finally, number six is you got to get it under contract. This is you filling out a contract. If it’s through a realtor, the realtor is filling out the contract. You do the negotiations and then you get it under contract at the same time. Sometimes, we’ll negotiate and then I’ll send the contract over. The owner is like, “Let’s change this.” You do not want to have a contract that’s crazy. You don’t want to be scaring the owner off.
I had one student. He went and got an attorney to write up the contract to buy a facility. It was 22 pages long and the owner backed out. My contract is three pages long. I told all my students this. I’ve done $25 million of transactions with this contract and it’s three pages long. That’s it. You don’t want to make it so complicated.
If you’re going through a realtor, you got to use the realtor’s contract and stuff. They’re so long. You can’t even assign that contract, which is annoying to me. If you wanted to assign it, you have to go through hoops and holes and stuff. I’m used to using my contract. The thing is storage owners are regular people. They don’t want to be BS around and stuff, so don’t make the contract so crazy.
You’re just buying a property. So what if they terminate? If they terminate, what are you going to do? Are you going to take him to court and say, “He told me he was going to buy this property?” You can’t do that. Nobody is going to do that. I had one guy back out the day before closing. It took us maybe six months to close the deal. I worked so hard on that deal, and the day before closing, he closed the deal. What am I going to do? Am I going to be like, “I’m taking you to court. You have to close.” I’m not going to do that. Nobody does this unless you’re crazy.
These are the steps. I mushed this one together, but this is to get the information from the owner and then run the deal analysis. This takes practice. We sat for two days in my bootcamp. We did deal after deal and ran the deal analyzer. The first time that you get into running a deal analysis on a property, it’s cumbersome and difficult. This takes practice.
I’m at the point now where I could look at a property and tell how much it’s going to be a lot of times. If somebody tells me the income, I can probably figure out what it’s going to be worth. That took me five years to get to. Know that this takes time. The truth is this whole stage takes time. This is all stage 1. Stage 1 is building a list of facilities that you can farm and then talking to those owners. After you talk to the owners, you’re getting all the information from them so that you can run the deal analysis and look at it. You need to learn how to do this.
You then got to make the offer. When you make the offer, you got to make a strong offer. You don’t want to be making a crappy offer. That’s why we do four different offers, the share sheet, and everything. You want to be able to negotiate. If they come back and say, “Can you counteroffer? Let’s work this out. Are you interested in doing some creative deal structures?” Come up with some ideas on how to entice them into negotiating with you. Finally, you get it under contract and you want to make it as simple as possible. You don’t want to make it so complicated because it scares them off. That is what it does.
This whole stage 1 takes typically anywhere from 90 to 120 days. If you’re actively looking for deals to go out there and do all these steps, it takes several months. It’s not easy peasy lemon squeezy. You got to grind. You got to talk to the owners. You got to get out there. You don’t want to give up. You want to be persistent. Know that it’s a numbers game. If you’re actively doing that and your goal is to execute these steps, then something will fall into place.
The truth is life is all about momentum. When you’re going and going, something happens. If you’re like, “Let me try this week,” and a couple of months later, you’re like, “Let me try this next time,” and a couple of days later, it doesn’t work. It’s all about momentum and energy. That is my two cents on stage one, finding deals and getting them under contract.
You can go to my website, which is StacyRossetti.com to get the Deal Analyzer 4.0. You can pay for that one if you want to get that. If you need a course to walk you through the process, check out my course. It’s called Super Simple Self-Storage. That will hold your hand and walk you through the process. That is what it will do. All the videos, checklists, and things that you need are all there as well. That’s it for this episode.
Does anybody have any questions? I’ll do a couple of questions before I pop off. Right after this, I’m going to go to StacyRossetti.com/fund. I always pitch my fund right after I teach. If you’re interested in passive investing or if you’ve got money and need to place your money, then please hop onto my fund and tune in to that. You do have to be an accredited investor to invest in my fund.
The contract is available to my students. It’s also available in the course. If you do want to get the contract, you can get it in the course. Someone asked, “What Skip tracing tool do you use?” We use Crexi. That is what we do. If you’re interested in getting access to Crexi, email us and we will introduce you to Grant. Grant is our go-to person. He’ll give you the Stacy discount because it’s more expensive if you don’t go through my discount. Our email is Questions@StacyRossetti.com. That’s our email. We can introduce you to Grant at Crexi.
Someone asked, “How far out from the primary location does it require to reach that kind of a list?” It depends. That’s a good question. For tertiary markets, you’re going to have to go further out, but it’s not that far. There are a lot of storage facilities out there. Let’s say, there are 1,000 in your state, that’s 250 per section or 300. That’s a lot of storage facilities in a little area. It’s not that long.
Someone said, “I’m going out for 30 minutes to an hour. How many storage facilities can I find from my location until then?” I’m going to go out for two hours, maybe three hours. We started out within 30 minutes and then went for an hour. We go to Florida, Georgia, and all around. We’ll go wherever.
Somebody is asking about online marketing for tenants. Online marketing for tenants means that everything for storage is online. The way that you reserve your units and the way that you get your tenants, everything is all online. If you’re not online, then you’re ancient. You want to learn how to market online for tenants.
Think about it. If you were going to rent a storage unit, where would you go to find it? You’d go online. You’d got to Storage Near Me, and then whatever pops up is what you’re going to be looking at. As the owner, you need to be one of those ones that pop up in your area. That is what you have to learn how to do. It’s SEO, getting out there, Google Ads, and all kinds of stuff like that. I appreciate you for tuning in. I’m going to go ahead and hop off to my next session. Get ready for that. I’ll see you next time. Take care.
