Buying your first storage facility is always a difficult task. In real estate, performance and market analysis are important. But at the end of the day, if you don’t have exposure and good operations, it won’t even matter. If you’re a terrible operation manager, you’ll still fail no matter how good the market is. Join Stacy Rossetti as she talks to StorageNerd student turned full-time real estate investor Valorie Williams about the first property she bought in Lufkin, Texas. Learn more about the facility and how mismanaged it was. It was only 12% full when she bought it! Know why having a real estate partner is good, especially if it’s your first deal. And find out why sometimes, it’s better not to work with a wholesaler. Discover all that about the deal and more in today’s episode of StorageNerds.

 

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Watch the episode here

 

 

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Case Study: How StorageNerd Valorie Williams Bought Her First Property

We have a special guest, Valorie. She’s a StorageNerds student. I asked her to come in and talk about her deal. If you need help getting started in self-storage, you should check out my course, which is Super Simple Self Storage, and that is available on the website, StacyRossetti.com. Don’t forget that we have a coaching program. It’s called StorageNerds. The doors are now closed for that, but they will open up in September 2022.

Be on the lookout for that. You can go to StorageNerds.com, and get on the waitlist. Once the doors open and I take calls for six days. Whoever wants to get in, we’ll work on getting you in. Other than that, thank you for hanging out with us. Let’s get started. Valorie, why don’t you introduce yourself a little bit and tell everybody who you are?

I’m glad to be here. We are in our second sports facility. Like most of you, our journey started in a single-family. I started several years ago, flipping houses, wholesaling and buying sub. We had a decent single-family portfolio for a few years, and it was a nightmare. I also am a licensed realtor. I would help other clients as well.

Along that journey, my whole passion was to be in commercials. I looked at lots of different things. We looked at some office buildings. I did extensive research on multifamily. We did quite a bit of underwriting and multifamily starting in 2019. We got the final and best, but we got outbid. If anyone falls in the multifamily market, it hit its peak at the end of 2019 and early 2020. That’s when we jumped in it. It got highly competitive.

That’s about the time that I started thinking that maybe we should put it somewhere else. Multifamily wasn’t our bread and butter. I was a part of a brokerage group because I’m a licensed agent. Stacy spoke, and I said, “Storage facilities sound along the lines of what I like.” We started looking around, and I did the 90-day challenge. A couple of months into it, we found a property. It wasn’t completely aligned, perfect, and beautiful, but it’s been going great ever since. That’s the background of me.

Tell everybody where you’re located.

I’m located in Conroe, Texas, which is North of Houston. We are lucky not to get as many hurricanes, floods, and all the fun stuff Houston brings, but we are part of the MSA. We’re all connected and a part of that area.

Where do you look for your storage facilities at?

We’ve done extensive marketing all over Texas everywhere. I haven’t left Texas yet. I don’t think I will. Our one storage facility is in Lufkin, Texas, which is almost two hours East of us. The other source facility we’re closing on is about three hours North of us.

Before we get into your storage facilities, why don’t you tell us a little bit about all the different types of marketing that you do to find deals?

For storage facility-specific, we haven’t done a ton of creativity about it. In general, we’ve done tons of different types of marketing, but the first one we got for the storage facility was from a wholesaler. I’m not promoting to get them from a wholesaler, but that’s where we got the first one. Other than that, we would do what Peter had talked about. You go on Google Maps, pin all the ones that you aren’t sure if it’s a storage facility or not, and open up the Google Map. We would create an Excel list and bring it to a VA. They would fill in the data by pulling up the address on Google because that’s where we pinned it.

We created an Excel sheet of as much information as we could get. We were focused on people who didn’t have a website, weren’t on Google Business, and anything like that. We were trying to find the little ones that, from an overview, look like a storage facility. Sometimes we would get ones with a website and still call out to them. We never want to waste a lead, but that was the most part. We did send out letters because a lot of people don’t have emails or sometimes don’t have any information.

Did that work at all or not? How did that go?

The letters did not work, which was a bit surprising. The single-family was massively popular doing letters. We haven’t had much luck with the commercial because most owners aren’t at the address at the commercial facility. You have to do a lot more digging. There are a lot of owners involved in commercials. It’s either you send 3 or 4 letters or pick and choose. You can spend a lot of money on one property, guessing where to send the letter. We haven’t had too much luck figuring out exactly the best route for that.

When you look up commercial property and try to figure out where the owner is, it always has a gazillion different addresses, phone numbers, and stuff. It’s like, which one do you pick? The easiest one is to call them.

We would call them. Sometimes people wouldn’t even answer their phones. We would text them. You texted a bunch of times, called again, tried to get an email address, and email them. A lot of people in the rural areas are not up to date with technology. Texting is a new thing. That email is even newer.

 

Did you have an idea of what facility you were looking for when you got out and looked? Were you like, “I’m going to look and see what I can find?”

For marketing purposes, it was pretty much everything. I have extensive experience in wholesaling, and I am a licensed agent. At the end of the day, I had a couple of exit strategies for whatever we could possibly even remotely negotiate. Our main focus was something wasn’t being managed 100%. Other than that, size and location, we didn’t take that into consideration in the marketing for the purpose of it.

Tell everybody about this first deal. You’ve been now marketing, and you’ve found it. What happened when you found this first deal? Do you get it from a wholesaler?

Yes. When we found this first deal, it was too good to be true. The numbers were amazing. Everything was amazing, which is pretty common. The performance is astronomical. The income is something, and everything made amazing sense. The unfortunate part with this particular property was as we were going forward, the wholesaler kept raising the price. We knew when it was under contract, and they would not negotiate. They were almost making more than the seller themselves. It was a bit unfortunate. That’s why I don’t like working with wholesalers very much. In this particular market, it still made sense. They said this property was 12% occupied.

How did you all figure that out?

We figured it out by going to the property and looking through all of the paperwork that was sent to us. It was also marketed as 119 units, and it’s 122 units.

They didn’t have the right number of units. That happens a lot with facilities.

We looked through all of the paperwork, anything and everything that they had sent. We got contracts from several years ago and stuff. We’re going through everything, adding it all up, putting it in an Excel sheet, and creating our own tenant template and stuff. We’re seeing what it truly looks like instead of going off of what’s provided for us and realizing how off they are.

We were asking for proof of any type of actual deposits, and they couldn’t send any. Most of the occupancy wasn’t paying occupancy. It was a relatively mismanaged property. If someone was working for the owners, they let them store stuff there. They were like a property management company and wanted to manage it. We were like, “No.” The people that lived there were like, “We have to pay now?”

What did the wholesaler give you? Did he give you a lot of information? Was he able to give you information about the property or not?

A lot of it was, “Go and pay for all these reports and market research.” I can’t remember what the report is called because it was $7,000 to do.

Is it a feasibility study?

Yes.

Is that what he did, or were you doing this?

No, that’s what he’s told us to do. That would have been nice to have. I’m an agent. I went through a lot of the access that I have. I’m running a ton of numbers. We had to get it appraised because our lender was a bank. I drove to the market and went to multiple commercial banks to get an idea of the area. I drove to all the competitions and gauged their occupancy, where they were located, and how they look like.

Was there occupancy?

Finding commercial facilities through letters is difficult. You end up spending a lot of money just guessing where to send the letter. Click To Tweet

Everyone was 95% or higher. Some people will turn people away. There are different sections of the town. We were close to an area where people want to live, but it’s a little bit industrial. It was this interesting little midsection. It’s still expanding and growing over there.

This looks like a nice property. Is this what it looks like?

Now, it does. We forget what it looked like when we first walked in.

This is not it. This is the sign.

It’s the new sign.

This is what it looked like when you bought it.

It had a lot of lino doors, locks, and handles that didn’t work. Every single door was rusted or bent. The trims of all the doors were rusted. There was grass everywhere. I don’t think I have a picture of the lights. We have changed it out since then, but the lights were like mercury. They’re incredibly expensive to operate and not very efficient. The security system didn’t work. There were a few cameras, but they didn’t do anything. It had a lot of open fields.

These are the lights you see a lot. This is the 1970s lights right here.

When you take a picture of them, they turn green.

How many doors and units are there? What’s the total square footage?

The total square footage is 17,900. There are 122 units, but 1 of them is a maintenance unit, so pretty much 121. This road keeps going, and it hits the fence at the end. The fence is not the end of the property. There is a half-acre past this fence down to the right, and this is an open parking area. Between the extension of the fence and this little parking area is over half an acre of a potential opportunity.

Was this fence still there?

The fence is still there. It’s a bit of a struggle. We’re slowly working on the fence.

Is it a gated fence? It has a keypad or what?

It has an automatic keypad to get in and an automatic gate to get out. To the right is a forest. On the other side, there were a couple of doors missing. As you go down the exit, there are a bunch of units that don’t even have doors on them.

Can you see this picture or not?

 

I can see the 10x20s.

What’s this picture of?

That’s the entryway.

We have a storage facility that has like this big old box here for the gate. It’s always breaking and stuff.

It gets like a leaf in front of it. We have a local guy that goes and moves the leaf so little close.

Ours if the sun shines on it directly, it doesn’t work properly or something. Are you going to upgrade this, or you’re going to leave it here? I’m fine. I spent way too much money on this thing. That’s it. I’m done.

Eventually, we want to do this front gate because a lot of the facilities have a nice front gate and the chain link fence that surrounds the entire property. It looks secure, but it’s for aesthetic purposes.

Does this only have this on the front and not on the back? Is that where you’re saying towards the back where all the extra acreage is?

Yes. It has a chain link fence, but it doesn’t have the barbed wire top on the back. The sign does. The side fencing does have barbed wire.

Why does it have the barbed wires? Do they want to be super secure or what?

It added security.

It’s over 17,000 square feet, 122 units. When you bought this thing, it was only 12% full. How did you get funding for this?

We have a local bank, and they’re pretty awesome.

Is it local like Lufkin Bank?

They are in other locations, but the one we went to is the Lufkin location. They’re not a huge bank, but they are in a couple of other towns.

It’s a small local bank. They were like, “We will do it.” What did you have to do in order to convince them to give you a loan for this? It’s hard to get a loan for a mismanaged facility. What were their thoughts behind this?

 

A lot of people in the rural areas are not up to date with technology, so texting is a new thing, and email is even newer.

 

They look at the history of the investors. We have an extensive history in managing and flipping properties. We have quite a few properties, and we’re passive in some multifamilies. They looked at that a little bit. Our other partner in operating this property together owns a facility in Hubbard, which is about twenty minutes down the road.

How did you find that person?

The wholesaler was being super helpful and throwing names out. There was a guy that he said would be helpful. I called him and talked to him all about the market because he had purchased a property. I was picking his brain about market research and everything. He wanted to buy the property, and I was like, “It’s mine.” We stayed in contact for the next couple of months. Through that, it was like, “We can run this together.” It’s been great.

He’s a partner. You guys are more the boots on the ground. How do you all have that setup?

We’re a little 50/50. He’s a little bit more of the tactical side of everything, but I’m not necessarily boots on the ground either. Initially, to meet with the contractors and get it off the ground, I would go there, but now we have a maintenance guy that goes out once a month to finish some of the CapEx. We have a lady who answers the phone and does admin.

What did you all decide CapEx was going to be for this?

We wanted to focus more on security and curb appeal. We added a ton of lights and upgraded them. With the security system, you can see every single corner of the entire property. We made it remote access. We have control of it all the time on our phones.

Is this what you all did?

That doesn’t have the pictures of the new lights, though. I haven’t been out there since I’ve done it.

The doors make them look good. Did you have somebody come to paint the doors?

The whole facility got painted. There’s a lot of rust, and it’s been neglected for so long. It’s a solid metal building. We went through, patched everything, did Rust-Oleum on everything, and put the protective outdoor rust paint on everything. They got new handles and locks for a lot of the units.

What ended up the terms from the bank? How did the structure work for the partnership?

Our partnership is 50/50. We are 50/50 owners of Love Con Self Storage. We have it simple that way. We do also have an equity partner, and he’s 25% of the equity and the NOI after reserves.

Are you talking about the down payment?

It’s for the down payment and the CapEx.

What was the purchase price for this?

 

It’s $600,000.

What were the terms from the bank?

The interest is 4.5%.

It’s 4.25%, 5/1 ARM, 12 months no interest, 19 years amortized, and the loan origination is 1%. That seems pretty good. How long have you all thought you were not going to hold onto this? You could flip this and make a lot of money on this once you’ve got all this stuff?

The goal is to hold onto it and keep it forever for at least 10 years if not 20 years. The goal was to get at least up to a point in the potentially refinance it, pay our equity partner out, and stay in the deal. We’ll watch the market. Now with the market, if you sell it, you can’t put the money anywhere. We’ll keep it.

We wait and see what happens with the market. How much CapEx did you all put into this?

We put about $40,000. We were below budget on it.

You bought it for $600,000 and put $40,000 into it. Do you have somebody that answers the phones and stuff for you? How are you all managing it?

It is a round-robin between me, my partner, and the admin. Someone is going to answer the phone.

Are there a lot of calls?

During the first two weeks of the month, we get a lot of calls between tenants and new potential tenants. It fades out. Usually, our admin is calling tenants after that. It depends on the season and the time of the month, but not a ton.

What are you all renting your units out for now? Are you at market rate?

We’re slightly below market rates. We could go up, but we’re about $10 or $20 from some of the other competitors. They have onsite managers. They’re a little bit bigger. Some of them have non-climate and climate control. We’re a standard unit. We’re pretty close to the market.

What was your due diligence like during the due diligence phase? Were you there a lot, walking through, and trying to figure stuff out?

It was stressful.

Why was it stressful? Is it because you were trying to find the money?

 

In real estate, your numbers can look good on paper, but you have to make that a reality.

 

The money was hard for sure because it was mismanaged. We’re proving to people that we could do it and turn it around. In real estate, performance and market analysis are helpful, and you need them. At the end of the day, if you don’t have exposure and good operations, it doesn’t matter. The market could be amazing. You could be a terrible operational manager and have it sunk to the ground. One of the things is you do all the research, everything looks good, and your numbers are always printed on paper and stuff, but you have to make that a reality. That’s probably the most stressful part.

I was there more often than I thought I would be. I got to know quite a few of the neighboring companies. Across the street is an apartment complex. I utilized a lot of her referrals. That was awesome. There was a lot of staying in contact with others, having others have eyes on the place, and relinquishing control a little bit. I couldn’t drive down there if I wanted to. It was the farthest property we’ve ever had.

There were lots of phone calls, going through the Excel sheets, market data, and everything multiple times, and double-checking everything. I would look at every single storage facility and compare every single little detail to see how close we could compete instead of being Class A, Class B, Class C, climate, or non-climate. What are their amenities? Where’s their location? What’s the vibe and the community of it? There are lots of little things. People are emotionally attached sometimes.

If it’s a good deal, you have to convince everybody else it’s a good deal. That’s one of the hardest things. I know that’s what you went through because I talked to you several times. The only thing I didn’t like about this deal was how much money the wholesaler was making. It’s frustrating to me.

That is how you end a relationship quickly. It’s unfortunate that people do that because the real estate community is small. Once you make a connection with someone, you should work hard to maintain that. Some people don’t.

If you’re reading and thinking about wholesaling, what we’re talking about is the wholesaler. For this deal, I know this wholesaler. He’s a good person. He tries to make so much money off of every deal. I feel like you need to create a win-win situation for everybody. That’s the one thing that’s frustrating about the whole deal. Sometimes it pissed me like to be sick in the stomach. I’m like, “Why can’t we all work together?”

We tried even $50,000 less anything at all because I was originally quoted quite a bit less. He came back with the other price and that’s why I went back to the table. We almost walked away.

At least you found this person that’s willing to partner with you, and out of the down payment, he brought people on money to the table. You guys partner on it 50/50 and work the deal. The truth is, for your first deal, there was nothing wrong with doing this at all. We partner all the time. We partner with people as well, too, because I don’t want to bring any money to the table.

I would rather give up money on the back end in order to not bring any money to the deal. You have to keep that in mind. There’s nothing wrong with giving up money on the back end in order to not bring any money on the front end. We have a couple of questions as you went on. What is it like? When did you find this and put it under contract? When did you close on it?

I don’t remember exactly the date that we found it and put it under contract. It was April of 2021.

How long did it take for you guys to close on it?

We closed in November 2021.

You found it, but it took a while for you to get it under contract.

It took us a little bit to get under contract. There were tons of back and forth and different negotiations. Once we got under contract, there were lots of new things we found out about it. I’m getting things from the wholesaler.

How much time did you ask from the wholesaler for that you needed to close? Did you get 90 or 120 days to close? How much time did you have?

It was originally 90 days. We only did one extension, and we pushed for another one, but the bank got it done. We got an appraisal done in ten days. We got down to crunch time, which was unfortunate.

 

When is the eleventh hour?

We had all this time and, all of a sudden, it was like, “We got to close.” We got it done.

You’ve had this since November 2021. You guys did the doors and the lighting. What did you guys have to do? What did the first 90 days or 120 days look like for you?

They were pretty relaxed at first. I left town right after closing. I was gone for a month and a half. I hung out for a minute.

Is it right around Christmas time that you took a Christmas vacation?

I’m gone visiting families. We were in Miami the whole time. It wasn’t until January 2022 that I was like, “I need to do something about the property.” We did get letters out at least and say, “We’re the new owners.”

Is it all five of them?

We got seven return letters.

I got the letters out, all ten of them. Seven of them came back.

We had horrible information. We still have two tenants that we can’t find, to be honest.

Have you all done any auctions yet?

We have not. It’s been a slow ride. It’s a mix of having a partner, having it the first one, and finding people. I feel like the turnaround time for bids and getting someone out there, getting stuff done, and getting materials takes three times longer than it used to. It’s been a slow process.

The good thing is you own this now. It is what it is. Some people feel like you have to get in there and get it all going and stuff. The truth is that you can pay as you go. You fix stuff up and get stuff done. You will get tenants. It will get filled up. It may take a little bit longer because it’s an unmanaged facility.

Putting on Google Business was massive. The first thing that we did was put it on Google Business. We were through ESS. We bought the website. That was huge. Google always promotes you in the beginning, “You’re a new business,” and they stop. I’ve done some Google Ads to help put us back up on the map a little bit. It’s been pretty consistent. We’re almost at 50% now. We didn’t finish CapEx until March 2022, like paint. The security system didn’t get to go until April 2022. We were a little slow on turning the property to push for our new rent. It’s been the last several months where it’s been repositioned a little bit.

Now you’re like, “I can start leasing it up or getting it leased up.”

We’ve gotten to the point where our maintenance guy was like, “Here’s like the end CapEx stuff. That takes time, but it shouldn’t hold up anything.” Every time he goes, he does the initial walk-through and everything he’s supposed to do. He’ll fill up some of the extra CapEx stuff on the end to keep filled on the way out of it a little bit.

 

The real estate community is very small, so once you make a connection with someone, you should work hard to maintain that.

 

How did you find your boots on the ground person?

He’s local in Conroe. He drives around. He’s going to be the same guy that goes to my other facility. I found both my people on the Nextdoor app. Our admin lady is a teacher. The other gentleman is a local guy who goes out there.

What does your admin person do?

She does everything with the tenants. She calls them, gets payments, and answers the phone. She doesn’t do bookkeeping or anything like that yet. She’s pretty much answering the phone, making sure that everything on the website is correct, all our tenants are paying, the leases are there, and they have renter’s insurance.

How much do you pay her?

I pay her $300 a month.

The boots on the ground person?

I pay him $200 a month.

That’s not too bad. You budget $500 a month to at least take a lot of the work off of your hands.

We still oversee them, and I do the bookkeeping.

That shouldn’t take too much time. We have a couple of questions. One of them is, “At 50% economic occupancy, what is your expense ratio?”

Percentage-wise ratio, our overhead is about $3,400. We have about $5,700 with our tenants, being at under 50% occupancy. We’ve rotated through most of our tenants that don’t pay. We’re 0.5% may be economic vacancy because we’ve pushed all of our tenants that were struggling, had issues, or anything like that out.

Did you have a lot of units that were full and you have to get rid of the stuff? Were they empty units?

They were empty. When we were going to take over the property, there was a ton of them like that. Right before close, we cleaned out all of them. It was unfortunate because we did get a couple of calls the next few months from people saying, “Is my stuff still there?” It wasn’t, but that wasn’t on us.

You’re not supposed to clean anything out unless they go through the auction process.

They didn’t have a record, it wasn’t locked, or I don’t even know. They went through, cleaned a ton of them, and kept the people they liked.

 

They were probably like, “I need to go through all this stuff and take everything so I can sell it on eBay or something.” I’m sure that’s what they were thinking. What do you all project you’re supposed to make with this thing on a monthly basis with 122 units?

I don’t have it completely full in my expenses.

Let’s say 90% full.

At 90% full, we’re projected to have under $13,000. I want to get to that point. We only did one rent increase, and we’re not looking to do that anytime soon. I didn’t project that for 2023. We probably will because of taxes, insurance, and everything.

What are the taxes on this thing? I’m sure it was expensive.

We’ll find out. We haven’t got $12,000. We’re going to try to fight that and see what we can do because that’s not what it is. That’s what we projected.

How much did the wholesaler end up making?

He made $125,000. Put that in the span of owning something for ten years. That’s ridiculous. He took more than I would make from the property without selling it.

You’ll make that on the back end when you sell it.

Selling will make that, but for renting it, I don’t know.

Were you able to have a conversation with the seller during due diligence since this was from the wholesaler?

Not for any information that we needed or wanted. We did try to reach out because, for a while, it was getting quite shady. We did reach out to the sellers to see if we could buy it from them with a little bit more, but they’re super country bumpkin. They’re like, “I don’t know if it’s under contract.” For actual data, documents, information, financials, and stuff, they had no idea.

I’m coming to find out that the property managers were the ones that had most of the information. We didn’t find out about them until after closing. We thought the sellers were in full communication with the wholesaler, and I don’t think they were. When we reached out to the sellers, they didn’t know what was going on. We didn’t know that.

Typically, you don’t reach out to the sellers. That’s bad etiquette, but every once in a while, I’m like, “We aren’t getting any information from this person. Let me go talk to the seller.” That’s how I am.

I would’ve called the property management company, but I didn’t know where the information was coming from.

They have a property management company managing this property, knowing it was only 12% full?

 

Turnaround time for bids and getting someone out there to get things done takes three times longer than it used to right now.

 

Yes. We had no idea. I thought the people that we were talking to are the right people, but they weren’t.

After you close on the next one, you get it up and running. Texas is a couple of hours away. After you close on that one, you have to come in and tell us a story about that one, too, because I’m sure everybody would like to read that.

That one should be better.

Is that a mismanaged property? Is that income-producing, or what is your next one?

It’s a mix depending on what your classification of mismanaged is because it’s not on Google Business. They rarely answer their phone. It’s a cat backcountry property, but it is income-producing.

How big is that one? How many units and stuff?

That was 97 units, and it is 99% occupied.

You should be able to get a bank loan for that.

We do, and it’s the same bank.

You have a relationship with this bank. You can be like, “I’m going to go buy another one.”

I was like, “Let me give you one that’s stabilized since you took a risk on us for this one. I’m going to give you one to make you some money.”

Tell everybody how they can get ahold of you, in case you want them to contact you or if they have any questions or anything.

I still am a licensed agent. I still do storage facilities and other commercial properties. I can put my contact information below. I’m like Stacy. I’m out there. Sometimes, I do webinars, and I have a YouTube channel.

What’s your YouTube channel?

Ramblings of Real Estate.

You can check out Valorie on her YouTube channel. Good luck with your next closing, and keep me posted whenever you get that one to stabilize and hop on. You could tell a story about that one too.

That sounds awesome. This was fun. Thank you, everybody, for reading.

Everybody else, thank you so much. I’m going to hop on. You guys can hop onto my next webinar, which is my pitch. You can go to StacyRossetti.com/Fund if you’re interested. I pitched that every Monday night. We got a property under contract. I’m going to go over that deal. It’ll be one of the deals that go into the fund. Thank you so much, everybody. Thank you, Valorie. Take care.

Thank you.

 

Important Links

• Valorie Williams – LinkedIn
• StorageNerds
• Super Simple Self Storage
• Nextdoor
• Ramblings of Real Estate – YouTube
• StacyRossetti.com/Fund

 

About Valorie Williams

Valorie has been in the Real Estate industry for over 15 years, starting as a Home Inspector in Oregon. Now she is a Full Time Real Estate investor that focuses primarily on Storage Facilities, Multi Family and Large Single Family portfolios.