Analyze my real estate purchase

I think people who think like you are few and far between. Maybe that's naive.

I’m just going by the other guy who used to work at storage unit where it seemed like it involved a lot of work.

No, I haven’t run a storage unit before. Do you think most people making comments on running site have run a storage facility? You’re the odd one asking about storage facility rental here. However, according to the one guy who has worked at storage facility, it doesn’t look like it’s as simple as just collecting rent.

I asked if you have rented a unit before, which most people have. If so, there isn't much to it. It's a metal box with a spring loaded door. The springs need replacing, sometimes the doors.

I think previous poster was collecting cash. Plan on automating this through credit cards. Lock people out when one month past due.

Maybe it is that simple in rural areas with not much turnover.

The one I worked at was in a ski resort kind of area with a lot of transitional people. Some units where rented out for decades but most got rented for 6 month to 3 years maybe. I was surprised who much paperwork was needed to cover the butts of the storage unit owners.

Why are you getting so defensive about this? It’s odd that you’re posting about this after you’ve already purchased, have done your due diligence, etc. You’ve spent several months cold calling to purchase this place. You know a lot more than any of us here. Why are you looking for some sort of confirmation, especially from here where you’ll get bunch of stupid responses.

I personally would never buy it. Making $20K/year to run this place sounds like too much stress and not worth it. You’ve already spent bunch of time trying to buy this place with all of your research, cold calling and such. Doesn’t seem too passive to me with a lot of risks.

Is it possible to store shtcoin cold wallet keys in there and put on bullet proof glass?

I ran some numbers for you and I would suggest against this investment. Taking into account your fully capacity NOI and comparing it to a 25-year return on the S&P 500 (10%) -- your cash-flows barely beat it out.

NPV of Storage Unit Project: $42,391.28 (Assuming full capacity and no hiccups / maintenance)

IRR: 11.15% (1.15% better than anticipated S&P 500 return)

Essentially, if everything goes perfectly -- you will have a $42,391.28 profit in todays value. Is that 42k worth the risk of being liable, dealing with really annoying customers, having to keep track of staff, etc? Obviously creating an LLC would be necessary to reduce liability, but that also makes you hop through more financial hoops (financial statements, different taxes, etc.). If you are not a financial person, this would probably have to be outsourced at a cost. My dad owned around 20 storage facilities and it is relatively profitable as long as no one else moves into your area with competition -- so that is a risk you must be willing to take.

Personally, I would much rather throw my money into the market and lose out a little without the effort of this storage facility. If you want a chance at bigger returns find some aggressive funds to invest in or just be content with a 1% difference. Good luck!

Didn't mean to come off as defensive and yes have put a lot of thought into it. There are risks with all investments. I think what most people ignore beyond the 20 to 30 k annual income potential is that you are paying down debt, slowly increasing value as you raise rents. In 10 to 15 years plan to sell it and fund college educations. It's the debt pay down that's the key long term with real estate. Cash flow always good too.

Help me with your numbers.

10 percent sp returns on 125 k first year storage down payment is 12500

Storage has potential for 55k NOI with fcf of 25k. What am I missing?

I used the discount cash flow model and took the present value of the future cash flows (57k per year), the initial investment (475k), then spread the cashflows for 25 years. You cannot deduct the loan payment directly from each years cashflow because they are being discounted and this will affect actual values.

The returns of the S&P 500 are cumulative -- so 125k * 10% = $12500, following year 12500 + (137500*10%) = $26250 ... etc.

Using the NPV and IRR functions in excel can get you your desired #'s -- I calculated your down payment as 25% so 118,750 (I see you mentioned 125k). You can use either NPV or IRR to choose your investment. If you plan to sell the business after 10 years, then these numbers would be different. Should take about 8.5 years to make your money back with non-discounted cashflows.

I am an MBA student and I am pretty sure these are right (still learning quite a bit in Finance) but I sent this scenario to my Professor so she can confirm. Hope this is insightful!

But the initial investment wasn’t anywhere near $475. So why consider that number at all? And maintaining a single member LLC (sole proprietorship) is about as easy as it gets. Pay your license fee, pay your yearly base taxes, and file on your 1040 (profits minus expenses for a non-manufacturing business).

I may be slightly biased as someone who has rented a few townhouses but based on the provided number this seems like a pretty good investment. Profits seem better than renting a house though the day to day sounds like a decent bit more work (perhaps I just have good tenants, though).

Yeah. I think previous poster is smart, but in the weeds and overthinking it. 475k is irrelevant overall. Can and would be reinvesting the cashflow into the market, so not like all that is wasted...

95% full does not mean 95% paying. You should probably assume 10-20% occupied but not paying. But even at 80% occupancy you won't be losing money. Seems like a reasonable, normal, investment if you are willing to put several hours of work per week into managing it. The ROI is extremely high, but once you cost your labour, its probably not much higer than the stock market. So if you end up enjoying managing peoples storage, more than other jobs, it seems like a good gig.

Except how many hours of work are going to be required to earn 25k a year? Is an employee included in the overhead? I'm not working full time for a possible $25k annual return. That's $12 an hour for a 40 hour week. Walmart pays better and there's no risk.

Extremely naive, people do it all the time. Just because you have never thought of doing it doesn't mean there aren't thousands who have.

$25k is cashflow. That doesn’t include the money going toward paying off the loan. Even at 20 hours/week it sounds decent. And I wouldn’t expect this to be a 20 hour/week job. Renting a home for me has been about 20 hours/year so far (no, I’m not exaggerating).

10,000 out of 150,000,000 million is pretty good odds he won’t have to deal with more than one case of that.

This is a surprisingly interesting thread.

I have 2 rental properties that are paid off and I might average 20 hours a YEAR of work. My profit is $1200 a month. And sometimes I'm annoyed with that ROI 😆