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Looking to acquire in Australia

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  • #16
    Courtz I'm going to back up the discussion a little versus just "getting" you a storage location. I'm going to take this post below and make it, its own post so more people can see.

    1. I'm about to sell you something. You don't know me. We will never do business together. You will never pay me a dime. Thus I am about to sell you something which cost you nothing. The proverb, you get what you pay for. All things Self storage can be validated. Don't trust me. Go to seminars. Watch/read YouTube and books. Find a similar investor in another market with similar goals to converse with. Also I have never been 100% correct and when I am 100% correct, I'm still not correct. For example: I don't know your Risk tolerance, Financing, family or professional life, appetite for self storage long-term, appetite for change, "Control" appetite. Thus my approach is not your approach. What's in it for me? I enjoying sharing my experiences. Also it sharpens my thought process. Take what I give you, change it to your situations and make it your own.

    2. Storage industry "generalization". Generally divided between Mom/Pop and REITS/Large regionals. About 70% of all locations are owned by Mom/Pop. About 60% of Value is owned by REITS/Large regionals.

    - Mom/Pop tend to be drive up, not climate controlled, no onsite professional management and site is based on pre-existing land and convenience to the Mom/Pop and not the customer. Tend to only own one location, are unwilling to keep expanding, their objective was to just use up the extra land next to an existing business or house, and their kids will not come back to take over the business.

    -REITS are typically climate controlled, multistory, onsite professional managed and site is Marketing selected. REITS tend to stay in large towns for economy of scale. REITS tend to be multistory because land cost is so high, you have to go up to make the numbers work. REITS are climate controlled because of their building structure. REITS tend to be 300 units or large to justify onsite Professional management. Due to there size they have strength in corporate management, financing, SEO, and investment diversification (if they own 50 to 1,000 locations, no one location knocks them out).

    These are two totally different business models and products. Again, this is a "Generalization".

    3. Start small and Make Your Big Mistakes Early. STEP 1. It is best for you to buy a pre-existing location of 25 up to 100 units. This way you only have to learn the operational side of storage. Later if you want to build then you can learn the development side. Not as overwhelming. A. Based on this I would go to all of your local locations near you of that size and make an offer. Keep "talking" with them every 6 months. B. I would also check your zoning and see where "Cargo Containers" are allowed. Then go look for the ugliest, cheapest location, preferably with a lot of concrete base or roads. Do one of these approaches. Even though option "B" is developing, its low risk and low input. You can always sell the ground and the containers; with minimal loss. You don't need to buy a lot of containers up front and you can always add. See my container post. Somewhere in Sydney is a nasty, old location.

    4. Developing versus buying. STEP 2, start while doing STEP 1. Currently no one wants to sell storage because it cash flows and is a great investment and business model. We have three recent projects we are developing. Cost $1.5mm/$1.8mm/$2.5mm. Appraisal when full $2.4mm/$2.8mm/$3.7mm. You have a choice to "Buy" at the appraised value. Or develop at the "Cost" basis. At first it seems obvious you develop. But do you have the stomach, can you control the risk, developing will take about 3 years from seeking land to full occupancy thus lost cash flow, financing is tougher and fluid, Interest rates will be different in 3 years, etc. But by developing, you get to seek out under served markets. Out position Mom/Pop and REITS who built based on convenience and their business model. You have more location options and determine all things being equal, which location is the better investment. You have far more investment options than seeking out existing locations.

    5. Baby Boomers. The majority of Mom/Pop locations are aging out over the next 10 years. Their kids won't be moving back to take over the business. Even if they don't know it, they need a "way out". You don't have to sell them on the idea, they and their families will come to a conclusion. You just want to be a solution. This is Australia where you are at. Be the next Sir Kidman (Nicole Kidman's relative). Instead of a cattle/sheep empire, build a Self Storage empire. Look at the strategies he used, they will apply to you. Yes, success breeds contempt.

    6. Systems. Develop and document systems for buying, developing, financing, operations, and security.

    7. Financing. Lay out ahead of time your path and deals. At some point you will run out of collateral or cash; and need to change your model. At some point you will reach enough is enough. At some point you will have to adapt your "Model" to align with new self storage, professional, family, etc goals. This is just like Software developing, your profession. Map out the path.

    8. Failure. Understand what failure means in Self storage. "Generally" when we do a new location we build enough units for a "Break even" at 65% occupancy. This covers all costs, plus debt servicing. The next buildings only need 35% occupancy for breakeven since all of the fixed costs for fence, land, most of security/electrical, storm ponds, are already covered. On Phase 1, even if we "Fail" and only ever get to 65% occupancy we are building an asset base. On Phase 1 if we used the wrong market pricing and have to lower the pricing and our break even moves from 65% to 90%, again we are still building an asset base. On Phase 2 you either switch products to Contractor bays or sizes for a "different" market, even though its still a metal building. Or you add parking rental. Lets say none of the above work, you still win because you learn. As long as there is a large enough Market, you can always rent out 100%, thus you are never at risk of a total $0 loss. Remember the Mom/Pop and REIT models above. Mom/Pop usually only have one location, you want more. REITS have multiple locations, so one location is "averaged" out is it does poorly. Failure potential is the reason most people never get into RE or any business. Do the spreadsheet. Change the occupancy rates and pricing. Add and reduce costs. Get to know your Failure ranges on the deal your looking at. This will get you over the hump.

    9. Value Add. I will do a separate post on Value Add options. This will also be part of your Site selection strategy. You really don't want to do one off locations, have a plan.

    Now lets get back to you.

    You have capital, in Sydney, RE prices are extremely high, software developer and have an online business.

    -Since you have capital, its just a "sizing" exercise. If you had minimal capital, then I would do a Lease approach.
    -Software developer, doesn't really matter your profession, just bring your experience whether it is a business person, contractor, accountant, SFH/MFH, sales person, etc. The only downside profession, I see is if your a pure "Financial" investor. But even that helps you out on the deal and financing end.
    -Online business, you have had to structure and run a business.
    - High RE prices, that is wonderful. Go back up to Sir Kidman and adapt strategies.

    Again, I don't recommend you invest 1,000 miles away on your first go, or even later (read value add post).

    Just in the Sydney area ( including 1 hour out), you have a lifetime of investments. You should be able to do 10/20/30 mm dollars of investments just in that area. If you develop a model, then take to other large cities. Your objective is to develop a system that is scalable, unless you just want one location. Read my site selection and "will they come" posts.

    You said Sydney is really expensive, and I said that is wonderful. You have three options:

    A. Do a perimeter approach. Take on all of the small towns or burbs surrounding Sydney. Normally your market area is 1 to 3 miles. Here you will be up to 10 miles. Be on the side facing Sydney. If RE is that high priced in Sydney, then it is hard to build, meaning a shortage of storage and more REIT models. Rents are extremely high, thus a good portion of the customers will drive farther for less rent and easy access. You will compete on 1/2 to 2/3 the price. Also you will be Drive up versus buggy/elevator. Buy or develop strategy.

    B. Go Head to Head with REITS in the city limits. Don't recommend this. Even at $1mm per acre, you can make the numbers work. You won't have enough locations to average poor performance out, SEO strength or financing power.

    C. Go UGLY. Check on zoning first. Look for the ugliest/nastiest piece of concrete in the city. Put Cargo containers on it. New developers hate old concrete because it costs to take it out, less buyers, lower price. With Cargo containers you love old concrete. Gives you a pad and roads, even if cracked and old. If you do asphalt, put plates under each corner.

    Be flexible. Buy/develop/perimeter/Ugly etc. Start seeking all of them. Go with the deals that occur and if more than one deal, prioritize.

    Actually, you do owe me something. Send a picture of something Australian on this post. Anything.

    Start small and Make Your Big Mistakes Early.

    This is my favorite of our 8 locations. Its our first one. 35 units and 40 cargo containers added later. Got flooded, but cleaned up and the Storage units are 100% full again. Just started to rent containers. Was going to sell them, if the market didn't come back. Flexibility.
    Debris cleaned out.png


    • #17
      Thank you kindly for sharing all your knowledge! Your post are so very helpful and full of information!


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