Remote Management

[dhchan8122]

Hi everyone newbie researching

Is it possible to remote manage a property in another state? I cant seem to find any for sale around where i live

[RHS_TX]

I remotely manage 2 facilities about an hour from my home. I visit each facility once a week to do routine maintenance chores and walk through (re-lock) any units that have been recently vacated. Everything else is handled at my desk at home via management software and video surveillance.

In my opinion: once weekly visits are about the minimum you can do without compromising customer service and maintenance.

If your facilities are in another state, you'll need someone in that locale that's on-call (and on payroll). Otherwise you'll spend a lot of time and money on state to state travel. Plus, even with this arrangement, I'd still want to have my actual eyeballs on the property at least once a month.

[Bubba]

I live about two hours away from our main facility and about 5 hours away from another one that I've never been to before. On that site I have our landscaper handle the maintenance side. It's key to have someone on payroll and someone dependable to help you out.

[dhchan8122]

Where do I find local maintenance and how much would it cost? The property Im looking at is about 100 units so Im pretty sure it wont be able to support a full time staff

[Clarkstoragellc]

Right now, it is better to build than to buy. Normally your first location it's better to buy an existing facility but premiums are too high now.

Watch the youtube on our website about Self Service storage. Put in Camera systems and you can watch your location anytime you want.

As mentioned, find a local person to reset units, pick up any trash, lawncare, snow removal, etc. One of our competitors uses a small hardware store operator to manage.

[dhchan8122]

I get the idea. I'm looking at broker listed properties they dont seem to make sense to me in terms of pricing. For instance one property looks like it currently making 40k after all there expenses and they want 1.4 million. how would one be able to pay a 1 million debt on 40k a year. Am I looking at it wrong?

[Clarkstoragellc]

As I mentioned it is better to build than buy right now.

[RHS_TX]

how would one be able to pay a 1 million debt on 40k a year. Am I looking at it wrong?

No, you're looking at a property that's ridiculously over-priced. A lot of these brokers tend to price properties based on pro-forma performance instead of actual value. In other words, they're telling the property owner, "It's okay that you're awful at managing storage, here is what your property would be worth if you were fully occupied and properly managed.

They then market these deals to buyers as "value-add" properties, when in reality they are giving the value premium back to the seller who ran the property into the ground.

Cap Rate = NOI divided by value.

In this case the actual cap rate is $40k divided by $1.4 million = 2.85%

Their pro-forma cap rate is is $66k divided by $1.4 million = 4.77%

If evaluating this property I would ignore all of their pro-forma crap and look at the actual numbers. So at $40k NOI I would apply a market cap rate of around 6% if the property is in good shape, and maybe 10% if vacancy is high and it needs a lot of work. So....

$40k divided by 6% = $666k purchase price
$40k divided by 10% = $400k purchase price

Now, there are some other considerations: the most important being room for expansion. If this property has undeveloped acreage that can actually be utilized (flat land with no swamps, cliffs, sinkholes...etc) then maybe you account for that premium and offer them a price that would value the expansion potential.

You should also consider the timimg of the market. For the past few years we've been in a crazy seller's market where debt cost was low and properties were getting snatched up quickly at 3-4-5% cap rates. Now, with debt cost higher, I'm seeing more and more properties sitting longer on the market and cap rates coming in at 6-7-8% and higher. Probably not yet a full buyer's market, but we are trending that direction in many locales.

[Bubba]

I get the idea. I'm looking at broker listed properties they dont seem to make sense to me in terms of pricing. For instance one property looks like it currently making 40k after all there expenses and they want 1.4 million. how would one be able to pay a 1 million debt on 40k a year. Am I looking at it wrong?

When I see the term value add I run the other direction. All I hear is how they never raised prices and mismanaged for 30 plus years now they expect a full pay day. Yeah.....good luck.

[joelmcminn]

Took me awhile to embrace the comparitive advantage/disadvantage of VARIATION OF PROPERTY TAX between states. Including reassesment tmeframe and the special terminology. Some states seem not so transparent as to how you can blunder into added expense over time. I suggest get famiiar, maybe find an expet to add clarity prior to selecting a state, certainly during diligence as the reporting during Close is sometimes key.