Deal & No Deal

May 27, 2022

The Capital Stack

Officially Closed!

Cow Country Mini Storage DEAL CLOSED.

Hopefully you noticed the absence of last week’s newsletter. My wife and I took some time to relax and celebrate our 4th anniversary on the Hawaiian island of Oahu. During our time off and with the help of a mobile notary we were able to close on Cow County Mini Storage through our Texas Storage Fund project. My partners in Texas and I are getting directly to work this week and are in the midst of finalizing details with our new property management company. Our property manager will make sure all payments are transferred to us as well as setting up all necessary vendors while we begin our value add program on the facility. 

Skyline Storage NO DEAL

We were under contract to purchase Skyline storage in Burnet TX. Skyline storage was built in 1990 and consists of 205 storage units with 4,000 sf of office/warehouse space. The property also includes 4 additional acres that allowed for easy expansion. We personally toured and made an offer on this 27,000-sf property the first day it was listed for sale on the market. 

Why We Liked it 

When purchased for the right price Skyline Storage was the ideal value add property. Current ownership is receiving ~$12,206 of monthly rental income. Our market research showed that the property could be making ~$25,000 of monthly rental income. With rents ~40% below market value we had plans to work with existing tenants to increase the rents as well as repair all the properties deferred maintenance. Our plan included replacing many of the garage doors as well as completing site work that would eliminate an elevated step into each unit. This change will allow the garage doors to sit flush to the ground which provides easier access to each unit.  

Aside from being a good value add opportunity we were motivated to purchase Skyline Storage for the extra acreage that would allow us to easily develop additional self-storage units. We were also attracted to the size of the existing property. With our storage fund we look to purchase properties around 25,000 square feet because generally this size property is too small for a big developer to have interest in but also too large for the standard solo investor to take on. 

Why We Did Not Like It

The price the seller is willing to accept for this property is not justifiable. We offered $1.9M to start and settled on $2.5M to tie it up and give us a bit more time to gather accurate construction/renovation quotes. The seller is looking for $2,550,000. After a couple days of research and quotes coming in for deferred maintenance/construction, this cost is only justified if the current rents were already at market value and the deferred maintenance has been addressed. We withdrew from the deal a few days later but we will keep an eye on this property and hopefully as time passes the price will be lowered and we will likely take another look at it. 

Major Market News

Lumber Prices Hit 2022 Low

According to an article by The Real Deal, lumber prices hit an all-time low for 2022. The article quotes “The price of lumber dropped as low as $780 per thousand board feet on Monday, the lowest point for the commodity in 2022”. The articles attributes the slid in lumber prices to the rise in mortgage rates and increased inflation. You can read the full article here https://therealdeal.com/2022/05/10/lumber-prices-drop-to-new-2022-low-in-continued-slide/ . We consistently monitor the cost of lumber as it has a direct effect on any new construction project we may be considering.  
Tips and Tricks
Vacation: Take a vacation without work once in a while. I have a very hard time with this because I can’t shut my brain off but traveling to Hawaii with a 6 hour time difference made it a bit easier to shut down for a week.


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