It has never been harder to buy self-storage than it is right now for the smaller investor.

It has also never been a better time to buy self-storage for the smaller investor.

But don’t let anyone tell you otherwise, it is challenging. It is hard because REITS have driven up the pricing in every segment of the market.

 

In our city for example, one owner sold his facility to a REIT for $10,000,000. Now every owner has their facility on the market for 1.5 times its real value. But even today, it does not take long to see who is a real seller and who just wants to “test the market”.

However, you have the secret to successful buying today. And that is your business strategy.

YOUR BUSINESS STRATEGY FOR BUYING SELF-STORAGE

 

If you are studying the newly released course “How To Buy Your First Self-Storage Facility” from the Self-Storage Quick Start Academy, you know my self-storage career transformed when I developed my business strategy.

Not that mine is great, it just took all the guesswork and emotion out of buying and looking for a “good deal”. I knew exactly what would work, and what would not work.

So over the next two weeks let’s do two things:

1. Start or tighten up your business strategy, and
2. Get a hot tip on what works well in buying when pricing goes up.

If you are an all cash buyer, you’re probably not reading this. In fact, I would like to read your articles. There are a few ways if you are all cash to maximize returns and add a level of risk reduction, but this isn’t the article for that.

If you are like most of us, you are going to borrow some or all of your funds to purchase a self-storage facility.

In the simplest terms, a business strategy is created to close the gap and fill in your weaknesses (weaknesses are not bad, just areas that need support) to make the difference between a cash buyer and where you are.

In other words, if you have $500,000 you can either buy a $500,000 facility or use your $500,000 and close the gap of a $2,500,000 facility with a bank loan of $2,000,000.

THREE PARTS TO YOUR BUSINESS STRATEGY

 

Again, in simple terms (very simple) consider there are three components that need to be covered in a business strategy:

1. Cash or down payment.
2. Bank financing.
3. Running the facility after you purchase.

Design a strategy to cover all three.

Let’s work today on cash or down payment.

If you have it, you’re done. You know where the money is coming from. If you own other investments you are going to liquidate or borrow against, that is your down payment. How much you have will determine how big and how many facilities you can buy.

If you don’t have it, no problem. You just have to get it from other people. I didn’t have much cash either when I started.

So where does one get this part of the business strategy. Well…either from people you know, or people you don’t know.

Either way, you are going to have to give them something to use their money. I suggest you are going to have to give them an “above market return”. In other words, you are going to have to give them more money than they could make putting the same amount of money in a Vanguard index fund. Today that appears to me to be between 9% and 12%.

However, there are many things you can offer depending on who your partners are and what they want. You may have a partner who has the money but doesn’t want to run the facility. You may have someone who has money and wants to be active again and be involved. Whatever you have to offer to use their money, consider it.

In my view, this is the most important part of the strategy. Really think this through. If someone gives you their money, a lot of spaces have to be moved through and there has to be a high level of trust. They have to (1) Trust you and think you really know what you are doing, and (2) have to feel safe with the investment.

The good news is you are in self-storage. Watch my free videos or read the book Creating Wealth Through Self-Storage and develop your own story line about why self-storage is the absolute best investment real estate there is. You are truly doing investor’s favors by getting them in this product type. Nothing is better for them to invest in than this. I have partners thank me every day and continue to invest with us because it is self-storage once they get it.

QUESTIONS YOU NEED TO ANSWER FOR AN INVESTOR

 

So here are the questions you have to have already thought through when you approach someone to close the gap you need for this part of the business strategy:

1. How much money are they going to have to put in a deal?
2. What are they going to earn on their money?
3. How long is their money in the deal?
4. How safe is their money?
5. What are you going to get?

This is the hardest part of the business strategy. Don’t rush through it. Really figure it out. Ask people if you don’t know. Be willing to change from your initial strategy if that is what it takes to have access to the funds.

Work on answering these questions, and we will finish up this part of the business strategy next week.

I hope this is helping. I am getting a lot of questions about this, so I thought I would address it head on. Let me know if I can help, and if you would like a FREE training webinar on this topic.

As Thanksgiving is upon us, I would like to take a moment and tell you how grateful I am that you actually read this and give me a place to explore this part of my passion for this business. Thank you and let me know how I can support you in getting in this fantastic business and doing what is next for you.