It’s going to happen.
If you are in the self-storage business, it will happen.
You will get a call after you have gone to bed. Your gate is not working, someone is in the facility and can’t get out (or something like that).
You won’t think about it then, but that is why your business strategy is critical. So that your “why” is stronger and more powerful than any obstacles owning and being in the self-storage business can throw at you…that life can throw at you.
Your Self Storage Business Strategy
So as we continue exploring how to design our business strategy for acquiring self-storage, let’s finish the conversation we started last week.
We discussed how to relate to using other people’s money as the equity and what they are most likely going to need and expect to hand their money (a sacred act) over to you to invest for them.
What if you are using your own investment money? What then? Well…you are now the investor as well as the operator. Put on your investment hat. What are you going to expect?
Is it a return on your money?
I doubt that. If it was, you would invest with someone else or put it into a mutual fund and forget about it. You most likely are seeking to generate cash flow as well as long term growth.
Sample Self Storage Business Strategies
So let’s examine this. I was working with one investor who ran another company and it kept her very busy. She didn’t have the time to run a self-storage business, but got it as an investment vehicle. She put the money up and partnered with a person to run the facility. That person got a percentage of ownership and a salary.
The investor’s goal was to sell her business in 10 to 12 years and retire. She purchased the facility so that she could take all the remaining cash flow, and use it to pay down the debt so the facility would be paid off when she anticipated retiring.
A great strategy.
Another person (also a lady) was going to lose a high monthly alimony amount of money in five years. She partnered with someone to cover her weaknesses in running the facility and purchased it such that she was comfortable within the five-year period of her lost alimony funds. Of which were more than made up with the monthly cash flow from the facility.
What Makes A Good Strategy
See, when you get that specific it becomes very easy to know exactly when a facility can work and when it will not work to help you achieve your specific strategy. The key here is it has to be very specific.
An additional $5,000 per month.
Retire in ten years and give me $15,000 per month to live on.
Take my $100,000 today and create $1,000,000 in 12 years.
Pay off the loan in 10 to 12 years then live off the cash flow.
Realistic and specific.
When you get your and your investor’s goals that specific, you know exactly what you need when looking at a storage facility. It is no longer a feeling, or a good deal, or you like the name (maybe I am confusing that with horse racing).
One more example: I knew a guy looking for an office to run his construction company out of and an additional $100,000. He also knew where a good location would be. He got a financial backer, built the facility (a large one), then between the management fee and the cash flow made his yearly income goal within a few years.
It’s Your Life
Your strategy should be specific to your life situation and your goals.
Can it change?
Yes. Of course. It most likely will as you grow. Some people get a taste of the business, like me, and want to really grow in it. Others see it more as a vehicle to achieve a specific goal.
Just know self-storage is perhaps the single best real estate investment vehicle to help you achieve what ever your goals are for all the reasons I talk about. Mostly the ability to project future cash flows fairly accurately. You can know in five years very close to the exact value and amount of distributable cash any given facility can generate. (You’ll have to learn a few things about the business and use a good financial analysis program either you design or {hint…hint…} the Storage World Analyzer).
So far we have looked at:
1. Raising equity if you do not have it, and
2. Your specific business strategy for acquiring your self-storage.
You have also looked at designing the strategy to cover for your weakness in the overall picture of acquiring and running a self-storage business.
There is one big piece missing. For most of us we need some type of financing.
The Loan
Next week we are going to cover that in detail. We will discuss different types of loans available and options you may have not thought of.
We will look at how this part of the money relates to the equity piece (here is a fancy term: total cost of capital…I love saying that because it makes me sound smart).
I will even introduce you to someone who I think can be of real help in this area to many of you.
Take Away
My coaching is to really design your life specific business strategy between now and next week. Why are you in or why are you wanting to get in the self-storage business. Not just “because it is a good thing to own”. That will not work at 11 at night when the gate is stuck and someone can’t get out.
If you already have your “business strategy”, review it and really make sure it is as specific as we have been talking about here.
I can not tell you how much fun it is for me to write these weekly articles and I am honored you read them. Thank you and as always, reach out with your questions and successes.
Thank you.
