Here’s a quick summary: This self-storage property was a Bank REO in Kern County, CA. I was familiar with the area and knew that this was a great value-add opportunity.
The property consisted of 100 units on 3.5 acres and was built in 2006. It was under-performing at 65% occupancy prior to possession, and had an NOI of $35k.
I was willing to pay a 10% cap rate, so at $35,000 NOI, I would have paid up to $350k. I ended up closing at $325k because I was able to pay cash and close quick using the private money and only $20,000 out of pocket costs (my deposit).
The property also had enough acreage for an additional 300 units, and I was able to recover those plans that had been previously submitted to the city, but expired.
I Had a Plan, but Kept My Options Open
My plan was to eventually develop additional units on the property, since there was a lot of demand for the location. I wasn’t really planning on selling the property because I acquired it at a good price and had stabilized it up to 85%-90% within six months.
During that time, I kept in contact with the listing broker who represented me for this transaction. We discussed that if there was ever a motivated buyer interested in this property, I would consider selling for the right price. A year later the broker approached me with an offer from a motivated buyer.
I ended up selling it for $620k. Not bad for a property I held for only 18 months. I did a 1031 exchange into a larger self-storage property and an under-performing 8-unit multifamily property in Phoenix, AZ at a great price, which I’ll discuss in my next success story.
Real Estate Investing Is a Relationship Business
This story is a great example of how important relationships are in this industry. [Click here to read Part One of Tim’s Story: Real Estate Investing Is a Relationship Business.]
I never would’ve been able to acquire the property for the price that I did without the relationship I had with my private lender. I never would’ve sold the property for the price and speed had I not kept a dialogue going with the broker.
Most importantly, this helps my track record, being the first self-storage property that I’ve acquired, stabilized, and traded up on.
Thanks for the opportunity to let me get my story out. I hope I was able to inspire some of you to continue to push through. Feel free to leave some feedback in the comments.
CLICK here to subscribe to our mailing list and get unique, fresh content like this delivered right to your inbox.