Public Storage Deal - Would You Do This?
- 8.0% Cap Rate on the Proforma
- 221 Units
- 11,178 Sq. Ft.
- 94% Occupied
Scheduled Gross Income: $416,940
Vacancy: $41,694
Misc.: $11,257
Effective Gross Income: $386,503
Operating Expenses: $108,390
Maintenance: $9,000
Taxes: $37,459
Insurance: $5,000
Payroll: $40,000
Total Expenses: $145,849
Net Operating Income: $240,654
Here are my questions w/regards to bank financing:
1) What vacancy rates do banks use (even if I tell them 6% vacancy)?
2) Is the minimal DCR 1.25 on public storage as well? If not , what is it?
3) How do the terms + rates differ from , say, multi-family?
4) What index are the rates based on?
5) What kind of down payment do banks expect?
Would I do this deal depends on how much I can get it for. By the way, what is the current occupancy rate? are rents at market? any deff. maintaince?
Quote:
On 2006-07-09 19:47, Kimtd wrote:
- 8.0% Cap Rate on the Proforma
- 221 Units
- 11,178 Sq. Ft.
- 94% Occupied
Scheduled Gross Income: $416,940
Vacancy: $41,694
Misc.: $11,257
Effective Gross Income: $386,503
Operating Expenses: $108,390
Maintenance: $9,000
Taxes: $37,459
Insurance: $5,000
Payroll: $40,000
Total Expenses: $145,849
Net Operating Income: $240,654
Here are my questions w/regards to bank financing:
1) What vacancy rates do banks use (even if I tell them 6% vacancy)?
2) Is the minimal DCR 1.25 on public storage as well? If not , what is it?
3) How do the terms + rates differ from , say, multi-family?
4) What index are the rates based on?
5) What kind of down payment do banks expect?
The 6% vacancy rate for self-storage is a correct number for this business. (You should have monthly turnover, if at 100% you are pricing the market low. If over 93-94% you are pricing to high)
The DSCR for self-storage is 1.25%, but the higher the better for qualifying
The terms and rates are not much different from Multi-family, using the Libor index for adj loans you would have several options to choose from
The Down-payment will vary ....the seller can be helpful with closing costs and carry-backs.
Good Luck,
Robert
[addsig]
I am calculating an average of about 50 sqft/unit and and average monthly income of about $150/ unit...or $3/sq ft. Does that sound right for that area? I am looking to build 100k+ sqft of mini storage in Napa County and market rents are in the $1.25/sqft-$1.40/sqft range...which from what I see is about average for the bay area.
Assuming purchase price = $3,000,000 (((240,000 / 0.08)))
If you put 20% down ($600,000)...and your loan was @ 7% on 2.4M...your annual payment (P&I) would be about $192,000.
So, your annual cashflow would be $240,654 - $192,000 = $48,000.
On a 600k investment that is 48/600 = 8%
Your DSCR = 240/192 = 1.25 so any bank should love that.
If you are happy with an 8% return I say go for it, especially if its in Santa Clara area where I imagine most cap rates are in the 6-7 range.