Help AJ - interesting self-storage opportunity facing foreclosure

[Salinger]

This could be an investment/development opportunity for somebody.
Please take a look at this video

[ame="http://www.youtube.com/watch?v=JrrkXCXzFVQ"]YouTube - AJ's property[/ame]

Are there any buyers out there who can buy this property before it goes to foreclosure?
If you know anyone who might be interested, please forward it to them.

More information can also be found here: AJ’s Story « Steve Marshall's Blog

Thanks.

 

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[AroundTheWorld]

Re: Help AJ - interesting self-storage opportunity facing foreclo

So, this is pretty much vacant land and a pretty little picture. How much is being added to the value of the land for this picture of a self storage facility?

 

[Salinger]

Re: Help AJ - interesting self-storage opportunity facing foreclo

So, this is pretty much vacant land and a pretty little picture. How much is being added to the value of the land for this picture of a self storage facility?

Actually, it's not vacant. The owner's home and ranchette is on it now. The "picture" includes all zoning, annexation, engineering, plans and entitlements for the self-storage facility. A buyer could finalize approvals/permits and put a shovel in the ground within a couple of months. The owner is out of money and can not take the project forward. He is facing foreclosure and needs to sell to someone ASAP - hence the opportunity.

The holder of the second mortgage (foreclosing) is an individual who took advantage of his lack of sophistication and made him a loan with some pretty unfavorable terms. He wants to get the property at the foreclosure sale, so there is no negotiating with him.

The owner is currently asking $1.7 million for the 8.5 acres (down from $2.7M in 2007) which puts it at $4.59/sf. The debt on the real estate is right around $1 million. Realistically he needs to sell for less than he is asking now. It might go to someone for $3.50/sf. If he sells somewhere above the debt, he can at least walk away with a little equity to start over. This property is all he has.

 

[AroundTheWorld]

Re: Help AJ - interesting self-storage opportunity facing foreclo

This thread is a perfect opportunity for the people on this forum to do some critical thinking when it comes to analyzing a real estate deal.

The very, very first step when looking at a deal is to understand which information is relevant and which is not. This is a mistake I've seen new real estate investors make (and I've done it myself).

It is so easy to get caught up in hype, which includes getting caught up in information that is not relevant.

The first step to investing without emotion is to learn to filter out what is not important.

So, when looking a this deal, what information do you find relevant? What information is just the fluff?

 

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[kurtyordy]

Re: Help AJ - interesting self-storage opportunity facing foreclo

This thread is a perfect opportunity for the people on this forum to do some critical thinking when it comes to analyzing a real estate deal.

The very, very first step when looking at a deal is to understand which information is relevant and which is not. This is a mistake I've seen new real estate investors make (and I've done it myself).

It is so easy to get caught up in hype, which includes getting caught up in information that is not relevant.

The first step to investing without emotion is to learn to filter out what is not important.

So, when looking a this deal, what information do you find relevant? What information is just the fluff?

some key info is missing:

what is the vacancy rate at storage units in the area? What is the population growth projected? What are the comps on similar land in the area?

Foreclosure/equity/second mortgage/ etc. are all needless fluff.

 

[Salinger]

Re: Help AJ - interesting self-storage opportunity facing foreclo

what is the vacancy rate at storage units in the area?

Last time I checked, about 9 months ago, all units in town were at or near capacity with waiting lists. I assume this has not changed much, though I would guess that defaults and late payments are up.

What is the population growth projected?

For Colorado, I think the most recent figure I've seen is about 3% annually. Longmont is probably the most affordable place to live in Boulder County and there are several large employers in the area, so it could grow faster than the state average.

What are the comps on similar land in the area?

There have not been any sales of similar land in the Longmont area in the past 12 months. Prior to that, the comps I could find were around $5-6/sf. I doubt that's still relevant given the economic downturn. If you try to find land with zoning and entitlements for a self-storage facility, there aren't any.

 

[kurtyordy]

Re: Help AJ - interesting self-storage opportunity facing foreclo

ok, now 2 more key pieces of info-

cost per unit to build

rent per unit

 

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[Salinger]

Re: Help AJ - interesting self-storage opportunity facing foreclo

ok, now 2 more key pieces of info-

cost per unit to build

rent per unit

I'm better on a per square foot basis than a per unit basis as the unit sizes vary.

A previous bid, from 18-24 months ago, has construction including soft costs at about $39/sf. This would likely be less now with reduced cost of labor and materials. If you include the land, it would be $55/sf or less.

The original feasibility study had the rents averaging about $12/sf. I think that's a bit optimistic, but not too far off for a new facility. If the land and construction costs are also lower than projected, the owner could charge lower rents and still make a nice return.

 

[kurtyordy]

Re: Help AJ - interesting self-storage opportunity facing foreclo

ok, $39/sf is based on total site sf or built sf? if built, what is the total sf projected built?

$12/sf profit, same as above, on total sf or on built sf?

 

[Salinger]

Re: Help AJ - interesting self-storage opportunity facing foreclo

ok, $39/sf is based on total site sf or built sf? if built, what is the total sf projected built?

$12/sf profit, same as above, on total sf or on built sf?

$39 per sf of building. Total 88,000sf.

~$12/sf is the projected average annual gross rental rate.
For a 100sf unit the gross rent would be $1200 per year, or $100 per month.

I'm sure there is some price sensitivity, but I would guess that the main criteria for customers are location and availability.

 

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