Wow...what a way to start a Monday morning seeing this email. Ok, I've built a portfolio of self storage (18 properties 6000 doors) and sold it. Built another portfolio, now 28 properties and 6500 doors. My criteria is conservative and cash flow positive. I've used family money (started in apartments in the 70's)...we have not used OPM (Other People's Money).
When you start, self storage is a side hustle (for me, first 9 years, side hustle...since then 11 years full time storage). If you are looking for it to pay for your life at say $10,000 / cash to you monthly, you will need...a property or properties that are generating $100,000 / month in actual revenue. For this conversation, assume you're able to get this for $12,500,000 purchase price.
$100,000 / month in revenue
45% Expenses
45% MAX MAX MAX debt service
10% Cash flow after Debt Service
45% Debt Service with $100k / mo in revenue means your max debt service is $45,000 / month.
6.5% Interest with a 20 year amortization = $45,000
Means you can borrow $6,034,598
This means you need $7 Million cash down.
Sit with that for a minute. If you had $7 Million in the stock market growing at 10% / year and you were paying yourself 4%, that would be $280,000...is the risk and the operational headache worth it?
Don't want to be debby downer but it is truth time.
Answering your question, tell yourself the truth about the numbers. Will a bank loan you money to do a deal that WILL NOT CASH FLOW...yes they will. Can you squeeze the balloon and do interest only for a period of time and IF IF IF everything in your proforma goes perfectly (which it most likely will not) yes, you can do interest only for a period of time and then when you need to refinance, things get tight and your options are limited...losing money is a real risk.
SIDE HUSTLE...have your day job and keep it. Do that really well. Buy your first deal, as good as you can find with $500k of your own money. Look for a deal, total deal is $1 Million and within 30 minutes of your home. Your $500k loan will cost you $3728/mo (if this was 45% of your properties total revenue / mo that would mean you're buying a property doing $8300 / month...this property you should be able to buy for $900k...have $100k in reserve for signs, gates, expansion, etc. If you are 45% expenses and 45% debt, that means you can spend, through the business $800 on yourself...or don't pay yourself and begin to build cash. BIG BENEFIT, $1 MILLION PROPERTY with Cost Seg should generate on paper a big loss for your personal taxes year 1 and 2 and 3...not having to pay as much in taxes is real money.
We could go on and on...our business is good but be conservative and patient and tell yourself the truth...join TSSA and go to the meetings where you can interact with others that have made all of the mistakes you're getting ready to make unless you steer clear.