Discover how Preston paid $530,000 for a property worth $1,100,000 and got $570,000 (more than a half million) in instant equity! Plus, learn how he acquired it without a bank loan AND his plans to add $5 million more in value in this inspiring interview:
Meet Preston
Introducing Preston! Entrepreneur, cancer survivor, husband, father of four beautiful children, and now a successful commercial real estate investor. Preston got his start investing in residential real estate, but switched his focus to commercial real estate because of the ability to increase the NOI and force the appreciation.
Even though Preston had real estate investing experience, he realized that to be successful in commercial real estate, he needed a mentor. He joined our mentorship program and with our guidance and proprietary techniques, Preston found a commercial deal that has changed his life. It hasn’t been an easy road though. In 2020, Preston was diagnosed with stage 3 Hodgkin’s Lymphoma, and he spent that year fighting for his life. Now, fully recovered, he’s celebrating the purchase of a 172-unit self storage facility with $570,000 instant profit and the potential for $5 million in additional upside! Here is Preston’s inspiring true story…
How Preston Found His Self-Storage Deal
The way Preston found this deal is remarkable. He was at a restaurant one day, talking to a relative about potentially looking at a piece of land to develop as a storage facility. Their server overheard them talking and suggested he contact her grandma who had a storage facility she was selling. Preston jumped at the opportunity and contacted the seller. This began the patient process of building rapport and slowly gathering information from the owners. There were hardly any records, which meant he had to do a lot of digging trying to hunt down as much information as possible. Little by little, the numbers trickled in and finally, after a lot of coaching calls with our team, Preston was able to make an offer.
Getting accurate numbers on the property was the most challenging aspect of the deal for Preston. But his patience paid off. They already had a potential buyer, another investor who had been in negotiations with them, but he was impatient, and the sellers were turned off by that. By following our guidance to take it slow with the Seller, he was able to create an unbelievable deal.
Seller Financing
Preston purchased the 172-unit storage facility for $530,000. Since there were no records to prove income, a traditional bank loan was out of the question, which meant Preston needed to implement the creative financing techniques we teach. He structured this deal using seller financing with the following terms:
- $100,000 down payment
- The remaining balance of $430,000 at 6.37%, (3 Year balloon)
- NO payments for the first 12 months
- Interest only payments for the second year and third year.
- At the end of the third year, Preston will pay the remaining balance.
$570,000 Instant Equity
Not only did Preston purchase his off-market property with great seller financing terms, he also had instant equity too. When he had the property appraised two months before he closed on the deal, the “as is” appraised value of the property was $1,100,000. The deal has $570,000 instant equity from day one!
Value Add Plan
But wait! It gets even better! The property has phenomenal upside potential. Preston plans to expand the facility and raise rents to maximize its value.
Increase Occupancy: The sellers were old school and all they had was a sign and a listing in the phone book. With virtually no online presence or marketing, occupancy was low. Preston will increase online presence and begin marketing the property the way we teach to maximize traffic.
Raise Rents: The rents are currently below market so Preston can raise the rents and increase the property’s income.
Expansion Potential: Not only is there the potential to add 80 units, but the expansion plan also includes adding some flex space and the possible purchase of vacant space behind a neighboring property that will give road access from the back of his property.
Feasibility Study
As his mentors, we encouraged Preston to hire a company to do a Feasibility Study on the 172-unit storage facility. The study produces a 90-page report full of crucial information, evaluating the property and the potential in the market. Preston was reluctant at first because a feasibility study is costly, but it was important because it gave him confidence in his value add plan. Here’s some report highlights:
- The property has the ability to add another 4,500 square feet of non-climate controlled storage units, plus another 13,500 square feet in flex space.
- If Preston were to add the additional units and flex space (not including the purchase of the neighboring property), he would achieve a 165% ROI (Return on Investment) and an ARV (after-repair value) of $5.85 million.
- The average occupancy for storage in his market is 90%, meaning there is room in the market for Preston to expand.
- They recommended Preston install property management software to maximize operations. Preston has taken steps to implement this using a company software called StorEDGE.
- Lastly, the property has no online presence. Work has already begun to establish a strong marketing and online presence.
$5 MM Additional Upside
There are 3 key phases in self storage investing:
- Phase 1: High Impact Value Add
- Phase 2: Capacity Expansion
- Phase 3: Stabilization
Preston is currently in Phase 1, improving the online marketing, adding the right software and reducing occupancy. In Phase 2, he’ll add 4,500 square feet of non-climate controlled storage units and another 13,500 square feet in flex space. Finally, after a few years, he’ll reach Phase 3 which will be to fill the new space and stabilize the property, achieving an estimated ARV (After-Repair Value) of $5.85 million dollars!
Preston’s 3 Key Takeaways:
The Best Deals are Off-Market: Preston tried investing in on-market deals, but it was tough to make a profit. Finding off-market deals and working directly with the seller is where you can structure the most profitable deals.
Conduct Thorough Due Diligence: To make wise investment decisions, you need solid information. And that’s why the Feasibility Study was important for Preston. It revealed any potential risks, costs, market demand, and opportunities for development. This gave Preston the confidence to move forward with expansion plans.
Get a Mentor: When Preston was presented with an opportunity, he acted on it immediately. You may be presented with similar opportunities, but they escape you because you don’t know what to do. As a student of our mentorship program, he was able to bring the deal to us, and we coached him through the deal step by step. Here’s what he had to say about mentorship:
“I’ve always sought advice from other people that have been there and done that. And I’ve always heard from a lot of these guys that I’ve studied, that if you want to learn how to do something or learn a specific field, ideally find somebody that’d be a good mentor, that can show you the ropes. That’s Huge. I don’t know how typical it is, but I can only imagine with entrepreneurs, there’s a lot of shiny objects out there. It’s easy to get distracted and onto the next new shiny object. And that’s another thing that’s been huge with you all. Being able to keep me grounded, keep me focused on one thing and seeing it through.”
If you have any questions, post a comment below or text PETER to 833-942-4516.
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That. Yes? Truly fantastic. I love it.