I love to chronicle my real estate purchases through words as it is my goal to help others achieve great success in real estate. I love to give back because I got started the same way, piggybacking on other’s successes to make it to the top. Please visit my website CaseyCavell.com or contact me at [email protected] to learn more. I would love to help you any way I can.
On August the 7th I received a call from a property owner in Covington, Georgia. He was calling me after my latest marketing campaign targeting self storage owners. The friendly voice greeted me and I began to introduce myself, to build a relationship with the gentleman on the phone. I took some time to ask some open ended questions (ending with) who, what, why, when, and so on. I was able to dig deep into the details of the property and we exchange emails to send some additional information back and forth.
Later in the week, the owners emailed over The Myst some profit and loss statements along with their overall operating numbers for the past two years. I was able to dissect these numbers and they were enough to get me going. During our next conversation, I was able to gain more insight on their motivation, which is important with any property owner; all-the-while, building more of a rapport with the owners and developing a relationship over the phone. Without a motivation to sell, most owners will not be flexible on price and the chances you will strike a good deal for yourself are slim to none.
In this case, the owners were downsizing there business and wanted to start selling off many of their rental properties. Their main business, which was also their passion and love, was electrical sales and contracting. They occupied a 20,000 sq. foot retail building which was at the front of their 53,000 sq. feet and 498 unit storage facilities. Their property, although old, was in good condition structurally and was located right on the busiest road in the county. They acquired the property over 25 years ago and were ready to downsize and slow down.
Their passion was not in the storage business and it showed in their operations. The units were not able to compete with many of the facilities in town because of the lack of amenities. They did little, if any advertising, their phone sales were poor, and they were never open on Saturday (one of the busier rental days of the week). They poured all of their time, money, and hard work into their other business and I saw an opportunity to add value in their storage operation.
After building a relationship and building trust, the owners were willing to share any information I needed. During our first conversation, they were looking at a 2.5 million dollar purchase price with a $500,000 down payment. They owned the property free and clear and were in the position to hold financing so they did not have to pay Uncle Sam. I asked them how they arrived at the price and they said that they knew the value was there. I then had to explain to them that I had to buy based on cash flow and the cash flow could not sustain the purchase price. It was during that conversation that I was able to tactfully have them lower their purchase price to two million dollars. I also mentioned that I would most likely want to add amenities and improvements in the property and was unable to provide a $500,000 down payment. They said they were flexible on that and would consider $300,000 down with a credible buyer.
The credible buyer they found was me. I showed them reference letters and some of the other properties I have purchased in the past and the improvements that I made (if you are a newbie, partner with someone like myself on your first deal so you learn the ropes). I was able to build a relationship with these people based on trust and honesty so they wanted to do business with me. I remember sending them a small gift in the mail, (a sewing kit as the wife of the couple loved to quilt) and a picture of myself and my family. They worked so hard for so long on this property that they wanted to leave it to someone they liked and trusted.
After they lowered the purchase price and down payments, the property was still a bit over priced. This property’s worth in my estimation would be 1.9 million dollars in 2-3 years. I could not afford to pay for future value and needed to reduce the price even farther. Remember never buy on performance buy on actual operating numbers only.