Today I’m giving you a 1.5 year update on our storage unit investment. We've been able to get over a 60% return on our cash flow and over 240% on everything. We will get into all of the numbers on this property. I will also include six actionable steps that you can use if you are interested in learning how to invest in storage units. To turn these into cash cows, you've got to create one or several deal flows. That means figuring out what you want to buy, sending out mailers, working with realtors, checking the MLS, and doing whatever you can to get connected for that specific niche of property.
With these storage units we had lots of people looking, and we had one connection that panned out. You've got to understand the market. This means really diving into the numbers and knowing what specific units can rent for. Once you know exactly what you can get for rent, find opportunities to add value.
With this specific project we knew the unit was renting for $130 per month. We looked at all the comparables in the area. We called around and found that this specific unit could rent for probably $50 - $100 more per month and we'd be right at market rents. We knew this had a great opportunity to add massive value in a very short period of time.
Once you've figured out how to add value you've just got to get the money to purchase the property. You can do this with your own money as a down payment. You can borrow money, or do a partnership. You want to find a way to get that money to be good long-term debt if possible.
We started this deal with seller financing that was incredible. Then we waited till rates were good and our situation was good. We could even pull money out of the property. We did a refinance into great rates that are locked for 10 years on a 20-year arm. Once you know your numbers work, you know how you're going to add value, you've got your financing locked in, you've got to get your management or systems set up so that it can run smoothly.
The last piece is just sending it. This is where most people get hung up. When everything looks good, they've got the deal and they chicken out. So when you've got everything in line, you've just got to jump in with both feet. This sounds simple but really that's it.
You may be wondering: is a storage unit the best investment? Ours has been great so far. My partner Yogi found this storage unit deal for us. He had an incredible connection and decided he didn’t want to go through with the deal by himself. I looked at the numbers and I wanted to get into it with him. So we negotiated back and forth and we ended up closing on the property.
We've owned it for about 18 months. Rents are usually between $9,000 and $11,000 depending on the month. That's after all of our management fees and everything else. We have almost $146,000 in our shared account after owning it for 18 months. Some of that probably needs to go to capital expenditures because we have had no maintenance on the property.
Management costs have been low, and we've been able to keep them full. That is where we got our 60% on a 1.5 year or a true return yearly of a little over 40%. Ok let’s cover the 240% return that I know you are wondering about. The biggest reason for that is the market has gone insane and even though interest rates are creeping up, we've actually recently had offers of close to $1.7 million to buy them. We paid $1.25 million so that's an appreciation of $450,000 on our initial investment of $250,000. So there are multiple ways for storage units to make money.
The cool thing about storage units is they're only month to month rents so we could bump rents immediately after purchase. We've slowly bumped them over the last year and a half to where the gross revenue of this is thousands of dollars higher than it was. That's how we've been able to crush it.
It seems simple but sometimes people over complicate it. Part of it too is it's professionally managed. The people who owned it before us are awesome, but they managed it just by themselves. When you have a full-time property manager, they have systems, people working for them, and they know how to handle bad tenants.
A management team will know how to get new people in faster which is worth a lot. I probably wouldn't have gotten rents up as much as our management company has in that time. They’ve done an incredible job with tenants and things run smoothly. That's why I believe it's so important to hire management companies.
That’s it on this storage unit investment rundown. I will keep providing you all the info on my investments because my goal is to help you build a huge passive income.