SSI Case Study – Mead

This is a self-storage case study by the numbers. I’m gonna show you the numbers on a facility that we got 311% return in just four years. This case study shows you our strategy and how we try to get high returns without ever exiting or losing the asset. And this is showing you what’s going on through the expression of the financials. All right, let’s show you the returns year by year. All right, so this facility is 115,000 square feet. It is in a smaller market that is adjacent to a second tier market. Neither one of these markets we’re seeing explosions in growth or anything of the sort as far as population growth goes. It was a decent facility that didn’t need major capital expenditures. It had a good location, but it was being run very poorly. And when I mean poorly, I just mean not actively engaged in the business and increasing that revenue. Overall though, it was being run well as far as leases went. Customers were happy, but there was no marketing. There was no effort into that facility to improve it. On this facility, we purchased right at $4 million. We put just over a million dollars into it. We’re gonna walk through each year and how our return on that million dollar played out. Out of our 116,000 rentable square feet, we have 487 units, which is broken down into 373 total storage, parking, 109. We have office space, five. We didn’t rent out the office space. Apartments, one. And the end of this apartment, the manager, when we purchased it, was living on site. In our numbers, first year was only two months. So that’s not a full year, obviously. We’re not gonna count that. We move into the first full year here and we received $206,000 from our million dollar investment. That translates roughly into a 19% return. The first thing we did when we took over this facility, we cleaned up the facility, got rid of delinquents, and we got rid of the people that weren’t paying on time and immediately went to marketing and tried to find the best, highest paying tenants in that area to utilize our facility. In year two, we took in $246,000. That brought our return on our million dollars up to 466,000, which is a 43% cash on cash return. Commercial real estate is valued off the net cash that it produces. So by increasing the cashflow, we also increase the amount it is worth, its value. Within the second year, we had already increased that value from 3.9 to 7 million. In year three, we took in another $300,000 that year, bringing the total up to 775,000. And in year four, remember it says year five, but year one was only two months. So the first fourth, the fourth year, which was the full year, we took in that year $2,500,000 plus. What changed? Remember, when we increase cashflow, we increase value. That means we are able to refinance at the same debt to loan value. And because it’s higher, we get to take cash out of the property. We’re not taking necessarily more debt out on a percentage. We still are at a 70, 30 loan to value. So it’s pretty conservative for commercial real estate. Yet we took out $2.5 million from the refinance process. The best part, when you do this, it’s tax free. That meant our cumulative total in just four years was $3.3 million, of which the $3.3 million, 2.5 of it was totally tax free. That makes our total cash on cash return in four years, 311%. Now that we’ve refinanced, we have all of our money out. We also refinanced into a non-recourse loan. That means I took all my money out and I’m no longer even liable on the loan. I have no more risk in this asset. I’ve taken a huge profit out, but I still own the asset. And the very next year, it made over $138,000 and we kept growing it. This is our underlying strategy. We buy underperforming assets. We turn them around through improving their cash flows, increasing their values, refinancing, taking our money plus a profit out, moving the financing into a safer non-recourse loan, but we still own the equity. We still own the asset. It’s income producing and wealth generating. This is essentially infinite returns after that point. The real beauty about this strategy is not just the returns. It’s the fact that I can take that money out and reinvest it into another asset that will produce again, a 311% return in four years, therefore compounding my wealth and making it grow even more. That is our strategy that we’ve been doing since early 2000s and how we’ve accumulated the portfolio that we have and how our money keeps growing while never losing the assets that produce the income that pay us along the way. If you wanna learn more about non-recourse loans, we’ve already made a full video and you can check that out here.

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