A few months later I reached out. Broker sent me financials. They were good. $24k a month in revenue and $10k in expenses.
On Sep 3rd 2020 we closed on a 120k sf glove factory built in 1890 in a small NY town.
Has 45k sf of self storage inside and had $14k a month of net operating income at closing.
Let's breakdown this deal.
A THREAD on creating $2 million out of thin air in 18 months...
👇👇
A few months later I reached out. Broker sent me financials. They were good. $24k a month in revenue and $10k in expenses.
I loved everything about it.
Countered at asking price + $100k credit towards roof.
I ignored the response.
I knew it was a good biz so I got more aggressive - $1MM + seller pays for roof / environmental.
Declined. Countered with $1.2MM but they'd give me a new roof and do the environmental.
They agreed and we signed a deal.
More on seller financing here:
https://t.co/qsEQRJ4E1l
We've used "seller financing" on two self storage deals in the past year.
— Nick Huber (@sweatystartup) January 21, 2021
And it raised our cash on cash return by 20%+.
And lowered the amount of capital we needed by $500k.
Here's a THREAD about a deal of mine and how this magical debt structure can work.
\U0001f447\U0001f447
They replaced roof. Did environmental. A few other things that came up in inspection.
It had $168k in NOI so appraisal came back at $1.85MM.
My bank: $950k
Sellers: $300k
Purchase price: $1.2MM
New security system ($12k)
Automatic / wifi overhead doors ($5k)
12 hr / 7 day access
No office (keeping manager on team though)
Rent increase to get customers up to market rate
She now answers phones and does admin for 3 other facilities in addition to this one.
In October we increased revenue from $24.8k in September to $30k. November and December were just shy of $30k as well.
Occupancy is up. Economic occupancy is WAY up.
Marketing: $1k
Payroll (1/4 of manager pay): $1k
Utilities / Software / Mis: $1.25k
Snow removal / Lawn: $750
Supplies: $500
Maintenance: $1k
Management fee: 1.5k
Taxes / Ins: $1.5k
On an annualized basis thats $258k in net operating income.
Let me tell you why I don't care how much someone will pay.
If I sell it I'll have about $3.5MM in capital gains. 25% of that will go to uncle sam. And I'll be left trying to figure out what to do with the remaining 2.5MM.
Here's how:
Then we'll go back to our bank and get the thing reappraised. We expect it to be valued at about $4.5MM.
The bank will lend 75% of that value to us.
After $1.25MM goes to clear seller financing and original loan, we'll have $2.125MM in cash go into our checking accounts.
And the best part...
We paid no taxes.
In the sell scenario: We trade our building for $2.5MM cash.
In the ReFi scenario: We keep our building and get $2.125MM cash.
I'll take #2 all day. And thats our plan with every building we buy!
https://t.co/ofRGWDCaNx
More from Nick Huber
More from Economy
EVs DO NOT EMIT MORE PM
Recently @OECD published a report about particulate matter (PM) from road transport. Newspaper headlines blared that electric vehicles where worse than combustion vehicles. That conclusion was wrong according to the report itself.
Let me show you.
The report (published december 7) can be found here: https://t.co/1HpicKexOt
It's main point is well taken: as cars get cleaner, fine particles emitted by brakes, tires and road surfaces will become more important.
The table comparing electric and combustion engines is on page 92. I took averages of low and high values to get the graph in the first tweet.
I merely took the averages. To get this.
I think it is a terrific report that pulls together a LOT of literature on fine particles that cars spew into the air and that make us sick.
We have ignored this problem for too long, and there's more here than simply exhaust!
Recently @OECD published a report about particulate matter (PM) from road transport. Newspaper headlines blared that electric vehicles where worse than combustion vehicles. That conclusion was wrong according to the report itself.
Let me show you.
The report (published december 7) can be found here: https://t.co/1HpicKexOt
It's main point is well taken: as cars get cleaner, fine particles emitted by brakes, tires and road surfaces will become more important.
The table comparing electric and combustion engines is on page 92. I took averages of low and high values to get the graph in the first tweet.
I merely took the averages. To get this.
I think it is a terrific report that pulls together a LOT of literature on fine particles that cars spew into the air and that make us sick.
We have ignored this problem for too long, and there's more here than simply exhaust!
Let's discuss how little you actually understand about economics and energy.
The first thing to understand is that energy is not globally fungible. Electricity decays as it leaves its point of origin; it’s expensive to transport. There is a huge excess (hydro) in many areas.
In other words, it can also be variable. It's estimated that in Sichuan there is twice as much electricity produced as is needed during the rainy season. Indeed, there is seasonality to how Bitcoin mining works. You can see here:
Bitcoin EXPORTS energy in this scenario. Fun fact, most industrial nations would steer this excess capacity towards refining aluminum by melting bauxite ore, which is very energy intensive.
You wouldn't argue that we are producing *too much* electricity from renewables, right?
"But what about the carbon footprint! ITS HUGE!"
Many previous estimates have quite faulty methods and don't take into account the actual energy sources. Is it fair to put a GHG equivalent on hydro or solar power? That would seem a bit disingenuous, no?
Well that's exactly what some have done.
The first thing to understand is that energy is not globally fungible. Electricity decays as it leaves its point of origin; it’s expensive to transport. There is a huge excess (hydro) in many areas.
Let's discuss the environmental cost of bitcoin. Because despite all the push for sustainable and green investment in the tech sector, there's a giant smoldering Chernobyl sitting at the heart of Silicon Valley which a lot of investors would prefer you remain quiet about. \U0001f9f5 (1/)
— Stephen Diehl (@smdiehl) January 17, 2021
In other words, it can also be variable. It's estimated that in Sichuan there is twice as much electricity produced as is needed during the rainy season. Indeed, there is seasonality to how Bitcoin mining works. You can see here:
Bitcoin EXPORTS energy in this scenario. Fun fact, most industrial nations would steer this excess capacity towards refining aluminum by melting bauxite ore, which is very energy intensive.
You wouldn't argue that we are producing *too much* electricity from renewables, right?
"But what about the carbon footprint! ITS HUGE!"
Many previous estimates have quite faulty methods and don't take into account the actual energy sources. Is it fair to put a GHG equivalent on hydro or solar power? That would seem a bit disingenuous, no?
Well that's exactly what some have done.
