$150k to place in storage: one facility or a piece of a fund

The paper ledger would scare me more than it seems to scare you. How do you verify 88% full without a real system? Is there anything to audit?

@kevin_lombard you walk the site and do a lock check. Count every unit carrying a tenant lock, compare that to the ledger, then compare the ledger to the bank deposits for the last twelve months. It is tedious, and it is the actual diligence on a place like this. Owners are rarely lying. They are usually counting units that stopped paying four months ago.

$1.85m on 210 units is about $8,800 a unit, which tells you almost nothing without square footage and rates. Get the unit mix, the current street rate by size, and what the competing facility down the road charges for the same sizes. If his 10x10 is $75 and everyone else is at $110, the whole thesis is right there and it's simpler than the software story. If he's already at market, the online rentals and modern management software get you convenience and maybe a point of occupancy, and that's a much thinner deal.

The two options are different risks, and the comparison depends on which one you can actually diligence.

On the facility, the value creation you're describing is standard in storage. An operator with no online rental path, no dynamic pricing, and no program of raising rates on existing tenants is usually 15 to 30% below market on in-place rents, and closing that gap over eighteen to twenty four months lifts NOI and therefore the property's value at any given cap rate. That is the whole small-facility playbook. Two things determine whether it works here. First, whether there is real rate headroom, which pike is right to make you prove with competitor street rates rather than assume from the paper ledger. Second, whether the market can absorb the tenant loss that follows rate increases. When you raise an in-place tenant 20%, some fraction vacates, and in a small town with limited demand you may not backfill quickly.

On the housing market question, relocation is one demand driver among several. Life events, deaths, divorces, downsizing, and small business storage keep running when transactions slow. A frozen housing market suppresses move-driven demand and it doesn't eliminate demand. Recovery in that driver is expected to be gradual and uneven, and low-supply markets tend to hold up better, so your competitor count matters a great deal.

The LP position gives you diversification across markets and professional operations, at the cost of fees, no control, and a lockup you can't reverse. Read the operating agreement for how the preferred return is calculated and what the affiliate management arrangement is.

The assumption doing the most work in your post is that 88% is real. Verify it against bank deposits before anything else.

Fifty minutes each way is not nothing when the gate breaks on a Sunday. The question to settle before you buy is who makes that drive, because if the answer is the owner, that is a real cost that has not been priced anywhere in the return.

The thing worth checking that nobody has raised yet is the lien process. In storage, when a tenant stops paying, you eventually auction their belongings, and the notice requirements and timelines are set by state statute and vary a lot state to state. A 1998 mom and pop operation with a paper ledger may have been doing it wrong for years, or not doing it at all, which is why some of those "occupied" units are full of abandoned property with no paying tenant. That is cleanout cost and lost revenue you would inherit. An attorney in your state can tell you what the current process actually requires.

The line about needing a partner or more debt to do the facility got glossed over, and that is the decision, ahead of the software or the rate gap. Bringing a partner into a first deal changes the deal, and borrowing to the limit on an asset being repositioned removes the margin for the eighteen months when the repositioning is not done yet. Work out what the facility looks like at $550k down with no partner and see whether it still exists.