Sold half my service book, $150k to place, 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?

@juniper you'd walk the site and do a lock check. Count every unit with a tenant lock on it, compare to the ledger, compare to the bank deposits for the last twelve months. It's tedious and it's the actual diligence on a place like this. Owners aren't usually lying, they're just 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. Ask yourself who is driving out there, because if the answer is you, that's a real cost you haven't priced.

The thing I'd check that nobody's said yet is the lien process. In storage, when a tenant stops paying, you eventually auction their stuff, 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's cleanout cost and lost revenue you'd inherit. An attorney in your state can tell you what the current process actually requires.

You said you'd need a partner or more debt to do the facility, and you glossed over it. That's the decision, more than the software or the rate gap. Bringing a partner into your first deal changes the deal, and borrowing to your limit on an asset you're planning to reposition removes your margin for the eighteen months when the repositioning isn't done yet. Figure out what the deal looks like at $550k down with no partner and see whether it still exists.