Transcription
For your projections to the final numbers, yep. So we just sold it. So we were super ahead of projections, like very ahead of projections. We're very conservative when we do our underwriting for these types of deals. And luckily, we structured the deal great. And then there was so much add value, so, so immediately that we turned a five cap deal, which was a really a seven cap market, and we got that five cap property into a 12 cap in like six months.
So take a step back. Everyone is listening. Caps, what is a five, a seven, to 12 cap? So a cap rate is essentially like if you bought the property all cash, uh, it's your cash on cash return essentially. And so we were new to self-storage and new to this market in Sebring, Florida. So we called brokers in the area like, what would a property, so storage property trade for in this market? And they said a seven cap. So meaning that people in this area buying self-storage, if they bought it all cash, they would want a seven percent cash on cash return for that asset. Um, these sellers wanted a five cap, which is like 30% higher price than what was the market price would be. But we were willing to pay that price one because we got good terms and number two, there was immediate add value that didn't really require, um, capital expenditures. They didn't really require putting more money into the property.
Got it. So it's like, um, for the house perspective, like, um, like a hotel. Yeah, right. Like it was just, it didn't require very much work and you can increase immediately sell it for more. Exactly. Well, paint, little lipstick, stuff like that. For us, it was, he had a tree company that was utilizing, uh, this large, uh, single-story building. And so he sold the business, which is why he sold to sell stores because it was on one, uh, parcel and they ran the self-storage as this just extra income. They weren't really trying to maximize that. They had a very successful tree business. So they sold the tree business, they move out. We moved a tenant in for like 17.50 a month that drastically increases the value of the property, increases the income. And then we had, so the rent was pretty much 50% below market. So we were able to, we did all the add value first. Yeah, because it's right in the middle of COVID. And then we increase everybody's rent. Literally, one lady moved out who had three units. Everybody else stayed and we literally just doubled the rent. So it was immediate add value without really having to do much else.
Got it. And so you said like two and a half years ago, so like you just exited this property. We sold it on February 28th. So this is not a simple flip. Um, we probably could have sold it right away. Um, but my intention of getting into self-storage was never to to sell them. Like I was like, I have my wholesale business that makes me money. Like I want to hold these for a long-term wealth. But when, um, from being in a mastermind for self-storage, these guys were all packaging, uh, facilities and selling them off. And I was like, should you know, should I be doing that? You know? And they're like, well, you got to look at your return on equity. You're making this much money per month on cash flow. If you sold it after cost and everything, what would you net? And so if you can net a million dollars and you're only making, you know, thirty thousand dollars a year, well, then you're making like three percent on your money. Would you make more than three percent if you had that million dollars cash? Yes, we can make, you know, 20% plus returns on on a lot of deals. And so it makes only sense to sell that property unless it's like a Class A facility that you know, we feel like is a legacy asset where we're gonna hold it for a long time. You know, I'm young, I'm not retiring. It only makes sense to move it and buy something else bigger and maximize return.
Being in a different room causes you to ask different questions. 100%. Yeah. So you bought this with the intent, I'm gonna hold this forever, essentially. And then someone's like, hey, Alex, you're not realizing that the million dollars from this self-storage could yield a much better return elsewhere. Exactly. And that's the power of being in the right rooms. Exactly. 100%. So first deal, I mean, I don't think that's a grand slam. I think that's a World Series grand slam, right? Like if you want to become one over 100 millionaires, make sure you hit that subscribe button right now.