Self Storage- Making an offer on land

[Henry Clark]

We operate in a 40 mile radius from our house. Anything is fair game within that driving radius. We have been really hammering one town trying to expand there and looking at all potential properties with a realtor there. There are several properties that either are zoned correctly or would need rezoning, but priced out of our range, so hadn't made any offers yet, there. We really "NEED" to buy in this town, but since we operate in a radius we can offset with other market areas. Then this offer in a different town came up.

New listing $1,400,000 for 5 acres.  Middle of city, shovel ready with electric/water/sewer/roads/entrances, etc.  Very little competition within 3 mile radius.  Very little land available for proper zoning or pricing.

Realtor/Owner of property offered to us at $900,000.  His partner is in financial duress.  We have bought through this realtor before.

I selected a Buyers broker to represent me, versus working with the Owner/Realtor to buy his ground.  I will pay a Buyers commission.

Looked at similar pricing with my broker in the area and determined their $900,000 was a fair price, but not a "duress" price.  We weren't really looking in this area, so made "Final Offer" of $800,000 for the property.  

By working within a territory versus a specific town/city, we are able to take ourselves out of "NEEDING" to make a deal.

This in turns allows us to "WALK Away" from an offer, thus we can make a "FINAL OFFER"; knowing the Seller will accept or we are okay walking away.  

This is another reason we like Self Storage.  Whether buying land to develop, buying existing Storage locations, reduce risk of over inventory of storage units in one market, TIME waiting for either land or a location to become available for sale, while we are trying to grow our business.

Start small and MAKE YOUR BIG MISTAKES EARLY. 

Also, be prepared to WALK AWAY from a deal.

[Taylor L.]

Nice! What do you think your construction costs and value at completion will be?

[Henry Clark]

@Taylor L.

Don’t know.  Normally we are ready set go.  But this one has roads on two sides with a four lane street road in front.  The front side is better valued with commercial business.  Lot is divided into three lots but can redo to two. 

If we split two acres up front for commercial leaving 3 acres for storage.  3 acres is a little smaller than I would like for this location. Have never done multistory, because I can beat them, but might have to due to the great location in the metro area.   would like to get over 3xx units in this location.  Not sure I can do that on three acres.  Still have to check setbacks. 

On the commercial that’s not my lane.   Probably just hold on to the ground and sell as a shovel ready site. A lot of the bare ground has been getting used for google, Amazon, weekend stay hotels, bass pro, casinos.   Thus as there is less available land the remainder should get more valuable. 

[Ronald Rohde]

Exciting!

[William Thing]

Awesome! Love seeing your post on this forum Henry!

[Henry Clark]

Still working on this property.  It had a set of covenants tied to it.  Had my attorney read.  Normal utility access and road access.  Got hung up on shared parking.  The 5 acres is part of an 8 acre development.  The other 3 acres is a weekly stay hotel. They are part of the covenants.  The covenants allow all owners to SHARE parking.  This won’t work with our closed access storage facility. 

Extended close date. The current owner is supposed to go back to the Hotel owner and ask them to rescind the covenants.  Then we will close. Still looking to close. 

[John McKee]

Henry, How do you determine the demand for Self Storage?  What are some of the key metrics you look at?  I see these popping up all over my town and it looks to be saturated, although I do live in a very dense area as well.  Inquiring minds want to know!

[Henry Clark]

Have a previous post that’s more in depth.  “Will they come?”

I use a factor of 6 units to 100 population. So a town of 10,000 would need 600 units.  Doesn’t matter wether 10/15/20 foot units.   Doesn’t matter economics of town or citizens.   If isolated town will include people outside city limits.  

Being an accountant I had to “know” the market.   Developed this by making a table in our 40 mile radius market.  Counted all units and sizes in each town and looked up population. 

The town we live in has the highest around 11 per 100 that I have found anywhere.

You can google and most people use a sq ft per capita metric.  
 
Any one can validate this in their market.  The big hurdle a new person has to get past is we are all the same. Life issues.   Death, divorce, upsizing, downsizing, house changes, etc.  

What I like about doing this by town is we can pick the best town to either buy or build in, from a market demand standpoint. Not all towns are equal markets.

With that said I haven’t met a town I wouldn’t build in.  Even if not a single extra unit will ever be rented in that town.  
San Francisco, Miami and Bill, Wyoming.  

[Al M.]

@Henry Clark Do you have a facility in the Bay Area?  Curious how that’s been performing?

[Henry Clark]

Quote from @Al M.:

@Henry Clark Do you have a facility in the Bay Area?  Curious how that’s been performing?

No location there.  Was helping a person analyze in that market area.   Identified two properties zoned, for sale and price is right.  Don’t think they ever moved forward.  They were just dreaming I think. 

[Henry Clark]

Quote from @Al M.:

@Henry Clark Do you have a facility in the Bay Area?  Curious how that’s been performing?

 LA is a great market also. Just can’t do what others are doing. Analyzes that market also but the person never moved forward. 

[Edgar Martinez]

@Henry Clark great info. Thank you!

[Henry Clark]

Quote from @Edgar Martinez:

@Henry Clark great info. Thank you!

Glad you enjoyed. If you like any of the posts vote for them. Helps me see what topics people prefer. On another forum I was surprised by far the best received was a post I did on Selfstorage and retirement life. Unfortunately BP does not use a counter on post readers in the general post area where we are. 

[Henry Clark]

Any issues I post on or you read these and many other issues that are a normal part of buying and developing a site. 

The cardinal Sun you don’t want to do is to have the same issue you had before due to oversight or lack of knowledge.  The key tool to use is to develop a checklist on each location and keep improving on it. But use other peoples examples or errors to learn and improve.  Using the above post as an example if you do t have Covenants on your checklist you need to add it. Don’t wait till you Learn it from experience. 

[Al M.]

Quote from @Henry Clark:

Quote from @Al M.:

@Henry Clark Do you have a facility in the Bay Area?  Curious how that’s been performing?

 LA is a great market also. Just can’t do what others are doing. Analyzes that market also but the person never moved forward. 

Thanks Henry!

[Zack Gill]

At what part of DD do you come across covenants? Is that a title company issue?

[Henry Clark]

@Zack Gill

Would have been at title search.  In this instance however I know the Seller (RE agent who I have bought from before) and the RE buyer agent for us (who I have bought through before).  Came up during the conversation with both of them.

Had my attorney review and she noted the shared parking covenants.  Which is good for the original Retail Subdivision usage, but not for Storage being one of the properties.

The way I do things I would just add it to my normal property checklist.  That way I only learn the lesson one time.  This would cause the discussion to come up earlier in the Due Diligence process.  

Still waiting on the Hotels response to canceling or releasing that portion of the Covenants.

[Henry Clark]

Finally closed on this property last Thursday.  The covenant allowing parking across all of the subdivision did not get changed.  I will deal with it later.  We paid half down and borrowed the other half with a 2-year short-term loan.  Plan to pay this off around March, when we sell some other property.  Although I will start the development work on this property, re-subdividing, change zoning or get variance for storage, and develop building layouts.  We don't plan to develop for another year or two.  Want to wait for construction costs to come down, or just hold as an investment property (which I don't like).  Prefer to have a purpose and develop, for larger gains.

For now, starting to clean up.  Rented bush hog and mowed the storm pond area and around trees.  Will cut down trees and poison over the winter.  Nice above ground project on cold day.  This will greatly enhance the visibility from the Interstate and local roads next to the property.  Will have to develop a new layout and have the engineer re-calculate the storm pond size and demand.  The existing pond should be plenty compared to our 8 acre spot and its pond.  This lot is 5 acres.  This ditch and pond and far bigger than our other pond.

Will try to give more details on this property.  Around the edges are 8 of these electrical power boxes and underground wiring.  The former developer already had them set, but never developed.

Several utility items to do are Water and Sewer along the front road.  Walk/bike path along the front road.  Depending on our cash positions we may go ahead and do these, even though we don't plan to build for a year or two.  It is always great to get your underground and as much surface needs out of the way.  These usually slow you down, since these are different contractors, and the weather can be a spoiler for below surface work.  Also need to put a fire hydrant in the middle of the Storage facilities. There is a private hydrant right next to us, but you can't use that.  Then we are over 300 feet away from the others, thus we have to put one in.  Again, this is underground work and would like to get out of the way.  Have to finalize building plans first though.

While we are waiting, we might even list this property.  Interstate work around this property is getting completed in 2023 which will open the area up.  Some of the bigger lots in this area are completing their construction and thus less land is available in the area.

Below is a layout showing a Week stay motel on the left.  This is not part of our 5 acres, but it is the property, which is part of the subdivision, we were concerned on the parking covenants.

Buildings 1 thru 10 would be the Self-storage.  This is not the final layout, this is inefficient.  Buildings 11 and 12, that land could either be sold off.  Or we could build office buildings there and lease.  That layout is fairly final.

Luckily not in a hurry and just work the system and not get in a hurry.

[John McKee]

Henry,  Congrats on your closing!  It's great that you are sharing the amount of work you have to go through to create a value add type of deal.  It's always inspiring when people post examples of what they are doing.  Keep dropping the knowledge so others can learn!

[Ronald Rohde]

was the prior use for residential? 

[Henry Clark]

Just a farm field.  Never been used.

[Joseph Gozlan]

@Henry Clark put the commercial land up front for sale, fund some of the construction before it's even finished. 

[Henry Clark]

Kept working throughout the winter.  Paid my buddies sons $1,000 for one day to cut trees down and poison the stumps.  Another crew came in and chipped them on site for $2,500.  Would have been about $5,000 to haul offsite and I couldn't burn.

Last week planted to Oats which I will harvest or shred late this summer.  Need to put a cover crop on or it can go from Ag land to Commercial taxation.  Will keep planting crops on it.

Caught two Construction sites with extra dirt about 3 miles away in town.  Going to get their excess dirt delivered to this jobsite.  Need to fill in.  Glad if we can get about 150 side dumps of dirt to fill in some valleys.  This will have a chance to settle over the years till we are ready to build.  Will either get it for the cost of trucking or for very little.  Have to do a dirt or excavation permit in town.  Cost about $.25 per cubic yard.  Each side dump truck will have about 20 yards.  Fee will be about $5.00 per truckload.  

[Ronald Rohde]

Free dirt is the best dirt! Really common when we're doing projects like that. Tons of dig out for foundations and underground parking garages near my projects

[Henry Clark]

Got free dirt about 150 truckloads. Leveled with a skidsteer.  Then had a road grader do the finish grade.  Still just sitting on the property.  Have three other projects going so this one is on hold.  Part of our risk management, being exposed on so many or dollars of development at once.  Will let the dirt settle and compact on its own.  

Took the tractor over and broadcast oats and then dragged into the ground.  Starting to sprout.  This will keep it zoned as agriculture versus commercial.  

[Henry Clark]