Self storage- Family Re-Union. Deal 14?

Question

Having our first family reunion near Dallas Texas. My wife wanted to go antiquing so I dropped her in a town. Won’t give the specifics since I might see if my two Texas nieces wanted to do a storage deal here. Sitting under a Pecan tree. Have a book to read while my wife is making the rounds. But thought I would look at self storage here. Hard to turn your motor off.

Zoning good

2 acres for sale $300,000

Location. Couldn’t be better

Texas has one of the highest property taxes. Recommend to do cargo containers

250 x $3,500 set in place $875,000

Grading and roads. $300,000

Electric $20,000

Fence gate- none. Nice location highly visible. Containers will create fence

Security system. $25,000

Website. $3,000

Say $1,600,000 total

99% occupied. 250 x $110= $24,750 x 12= $297,000.

Pro Con: A. Can do year one write-off of everything except land. Only 80% this year since sun setting. Shouldn’t have to pay income taxes for 3 years. Good for cash flow up front.

B. Since containers are movable and personal property will be harder to finance with a bank.

C. Risk. Low since you can add containers as you need them. Easy to resale. And the land is still bare and easy to resale
D. Market and competition. Need further research but looks good.
E. Little property taxes since containers aren’t real property.

F. Our financial targets are 8 to 12 year payback. This would be in the 6 to 8 range. Plus would be in stages since it will take a while to pull 250 together.
G. Management would be self service.
H. No state income tax.

Cash flow would be about $230,000 per year before management costs.

Will need to discuss with my two nieces. About 27 and 29. Nurses. See if they want to do. They want to do REI just like everyone hesitant to jump off the cliff.

Start small and Make Your Big Mistakes Early.

Only in America. Happy July 4th.

Henry Clark · Answer

This is a small town in Texas. The neighbor has a shot gun. No fence or gate needed. Give him two free units to watch the place and kill weeds.

Got to love Texas around July 4th. Having a brisket competition and fishing tournament. How far are you from Kemp? Let’s have a beer and talk REI.

Andrew Nesbitt · Answer

Never seen a self storage with no managers office. So does this mean every time someone wants to rent, they have to wait 20 minutes for your uncle to drive up there and sign the rental contract on the hood of his Ford pickup(or whatever they drive in TX)?

That would also make it a prime target for thieves if they know there is no managers office. I know you said "everyone has a gun and the neighbor will watch it for 2 free units", but let me tell you, when you see 20 people per day moving things in and out of their storage units, it's pretty hard to tell who's a thief and who's a customer. In fact, when someone does steal something, its unlikely it will be known until the renter reports it (Unless the thief is really messy and doesn't close the door on his way out)

You also need to check how much storage units are in the area already and see if there is even a demand. When a market is oversaturated, you see them offer all kinds of deals like a unit that would normally rent for $100 would have an offer for like $30 per month for 3 or 6 months and then they hope you stay when the rates rise and not move to the next storage place offering a similar rate.

Henry Clark · Answer

No go. My cousin's family "wants" the benefit, but not willing to engage on the effort.

It takes 3 things to create wealth. 1. An idea., 2. Money, sometimes., 3. Jump off a cliff. There is no need for them to make this investment. Good retirements coming up. House paid off. Kids past college with great jobs. They don't have a why.

The kids want it, but again they have great jobs. They haven't been through corporate America and had the ups and downs. Their jobs pay well and are easily transferable anywhere in the US.

Pass on this deal.

Either way, great Family Re-union. Plus got to go to Omi's in Dallas for Korean Barbecue.

Ronald Rohde · Answer

Looks like Canton or Gun barrel city?

I think it can work, but add back a line for BPP those taxes will spring up on containers.

I think security is an issue, but maybe cross that bridge when you get there. Worst case, it just eats into your $230k NOI.

Henry Clark · Answer

Use the lookup function on my name and a post “will they come”. Self storage location selection is like going to war for a town or region. We stay in a 40 mile radius. Use a buy first or build approach. Then we go for a daisy chain or wagon wheel approach for locations. We use our competition to drive prices up.

If you have your own location let me know.

Start small and Make Your Big Mistakes Early.

If you have your own location let me know.

Start small and Make Your Big Mistakes Early.

Henry Clark · Answer

@Andrew Nesbitt. Watch our rental process on our website YouTube. Have 7 locations. Whether I’m at home, Texas. Washington, France, Italy, Belize or driving through Mexico they all can rent a unit in 2 minutes.

Security. The last guy was stealing at 4 am in the morning. His tires and radiator got shot out. He was sentenced to 20 years. Talk with your security guy and go over your systems. People stealing in the middle of the day we catch them. Go over your security systems with your contractor. Last two were charged with Federal charges. Describe your security systems and let’s go over them.

Henry Clark · Answer

90% vs 99% occupied

Bruce Lynn · Answer

I've seen some storage containers at existing sites, but never seen 100% storage container location. I'm guessing these do exist already, but have you seen any?

Around DFW any more I rarely see any location without security fence. Not sure that helps because theft is a regular occurance at these places. Seems like no matter where they are, theft is a huge problem. I would think even with containers, theft might be a real concern.

Controlled access seems to help with collections too.

I don't see in your numbers anything about labor? No management, No maintenance?

Even adding fencing and control gates probably wouldn't add that much cost.

Henry Clark · Answer

Market analysis. Our largest Location is in council bluffs.

Do a google search in council bluffs and then Omaha for self storage see how we do.

Then do a search on Sparefoot for council bluffs then Omaha, see how we do. Let me know your town and location name and I can do a market and competition analysis.

Henry Clark · Answer

We have done two SBA loan applications.

Came up on the first one. We put the name of our Building contractor as the GC.

The second one it also came up, but since the majority of the cost was in the buildings under a contractor, they allowed.

Very little of the work on these Self Storage sites is done by us.

Self storage- Family Re-Union. Deal 14?

Self storage- Family Re-Union. Deal 14?

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