Well its supposed to get up to 100 degrees today. Decided to move and store our Bollards that were delivered yesterday. 7 foot long, 6 inches diameter, oil drill stem, $40 each. The ones below are for a future project the rest are at out CB- RR location for our upcoming new buildings. Bought about 100 in total. They are hard to find.
Thought I would take a break and write a post, I thought about 2 days ago. Had a guy I have been helping say he got beat out on an offer by a cash buyer. My wife said we have $17,000 in that location account and have to pay the ½ property tax $19,000. Couldn’t think why the above two are issues. Lack of communication and understanding on my part. You will see below.
Today is September
11th. Thanks for everyone. September 11th for
me was a surreal day.
That week was one of the happiest in my life. We just got back from South Korea with our adopted son. Was at work and went to the TV to see what was happening. Saw a “speck” falling down along side the towers. Realized it was a person jumping to their death. It wasn’t TV, I could feel the person dying. Went out to mow hay in a field that afternoon. Was like I was 200 years back, so peaceful. No planes or plume trails. No car noise on the highway 2 miles away. No noise, could picture Indians walking across the field. Went on the back porch later that day to drink a tea. Saw 3 Boeing's racing off in a close row, with two fighters alongside. It was the president heading back to Washington. All I could do was yell at him, to get his butt back to Washington.
Well lets dissect
SBA 10%; Seller financing- part now, part 5 years from now, no
interest; Conventional- interest only Construction period. Save as
much Cash outlay as possible at the time of purchase or development.
How did my
acquaintance above, get beat out by a “Cash” buyer? I don’t
understand this, because we are all cash buyers. If your making an
offer with Seller financing, make sure your offer is only good for 3
days or less. That way if Seller financing doesn’t work, they have
to reject your offer. Then you need to come with 100% financing or
“Cash” purchase. You need to be pre-approved or have a 30 day due
diligence period to cover your loan approval period.
Ramp up- “Interest only” during occupancy ramp up. Make it
in terms of Months or Occupancy %. We use 18 months and/or 65%
occupancy. This will cover Principal/Interest and all expenses in
Phase 1. Phase 2 usually only requires about a 35 to 45% occupancy
to cover new building needs. If you have an operational Facility
then you should be positively cash flowing already.
Value Add costs.
Make sure your bank understands you will be coming back to them for
additional loan capacity. Your banker would prefer to know this
ahead of time, so they can write it into the original loan document,
versus create a new loan.
no issue. As long as you did your numbers and now hit your targets,
your in positive cash flow. The key is to not treat “Storage”
cash, as a piggy bank for your other cash needs.
4. Large lump
payments- Your largest lump
payments will be Property Taxes, Insurance and Income taxes. Above,
I didn’t get why our $19,000 property tax bill and our $17,000 cash
on hand position were an issue. You don’t have to pay the property
tax when it is due. This
location is running $12,000 per month at this stage. Also
when we get cash positive, I always pay the two payments off up
front. That way there is no forgotten cash need in the future.
Again, you should be positively cash flowing and not need to hold
cash. Use the Cash you have to take away future bumps. Or pay more
down on your loan.
Bank Account, one solely for the Self Storage location.
Don’t mix with your personal or other business. Credit Card-
one just for Self storage. Provides better tracking versus just
paying with cash, when you don’t have your check book with you.
Segregation- Depending on the size of your location always do a
cost segregation study. If your developing, make sure your Road
bills are segregated from your building pads or dirt work. Example:
On a $1.5mm deal. Say $300,000 concrete roads, $50,000 Electrician,
$50,000 Security, $5,000 landscaping, $60,000 Fence, $10,000 Office
equipment, etc. This is 15 year life or less assets. These can be
either written off in year one, or over the first 5 years. I prefer
to write these off in year one, while you are short on cash.
Hopefully don’t pay (cash) any taxes for the first 1 or 2 years (Loss carry forward).
Fix/Flip- don’t do
Cost segregation since you will need to do depreciation recapture.
7. Auto pay
only- credit/debit card or bank account ACH. Our two
latest/largest facilities we moved to Auto pay. This is more of a
reduction in management time versus a Cash decision. At our other
locations, we have started moving all new customers to Auto pay. The
reason this is a “Cash” discussion is it improves your Cash
Cycle. No more payment is in the mail. You get to “lock out”
quicker. Which means more “good” stuff is left in the unit,
which means they are more likely to pay.
card since this is an immediate notification. Bank ACH may be a week
after your system charged before you know insufficient funds.
Auctions- Only accept cash or money orders 3 days before the
auction. If they pay with a credit card or a check one day before
the auction, they can cancel after they get their valuables out.
“Control”- if your not managing your facility you need a
weekly cash/rent/bank reconciliation report and every few months take
a Rental unit audit and Rent price audit. This becomes less of an
issue when you move to Auto pay. You still need to do the above
10. Contractors- Always pay the "next" day after you get the bill. They are your team. I can call at 7 pm on a Sunday and they are happy to talk with me.
and make your BIG Mistakes Early.
@Henry Clark I have one business tenant at the facility using echeck and she said the amount did not go through and it shows it did in WSS. Sounds like I need to check in a week just to be sure.
Have her look for the amount. Sometimes it comes through under "Uhaul" (note Web Self Storage is owned by Uhaul) versus your location name. We have that happen and the tenant doesn't recognize it. Should be within 1 to 2 days of your date, depending on weekends.
When a transaction truly doesn't go through WSS will catch it and process it, at some point based on their system.
Congrats again on your new location.
Thanks for the information. I also like to invest in storage units. Recently I saw an advertisement for a 16 unit property for about 60k. One of my friends who is working with a self-storage company has already given me advice for this project. I like to know more about the project's ROI. Please share your opinion if somebody here has experience with it? Would you recommend me to go on with this project or stay away from it?
not enough info.