All Forum Posts by: Henry Clark

 Funny.  They must have been bought by a private equity firm also.   

Our industry marketing is changing.  Used to be for Omaha we would be number 1 of 120 locations.  Now there are only about 39 locations showing.   Either they all filled up.  Which is like designed self destruction for an advertising firm.  Or they just cost too much and people opted out.  

Just a note on one small component of our Advertising efforts.

We do Self Storage.  One of our advertising outreach approaches is Sparefoot, who is a Self storage Consolidator.  When a person does a search for Self Storage in an Area, there are about 18 "channels" by which Sparefoot captures their search and then will direct it to one of the storage locations in a zip code, city or geographic area.  

Depending on a weighted factor Sparefoot will show you as a recommended location for an area, you might even be 15 miles away, but if their algorithm says you're the best then you will show up at the top or closer.  For our area we are generally number 1 for our city and even the larger city 1mm people area next to us.  We have used them for about 9 years.  As one of our locations gets close to 100%, we turn off that account, since our normal "funnel" of customers will feed our needs from then on.  

When we started it Cost us 1.5 months of rent for a "Reservation" that turned into a rental.  Their system is on the honor system. At the end of the month you have to say which reservations turned into actual rentals. It would be very easy for a location to take rentals and not report the rental so you don't pay the fee. But to be ranked at the top of their search, you have to show you converted a larger % to actual rentals. That is a part of the Algorithm. We have learned their Algorithm. We are small Mom/Pop versus industry REIT giants, but still compete at the top.

About a year ago they started charging you a minimum of 50% of the reservations they sent you.  To exaggerate, even if none turned into rentals, you would still get charged 50%.  You could tell the pressure at the call center was on, because you would get reservations, talk with them and they would decide not to rent from us.  After a while, I asked why?  Said they were just looking but the call center booked a reservation.  I have even had 2 and 3 reservations from the same customer for different sizes of units or the same on different days.  You call the center and they normally will take them off as bogus reservations.

Last year they moved our 1.5 months fee up to 1.75 months.  Then last month they moved it up to 2.0 months.  For each rental they charge us 2 months rental for that reservation.  Doesn't matter if for 1 month, a year or 10 years.  Plus, you pay 50% of the "Reservations" if your rental conversion doesn't go over 50%.

Last month I looked at our Rentals and saw how many come from Sparefoot and turned them off for our largest location.  We are about 82% full, use google ads, have a large bill board, plus our Vortex of community renters has picked up and we add renters organically.

This is really the story of a PE firm buying into an industry.  Pushing for revenue/income scaling on a shrinking market base.  But unfortunately, the industry is consolidating.  The Large REITS can build their own advertising systems, plus google ads, etc.  

If you're in Self storage, what other avenues are you using for marketing from a Consolidator standpoint?  We have website, SEO, Billboard, google Ads, Bus seats, covered.

If you're not in Self Storage, what RE industry trends are you seeing in your consolidator or Advertising methods? See if I can take some queues from AIRBNB, ST/MT/LT rental markets.

As we get close to 90% at all locations, we turn off Advertising, since our local Vortex feeds enough renters to us.

Start small and Make Your Big Mistakes Early.

OP.  Best to start with your personal situation.

1. Assume your tag line Tallahassee, FL.

2.  How much disposable cash do you have?

3.  What is your housing arrangement and cost?

4.  What type of job do you have?  8 to 5?

5.  How handy are you?

6.  How presentable are you?

7.  Type and value of Transporation?

8.  How close to FSU, FAMU, hospital, etc do you live?

9.  Etc etc.  Based on this info, there are tons of options for you.  But you have to start small and build up your Cash Snowball.

Note Fix/Flip is great, but you have to pay taxes, have potential cost overruns due to unidentified events, etc.  

OP.  Stop reading and watching podcasts.  Let's narrow down your options.  You don't need to answer these online.

1.  What town do you live near?  Reason- learn in a market you are familiar with.  Narrow your focus down.

2.  How much investable cash do you have?  Reason- you can work backwards into the size of your investment. Say you have $20,000.  You can finance with 10% downpayment.  Then you can do a $200,000 deal.  Narrow your focus down.

3. What is your housing arrangement? Reason- can you do BRRRR, rent share, etc. How much is your housing, that can be part of your financing. Narrow down your RE strategy.

4.  What is the makeup of your family?  Reason- again to narrow down your RE strategy.

5.  Wifes concerns- either you have to take her along for the learning, or do risk analysis on the investment for her so she knows  the top side risk.

This will now help you to narrow your learning and to start actually to do some deal analysis.

OP.  I would start with dryland marine storage first.  Run the numbers on 1021 S. 82nd St in Tampa.  Asking price is $4mm which could work.  I would make a 3 day offer at $3mm.  If they make a counteroffer, accept their $4mm but with a zero-interest loan of $1.5mm for 5 years.  They would need to take second position if you get a lender involved.

I would get the occupancy rate up to around 60% by year 3 and then put on the market for $11mm. You should make $3 to $4mm profit.

You will have to bring about $2mm to the table for the total deal.  Run the numbers and do your due diligence.  I'm just writing on a napkin.

Or do Conexes or Cargo Containers 8x20; since your near ports should be relatively cheaper.  Should give you about a $30mm valuation once occupancy gets around 90%.  Also depends if they will let you do Conexes and also if they will let you do rock roads or has to be concrete.  You will need about $4mm plus the land cost above.  At 25% down; you would have to bring about, again $2mm to the table.

OP.  Since you're a lender.  What types of loan structures would you do for the 3 options above?

OP.  I would pick the prime location with the lower returns.  

Example:  Since your reference is Miami.  Would make an offer on 5253 NW 7th Ave, Miami.

.54 acres; $1,073,000 asking price, 12,936 sqft not sure this is correct; tons of parking or building space.  Listed 05/22/2024.  Funeral Home.

Would make an offer for $700,000 with a 3 day window.  

3 value add plays:

a.  Split the existing facility into more rentals.  Double the current income stream.

b.  Demolish and sell the lot for $1,200,000

c.  Add another building to the location for rent.  Plus split the existing facility into more rentals.

Would have 5 properties lined up to make offers.  One after the other.  Subject to Inspection and financing.  Whichever one bites is the deal I would do.  Luckily lots of properties in the Miami metro.

OP. Capex, existing contracts and lessors, value add proposition.

The CAP rate and cash flow stream, I will back into the price and Metrics, I'm willing to pay for the property.

OP.  Google every similar site within 300 miles and go visit. In similar size metro areas.  Our local town of 60,000 has a huge complex just for Soccer. 

1.  Get tons of pictures and ideas on layout.  Example above, 20 parking spots as a minimum would be a non starter.

2.  Ask them for their "Sales Deck".

3.  Look for the big donators in the community.  The casinos may be required to invest in the community or do funding.  Bring them along for the ride.  

4.  Start building a team.  Insurance, Finance, legal, marketing, RE developer, CPA, GC,  etc.

5.  What do you do for a Day job?  Someone has to push this thru for the next 5 years.  If you're not the person, find them.  You can still fulfill part of the development.

6.  Decide if it will be Non-profit or For Profit.  Set up a Legal entity.

7.  Go talk with the local Pro Soccer club business team.

8.  As you develop the layout, think of player interaction safety.

This won't be a YOU project.  You will need a Team.  Throughout all of the player families, your team exists, with a passion for Las Vegas Soccer.  

@James Hamling       

Secret Sauce- remember War and Strategy.  I use a Wagon Wheel or Spider Web market approach.  Basically the same thing, just the Wagon Wheel uses a large city as a base, and the Spideer Web is for smaller markets spread out 10 to 20 miles.

1.  All cities roads are built in the general shape of a Wagon wheel.  You emanate from down town, the main roads then spread out like Wheel Spokes, then you have an outer loop road, the main roads get farther from each other the farther out.  Like a Wagon Wheel.  "Strategy"- Closer to the city are the Big Dog REITS or regional competitors.  Don't compete against them, but "USE" them. Traditionally the rate for say a 10x20 is let's say $200 on the outer loop.  Pick one main road and let's say every 5 miles the rate goes down.  $150, $130, $100, $80.  You want to buy or build along that road.  Now your strategy.  Each of the ones you build or buy along this route you increase the rental rate.  So the $150 you move up to $200;  They can't go towards the city since it is also $200 and you are closer.  Then the $130 you increase to $150, and so forth.  Since the Spokes or roads get farther away from each other the further out, the customers can't just go to the left or right to another main road, because it is too far.  

2. Buying one of the above, you can afford to pay more since the current owner already thinks they are charging to much. But you now have a Business Reason why you can charge more. Even thought $20 per unit doesn't sound like much, that can be a 30% increase in cash flow and profit. Immediately increasing the CAP rate and value of the property on day one.

3.  Spider Web- basically the same thing as the Wagon Wheel but your out in the country side with towns 10 to 20 miles away from each other.  The more you buy in that spider web area, the more you can increase the price.  Since to get away from you they have to start driving 30 to 40 miles away, which they won't.

4.  What is different about Self Storage is since my ratio is 1 unit per 6 people, you can control a market easier than housing which requires housing for each person.  And your market is smaller than the housing market.  They have already committed to living in an area and are now looking for Storage.  Whereas Housing, they will move to anywhere in the city to find what they want and the price point.

5.  Minnesota is a high Rec area.  Build parking storage along the major roads towards the rec areas.  Always preferable closer to the persons residence.  Or near the Rec area.

6.  Your near ports.  Cargo Containers or Conexes should be relatively inexpensive.

7.  Summary, although there is a ton more.  Minneapolis is a great market and needs more.  Even if Minneapolis currently had say 10,000 storage units and for all eternity, it would only need 10,000 units, it is still a great market to build.  Because there are to many "Black Holes".

8.  Remember the harder to find a spot, the more valuable it is.  Less competition.

"Start small and Make Your Big Mistakes Early".