All Forum Posts by: Henry Clark

@Bryan Mitchell

As you well know being from GA, even a blind squirrel finds a nut every once in a while (country saying).  Hopefully one out of five of my posts, will be useful to someone.

Phase 3 getting started.  4 trucks arriving today to unload.  Erection crew on site.  More trucks to follow in about 2 weeks.

Been getting complaints from the hired help.  Wife (CEO) and son about all of the unit sweeping they have to do on the new units.

Not going to show them the picture below.  Just tell them, I swept with a push broom.

We have 8 locations in 5 towns/cities.  We use a 40 mile radius in which to build or buy.  So I have never wondered what town/city was the best in the US to invest in, all this time.  Helping some folks out, I named a few.  Later thought I didn't really give them any affirmable information.  Being a former CPA, Controller and CFO, I sat down and developed an analysis.

As I was building a "great and wonderful" template, I stopped; I realized there are really only a couple of overarching factors.  Unit Price, Land Price, and on the expense side Property taxes. Will let you research Property Taxes. Generally speaking all other Capex costs and Expenses are the same no matter what market you are in.

At the very bottom of this template is a ratio of Annual Revenue versus Total Capex. These are actual cities I have researched before.

- Only one of them has large REITS in them.  Populations 60,000 to 1,000,000.  Large REITS will buy you out once they reach your town.

-Two of them, the market really doesn't use Sparefoot.  This means both, you would be number 1 in marketing using Sparefoot, and two, they don't need extra marketing because they are full.

- Three of these, zoned land is readily available.

- If we weren't done investing in new Locations, I would be building in Location 1 and 3.  4 is good also.

No I didn't really answer which town/city in the US is the best.  But I have only so much money and these 4 look great.  This is not an investment analysis, but a market analysis tool.  There are several more factors once you pick the city you want to invest in. Demand versus supply.   You have the format, now do your data analysis.

Start small and Make Your Big Mistakes Early.

Is now a good time to invest in Self Storage, looks like it is saturated?  I will get this question every once in a while.  Like any Real Estate investor, my canned answer; what do the numbers say?  "Any time is a good time to buy or build."

The last person that asked me, who is in Real Estate, said he got that, but is it historically a good time to get in?  They are doing a 1031 and want to move into Self Storage, but had not done any research yet.  Realize they are on a time line, I have been crunched myself before on a reverse 1031.  I say sure.  They say of course, but your experienced.  I just explained he has an information or experience deficit he needs to overcome in a very short time.  And explained how to do that with the resources in BP.

Generally:

a.  Is the market Saturated?  I always tell people, even without knowing the market and assuming not one more Storage unit will ever be rented in that market; I would still build or buy in that market.  And their market is probably not saturated.

b.  Historically is now a good time to invest in Storage?  The next 10 years is the best time in the history of mankind to invest in Storage.  Now I want you to check to see if my hand is in your pocket, getting your wallet.  Read all of my posts.  I think the only thing I have ever asked for was a picture of a great Abalone meal, to bring back memories.  I gave the advice, but didn't get the picture. Basically, I'm not selling you anything.  But really, how good is it?  Think of all the Eastern side of the United States, all of the trees being harvested.  Think of 100,000,000 buffalo being slaughtered on the Great Plains.  That is the magnitude of the moment.  No those actions weren't great.  I always get a kick about the 94,000,000 cows about to kill us with gas.

60 or 70 percent of all locations (not units) are owned by Mom/Pop.  They basically have to sell in the next 10 years, even if they don't realize it.  Their kids aren't coming back home to run a small Self storage location.  They don't know it, but they have to sell.  There are limited buyers in there market.  I'm 60 and on the end of the Baby boomer generation, and even I am making plans.  You have a chance to buy.  Put together a Group of similarly managed locations, you have a chance to Sell.

The other 30 or 40% is owned by REITS or national firms who are on a feeding frenzy.  All large corporations have two driving forces, Growth % and increased margin %.  It gets harder and harder to do, thus they get more and more aggressive.  Do not compete in this market.  All industry that start to consolidate are not around the industry itself but about operations, finance, distribution, marketing, etc, which won't ever be your strength, above and beyond theirs.  If you size correctly, you have a chance to sell.

The above two groups are generally two different products and business models.  They very rarely collide.

The next 10 years is the Greatest Time in Mankinds History to get into Self Storage.

Start small and Make Your Big Mistakes Early.

Why Teak Trees?

-Myanmar or formerly Burma is the major source of old growth Teak. They have basically shut down harvesting their forests.

- Primary markets are India, China, South east Asian countries. For me, this is a great risk management tools versus US investments.  Both India and China are both growing economically and in terms of people, China is kind of flat.

-  This is a product which is easily raised, harvested and milled in Belize.  But the market in Belize is almost non existent and very low priced.

- Resistant to price fluctuations.  Demand is increasing as India/China economy is growing, while number of Teak trees are diminishing.

- Even if all of you reading this planted a 1,000 acres; that would not but a dent in the demand, and decreasing availability.

- If the world goes into a recession or depression.  A Banana you have to sell.  A Teak tree you keep growing and as it grows, it keeps adding value.

Teak tree overview:  Below is the "Quantity" discussion, will do another post on the "Quality" side of the discussion:

1.  Generally a 25 year investment unless you can buy land already planted and maturing.

2.  For Belize the "delivered" log market is about $500 USD per cubic meter.  Not "Standing Timber".  Teak logs from Myanmar or former Burma might be $3,000 to $5,000 per cubic meter (for several reasons).  Be careful when someone gives you prospective figures to understand what the data represents.

3.  Measurements.  International market usually uses Cubic meters.  US usually will talk in terms of Board feet.  A board foot is 1 foot square by 1 inch thick.  A planed board is not a true 1 inch, it might be 7/8 inches, but still called a board foot.

4.  424 board feet make a cubic meter.

5.  Yield lets say $50,000 per acre.  Most foreign countries talk in Hectares which equals 2.47 acres.  

6.  Make sure you are converting correctly:  Currency, Acres/hectares, Cubic meters/board feet, standing timber/raw logs/finished wood.

7.  How much is a Tree worth?  Use the following as a "Factor" for discussion and not as exact.  This is for "Hardwood and not Softwood".

a.  ($1) Standing Timber.

b.  ($2) Delivered Logs

c.  ($4) Sawn or dimensional lumber

d.  ($8) Kiln dry

e.  ($16) Planed

f.  ($32) Molded   Retail value.

8.  As you can see the actual Standing timber has very little value relative to the Retail board.  There is almost a doubling of value as you move up the Value add chain.  Think of Shipping "Logs" to India, versus "Finished" boards.  The same price per container/pounds either way.  A large difference in Shipping cost versus Sales value.

9.  The Standing timber also has less of a Comparative price to use for the land owner to sale.  A timber buyer is going to adjust for: location to roads, distance to mill, terrain to log, unknown quality of wood, Owner lack of knowledge, etc.

10.  Usually timber gets sold as "Standing Timber".  The land owner wouldn't want to sell, after the trees are cut, because then they need to get to the mill and if the buyer backs out, they are stuck.  Given that the Buyer doesn't really know the quality of the logs until they are cut and sawn.  Thus the buyer won't want to give you the full $1 above.  Because they are gambling.

11.  Why would a Buyer not know what the wood is like until they cut it down?  Lets say two of the exact tree, but on two different properties.  Again this is Hardwood, and not Softwood.  When the buyer looks, Tree 1 and 2 are both 15 inches on the "Small" end.  Tree 1 however has "live wood" or the white growth wood of about 1/2 inch on the outer rim.  Tree 2 has 1 1/2 inch "live wood" on the two outer rims.  Normally this extra Live wood is caused by the tree growing to fast.  They may have kept fertilizing.  Tree 1 might get measured using a width of 14 inches, while tree 2 might be measured with a width of 12 inches.  Now 2 less inches doesn't sound like a lot, but it is a lot less.  Draw two circles with 14 and 12 inches and then measure the volume.  Its a big difference.  Hardwood, the value is in the "Heart" wood and not the "Live" Wood.  Softwood, you use both.

So the buyer might only offer you $.65 on the $1, due to rough terrain, distance from the mill and to cover if the Logs are poor quality.

If you invest in Teak or any timber, you want to reap the rewards as far up the Value Chain as possible.  Your profitability increases and the accuracy of Market Value is easier to determine.

Contact/join Texas Mfg Home Association.

@David Antonelli

Don't know if your still looking at.

Cost Approach:

Change the info below as needed:

Land 1/2 acre   $50,000.  Depending on configuration of land you should be able to get 75 or more on, depending on setbacks.  Possibly 100, so I went with an 1/2 acre since your said 54 possible.

Fence $20,000

Gate $20,000

Electric  $15,000

Security  $15,000

Rock road  $40,000

Concrete road $100,000  Take one of these out.

Dirt work, entrance, culvert, etc, etc.  $???????

27 "Large" units at $5,000 each; prices are high right now.  $135,000  Do smaller 10/15/20 sizes if you add on.  Depends on the layout.

Total $235,000 using Rock road.  Buildings are good.

$359,000 is asking price.  High unless concrete roads or other costs.

Value add, build additional 27 units. 

Your rental rates are to low at this point. Building costs for a 10 x15 or 10 x 20 is around $4,200.  Doesn't work at your area rental rates for now.  Would have to wait till Building costs come back down to around $3,100.

Revenue Approach:

Don't know what "Special Balance" means.  Your above figures don't get you to yearly expenses of $26,400.  Your expenses have to be wrong, unless your including P/I loan payments as expenses or negative cash flow.  Be clear if your including depreciation, income taxes, etc.  

Actions:

Re-do your numbers and be more explicit.  This should work.

Then pick your Offer number that makes it work for you. Example.  $250,000.  Then make an offer.  If the only thing wrong with a deal is their asking price, always make an offer at your price.  You don't know their situation.

Even if this is a so/so financial deal, I would do the deal "IF" you plan to do more Self Storage.  This is a perfect size and transaction to start to learn.

Start small and Make Your Big Mistakes Early.

@David Antonelli

Hello is this Antonelli's storage?  We are looking to redo our house in December( two months out).  I have never rented a storage unit before.  Can I just walk in and rent a unit or do I need to reserve one a few weeks in advance?  How many do you have available today for example?  Also don't know if we will need a 10 x 15 or a 10 x 20; what are the prices for those sizes and their availability?

Or look on Sparefoot and see what sizes are turned on, for the competitors near you.  If your area uses Sparefoot.  If they don't use Sparefoot, then they are probably filled up, since they aren't pushing themselves to fill up.

@George J Roth

Talk with your tax accountant.  The rule is 2 out of 5 years.  Not the first two, last two or middle two.  So you have 2 already at your current station.  You had 2 at your CA station.  You should be able to sell again and avoid Capital Gains, as long as both were your primary residence for 2 of the last 5 years.

The following is dependent on if you have enough collateral for a down payment at your next station. If you don't want to sell your current house and "have" enough for a down payment at your next station, then keep the current one as a BRRRR if you want to. Just me, I would sale if I can avoid the Capital Gains on that property over the next 5 years, before it times out.

As the above folks noted your are not guaranteed to move into a market that "appreciated" but this isn't true in your instance.  Even if the market is stagnant, since you get to use BHA and possibly rent to other BHA personnel, your have a guaranteed "Appreciation" by Uncle Sam.  Your rental income or BHA, pays down on your P/I.  Find out what your Rank and next station pays in BHA, before you go to do planning.

Your next spot, find a property that takes care of your family, but also has a detached guest or garage house. Don't know your neighborhood or family lifestyle, but if an RV will fit there, then buy one and rent it out. Lets say your going to Guam, find out if the military will pay for your "RV" to be shipped there, then set it up and rent it out. Sell it when your done. Or do Airbnb with it, or STR. My brother sold his first trailer after three years for more than he paid at one of his stations.

@George J Roth

Apply to your situation as fits

1. BHA follows you.  Make sure your additional rent covers your BHA

2.  Compare BHA to BHA by location and rank difference

3. Do you have the downpayment or collateral power to keep scaling

4.  Talk with your tax accountant.  Primary resident.  2 out of 5 years no tax on the sale of you home. Take the gain now and keep rolling it into larger primary home. You should always have a gain since your applying BHA

5.  As you scale, scale first with your primary house.  Get more and more br/baths.  Keep renting to other BHA payers. Talk with your tax accountant

6.  At some point if your home price gets to big at your next station roll into MFH.  Then keep that one with a PM service. When you finally “Land” in a good spot.  Decide if you keep or buy closer with a 1031 if you can

7. Non REI. The government will deliver your goods base to base. Make money off that. If your going to the Philippines or similar. Buy a $100,000 offshore fishing boat and line up a buyer. No sales tax, no freight cost, possibly no import duties. This is your profit. Take three Harley's to Korea. Sports or luxury car back from Europe. Black diamonds from Afghanistan (old comment).

8.  If your dollar amount is lower start with trailers or trailer lots.