All Forum Posts by: Henry Clark

@Jeff S.  Post I did on BP.  "Self Storage: So you just died, did you send everyone to hxxx?"

There was no reason, but the day I hit 30, I realized it was “ME”. Everyone around my family was doing fine, work was great, it was a nice day. Just for some reason, I realized I was the person in charge of my life. Its not like I all of a sudden matured. Paid my way thru college, top of the class, top 1% job, only got drunk twice in my life, etc, etc.

My realization was, I was it. Now I didn’t do anything with that thought. From that point on, until I was 50, I knew literally I could go through Mountains, jump over them, dig under them, go around them and stop Run away trains by hand. There was no obstacle in my life that I could not overcome.

And then it hit me. I ran into an obstacle, that I had no clue how to deal with, it could not exist (in my world), and the experts had no clue (from my point of view). No more Invincibility.

We are all at different points of our lives, perceptions of living into eternity, Invincibility, or just lack of thought on the subject. If your “there” and are aware of your lack of invincibility, please keep reading.

So you just Died. The following are actions not to put your Family through Hxxx. (Also Vendors, Customers, Bankers, employees)

A. “Will” or “Trust”?- Do you want things to go through Probate for several months or seamlessly go through a Trust with no stoppage in operations or control? Without a business, you might not care if your below a certain Dollar level or asset types that don’t deteriorate. Various discussion points- Bucket Trust, rename all of your assets to include the Trust, etc, talk with your attorney.

B. Power of Attorney- you can have this made specific to different aspects of your life. You may have a business partner who you want to be able to make decisions on your behalf for the Storage business, but have no say over your Personal life.

C. Bank Accounts “POD”- Payable on death, So you just died and who is going to pay the bills? This will automatically allow a person to access the funds and support the ongoing business. You probably have you and your spouse on the account already, so put somebody that is likely not traveling or living with you, in case both spouses pass at the same time.

D. Life insurance- not tax deductible, tax free proceeds. This is more about risk, comfort zone, lack of knowledge and stage of investment. With our fast growth we have taken loans out. All of the locations cash flow very well, so there really is no risk from losing a “wage earner”. It is more about taking pressure off the family members who will end up with the property. Also to cover any estate taxes or debt restructuring if they arise.

Where the major danger comes in, is if your in the middle of a development and your the main developer. The other family members only know how to run an existing facility. This is where you can lose a lot of money, if you have to sell the property and not complete the build out.

We identified three areas of risk and they are all on three different time tables. 1. Ongoing debt payments for existing units., 2. One location in Rent Up Phase., 3. One location in development phase and then Rent Up phase.

Per our advisor we took out three separate Term life policies. That way as the risk diminishes you can drop one policy at a time. If you had just one large policy covering all three risks, you would have to cancel a policy and renew. You have gotten older, any new health issues that arise, and the need to go through the review process again, may change your access and cost of an insurance renewal. Don’t get to exact figuring out your coverage needs, it is really cheap, go for the higher number.

E. Living Will; End of Life- This is more for applying medical treatment or not under certain circumstances to continue your life support, while you are incapacitated. Just added this so you have a complete package of estate issues. By this point you should not be in control of any business, unless you were incapacitated due to an accident or sudden medical issue.

F. Medical Power of Attorney- this allows someone to be in charge of your medical treatment if your incapacitated. Not so much a business impact, but wanted to keep the list complete.

G. Facilities Management- worst case, no one knows how to run or has the time to. Develop an “Info List” with all contacts and passwords. Identify ahead of time a Management company or local Realty company who you have vetted to manage the business. Have them identified on the list.

H. What does a storage facility look like 6 months after you have died? You go down to 70% occupancy from 95%. 40% of your customers are behind. Some customers haven’t paid in 6 months. No one can find the contracts. 5 of the units were yours. All of your systems are on paper and no one has kept up. Trash has been thrown over the back fence and the neighbors want it fixed. Weeds are everywhere. I come in and offer to pay 50% of the value. Ended up not buying your property. It takes about 3 to 4 months to get a location like this transitioned over to a management system and cleaned up, through auctions. Your investment value has greatly deteriorated since there was no transition plan.

So are you taking action; or are you sending everyone associated with you under the bus?

“Start small and Make Your Big Mistakes Early”

Got the gate operational. Had to plug some things in to get going.
I prefer to have all of our equipment the same, but for our two large locations we got two different sales people and two different Gate operators. Also one is your normal Black security fence and the other was required to be a Black Ornamental fence to match the neighboring apartment. This is our gate system with the ornamental fence. Gate motor/operator on the inside to the left.

Will compare this one to our older location. New/Old references.
New at the top is plastic. Take bolts off, then keylock at bottom, the silver circle.
Old second below is a substantial metal box, with hefty locking system.

The one on the left is the more Advanced model and the one on the right is the more durable exterior. Can't have both together.
Both have exterior "Reset" buttons on the outside. New- black slide at the bottom, inside switch. Old- exterior black button at the top, left of the L in Liftmaster. Hit these to turn off the machines to manually roll gate.

My finger at the bottom is pointing to sawn lines in the concrete. Had them put metal sensors to detect if vehicles are approaching the gate. This sensor can be used to stop the gate and make it reverse and/or open the gate without a keypad. We are just using it for the safety purpose. We require all renters to push a button to get out. The purpose is to get a Facial picture of them with the cameras behind the push button, and to also align the front of there car in a position for a License plate camera. The Second picture below, the dial I am pointing to, sets this feature.

The blue dial below sets how fast the gate opens and closes (cycles). We turned ours to 8 seconds. On the old model we have to have our Security person set it.

The Red dial below sets the speed of the gate as it either starts up or stops. Ours is set to have a Gentle Start and slow down. This makes for less jarring of the entire gate system.

Now some of you are thinking you don't need to know the above.  But if you are managing remotely or have an employee (who can leave); then you need to be able to operate.

Get good pictures.  Maybe do a youtube.

Our security person has to come and set the Open/Close times. We use 8 am to 9:15 pm.  Our close time is 9 but we added 15 minutes just because.  If we wanted to get techy, remember the metal sensors in the concrete.  We could have our security guy program the gate to open after 9PM if someone drives up on the "inside" of the fence and let them out.  But we want their picture and license plate.

Talk with your tax accountant. It is probably better for you to sell the original house so you don’t pay taxes on the increased equity if you sell in the future.  Ask them about 2 out of 5 years disposition. Your on a timeline. You will lose this opportunity if you wait to long. 

@Sohrab Ansari

Please walk away from this deal.  Not saying its not a good deal, but you haven't run your numbers.  You need to get to a higher level of understanding before having your very first deal be $2.6mm.

A.  All of the value add points you note above.  You have to "run" them.  Can't just say them.  "Adding Insurance" example   About 20% of your 343 units will buy your insurance if the world is great.  Most likely only 5% will buy.  But you will make about $1 on a $7.95 per month policy for $1,000 coverage.  So 20% x 343 x$1 x12 months= $823 of income from selling insurance.  It took you over 40 hours per year to achieve this.  My point is not about is Adding Insurance a value add model.  It is.  But if you did the numbers and saw what I just presented, you wouldn't have brought it up.  You need to do your numbers.

B.  Read my previous post above.  Don't trust anyone's numbers other than your own.  If you received numbers from the Realtor or Seller, don't trust them.  Build both the revenue and expense figures yourself.  Don't use an "Expense Ratio".

C.  Cost or Development basis.  Not including cash flow for existing rentals.

a.  Land 5.5 acres.  Say $100,000 per acre=  $550,000

b.  Buildings 10 x15 or 10 x 20 equivalents are running around $4,000 erected.  You PM'd me some info.  Over half of your units are 5 x 10 and 5 x 15.  Lets say your overall buildings are 240 equivalent.  240 x $4,000= $960,000

c.  Roads, say rock.  $50,000

d.  Fence  5.5 acres  $50,000

e.  Electric/lights- $60,000

f.  Security- $50,000; motorized gate $20,000

g.  Engineering, fire hydrants, water, sewer, office, landscaping, dirt work, water/sewer/electric to property, etc, etc. $$$$$

Total= $1,740,000

h.  Interest during construction period and rent up phase= rough 3 years= est $50,000

Total= $1,790,000;  Say $1,800,000 rounded.  Brand New.

How old are buildings?

i.  Cash flow stream: They show $225,000 net revenue stream for 2020 above.NOI $155k above. Real rough next. Deduct out depreciation, add in Income tax, add back depreciation to get to cash flow. Lets say $120k cash flow after everything. Say 6% over 12 years = $1,006,000 NPV.

$1,800,000  Development costs- really rough; brand new.

$1,006,000 Cash flow stream- really rough

$2,806,000 value for a brand new facility with a known value stream.

Change all of the figures above to "Boots on the Ground" information.

They are asking $2,600,000.  I actually like these people.  They think just like me.  The majority of our facilities are brand new.  All the development and Rent up phase risk/exposure has been handled by us.  I would never sell ours for the cost to develop or for the revenue stream individually.  Why give a person a property at cost, that will be worth the same amount in 15 years disregarding inflation, with very little repairs or tenant repairs; plus give them a revenue stream to pay it off.

There isn't a lot of Meat left on the Bone.  You have to truly nail the acquisition numbers, and then you have to nail the "Value Add" potential.  Otherwise you don't make any money or equity until after about 12 years.

Last:

Have you done a Risk analysis on the property and market?  How easy is it for someone else to build next to you?  Do the other competitors have extra land to build? etc, etc.

This is a great exercise for you.  Do about 5 more of these. Throw them out on BP like you did.  Just pick them off Loopnet, so people can easily see the property details.  Go to some training/seminars/coaching.  Then definitely jump out there.  Definitely buy a small location. You will learn more from that than 10 years of training or coaching.  Lets say you bought or built a small 25 unit location and the numbers or ratios were similar to the project above.  I would say definitely do it.  Start learning, with little potential for significant loss.  Matter of fact, ask one of the trainers to actually design a 25 unit location, that people buy, manage and sell for 6 months as part of their training.  Tell them to charge you $15,000 for this experience.  It will be worth it.  My favorite location is our first 35 unit spot.  Learned the majority of Self Storage there. 

Start small and Make Your Big Mistakes Early.

Pond is still being dug out.  Getting closer.  Its amazing how much dirt is in a place.  The Driveway down, is starting to get narrowed down.  They are starting to pull up more of the dirt out of the bottom.  Then I need them to go back down in, and dig some really deep holes.  

Starting to fill the temperatures drop and Fall in the air.  Getting antsy to get the pond done, sides seeded down, fish stocked, plant some wild pond plants;  sit back and watch the wood ducks fly through in the evening.

Filing for SBA loan on another property. Attached are some of the info needed:

1. Balance sheets as of 12/31/xx Current year 08/31/2021 and 12/31/2020 2019 2018

2. Interim income statement, must be within x months of filing. 08/31/2021

3. Debt schedule as of the most current date 08/31/2021

4. Tax returns for last three years.

5. Tax returns for any associated companies for last two years.

6. Full documentation of construction or purchase cost. Either a General contractor bid or actual invoices.

7. If LLC or corporation, need Corporation certification and Operating agreements.

8. SBA form 413

You can finance with the SBA up to $5mm.  This is there portion of the loan.  Example:  You $1mm; SBA $5mm; Local Bank $5mm. rough numbers.

Use magnifying glass search feature at top 

@Valerie Lane

Read my two posts. 

Self storage.  Financing for new investors. 

@Joseph Hammel

Read my post. 

Self storage.  So you just died. 

Don’t talk with your regular lawyer. 

@Devin Duval

Please send two side pictures and one direct picture from about 40 feet away.