All Forum Posts by: Henry Clark

@Stephen Brown

Commercial Real Estate is pretty broad.

Use your Real estate background, so your building off a starting point and start doing country Subdivisions.  Make a Subdivision so you control the type/value of the homes.  No Pink Trailers that wipe out your value.  Look up Journeys End subdivision, Glenwood, Iowa.

I'm showing you the concept and not specifically analyzing the following example.

Tontogany, OH there is 16 acres land for sale.  $190,000 listed for 639 days.  Again, go with the concept.  This could be an old listing, it could be sold, it could be whatever.

Could be in the city or county.  Zoning.  Road access.  Etc Etc Etc.

This location has two access points.  See if zoning will allow shared drives, then take the parcels and re-plat and subdivide into 4 lots.

Spend $10,000 on everything.  Survey, subdivision, etc.  

Make the 4 plots into $80,000 plots.  Make different selling prices based on Lot appeal, so you hit different price points.

Do minimal work.  Leave for the owners to run in electrical, water, sewer.

First check everything is possible.

Run your numbers.

Make an offer that works for you.  Then walk away.   Start your next deal.

Say you make an offer of $140,000 versus the $190,000.  They say no, then you say $150,000.  They want $180,000 you say no, but will do they do Seller financing on $90,000 no interest for 5 years.  They agree to the replotting of the land and releasing each property as sold, and you pay them that portion.

As all ways, market and do the numbers work.

Low input costs.

Carrying cost is usually what eats a deal up.  But we are at low interest rates.  See if you can lock in a 5 year note.

Do some landscaping.  Grass the area.  Buy some trees and have tree spaded into key visual areas.  Plus plant some fast growing screen trees.  $6,000

Maybe spend $10,000 and dig a pond out in the middle adjoining as many of the lots as possible.

This one doesn't work, look for the next deal.  No one else will be doing this in the Toledo area, and that's a lot of area.  No bidding wars.  Look for property that has multiple sides or access points.  On listings for a while, 180 days or longer.  Learn zoning requirements.  

Actually like this one.  Across from High School.  after landscaping in the country, yet in the city.  Bowling Green nearby.  Toledo easy to get to.  Been on listing for a while, seller understands market now.  With that said, it probably won't happen.  Just keep looking and checking.  See if there are any Rock quarries around.

@Mark Berge

Another way?

Know gas is big on the East coast.  You might take a look at using a electrical "Split" system since the house is only 1,000 square feet.  Especially if just one level.  Check in your climate first though, with an HVAC person.

Compare your operating costs.  Gas versus electric; system to system.

@Jacob V.

Ask for an interest only Construction loan.  To be converted to an SBA loan.

Doniel Brisby

832 620 6366

dbrisby@mwregionalbank

@Sohrab Ansari

Not enough info to answer "What do you think?".

Don't answer any of my points back on an open forum. You don't have a deal yet (you sent an LOI).

Here are some points, in no particular order since your question and info is really broad or lacking.  Treat any question as a call to action.

1. You sent an LOI in. It hasn't been accepted. Part of that should have been a 30 day due diligence. Do you have a list of due diligence items to check on? How many units used by the owner or relatives? Past Dues? Will they transfer over records and system access as part of LOI? Are taxes paid? Zoning? Facility repairs? Develop a list. Your bank or investors already approved? How long did you extend the offer? 3 days?

2.  You have either got a Fabulous deal, the numbers are wrong, or this is in the middle of South Dakota.  First of all, your from Ann Arbor, but this deal can't be in Ann Arbor.  Your average rental rate is too low per your numbers for this area.  Your running $58, which I will assume your average is a 10 x 10, but this is only about 1/3 the Ann Arbor rate for Drive up access.   Again, don't respond to me.  If your far out in the country your average should be about a 10 x 15.

3.  5.5 acres and 343 units.  This is good.  You have extra land to expand unless its wetland or hilly.

4.  Financing.  Don't know how your getting Interest only for 3 years on a going concern.  If this is a "special" loan then they should be charging you a higher interest rate.

5.  Financing.  Your keying on Cash on Cash metrics.  Don't know why you are putting $460,000 down.  Go for an SBA loan at 10% or $230,000.  Do a construction, interest only loan with a local bank, until they get you switched over to an SBA loan.

6.  Snow.  I lived in Grand Haven/Muskegon 60 inch snow.  Your in the 40 inch range.  5.5 acres, I would budget about $15,000.

7.  Risk analysis.  You did the projections.  Have you done a risk analysis?

8.  Financing.  $60,000 "interest only loan" on $1,840,000 for 3 years= 3.3% interest rate?  20 year amort, 5 year renewal?

9.  Management fees, what do they cover?  How do you plan to manage?

10.  35,100 sq ft in 4 buildings, sounds small on a 5.5 acres parcel.  How much bare usable ground is there?

11.  If this is recently developed, ask for the fixed asset records or details.  Help you do a Cost segregation.  Pay zero taxes for the first 2 years.

No matter what, sounds like a great deal since your moving forward.  Congratulations on your first "offer". Now close it.

Overall we have lots 2 and 3 left to sell.  Lots 1 and 4 we don't really want to sell at this moment since they are next to or in front of our house.  Just have to sit back and wait for movement on them.  They are on a different side and road from the 5 lots that have sold.  Not as much of a natural scenery behind them.  Actually this is a less travelled road than the lots that have been sold.

Internet Fiberoptics 5G is being installed.  This is key out in the country.  This will help on lots 2 and 3.

Lot 6 listed for $200,000; sold for $190,000 noted above.  Required $20,000 non refundable deposit, so the sale didn't get tied up in a pending sale and then buyers walk away.  Below is the Close for the property.  Signed papers yesterday.  Will close Wednesday.

Go through a couple of the line items. This is more for a person who hasn't done a property closing or purchase before.  Nothing interesting if you have done property sales before.

Commission $13,300 is at 7%.  This is the normal rate in our area.  A little excessive since we are selling several lots and did the Youtube up front on each lot.  Plus no staging and very little showing.  But our realtor is the dominant realtor in the market, over 95% of all listings, thus helps to sell faster.  The Youtube really helped out with out of state buyers and local buyers with Covid.  Lot of people were looking online.

Property taxes, two lines.  Property taxes are paid a years in arrears.  One line is for the current year portion that is not due.  The other line is for taxes in the prior year that will be billed.

Several lines for Title insurance.  Some times you do an Abstract review and update, but this is rare in most states.

Trust fee.  We have all of our properties owned by Trusts, thus a separate fee for this as a Trust sale.

Looks like some pictures didn't attach above.

This is not about the recent changes in the forums.

I get a kick out of the following types of posts.  I've changed the details, to protect the guilty.

1.  I'm 8 years old and what should I do to start in Real Estate?

2.  I'm broke, don't have a job, and owe $5,000; what should I do to start Real Estate?

3.  Who is the best Plumber in Podunk, USA.  Keep in mind "I" grew up 20 miles away from Podunk, USA in a national forest.  And I know who the best Plumber is.  But the other 500,000 towns in the USA, I don't know.

4.  I came into $500,000 and want to know what is the best place to invest?

5.  I sold and have $1,000,000; where should I invest for the best return, liquid, and I need the money back in 1 month?

6.  I need this service, but the quote I have is $750 and can't get to me for 4 weeks.  Is this normal?  Responder- google and call to get more quotes.  Response- I already know how to google and do a phone call.

7.  I can't disguise this one.  Its hotter upstairs than it is downstairs, what's wrong with my HVAC?

8. I'm starting SFH, what is the best city to start?

Situation:

As Bigger Pockets continues to grow:

There will be a greater disparity and frequency between levels of questions, info requests, how to search for info, usefulness and enjoyment of the BP site, etc which will need to be restricted.

Countering that, there should be a general hesitancy to restrict forum activity both from a financial standpoint, advertising standpoint, etc.  

There is always a pivot point as a company grows where it has to decide whether it stays true to its Grass roots development or switch to a Corporate business model.  Very few companies can do both well.

Recommendations:
I'm going to assume all of these are legit questions and not just someone yanking our chain. Thus my suggestions come from both sides of the fence.  To actually get these suggestions to take root, they have to help BP or its channels make money.  

Self Governing:

1.  Develop a "New" investor info module, they have to go through to gain Post access.  Present info, ask questions, they have to select answer.  If your not familiar with this type of program, google concussion learning test, sexual issue prevention, etc.

2.  Develop an "Existing" investor, New to BP info module, they have to to through to gain Post access.  Present info, ask questions, they have to select answer.

Wading through the info:
3.  By investment type, have a "package" for New investors.  Don't have them have to ask or search for forum posts, podcasts, or calculators.

4.  Start holding "ongoing" online seminars for New Investor topics.  

Wading through the Posts:

5.  Advertisements.  Start marking Advertisements with Views.  If an advertisements only gets "X" views per week or month, take it down, even if your making money.  It makes for a bad experience.

6.  Forums, also do a View count just like in the Education, members section.  This gives both the poster an indication if their posts are noteworthy and also to viewers if they are popular.  "Votes" don't cut it.  Most BP viewers don't vote.

Divide your "Content" into categories.  Make sure each one is a good experience.  Example:  I don't watch podcasts, thus if your doing a great effort for Podcast viewer satisfaction, it does nothing for Forum viewers.  If Forum viewers don't enjoy themselves, wading through why does hot air go up and cold go down, and go away, they are your Content providers.

@Drew C Grossman

Congratulations.  Once you get this one done, no holding you back.  The next 10 years most of the Mom/Pop locations will need to sell, due to aging out, even though they don't want to.  Develop a cookie cutter business plan and ramp up.  Read my Value Add post on Self Storage.

You note NOI, thus your approach is probably CAP rate. If your still under the loan try to switch Expenses over to Depreciation, above/below Operating.

LED lights, Solar panels, grass to rock, management to self service, on the expense side.

Revenue increases (rates, fees, Uhaul that you don't manage, etc) and write-off reductions (autopay)- you will cover.

When you get to the end of your BRRRR it will be curious to see if you actually sell once you run the numbers. Self storage is different than SFH and MFH.

Congratulations.

@Dave Moore

Below is a separate post I did for self Storage.  Applies to your situation.

ZONING, I-3 RIGHT?

When ever I take a look at a new town to do storage, I take two approaches at the same time. Do I build? Do I buy? Do both of these at once and go with the one with the best return or impact. Preferably, I like to buy because this takes out competition, greater control over pricing, and hopefully they have some land to expand on. The expansion of an existing facility is always more profitable than the initial purchase or build.

A. Look at zoning either online or at the City or County courthouse look up both the Zoning Map and get a copy, if one exists of a Zoning template, which explains what each zone permits and may allow under a Special use or Condition permit.

B. Read each Zone in detail, unless they have a cross reference table showing “allowed” and “special use”.

C. Ask for the Future planned zoning map. This will tell you where you probably can ask for a change in Zone or for a Special Use permit; and have a greater chance of getting it approved.

D. Talk with the local realtors and they may know what is not on the above Maps and tables. Most cities don’t allow “Spot” zoning. So they don’t get sued. One city I know designated an entire area “Agriculture”, the lowest zoning possible, so they could control allowing what industries come.

E. Most of the time Storage is designated to an Industrial zone. But not always. I have seen it under Agricultural, Planned Residential, Commercial and some Industrial zones.

F. Look at a GIS map of the city. See if Railroads cross through. The Federal government gave both city sites and land along the tracks to the railroad. The Railroad then sold this land to help finance their construction. Look for any land that is still owned by the railroad and ask them to buy it. It won’t have a “For Sale” sign on it, but it will most likely be available for sale if it is not used as a work yard or siding. The good thing about this property since it is so old, it will be in the middle of the town, in a great location. It will probably be zoned “Residential”, but the Railroad will not sale it without putting covenants on it, that no human habitation (home, daycare, school, retirement home, etc) can be built there. Another good thing, is the Railroad does not pay property tax, anywhere. Put in an offer subject to zoning approval. Ask the Zoning committee to allow you to do a “Special Use” permit since the Railroad will never allow “Human Habitation” in this Residential zone. Also ask them to let you pay property taxes. Your units will be well landscaped and they will provide a noise buffer with the railroad.

G. Look at Non-Allowed zoned properties, next to Allowed zoned areas. Still look at these properties since Zoning committees may allow you to switch the zoning or do a special use permit. They do not regard this as “Spot” zoning, since it is next to an allowed area.

What do you do with this information?:

1. Now, that you know the zoning, look for any spots greater than 2 acres (“drive up” storage). Start checking on the prices, even if a location is not for sale. So you don’t waste your time looking at all locations, prioritize and pick locations that put you in a more favorable location between your future competition and your residential customers. Most storage facilities are Mom/Pop and were built with the owner in mind and not the customer. Examples: Gas station owner had two acres and built on one. Hotel operator had additional space. Etc. They did not necessarily build closer to their customers or for ease of access or street advertising. Buy them later when you have a footprint in the town. You don’t want to buy them first and have to go check on 30 units, 30 miles away. We built in one town, and before construction was done bought two other locations that were offered.

2. Line up your potential purchases in priority and start making short and time sensitive offers. You are now in power since you are not tied to one location or even one town. You have a 40 mile radius or whatever you consider a comfortable distance to manage.

3. The harder it is for you to find a location, the better. Less chance for “Stupid” money to build next to you, or out position you.

Zoning Adjustment Meetings:

“Just the Facts.” You will get to speak first, remember your an “Outsider” and don’t vote in that community. Take your time describing your facilities. The property and sales tax it will bring. Explain the current taxes and current look of the property. Show them a “Look” of the new facilities. No one may show up, or you might get 30 people to show up. You “personally” may have to notify everyone within a 200 foot radius or the City might do it. When the public speaks, don’t argue with them. They get their say. Hopefully your added property/sales tax dollars outweighs the public view point. When the vote (good or bad) is over thank each of the members, they’re not paid and most have businesses.

If the Zoning Adjustment committee approves or disapproves it, you then can go to the City/County board for another public hearing and a vote. Don’t waste your time, if the Adjustment committee voted against you. If the City/County Board approves, ask them to waive the need for future “Reading” meetings. The above two public hearings, possible two more “reading” meetings and the final “vote” meeting may take you 4 months, 4 weeks or maybe just two meetings. Depends on how often the boards meet and how much opposition/benefit there is.

Happy hunting. This is the most stressful and fun part of the process. You have very little control, but your decision on property will be the most important of the whole build/buy process. Add Control, by adding more location/city options. ClarkStorageLLC is done growing, but you never stop looking. The best spot yet, is a cornfield where there isn’t a house for a mile. Would love to have built a 1,000 unit location there.

Remember, start small and make your big mistakes early.