All Forum Posts by: Henry Clark

Lot 6 pending sale.   Offer/Counter offer.  Forget whether the below is right or wrong, just wanted to show you the give and take, and thought process.

This lot was originally priced at $180,000.  Once I decided to build the pond I moved it to $200,000.  In the next three weeks once the pond was filled, I was going to move it to $220,000.  This land cost about $42,000 about 13 years ago.

Offer came in as follows:

1.  Sunday night, with a Monday 5pm response time.  I received the offer around 10 am Monday, but did not check on it till around 12am.

2.  Offer:  $160,000.  They can get all of our previous Subdivision data.  They could see the price had moved from $180,000 to $200,000.  They could see we had been allowing the offers and counter offers to come in about $10,000 below list.

3.  This is a shared driveway with lot 7.  They wanted me to go through the process to get an easement recorded with lot 7 for the shared driveway usage.

4.  They wanted a subject to a good well being drilled.

5.  Pond work to be completed by xx/xx/xx date.

Additional Info:

This is small town USA.  So even if you don't know them, you can check on them.  This family has a massive building to play with cars and vehicles.  Thus they have money.  

Once the pond is in, people can't resist "water".

This offer was out of the same real estate office as my realtor.  They have been re-enforced, "We do not need to sale" and when we send our counteroffer and sale firm/final; we don't take counter offers.

There is no inventory of homes or lots available in our area.

You can look at the lot and subdivision, googling the subdivision.  What makes this spot special is 4 lane highway 1/4 mile away, hard surface road, perfect walk out building site, 100 year old oak trees, pond, stream, back yard abuts our creek and pasture where no one will ever build, 13 year old oak and evergreen trees around the property, boulder landscaping, 1 mile from the town and events, 5G internet coming this fall.

Counter offer:

1. Our counter offer was good till 11 am the next day.  I wanted to leave it at 5pm, the same day. I was a little pissed being given only the next day 5pm, as a squeeze play by the person. The Realtor and I completed the counter offer at 4pm.    Plus, I actually didn't want to sale, because at $160,000 this will sale all day long.  If we waited till the pond was filled, it would be worth another $20,000 at $220,000.

2. We came back at $190,000.  $10,000 reduction to show some good faith bargaining.  Decided $190,000 with a known buyer, was better than $220,000 for a possible future buyer at say $210,000.

3. Shared driveway, I did not allow the requirement for an easement.  The new buyers can do it.  Or they can just add another 5 foot to the width of the existing driveway on their side.  Did not want this minor point slowing down the close.

4. Water well drilling, gave them both a deadline date and also a defined "good" well of 8 gallons per minute.  Lot 8 about 100 yards over got a 15 gallon per minute well drilled.

5. Pond work, non issue since we will be done in about 3 weeks.

So we had 9 lots originally.  We have sold 5 lots since about February, when we opened.  After we sold the first two lots we started raising the prices on the others, since the ball was rolling.  We have two lots we want to sale, and the two remaining lots we have priced at extreme prices, because they front or tough our homesite and we don't want neighbors, unless someone pays those crazy prices we set.

The last two lots we want to sale, I plan to transplant more evergreen trees this fall and do more rock/boulder landscaping over the next two week. 

Again we are sending all funds to our bank and paying down existing Self Storage unit loans.  Basically converting assets that have reached their value peak, for assets that will create even more wealth generation.

The tax implications will be offset by the new storage location early depreciation write off of roads, fences, electric, security, etcetera.

This property was originally bought with a 1031 tax exchange, but we decided to pay our taxes on this property sale.

@Wayne Brooks

Same issue up here.  We add Ice to the mix, when needed.  Very few people pour early up here.  Usually done by 1 to 3 pm for the day, before we hit 90's.  Up here you can't back out of a pour last minute with a concrete company, otherwise your on their bad list.  Thus with few trucks, we had to take the loads.  Between the high humidity and we do a sealer spray, there is less chance of the concrete drying out too fast and cracking.  The only issue is, if too high humidity, the concrete not setting.  See my "Concrete Road" post.

Its 94 degrees and 55% humidity.  Its hot.  

Trying to wrap up our last location.  Both the Building pad and the Road crew are pouring concrete today.  Normally neither of them pour in this type of weather.  Puts to much stress on the concrete and on the workers.  Normally they would shoot to start pouring around 8 to 10 in the morning and be done around 1pm.  Today both had to wait till around 2:30 to start.  They have tried for three days to get concrete and this is the only time they could get scheduled, thus they weren't going to pass it up.

The cement company has 68 trucks but only 30 drivers.  This company can't get the other 38 or so drivers to come back to work.  

“The only thing necessary for the triumph of evil is for good men to do nothing.”  Edmund Burke. 

Thought of this comment as I was thinking about why the 38 truckers weren't working. Then I asked myself who is Edmund Burke.  I've heard the saying but never anything about the person.

Found another quote from him:

“a sort of people who affect to proceed as if they thought that men may deceive without fraud, rob without injustice, and overturn every thing without violence”.  This was stated around 1760 to 1790.  He was part of British parliament during the US fight for independence.

The above quote actually makes me "comfortable".  What comes around, goes around.  

In the future, we will be able to order concrete for morning delivery, lumber prices will go down, Arby's won't be out of Jamocha Milk shakes (another post), etc.

I'm going to keep building and investing.  And not run for government ("for good men to do nothing").

@Michael Sabosky

Here's "a" path, I'm not your mentor. 

If you have already done this, then its a matter of pulling the trigger.  Read my post to another new person, about calculating their risk of failure.  Although people are talking about success, their real reason for not pulling the trigger is they can't understand their risk of failure.

Recommend you do the following:

1.  Stay in your "Lane".  Build off your "Sales" background, business management and Solar.  Don't start from ground zero.

2.  Commercial Real Estate is a wide ranging field.  Recommend you do a sample at first, then narrow down your field and get into that "Lane".

3.  Lets do some exercises.  If you have already done this and are stuck, then go to my post above about risk of failure and do that exercise.

4.  Develop the following:

a. Cost and revenue model spreadsheet. Recommend you build one. This forces you to understand the concepts. Later you can use one you find. Get people to challenge it. Use BP. Join a local REI investment group. Start to disassociate with everyone who lets you know you will fail. Because there will be every reason "to" fail. That's the fun after a while of doing REI or development.

b.  Develop a project or property review checklist.  See my post on Checklist 101 for Self Storage.  Change it to fit your type of Commercial.

c.  Develop a contact list.  Name, profession, phone, address, email, etc.  Don't just fill it in.  As your engaging people, ask for who they recommend.  Realtor, Attorney, Zoning department, electrician, plumber, banker, insurance,  etc.  This will become your team.  Don't penny pinch them or treat them as workers.  They don't need you.

d.  Here's a test run.  Look up Loopnet San Diego, Carlton Oaks Drive, Santee, CA.  Put a business model together.  Do all the research to buy and develop this property into a Solar Farm.  Don't just look at the obvious. Example: make money making electricity.  Your in California.  Sell to other people "Green".  Your going to find every reason this project won't work.  Walk thru the process to make it work.  Zoning, rezoning, wetlands, etc.

e.  How much money you have?  Don't want to know.  Make an offer on this property.  They are asking $182,000.  Offer $50,000 subject to 30 day due diligence and zoning changes if needed; or wetland study, etc.  If you can't do $50,000 offer your amount $xx,xxx.  What happens if they accept your offer?  Your a sales person.  3.47 acres of nature in San Diego?  Think Tiny house, camp ground, rental day park, open air wedding, etc, get crazy. 

f.  As your doing this, develop your checklists, models and contacts.  Access, zoning, water, sewer, insurance, fire hydrant, etc.

g.  Have all of the above reviewed.  Tell the story and ask for input or other peoples spin on the project.

h.  Done with that one?  Try 3940-3946 Alta Loma dr, Bonita.  I like trash.  Figure out the angles to use on this property.

Each one of these, put a post on BP.  Tell all of the info and what angles.  Ask people for the angles they would have taken on all aspects.  Bargaining, financing, use, etc.

After you have done 10 analysis like the above. Your ready for Commercial REI.

I didn't learn stock market investing until I actually invested in the market.  Made a good profit on my first 19 trades, then lost it "all" on the 20th trade.  I got too "smart".  Learned an investment can truly go to zero.  Luckily I had already asked myself the first question above, what is my risk of failure.

Start small and Make Your Big Mistakes Early.

Look forward to your posts on your analysis.

Probably.  Join self storage talk forum.  Pm.  Tall Teri.  She is looking to do something in the next two weeks

@Brittany Stradling  Forget how "they" did it, lets figure out how you're going to do "it".  

I'm in Self Storage but still have the same financing decisions as it relates to Scalability/growth.

A. Point "A": How much Cash and Collateral (65%) do you have. What is your financing mechanism? Cash, SBA 10%; SBA 15%; conventional 5%; Conventional 25%; Conventional 40%. Get to Syndication later. The combination of these factors determines your project sizes. Also when you "CAP" out with your existing Collateral and have to find a new funding source.

B. Point "B: Where do you want to get to and how fast? Also how much risk/passivity. As people have mentioned, need to keep it apples to apples. Before/after income tax; with/without Capex set aside; etc.

C.  Now build a spreadsheet going from Point A to Point B.  Put a timeline along the side.  Now insert "Deals".

D.  Risk Assessment- perform one.  Interest rate change.  Bank 5 year renewal.  Inflation.  Scalability- cant do it all yourself, need a team?, etc.

E.  When do you quit your day job?  Or do you?  Part of your Risk analysis.  If you don't build a Team, then you have to quit your day job.  So along this timeline add in your team.  Just because your making $10,000 per month, you might need a $50,000/benefits maintenance person as you scale.

F. On your bank, find the following out: 1. Federal Lending Cap. Does this fit your goals?; 2. LTV loan to Value; LTC Loan to Cost; What are their expectations?; 3. Will they do "interest only" construction loans? How long or occupancy %?; 4. Etc.

Lets say your target is $10,000 per month. Again make sure this includes income taxes and Capex.

Lets say your first deal had $20,000 collateral/cash, and cash flow $200 per month after income tax and Capex set aside.

To get to $10,000 per month using $200/month you need 50 deals.  Also you need 50 x $20,000 collateral= $1,000,000.  

Now use the BP folks to challenge this. Example: 1. You don't need $1,000,000; part of this should come from refi., 2. Can you source 50 SFH's and BRRRR them; or do you need to switch to MFH?, This has to fit your "Life"; not someone else., 3. Etc, etc.

Key point is to visualize the path.  These folks have been down the path, and can help you adjust it.  

If this path doesn't get you there or if the time frame you want, then need to search out a different REI model or financing tool.

Start small and Make Your Big Mistakes Early.

We have been doing Self Storage for about 6 years.  Only in the last 2 years, have we gotten to scale where I am more than comfortable to compete/win with the larger REITS in self storage.  It took a lot of mistakes and learning to get to this point.  Also my bankers, contractors and family trust me based on our past performance.  We could not/should not Scale to where we are today in years 1 to 3.  Go at your own pace, risk tolerance and goals.  With the knowledge and experience we have now, we could easily scale in 3 years with low risk; but we started from zero knowledge base.

Develop a path, then put it on this post string and have these folks help you challenge it and improve it.

The dam is moving along.  Got the culvert or drain pipe in.  He actually set it to "high".  It was higher than the spillway.  He came in today and cut a section out and lowered it.  Also he will build up the spillway about a foot more.  Unless a flood, we want the water to go down the pipe, causing no erosion, also we don't want to lose fish.

He cut about 4 foot off the above tube, to lower the drainage point.

The picture below.  The temporary drain is in the water next to the big pipe.  You  can see it boiling up.  When we get ready to flood the pond it and the tube you see will be covered in Dirt.  We will also bury the temporary drainage on the front or pond side also.

Electric service being delivered. The power lines are across the road.  They bored underneath and will put a transformer on our side.  There are three lots at this location.  Per the subdivision agreement the other two lots have access to run underground power from this lot.  Did this so there would not be three separate lines coming across the road.

Response to another post.  Thought it might be useful for first time investors.

To re-state your audience are people who want to start in REI.

Your next question is what is the most under appreciated REI investment.

The underlying question is where “they” can do the best.

Here is how I address this question with new investors.

1. How much money; or collateral at 65% do you have?

2. What financing mechanism will you use? Cash, sba 10%, sba 15%, conventional 25%, conventional 40%, etc

3. The combination of the above two determines your investment limit. This will narrow down your efforts to look for an investment  Example:  $20,000 with a conventional 25% loan= $80,000 investment.

4. Define failure. Most of your friends and others will never invest not so much because of what they can gain, but because they don’t know what they might lose. So how much can they lose that doesn’t cause: kids can’t go to college, have to sell their house, no more dinners out, etc Determine their failure level or risk tolerance

5. Their first investment should not be about how much they might gain. They will gain a ton of experience. They should only lose x amount. Pick an easy flip. SFH that needs some landscaping and some painting. Sell it for break even. Maybe take a loss on the commission. Not that SFH is the top investment. It is the easiest and most frequent type and they can relate to it.

Pick a non REI friend or a mirror that is interested in REI. Give them the following two options

A. Greatest loss potential $10,000. Maybe breakeven. You will learn a lot about REI. Best thing is you will get started.

B. Have a great investment you might make $30,000. Can't tell you how much you might lose. You will learn a lot about REI. If you don't do this you will probably never get started in REI.

We all have our stories. Just like gamblers about their big wins and not their losses. I've had issues on every deal I've done and love it. New REI folks just need to get started.

Start small and Make Your Big Mistakes Early.

If interested let me know and I can contact "Tall Teri".  Primarily Central Florida, existing or development with 16 years experience.

I always thought of Self Storage as a way out of 8 to 5; but never thought of a worker or manager at a self storage facility being 8 to 5.  I know Tall Teri from another forum.  She is the manager for a location that has been sold and her pay is about to be decreased.  Thus, I said hey instead of looking for another job, why don't you do a salary position with a 10/15/20%  no cash stake in a facility.  Lots of people wanting into Self Storage, they have money, want to be passive and don't have experience.

Even has a development location in mind.

It takes three things to create wealth.

1.  Money, most of the time.

2.  An idea.

3.  Initiative to "jump off the cliff".

@Amy Raye Rogers

Lively topic.

To re-state your audience are people who want to start in REI.

Your next question is what is the most under appreciated REI investment.

The underlying question is where “they” can do the best.

Here is how i address this question with people

1.   How much money or collateral at 65% do you have?

2.   What financing mechanism will you use?  Cash, sba 10%, sba 15%, conventional 25%, conventional 40%, etc

3.  The combination of the above two determines your investment limit.  This will narrow down your efforts to look for an investment

4.  Define failure.  Most of your friends and others will never invest not so much because of what they can gain, but because they don’t know what they might loose.  So how much can they lose that doesn’t cause: kids can’t go to college, have to sell their house, no more dinners out, etc   Determine their failure level or risk tolerance 

5. Their first investment should not be about how much they might gain. They will gain a ton of experience. They should only lose x amount. Pick an easy flip. SFH that needs some landscaping and some painting. Sell it for break even. Maybe take a loss on the commission. Not that SFH is the top investment. It is the easiest and most frequent type and they can relate to it.

Pick a non REI friend that is interested in REI. Give them the following two options

A. Greatest loss potential $10,000. Maybe breakeven. You will learn a lot about REI. Best thing is you will get started.

B. Have a great investment you might make $30,000. Can't tell you how much you might lose. You will learn a lot about REI. If you don't do this you will probably never get started in REI.

We all have our stories. Just like gamblers about their big win and not their loses. I've had issues on every deal I've done and love it. New REI folks just need to get started.