All Forum Posts by: Henry Clark

We do Self Storage, but here are some questions.

1.  Are they on city or district water and sewer.  Or a drilled well and septic system.

2.  If City or District water, find out from neighbors how water system has been.  Have run into some areas where the wells didn't supply enough water and you had to add a tank to your house and have it delivered.

3.  If its a drilled well.  Ask what the gallons per minute is?  If they have a cistern well (good)?  Ask the tenants about water pressure.  Ask for a water test.  If high in Nitrates or others, you have  a problem.  If hard water, what type of softener system or RO system do they use.

4.  Sewer if a septic system ask about sizing.  How often does it get pumped out.  Is there a sewer trap to clean out.  Ask about leach field.  Ask tenants about flow.

5.  Ask about rainwater run off.  Ask tenants.

Couple of steps:

1.  Don't waste their time.  Do your research ahead of time.  Make your questions or requests clear and concise.

2.  Pay on time, and possibly in person.  My larger vendors, I always personally drop my check off one day after I get the invoice.

3.  Don't keep shopping around for cheaper.  Keep giving them references, especially on the internet and web forums.

4.  Treat them professionally, don't "own" them.

5.  As I get projects done or at year end.  Will drop off Caramel apple pies, desert assortments, alcohol, etc.  Thanking them for the year or the project.

6.  If they have a work crew on a long job for you, buy them lunch.

7. Don't keep making changes on them.  Plan ahead and be thorough.

This is a professional relationship and not a friendship.

All of my vendors are more than happy to take a call on a late Saturday or Sunday and help me out.  This only happens a few times and it is usually to help them out coordinating the job for Monday.

Look at doing a BRRR on a trailer. Or check out Selfstorage and see if there are any positions with living quarters along with a job for one of you.

We do self storage but here are the checklists we use. You might adapt and adjust for BRRR. Roof, sinks, foundations, landscape, windows, doors, plumbing, electric, HVAC, permits, inspections, etc. To me your column headings would be 1. Topic, 2. contractor, 3. Estimate, 4. Actual, 5. Permits, 6. timeline. 7. Status. First checklist is a project cost worksheet. Second checklist is more of a business plan worksheet.

@Greg George

As noted above, not enough info, to say whether a good deal or not.

Just some check points:

1.  Any issues with getting occupancy or liquor license from city?  Zoning? Run down the list.  Do you have enough parking spaces to make it work.  Did they do ADA steps?  etc.

2.  Renovations- part of the lease should state what renovations "stay" after they leave.  Hate for them to put in a special HVAC system and rip it out, leaving you with the cost of filling the hole, before you can lease.

3.  How stable is the guy who actually knows how to make beer?

4.  How does their beer taste and what awards.  Sounds too simple.  But if you don't like their beer, I wouldn't do it.

5.  Normally breweries have to scale as they grow.  Where will this stage be at?  In other words if they grow "xx"% in the next three years, will they need to move out, due to scale.  Or they have to add kitchen and food to make their model work.

6.  Review their business plans, as if you were an investor, which I don't recommend.  As stated above to keep the roles separate.  How does the $4,700 per month work in their plans and when is the break point in terms of sales, that the $4,700 doesn't work?

7.  Basic.  Have them add you to both their Construction and permanent insurance as an Additional insured.  They need to provide updated copies every year to you.  This should be on top of your insurance coverage.

8.  Add to contract, all equipment stays, if they can't bring the business to fruition.  Or to some affect like that.  You don't want to be tied up for months into the future with any bankruptcy proceedings on their equipment, or not being able to get them to move their equipment out so you can renovate.  Make sure you record a lien on the equipment.

As you noted, they stand to lose $200,000; so make sure you are covered while they are in a position.  Example 8 above.

Primarily a zoning question.  Start a storage location with just cargo containers.  Buy 80 8 by 20 units.  Write off the containers, fence, security and road development.  Be about a $300,000 investment not including the land.  

Primarily a zoning question.  Start a storage location with just cargo containers.  Buy 80 8 by 20 units.  Write off the containers, fence, security and road development.  Be about a $300,000 investment not including the land.  

@Matt W.

@Nathan Gesner

Matthew, Nathan is wrong about how smart I am.  Since he is from Wyoming, I will tell you my Wyoming story.

I like to hunt and a free week popped up and bought a Pronghorn antelope tag.  Planned the trip.  Wanted to hunt in the Thunder basin area.  Saw the route on the map.  Identified the town of "Bill" Wyoming as a good place to base near, for food, water and gas.  Headed out.  "Bill" is about halfway in the middle of the state with no other towns near it, for about 2 hours.  When I got to "Bill" found out it is two sheds, with no one living there.

With that said, I would build storage at "Bill".

Self storage:

1.  Determine your finance level.  How much money or collateral do you have and what will be your finance mechanism?  10% down SBA, 25% conventional, 40% conventional.  This will help focus your efforts.

2.  Wilmington has a population is 120,000 which would be 7,200 storage unit market, not counting just outside.  So its a good market.

3.  Competition.  I love Wilmington.  When you do a Google Self storage map search, at first it looks like a lot of storage competition.  But if you pause, you will notice the majority of the locations are along the highways.  Probably due to both easy zoning and yes customer flow.  Look for the nastiest commercial/industrial property you can buy with the least amount of cost.

4.  Get your city zoning map and future zoning map plans.  Ask them to explain every zoning code that might allow Selfstorage, even if with Special Use or Variance permit.  Also look at land that does not allow Selfstorage, but it is next to zoning that does.

5.  Look in the general areas of:  117/17; 74/17; around the airport (land should be cheaper); in the middle of all neighborhoods away from the major roads.  Yes it will be harder to find the correct zoning.  The harder it is to find  the correct zoning, the safer the investment.  Look for 2 acre minimum.

6.  Build 100 to 200 units at each site and no more, until you are experienced.

7.  If the price tag is to high in Wilmington, then pick a road and build at every small town or intersection.  50 to 100 unit location.  Highways 421/74/17/701/501/301 away from other storage.  See if Cargo containers are allowed.  Then you can add and sell as needed with not property taxes.  This is easier for you to get into the business.  Personally, I would build along these smaller roads at each intersection if I was first starting out.  To small for competition and lower $ entry point.

Start small and make your Big Mistakes Early.

@Chris Piette

Definitely pull all of the info and actions from the above.

Recommend the following:

1.  The longer a deal stays open the less chance it will occur.  Put an earnest money deposit down for 6 months.  Or;

2.  SBA loans take a while, plus now they take longer.  About 2/3 to 3/4 of all SBA people got moved over to help process PPP payments.  Loans are going through a lot slower.

3.  Identity the Bank you will use that will process the SBA loan.  Tell them you want to do a Construction loan with interest only payments until the SBA is approved.  Use this to buy the facility and to make upgrades.  If you do the loan and then do upgrades you will need to foot the bill, which sounds like you will be pushed even for the 10%.  Example:  Fence, security systems, website, any repairs or road work, etc.  This will allow you to buy the land quickly.  Not have to pave P/I until SBA involvement.  Check with the bank to see if a construction loan is allowed with a pre-existing location.  SBA 7 versus 504; ask them.

4.  Insurance- go with a specific Self Storage insurance company.  Call Ponderosa insurance who is owned by Uhaul. There are others out there, just google. Example:  your 200 unit location, say $1,500,000 value, metal construction might be $5,000 per year.  They will have coverage for Auction claims, normal commercial coverage, etc.

5.  Whatever Storage software you use, make sure they have a Customer Insurance program tied to it.  Otherwise you will double the work recording and tracking customer insurance payments.  Also see if they have an SEO function for website development.

6.  Collateral.  Do you have any other investments or home equity?  You might have to refinance with the bank you will use for SBA.  I don't like pulling family in, but you might see if anyone has some land or an investment the bank is willing to use as collateral.  Pay the family 5% for 5 years.  At the end of five years you should have enough equity to refinance using your original down payment and your new equity position in your location.  Might cost you for a new appraisal $3,000.

7.  Do a risk analysis on this location from a new competition standpoint.  Check out zoning, future development plans, land availability, land price, topography, 2 acres or more, distance to population, etc.  We passed on a location that was 4 miles out of town, that was full and had extra land; and the numbers worked.  We are building closer to town and the people and cut them off.  We are completing Phase 1 of a location that is in a very hilly area, lot of people and no zoning allowed for Self storage, except for this particular location.  Check your risk out.

We finally decided on a 2.99 acre piece of property and closed on it.  

Have the following identified:

a.  Building mfg and erector.

b.  Roads, plumber and pad contractor

c.  Electrician to be identified

d.  Sign company

e.  Security company

f.  Fence company need to decide on.

g.  Got liability insurance in place for during construction.

h.  Banking decided to use my bank in Iowa, will expand below.

i.  He will need to decide upon a company name, Website name, and Storage location name.

Will start office first.  And there is a pre-existing building that will be rented out.

Started site development.  About 50 scrub oak trees needed to be taken out, so I drove from Iowa down to Texas to help out.  This soil is very sandy.  We only cut about 2 of the trees down with a chainsaw.  Showed my friend hope to use a mini excavator and a skid steer with Grapple hooks to dig the trees out with the tree still attached.  The extra weight of the trees just pops the stump and roots out when the fall.  If you ever do this, get the narrowest bucket possible for the mini excavator.  It will apply more cutting pressure.  Don't use the knife hook.  The bucket moving dirt out, helps to make the tree to fall.

Got all of the trees knocked down and piled.  Most of them burned.  He will need to do a second fire to finish them.  Cost about $1,500 for the machinery and two days of work.  Versus about $20,000 to have hauled off.

We updated our financial numbers since we now had actual quotes for the buildings, concrete pads and road.  My friends project is actually going to turn out way better than my projects.  Will have a 6.6 year payback; plus the office will be 1,200 sq ft and be his home, saving him about $300,000 to $400,000 for a house; which he does not want.

Banking was real unusual.  Talked with 4 different banks in Texas and basically the same story.  For conventional they wanted 40% collateral, versus I'm used to 25%.  SBA they wanted 20% versus 10%.  For a new customer and a construction loan, they actually did not want to do this loan due to the paperwork.  They require vendor invoices as you go, which isn't unusual.  But they would not pay the vendor until they were done and had signed a lien waiver saying they have paid all of their vendors and employees.  That would mean we were basically financing the whole project out of pocket until near completion.  Came to an agreement with one bank.  They would finance after we were up and running with 6 to 9 months actual data.  My bank requires an appraisal, and it will cost $4,500 versus $2,500 up here.