All Forum Posts by: Henry Clark

@Steven Thinnes

Read my post "Self storage- Zoning I3 right?

@Bryan Danger

2.  Still on health insurance/costs.  Get an annual policy with Allianz Global, since your travelling.  Costs $825.  This will cover transportation costs back to the US for anything major  plus other medical.

Non life threatening issues in Second and Third world; setting broken leg $50; MRI scan $200; Hip replacement $15,000; Chinese Acupuncturist $10/hour; US trained doctor $50/hour just because he wanted to talk with someone from the US; Prescription drugs being over the counter from Pharmacist cheap, etc.  If you want better care, then contract with local doctors versus State run clinics.  Most are US or Cuban trained.

Your major issues of Heart surgery, Cancer treatment, or ongoing treatments such as dialysis; you will need to find a low premium, high deductible coverage, plus move back to the US for treatment.  This is your main concern if not in the US or a 1st world country.  Since this will probably be a rare occasion, don't need to set aside funds.  Need to be prepared to sell a property to meet deductible.  If you don't have insurance, you need to be prepared to sale all of your properties ($250,000 to $1,000,000 bill), plus go back to work while taking Chemo or rehabilitating from Heart surgery.

Tell us your numbers and how you have covered.

What's number 3 item on your list for Financial Independence?

@Jai Reddy

Lukewarm on storage?  You know how you push someone to do something then they won’t do it.  But if you tell them not to do it, they will do it

If I remember tomorrow, I’ll write a post on why “ not to invest” in storage.  See if I can convert you to the dark side. 

@Mary Jay

My brother and nieces live in Phoenix.  Great town, kind of hot.  Like he says though, its a "dry" heat.

Don't wish anything bad on Phoenix, but it took a real nose dive the last hit.

Sell your house.  No taxes if you lived 2 of the 5 years.

Run the numbers on the Van Buren st Selfstorage.  Has live in quarters or you can make it that way. Do self service, you don't need to meet your clients.  See our youtube.  Do a 10% SBA loan while interest rates are low.  Either rent your house out, or with extra money buy another property if you live on site.

I like it, since it is a small operation.  They don't show any numbers though.

Run the numbers.  Check out the property next to it, and see if you can expand.

@Bob Vollmer  Your town can take 270 units. Drive around and see how many are there.  We are in Glenwood, Iowa; your next to Glenwood Springs, Co.  Same guy built ours, then moved to Colorado to build that town.  Send some steam pictures of the springs this winter.

Go down to Apple Box Storage and make them an offer.  If I have a registered Hereford Cow herd, I don't need a Charolais bull.  I think you can buy this one.  As always, check the zoning and run your numbers.  And there aren't any cows there.

Overview of two storage rows at the top and 6 Flex buildings on the bottom.  Storm pond at the bottom left, I need to dig out 2 feet more, since I added buildings.

Self Storage- SBA Financing 09 13 2021

Our 7th location has taken about 3 years to get financed on our Self Storage project. The project was under a Construction Loan interest only while we processed our SBA loan. The original SBA loan proposal took 9 months to process, which was extremely long compared to the 3 to 4 months projected. We then got the property and proposed facility appraisal and the appraisal was about $1,000,000 over cost. Which is great, but I found out I could not use that appraised equity value on the next phase of this project which was to be Flex/Contractor buildings. SBA requires 51% occupancy by the applicant. Plus they just didn’t like the idea to begin with. Thus I stopped the loan process. Even though they were going to give us 6 months both principal and interest for the SBA portion of the loan with the Covid funding/ARRA.

This is an 8 acre property, we split 4 acres for the Self Storage and the other 4 acres is to be for a Flex/Contractor complex. The SBA loan took all 8 acres as collateral. I knew if I proceeded with the loan they probably would not rescind the additional 4 acres. Put the loan on pause. Did a Subdivision of the land with the city. This took about 6 months. Finally got the subdivision approved.

Went back to the SBA and put in a request for the property to be released. Covid hit. Three quarters of SBA personal were switched from loans to process PPP (Paycheck Protection Program). Thus any loaning processing got extended indefinitely due to lack of resources. This was a simple request since the total Appraised project plus the original land purchase we paid ($200,000), left the banks with about $600,000 “extra” collateral value. Far more than the 10% requirement, which with the collateral they have could be an $8mm project.

Loan Signing- September 13, 2021

10%- our portion

45%- Local Bank

45%- SBA

Terms:

Local Bank- 4.25% 10 year term; 5 year fixed/renewal; At 5 years renewal interest will be 1% point over index, currently at 3.25%. No prepayment penalty. No origination fee from the initial Construction loan.

SBA- 2.86% was 4.7% when we started the above process; 20 year fixed; 10 year descending early payment penalty.

Cash flow:

Principal and interest is $8,500 per month. Currently we are running $12,500 at 48% financial occupancy, and can cover. Normally we shoot for a 65% occupancy for breakeven (P/I, property tax, insurance, income taxes, etc). Since we developed this location and had the hard costs, we were able to do a Cost Segregation, thus no Income taxes for the first two years, to help with cash flow.

Shortcomings/Whoopee:

The above additional Appraised value can only be used through another SBA loan. When we met with the banker today, let him know we are already to start Phase 2 (see separate post). The additional collateral from Phase 1, covers phase 2, thus no more capital infusions. We also discussed our Flex/Contractor building project, which there is a separate Post, and he noted the 4 acres at the appraised value will cover LTC/LTV at 25% up to a total $2mm project, so no cash infusion for that project is required. Things are looking good.

Wisdom learned:

a. Always segregate properties up front, if you plan two different projects. We knew up front we would not do the full 8 acres in Self Storage (market risk management- 230 built, another 200 phase 2, Could have built another 350 on the flex site). Intentionally built the storage on the backside of the property and left the front for the Flex buildings to utilize the Vehicles per day around 15,000 on 4 lane road. Will make it easier to rent the Flex buildings.

b. Bad luck is good sometime. SBA 2.86% versus if done earlier 4.7%.

c. Don’t underestimate how long the government takes, both on the Loan processing and the re-zoning/subdivision process.

d. Construction period interest. This is before we started renting was about $50,000. Due to the weather and construction taking about an extra year, we were about $35,000 over our original budget.

Start small and Make Your Big Mistakes Early

Yep, still learning.  Ya'll are probably getting bored reading these posts.  About another year and another 700 units built on existing sites and I will be done posting.  Just passing the time, sharing experiences.

@Sohrab Ansari;  @Scott Krone

Scott's points are really valid.

One deal I looked at, they did not show property taxes, normally one of the biggest expenses.  Zero is  a no go.  Found out it was part of a larger agriculture property and not yet subdivided.  Plus the government had not re-assessed the property as Self storage. Thus yes, they had paid minimal taxes, but you would with the subdivision and re-assessment.

Same deal, there was no management charges.  He was paying "cash" (25% of revenue) to the neighbor and not reflecting on the Sales data.

Both of the above are "okay????", but you would get hit with them.  Always start from zero on both your Revenue and expenses and challenge and build them up.

Make sure your offer has a 30 day due diligence period.  Then really fast you need to learn how to do due diligence (which you can't learn it fast).  Pay one of the folks on the Forum $3,000 to help you do a due diligence review.  This is a cheap spend. And I'm not in that business.

@Bryan Danger

Hopefully people aren't reading your stream and getting sucked in.  As I stated before show your numbers.  The topic is fine, but your approach doesn't work.  In the mean time I'll give you some items to reach "Financial Independence", your not there yet.  As all of the BP crowd will say, have you done your numbers.  Otherwise its gambling.  Lets make this post, a how to do "Financial Independence" once you get to your number.  A checklist. It will be beneficial for you.

1.  Get with an accountant with a payroll service and have them pay in annually an amount for Medicare/Medicaid.  If you don't have W2 income.  Don't want to hear about spaghetti dinners and go fund me pages when you run into a problem, and you spent all your money.  Chump change now.

If you have these covered then just state you have them covered and how.  Then do 2.  If not I will do 2.

@Weina Shi

Have her look for the amount.  Sometimes it comes through under "Uhaul" (note Web Self Storage is owned by Uhaul) versus your location name.  We have that happen and the tenant doesn't recognize it.  Should be within 1 to 2 days of your date, depending on weekends.

When a transaction truly doesn't go through WSS will catch it and process it, at some point based on their system.

Congrats again on your new location.