All Forum Posts by: Henry Clark

@Jameson Waltz

Re read my post. 

Go Steelers.

1.  1031 to Self Storage.

2.  Sell high, buy high         Sell low, buy low    This takes away your high market concerns.

3.  Check up 1031 and Reverse 1031.  Discuss with your tax accountant (you really need to).  Get all of your records in order.

4.  Cash flow to cash flow property, this address that concern.

5.  No more painting, soiled carpets, Saturday/Sunday/night calls.

6.  You can get rid of tenants in about 90 days, with no legal action.

7.  1031's are all about timing and documentation:

a.  Recommend you buy the self storage first.  This takes half of the worry and time control off the table.

b.  Now you can control the selling of the rental units.  Might take a little shave, but not much due to selling quickly.  Go for qualified buyers only with no selling restrictions.  You can't afford to back track on the deal and loose time.

c.  Since you know the $number on the Self Storage, you know the number of units you need to sell.  Versus selling and then buying to your 1031 numbers.

8.  Cash Out-  Get with a bank who does SBA loans.  Set up a construction loan, interest only.  SBA loans can take several months and this doesn't work with 1031 timeframes.  The local construction loan adds to your time frame.  Check with your accountant to make sure this meets 1031 requirements.  10% SBA collateral, take cash out when you trf from the local Construction loan to the SBA loan.

9. Be prepared: a. Set up an LLC and find a 1031 company/executor., b. Find a local/SBA banker. Get all loan docs and agreements in place., c. Call out to National Self Storage Realtors and tell them what your looking for. State, $amount, managed, etc., d. Prep properties for sale with Realtor and physically,

Now buy the Self storage.  Clock starts ticking.  Sell the units.

Only take offers from pre-qualified buyers and no restrictions on taking possession.  You don't have time for the buyer to go back and refi, or to be held at their mercy waiting on an inspection/etc.

Did you, if not request a nonrefundable deposit.  $5,000 to $10,000 or more.  I did $20,000 just on a lot.

Otherwise they are holding your property as an option while they are looking at other properties.

Your out the 30 days due diligence time window.  When you come back on the market, people will wonder what is wrong with the house.

The market is tight and low inventory.  Talk with your realtor.  Reject all requests.

Negotiations is re-opened when they changed financing type and window. Can they get an FHA loan in 13 days? Again, they are wasting your time and money. They either have bad credit score, little downpayment or no permanent paycheck; and are finding it hard to get a conventional loan. Again wasting your time. Ask for pre-qualified buyers. Your in Control.

You need to switch realtors if they don't see these things coming at you.  And are appraising you of the risks and issues.

On another forum one of my posts has 2,947 views and 8 votes.  I have other posts that have 8 views and 4 votes.

On the BP forum page just like the members blog page why doesn’t BP track views?  Views is far more valuable as an indicator than votes.

Views would be more useful to me to help guide what is useful and not useful when I post.

The majority of BP users don’t vote.  Only about .1% of BP users vote.  100% view.

This is technology BP already has and is familiar with.   Doesn’t take a lot of bandwidth to store data or to install. Has almost zero downside to its users.  And to me is extremely useful.   

BP has a position posted for a person to focus on its top 1% (content providers) users.  They have posted several what improvements would you like posts.  But have provided no feedback.   Just a “plop”.

I have been in charge of our IT department at different companies.  The way I chose to communicate with the user group was to ask for a list, prioritize it, vote on it and then communicate the direction and tasks for the next 6 months until we did it all over again.  I do not expect BP to take the same approach except on the communication side.   What would you suggest, here is what we are moving forward with.   

Take my view idea.   I think it’s the one and only improvement needed and is the greatest thing since sliced bread.   Now you show me the list or direction of where the forum is heading, then I say wow I like their ideas better than mine.   I understand why mines not number one.

For example ads.  Getting tired of wading through ads for Chicago.  Why don’t ads have view and vote counts? Just because someone can pay money doesn’t mean the rest of non Chicago has to see the ad.  This does not enhance my experience on BP.

Communicate.  

They have put the bus bench signs out.  They look good, but this is real flimsy material.  Have a message in to see if they did they temporarily, until they get permanent signs in place.  This whole area is near our city zoo, so I decided to add some animals as an attention getter.  Now will have to set back and wait a few months.  Re-analyze our customer mix and see how many are coming from this area.  We also have doubled our google ads and honed them into 4 zip codes covering our marketing area.

Overall update.  Lots 6/7/8/9/10 are sold.  Although we took a $10,000 price reduction from List on every property, just so "we were working with them" we had increased the price about $20,000 across the board after we made the first sale and got the ball rolling.

Two of the lots dug wells at 90 feet and got 18 and 20 gallons per minute.  A decent well is 8 to 10 gallons per minute.  Part of our sales agreement is they must get a decent well.  We have some wells going 300 feet in our county.  If you ever do a well, do a Cistern well.  Even if you get a Bad well of say 4 gallons per minute, the Cistern normally holds 1,500 gallons.  You will never run out of water, even with a bad well GPM.

Once we decided to build a pond, we raised the price another $20,000 on those lots.

Forget whether the above was smart or not smart; originally underpriced or not; the take away is our area has virtually no houses for sale, and there are very few lots available in the surrounding farming community.  That put more pressure on these lots which are available for market, on hard surface road (bmw/mercedes/harley no rocks and dust), near a 4 lane highway, 1 mile to town, yet in the country, and 5G coming through.  Every time I call the broker, he thinks I'm going to raise the price again.

We live in Lot 5 which is below 4 and not listed, since we don't want to leave.  We have artificially raised lots 1 and 4 to unreasonable levels, because we don't want anyone living in front of us or to the side.  "BUT" decided to list in case someone decided they wanted.  Lot 4 for example is 21 acres for $350,000.  Its a great lot, but an unheard of price in our area.  But $350,000 for 21 acres is chump change for people coming out of other markets, who want a great lot.  Should we have listed?  I decided since we are doing the work, put them out there.

Lots 2 and 3 are the only lots we really want to sell.  Again all of this land has been paid for, thus no bank loan pushing us.

Lots2/3 do not have as good of a nature backdrop to them, but still great locations.  I have done some easy/minor landscaping and will plant about 20 more evergreen trees this year, about 8 to 10 feet tall.  Just really need to sit back and wait.  Also 5 G will be coming through this fall.

If we wanted to, could go back and subdivide again and replat to 1 acre lots to lower the entry cost, but for more in total.  Instead of $130,000 for 2.3 acres; could convert to two lots for $90,000 for 1 and 1.3 acres as an example.  Less land, but lower entry point.  Total dollars $130,000 versus re-subdivide $180,000.

Our county smallest lot is 2 acres, but we are within the 1 mile range for city rules, which would allow 1 acre lots.

Will hold off doing this play.

100% of the funds are going to our bank and paying down on Self Storage debt.  Not holding out any for taxes, since we are building new Self Storage and doing year one write-offs on roads/fences/electric/security/etc to offset Subdivision profits.

Was this a good decision?  Taking land purchased for $585 per acre or $7,000 per acre; selling for around $60,000.  Paying off Self Storage debt at average 4.8% interest rate on 5 year term/20 year amort.

a.  I don't see land/housing market to come back to this level at anytime soon in the future.  Low interest, low inventory, high demand.  

b.  Don't see the land value from $585 or $7,000 up to $60,000 occurring again.  It would have to go from $60,000 up $540,000 per acre to achieve the same return levels in the next 30 years.

c.  Don't see my son both hitting the same market and also having the same Financial/RE skillset to do this project for another 20 years of maturing.  If we decided to let him sale in the future.

d. Paying down debt with 4.8% interest rate on an asset like Self Storage that cash flows and funds itself is not a wise decision. REI is about leverage.

e.  Basically we have taken an asset we did not need anymore, that we did not think would perform at a high level in the future and "convert" it to Self Storage which will outperform this land going forward. 

f.  This was really about Risk aversion.  We had the land which is at a high level and the "needle" is pointed more towards a loss than higher gains.  We had Self storage debt which was better "kept", but we did not want to move the Subdivision money to Stocks/Bonds or other investments where we did not feel a better than 4.8% after tax return was possible, or with less risk.

Forget whether we are right or wrong, this is our thought process and market evaluation.  Luckily Self Storage is a very "liquid" fixed asset and can be converted to Cash very easily if we need it in the future.  Plus we have taken care of the tax impact on the Subdivision land on our own timing.

@Jacob Hufford

On the deal above, even if its old, you need to address the following:

1.  Market size. I use 6 units per 100 people.  Milford DE has 11,000 people; probably another 2,000 outside.  Around 13,000 at 6/100= market of 780.  This is a rough estimate.  The town I am in, we have around 11/100 units; and we are still building.

2.  Existing supply- go on google and find all locations.  Then go count them by size, by location.  Call to get pricing and occupancy.  Note value add.  Hours operations. etc.

3.  Lets say demand is 780 and supply is 1,000; I probably would pick another town, unless you can out position them.  If 780 and supply is 500; I would build another 300 plus try to always buy people out.

Which town near you is best?  The one you can build or make a good deal in.  We use a 40 mile radius and anything inside that range is fair game.  

The problem you have is experience and money.  

The problem other people is they have money, don't have the experience, want passive investment and don't want to develop. 

You need to get the experience.  See my first post and start small.  Get a weekend job working at storage.  Put a game plan together and come back to the forum and find someone with money.  Do the three phase value add play for about 5 to 7 years, then decide what you two want to do.

Don't undervalue yourself, money is cheap.  Again, your 20.  Plan to be a $1mm before your 30.  Then make your next $5mm before your 35, since you will have both experience and money.  After that you have to learn how to leverage yourself over more deals.

@Jacob Hufford

Had to stop for a late dinner.

Two more areas for you to consider, will do in two posts.

All of the above info is a waste for you. You need to develop a system, whether SFH, MFH, CRE etc. You need a way to "retain" and categorize information.

1. Develop a checklist by investment type. See my post Checklist 101 for self storage. Adapt to SFH, MFH, CRE.

2.  You need a cost model.

3.  Need a revenue model.

4.  Need a Team list.  Make a list right now.  Fill them in as you meet or find them.  Keep asking for suggestions as you encounter people.  Lawyer, banker, zoning commission, contractor, electrician, plumber, dirt work, realtor, etc.

Name, address, phone email, occupation, by town, etc. etc.

Your 20 years old and interested.

1.  Read every post on here that contains Self Storage.  "You" make the time investment.  Watch every podcast, read every book. 

2.  Do you have $175,000 for a 10% SBA loan?

3.  Start small and Make Your Big Mistakes Early.  Do you know the "questions"?

4.  Go to some seminars and training after you do 1 above.

5.  Back to your question.

a.  Why is its occupancy rate down?

b.  Why are they giving away so much discount?

c.  The expansion area, is it zoned correctly?

d.  Do you need Storm pond or is it grandfathered in?  I can't see.  

e.  Are there any other requirements such as above, if you build extra buildings/units.

f.  Looks under lighted, especially for up there.  $30,000

g.  Has a gate, but I don't see any security cameras or systems on buildings. $50,000

h.  Are you going to maintain or add additional management fees $50,000.

i.  Google Milford Delaware self storage.  On Google maps I don't see them.  This is good, you value add them.  You want to get to the top three so your on page one.

j.  Google Milford Delaware Sparefoot- no one and not this location is listed.  This is good, this location needs marketing.  It will be at the top immediately on Sparefoot for google searches.

k.  Google Milford Delaware Central Storage.  I can't find them this way or just looking for Milford Delaware Self storage.  This is good, they need a website.  Again easy Marketing value add.

l.  Building sizes.  They did 3 30 wides and 1 40 wide.  This makes for a good product mix.  10/15/20/30/40.

m.  Ask why they are listed as "Central Storage" versus DE storage on the google map.

n.  Is this an old MLS listing?  Look at the Google maps site.  Looks like they have already added 7 other buildings.  Know what you are looking at.  Visit the site.

o.  Property tax and insurance seem low.

p.  Add in Management costs and at the 7% cap rate, the value goes down, to near their listing price.

q.  On the peninsula, thus not a lot of potential buyers.  Plus small towns.  This is great for a three way value add play.  1.  Buy improve, raise rent., 2.  Buy/build in nearby/same town/towns so you control rent and raise.,   3.  Develop a group of towns and locations, then sell as a packaged deal.  Looks like you live in the area, so a perfect fit.

r.  I don't think this listing is still active.  But, from a revenue standpoint, with the management fee (unless its you), it doesn't meet my 8 to 12 year payback.  From a Cost standpoint; use todays building cost of say $830,000 for erected buildings; Land of $xxx,xxx; fence $60,000 all around; Electric at $50,000; Security at $50,000 (1 camera for every 6 units, plus license plate cameras and face cameras at entrance/exit); office/utilities $50,000; Grading $??,???; etc etc.  Probably gets you close to their $1,750,000 price ( but pretty sure this is an old listing); using cost plus a revenue stream.  Also with the "come" on the marketing/value add points.

I would recommend you buy a cheap piece of ground.  Always check zoning first.   See if you can do Cargo Containers or conex's on them, plus boat storage.  Use this to start small.  Learn and develop your business model on this, so your mistakes don't take you out of the game.  Pick the north side on "1" towards Dover AFB or on the east side towards the coast on 36 and 1.  Do an SBA loan at 10% collateral, put in around $10,000 to $15,000 of your cash.  This will not be a great money maker.  It will get you in the game and start your "real" learning, hands on with very little potential loss.

Start small and Make Your Big Mistakes Early.

Additional items, Pennsylvania:

1.  Partition walls every ??? Firewalls?

2.  Exterior doors sizes (12x12; 12x14; 14x14) and mechanisms (chain, remote)?  $3,000 or $20,000

3.  Gutters? Canopies? Ice Guards? 

4.  Fire hydrants? Fire Sprinklers?  $100,000 and $100,000 ????? How far?  What type wet/dry?

5.  Storm sewer system to storm pond or surface drain approved? $100,000 or $0.

6.  Insulation and where, to what degree?  Does the city require certain ratings? $200,000

7.  What type of roof?  Screw down or standing seam? $0 or $80,000

8.  What type of steel frame material?   Easier for you to do the specs above, then ask for a quote from an actual dealer versus anyone here.  100 x 300 I have $880,000 and $1.5mm estimates for a project we are doing.

9. Concrete floor and drain system?  What thickness? Rebar and spacing?  What type of tenants "potentially"?

10.  Electric could be $250,000.  Separate meter, 220/240, 3 phase, etc. How long of a pull from the street?

11.  16k sq ft for office? 100 x 300 is 30,000 sq ft.  That's a lot of office and bathroom; and finished area, over half of the building.  You might need to check with township zoning on what your doing. 

12.  HVAC/Humidity control? Floor, ceiling heating, hvac? 

13.  What climate are you in, Pennsylvania?  Footings.  18 inch deep by 12 inches, 42 inch deep by 6 inches, 36 inches by 10 inches, etc.  This can cost 1/2 to 2/3 of your floor cost depending.

14.  Windows?

15.  Grading, looking at your contour map?  $30,000 minimum.    How are you going to compact and how long will it take.  Interest costs, if you plan to mound and let settle.

16.  Athletic field?  Assume part of business plan.  $100,000 to $500,000. Seeded, turf, or artificial? Sprinklers?  $50,000 for logo in the middle.

17.  Parking and driveways?  Asphalt/concrete?  If the building is 300 foot long, then rough guess on the driveway and two parking sides in concrete, $300,000.

18.  Engineering fees, if just site plan and filings $25,000;  If building also another $40,000.

Build a spread sheet with all of the above bullet points and others, people offer.  Then define them.  Then do your rough estimate.  Your range of accuracy will be really wide if you just say 100 x 300.  The sundry items, might cost more than the building itself.

Good luck.  Please share your experience on a blog post.