All Forum Posts by: Henry Clark

@Jeff Gardner

Look up my post in the Commercial section or in the members blog.  What happens if you die?

To your base question.  Why so many tax returns, insurance policies, etc?

If you get sued, it will be in the state where the property is. Having an LLC in that state versus your home state won't lend anymore liability avoidance. This is where your insurance coverage would kick in. It will be cheaper to cover all properties under one policy than one by state.

The first question should be how big do you plan to get and how many states?  Recommend to keep it simple, unless you plan to get to some critical mass level in each state, and there is a specific benefit you are looking for.

Either way, keep on growing.  Success breeds decisions.

@Scott Travis Cuthbertson

Something is wrong.  Missing information.  

No bank would set those terms up.  

Maybe a 3 or 5 year term with renewal at x% above prime for another 3 to 5 years.

Plus are you cash flowing the development and rent up period?  Not a good deal, unless you plan to cash out at the refinancing point with your bank.  Your bank should do a construction loan, then roll it into a permanent loan.

On the backend, your comments are what are possible.  But they don't want the property either.  Thus, again, missing some information.

Also why build in a "smallish" market.  It's going to cost you the same price other than land and possibly road surface (hard surface versus rock).  Define the "opportunity".  Example:  opportunity of Cheap land, is no reason to build.  The business plan has to fit with the location.

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.