All Forum Posts by: Henry Clark

a.  Covid- go with a 1% death rate across the board.  Assume 1/2 of these people live with others or in a rest home.  Thus only 1/2 of the houses will need to be sold.  So 1/100 die.  1/200 homes need to be sold.

Ask your local realtor what an influx of 1 out of 200 homes on the market will do.

b.  Currently our realtors are in their best year ever.  Can't get enough properties on the market.  No problem showing or closing home sales.  1/200 homes added would not impact the market at all.  If anything Covid, with people having time on their hands is having a favorable impact.

Larger impact to real estate normally:

1.  Interest rates at say 3% today.  I slow down investing at 7%.  I stop investing at 9%.  Your a Flipper/Rehabber, I would think you could go up to 20% interest if you can flip the house start to finish in 3 months.  If it takes you 6 months then interest of around 15% might stop you.  Don't see interest rates changing in the near term.

2.  Stock market implosion.  We are due.  As long as you have capital to ride out additional months till you sell or rent.  Lets say a house takes 1 month to sale today.  Can you go say 12 months from completion to sale or take a xx% price decrease to unload, in a down market.  Greater chance of a stock market drop, since we are in a long-term bull market and Price/Earning ratios are in neverland.

We did a "minor" subdivision.  80 acres into 10 lots.  But with front road access, no interior roads, to cost prohibitive.

Go to your County and ask for their subdivision rules and a step by step process.  If they don't do many subdivisions, this could take a year.

Determine if you are doing a true subdivision or a land split.  Sounds like a subdivision unless everyone has front road access.

What you want to find out is:

a.  Minimum lot size

b.  Road surface requirements

c.  Covenants required.

d.  utilities, sewer/Water/Electric

e.  Fire hydrants, must you supply

f.  If water wells.  Then you need to do test wells and/or guarantee water.

g.  Storm retention pond and/or storm drain systems required.

If you have to do hard surface roads and fire hydrant, 20 acre splits will not work to cover cost, unless your selling for $100,000 to $250,000 per lot.  Hopefully just rock surface and surface water run off.

Good luck.  Can be very profitable.

update on Marketing.

November 15th we're at 32% "rented", and 29% economic rent. Our normal objective on a new location is to be at 30% by June. I'm satisfied we have done all of the avenues I have noted above. Had a strong Fall thus far. Adjusted some rents down a hair, to catch more Fall rentals. We are in Iowa and the weather shuts storage down from about December thru March.

Google traffic was 408 for Oct/Nov, thus our google placement and ranking has continued to increase as we have more time in space. 81% are new visitors which is great.

8 of the 408 Oct visits came from Facebook links. This has dropped significantly from the prior report. Luckily Organic and direct searches total 61%, thus going good.

Moved up to 4th on the Google map listing. This is really big. One more spot and we will be on the front page, before the drop down.

Moved to the top of page 2 of Google searches. This is really great progress since the last update.

Youtubes have moved to the middle of Page 3. This is actually the internet marketing tool that I am the most excited about. Our SEO company is continuing to push on Google, and Google is slowly raising our search based on time.

Our Coupon program never took off, just 1 renter. It is still on our Website, but we are not pushing it.

We don't do "First Month" or "Etc." free. May have to consider that, to be on par with competition. Another large competitor will come on line 1st of the year, about 2 miles down the road.

On Sparefoot, which fluctuates we are number 1 this month for our specific town and 4th over the larger metropolitan area of 1,000,000 people and 116 competitors. This is from starting from 0 in February.


Operations:

Splitting the land, in process to do Contractor incubator buildings. City is finalizing. Appraisals needed to validate collateral with current SBA/Bank loan turned out great. Thus should be able to split and they actually get even more collateral.

10's are filling up fast. May have to adjust the next two runs of buildings. Probably won't though. We still are required to have concrete drives. Hate putting them in, just to support a 10 depth. Might just rent the 15's out as 10's when needed.

In a normal year I would expect to be around 50% this year. But we are a brand new location and with Covid. Fine being at 30%. With our location having been in place and our online presences significantly increasing we should have a great year next year. Plus 30% over 9 months or 3.3% per month, is about industry standard.

Attached Files

@Wale Lawal

First of all thanks to everyone for their contributions. Forget agreeing or disagreeing, but I love seeing other peoples thought processes. As you well know there are very few people in our daily lives that we can have these types of REI conversations with.

Quick answer on Biden presidency. Very little impact on Real Estate short term or long term. As folks have mentioned both party backers are rich and invested to some degree in Real Estate.

Let me pose your question a different way. How do you rank the Biden presidency versus the following:

a. Biden Presidency- 1031 discontinued- I’m from Iowa. Most 1031’s are done with Farm land out here. 160 acres at $7,000 is $1,120,000. This isn’t abnormal “out here”. Dirt rich, cash poor. If 1031’s went away, the property just wouldn’t shift as fast.

Iowa Farm ground 30,600,000 acres, just farm ground. 92% owned by people versus government or other programs. 47% owned by women. 39% owned by Trusts, estates, Corporations, LLC. Average age of a farmer, whether they own land or not is 57 years old. Assume a Basis of $1,000 per acre, just picked a figure, ours is $500. $7,000 less $1,000 means a gain of $6,000 per acre.

30,600,000 acres x $6,000 step up= $183,600,000,000. Just for kicks multiply that time 30 states; and you have a lot of potential Cash/investment not flowing around.

b. Biden Presidency- Eliminate Stepped up basis- Take the $183,600,000,000 just for Iowa. Take it against 30% tax rate just for discussion. $183,600,000,000 x .3= $55,080,000,000 estate taxes, due to no stepped up basis. Some of this would not get taxed if Estate tax limits are not rolled back. Impact on real estate would be most family farms would go out of business cause they have to sell the farm to pay taxes; and corporate farms would take over. This is already occurring, just slower.

c. Socialism- in the above example, again just for kicks. Realize the numbers aren’t “right” to the nth degree, but the point is the same. Take 30 states x 30,600,000 acres x $7,000= $6,426,000,000,000. So $6.4 trillion; TAKE it from them, 100% tax. US population 330 million rounded.

This is just the farm ground, not equipment and houses. If you take 100% of this; then the populous gets $19,472 each. Unfortunately they won’t get anything directly, it will go through the government to pay down the debt which is $27 trillion versus the $6.4 trillion above and the $27 trillion is the “little number”.

Luckily the government will own the ground and someone will still be producing food. Not true. People don’t work when there is no incentive. No incentive to own Real estate if it can be taken from you. High impact to owner/low probability??/ low impact to national debt.

d. Retirement- Baby Boomers- I will turn 60 this year. I am at the very end of the Baby boom from WWII. 71 mm people, between 56-74 years old. That’s a lot of houses to be sold. A lot of Retirement homes to be built, or a new model developed. A lot of medical supply and floating RN, home support, PT offices needed or not. Impact to Real Estate, disregarding the Tax discussions, will be a higher churn in houses. With an increase in Retirement homes. The question is, will there be a market for these “non starter” homes, plus out in small town America. To me the key to Baby Boomers is the following. If no changes to Medicare, Medicaid, SS, retirement age, etc (keep in mind these people vote); and the Support of workers to retirees 1 to 1 relationship. The workers will need to pay more in taxes and have less to invest in housing. We no longer have 3 workers to 1 retiree anymore.

e. Covid 19- Lets discuss REI. 1% of the population dies. Which is 1/100. Assume half of these people were living single in a home. The rest were in retirement homes or with extra family. Thus lets say 1/200 houses will need to be placed on the market. In our area, this is the hottest real estate market we have known. 1/200 houses would be digested without any impact to the local market. My empathy goes out to all impacted.

f. Ethnic groupings- Lets discuss REI. There is no way to talk about this dynamic without Racism. First I see no changes in the dynamics of Racism occurring, no matter who, what, etc occurs. The wrong issues are being worked on. With that said, I see no “Change in racism” impact to the real estate market. But, yes the Racial/Ethnic mix is going to change.

Caucasian- 60.1%

Hispanic- 18.5%

Black- 13.4%

Asian- 5.9%

Less Caucasians and more of the sub groups. With Hispanic growing the most. The Caucasian and Hispanic groups will move about 2% points in the next 10 years, subject to immigration changes. Don’t really see a near term impact from Ethnic groupings. Folks realize Racism is a hot topic right now, but that’s another discussion. My concern goes out to all impacted.

g. Interest Rate- Lets say 3% now. I am in Self Storage. At 7% I hesitate further investments. At 9% I stop investing. Each portion of REI is different. Example: If I was a flipper, I would keep going. Don’t see this changing in the near future. The only Pendulum item that could rapidly swing this, is if the world loses “Faith” in the US dollar. After all, its just a piece of paper. Then cash would dry up and rates would skyrocket. Yes, this would create inflation and your hard assets would increase in value, but who cares, since no one could buy them, they are worthless.

h. Location/Location/Location- there will always be deals to be made under any scenario.

I. Income Tax rates- Lets say they go up to 70% for the wealthy with no loopholes. Two scenarios, if you lived in France, my friends family construction company, moved to Morocco. If you live in a Nordic country you stay, as long as you are a homogeneous group (little immigration).

j. Biden Presidency - Climate change- Lets discuss REI. forget whether you believe it or not, just go with the thought.

Climate changes- Nothing will occur to impact population shifts. 10 more hurricanes, 10 more tornadoes, 10 inches more or less of snow, 10 more forest fires, etc. Will not be enough to make people move.

Policy changes-

1. Less people, less carbon footprint. This isn’t going to happen. No China, “1 child policy” in the US. Big Impact; very low probability.  Plus we are already doing that to a degree. We are at a net loss, other than thru immigration.

2. Significantly less fossil fuel- Not sustainable along with the American way of transportation. Cars would have to go. Mass transit put in place. Urban sprawl would have to be curtailed and reduced. Less Suburbia (small investors). More large housing projects (big investors/syndicates).

Also energy cost dictates World competitiveness in production. Currently most of the Midwest is around $.07 per KWH. If we move to $.21 KWH, then we become a totally consumer nation and at only a profit margin on traded goods of say 5%, we become bankrupt within a couple cycles. China strategically built the largest dam in the world. They have locked up $0 KWH for the next century regarding that dam. We can’t compete, staying Green, without Nuclear.

Lets add Nuclear. Goes against “green” even though its the cheapest and “cleanest???”.

Lets go Hydro/Solar/Wind- Hydro won’t fly because it goes against Green (kills Sturgeon and terns).

Solar/Wind won’t work, because you wouldn’t have a Coal based power grid, to utilize as a power bank and offset or an undiscovered/undeveloped grid based power bank system. All along the Coast and any mountainous regions can use Solar/Wind “Water reservoirs” as power banks.

Nuclear/Solar/Hydro/Wind, would have no major impact on REI, since they are all tied to the Power grid. Thus Housing would not need to change based on source of power.

3. Carbon sequestration- new one for most of you. Instead of reducing Carbon output, you increase Carbon capture through vegetation. Stop urban sprawl taking over Green areas. Take Farms and plant grass, trees and bamboo. To the degree this is done, the “Climate Change” impact is stopped or reversed in 20 years. REI- Farm ground becomes less valuable. Suburbia (small investors) is reduced. Large housing projects increase (big investors/syndicates).

You will lose the Midwest political Vote. Also if you take out our Corn/Soybeans out of the world market, a lot of third world people starve. Big Impact/Low probability.

k. (REPEAT) Location/Location/Location- there will always be deals to be made under any scenario, except all out Socialism.

Folks to further the conversation, if you challenge the data, provide your correct data and come to a conclusion. If you disagree with the concept, state why and propose a new one. If you disagree with the interpretation, provide a new outcome or degree of outcome.

Restatement, who the President is, has very little impact on the REI market. With the Three branches of Government, only policy change will make any of the above occur to a significant degree. I see none of the above good or bad occurring within the next 10 years. To me the only short term impact would be an implosion of the Stock Market; and next year due to pent up demand will be a great year for the economy. So you have at least 1 year to make hay while the Sun shines.

@Wale Lawal; Please take the above and rank or give input on what you consider the items to watch based on your REI background. Thanks.

What town or state are you wanting to focus on?

Ok. We need info to help out.  

Give us info. 

@Mark Wille

Thanks for the vote of confidence on my other post.

Loopnet Commercial Sacramento.

Address 7210 Greenhaven drive, $350k, office/live in, 4 offices.  Do a Hack.

Forget whether this fits your bill or not.  Approach it with a thought to buy.  Go through the process.  Basically sharpen your pencil and your skill sets, for the deal you finally go through with.

Don't know how you plan to finance coming from $20k.  This has an existing revenue stream. Also you have BP group to pose the thought to.

Good luck.

On these long projects, every once in a while you want to stop and think why you are doing them.  Pay for your house or Son's college.  A bigger "Number". Pure joy.

Or knowing we got our 10,000 Teak trees planted down in Belize, and life is good.  Can't wait to go down around Covid, and walk through the Teak plantation and seeing the trees growing.

Been doing paperwork to finalize the subdividing of the 8 acres:

1.  City Economic development review- completed

2.  County GIS review- finalize Thursday.

3.  County Assessor signoff.

4.  County recorders office- copy of plat, certified resolution, then record the subdivision.

Although this property is in the City, for whatever reason, need both City and County review/approval.

At this point the local Banker will work with the SBA, to get them to release the front 4 acres so I can do the Contractor buildings.  Again, SBA won't loan on properties where someone else is running a business, which this will be 100% contractor rentals.  Should not be an issue as noted in the post above.  SBA portion of Self Storage, has roughly $400k value extra per appraisal than the 10% $160k equity required for the loan.  But we will see, government and bank project.  

Forgot pictures on last post.