All Forum Posts by: Henry Clark

1.  Your net operating income should have changed more due to the CAMS of $19,528.

2. You're increasing the rent, but also adding CAM of $19,528; plus, NNN other costs. How sensitive are those Renter types?

3.  Do some failure or sensitivity analysis.

a.  Assume xx months of lost occupancy.  Right now, your assuming 100% occupancy.

b. Run your COC with Principal and Interest, since you're looking at this from a long-term standpoint.

c.  Switch your interest rate to 8% and run both your current 5 years and after your 5 year balloon period.  Validate your financial metrics again.  Don't do the deal just for an Interest only loan.

4.  What are the quality of your clients?  

5.  When they leave, what is your conversion costs or build out costs for upgrading.  Need to factor in an assumption.  

6.  Run the numbers doing a Commercial Loan with 25% down and interest rate of 7.5% and compare against your Interest only loan of 5%.  a.  What is the difference in cashflow P/I versus I?, b.  What is your opportunity cost of the Downpayment difference, do you have other deals you could be doing?  The interest only looks great, but I would still run the numbers and see the difference.

Quote from @Steve Smith:

Quote from @Henry Clark:

Quote from @Steve Smith:

Quote from @Account Closed:

One thing you might wanna consider is setting up a trust for your kids. It can be a solid way to pass on assets while you're still around or after you've passed. Trusts can offer some tax benefits and allow you to specify how and when your kids receive the assets. 

Plus, they're pretty flexible, so you can tailor it to fit your situation and your kids' needs. It might be worth talking to a financial advisor or estate planner to see if a trust could be a good fit for you.

RM, Thanks. I'm a big fan of trusts and have several. And, yes, they work very well. I'd like to find creative ways to get more dollars into their Roth IRAs.

 The easiest way is for them to put them there.  What are they contributing currently?  Have them contribute to the max.  See my comments above to give them extra cashflow. 

The next option is for you to max out.  You’re over 50?  Max out.  Put this under a trust for their future benefit.

Nothing creative about the above, but the fastest way to achieve your objective.  Both are indirect, but easily accomplished.  

Clark,

You just can't put money into someones Roth IRA, there are rules on how they are funded. And I can't put anything in my kids IRA, I'm a "prohibited" person. They do contribute the max, but that's very limited. There are work arounds, and that's what i'm looking for. Roths make money by what they invest in, not thru contributions.

"The next option is for you to max out. You’re over 50? Max out. Put this under a trust for their future benefit."

What's over 50 have to do with it? And what kind of trust are you thinking?

Please reread my suggestion.  Both posts.  These are all indirect methods. You personally will not be making any contribution to a retirement plan other than yours. 

Really need more info to address your question.  

If you’re talking several million dollars then look at an Insurance Investment product.  Really depends on the age of your kids and grandkids whether it is worth it.   

Quote from @Steve Smith:

Quote from @Account Closed:

One thing you might wanna consider is setting up a trust for your kids. It can be a solid way to pass on assets while you're still around or after you've passed. Trusts can offer some tax benefits and allow you to specify how and when your kids receive the assets. 

Plus, they're pretty flexible, so you can tailor it to fit your situation and your kids' needs. It might be worth talking to a financial advisor or estate planner to see if a trust could be a good fit for you.

RM, Thanks. I'm a big fan of trusts and have several. And, yes, they work very well. I'd like to find creative ways to get more dollars into their Roth IRAs.

 The easiest way is for them to put them there.  What are they contributing currently?  Have them contribute to the max.  See my comments above to give them extra cashflow. 

The next option is for you to max out.  You’re over 50?  Max out.  Put this under a trust for their future benefit.

Nothing creative about the above, but the fastest way to achieve your objective.  Both are indirect, but easily accomplished.  

Managers roof got finished.  They can't wait to hang the hammocks.  More breeze and no bugs up there.

Think they are trying to decide what is for lunch.  Jayden still is growing, snake is 6 foot.

Next week is electrical, painting inside/outside, pour sidewalk and porch.  For the inside paint we add a Mold preventer to the paint.  Easy way to just be done with any mold issues on the walls.

Our managers brother used to put up metal roofs and buildings.  Paid him separate $4,000 USD.  Had quotes for $20,000 not including materials. 

Most materials in Belize cost the same or higher due to import tariffs.  The cinderblocks are made there, so they are inexpensive. All of the metal for the metal roof, is imported as coils for the roof and flat metal for the beams/rafters and purloins.  They then use their roll formers to form and cut the roof sheet steel and to also form the beams, rafters and purloins.  This way they are importing lower cost material and paying lower tariffs.  Plus, since they can cut and paint to size, shipping costs is less, and they stock way less material on hand.

Imported treated pine lumber is astronomical since their pines trees were wiped out by the pine beetle and they also don't have a coating/impregnation process for the raw timber. For termites, has to be treated lumber. Metal is competitive with lumber construction cost.

Anyone needing to get out now in Myrtle Beach, Savannah, Charleston, Hilton Head, glad to help out.  Must be within 2 blocks of the beach and for $300,000 or less.  Interest rates will skyrocket, as inflation comes back.  Too much pent-up pressure for housing and industrial building coming back from China, and wages.  If California puts in $50 minimum wages, rentals should skyrocket.

Alternative investments: a. I would be hammering Texas Property Tax sales- off list, not at the sheriff sales, b. Anywhere near military bases- Soldiers have BAH federal money and if they don't pay or trash your house just call their commanding officer. Do SFH., c. Parking lots or Self Storage in Italy., d. Mobile home parks- as people downsize, there will be market pressure for lower cost of living., Do Mobile home parks in the counties in Texas- no zoning., e. OId schools or motels for sale. Illegal immigrants have to live somewhere. I would go for NY and NJ, for State and Federal Funding., f. We are gung-ho on Country Subdivisions lots. Once economy settles to whatever level, still short on houses, thus they will buy lots. Don't build the houses.

Stay away from Belize and Teak.  Don't need more investors running my prices up.

We don't do STR, but if in the right market, I would look at traveling nurses or military LTR by the room. Might not be the numbers you analyzed on STR but re-do your analysis if you're going to lose money anyways.

@Scott Mac. Thanks. Nice exercise.  

I’m always worried about seeing red or brown.

On our deals we always do rental rate, occupancy percentage, cost, and finance stress tests.  

In this post type of concern  I ask my circle of influence (bankers, insurance, contractors, fellow storage owners) their perspective on the economy and also their sphere of influence.  

The video is both a great message and approach.   Thanks. 

OP  Not sure if this discussion is clear.

A.  Normally you would have a 20 to 25 year amortization period.  Your Loan period.

Commercial, normally will have a 3 or 5 year balloon term.  Your P/I is based on the amortization period during the balloon term.  The balloon term, is when things get renegotiated or per terms of loan, a change in P/I is made.

5 years is not the Payback period.  

Is 5% for 5 years good?  Normally I would say yes, but I have turned pessimistic.  I think at the end of 5 years interest rates will be over 10% from today.  Decide if the savings of seller finance at 5% versus a commercial loan at say 7.5%, is worth it from a balloon term time frame.  Also depends how much the commercial loan can increase in rate at the balloon period.  Today, I would rather fix the higher interest rate, with a known maximum interest rate hike at the balloon period.

Most commercial loans will be coming up in the next year to 2 years.  They probably did their deals based on 4%, but will now have to refinance around 8%.

B.  Your side question.  Run the numbers.

C. "Ditch your job"- Run the numbers. Personally, I would not give up my day job. All depends on how active or passive your REI type is. If you're just starting out. Do a Scaling exercise. How will you grow, with your team, finances, downpayments, etc. Only when it is Sunday at say 6PM and you just sit down for a 30 minute rest. That is when you might consider giving up your day job.

Quote from @John Canchola:

Quote from @Henry Clark:

Recommend you use Loopnet.  Look up properties for sale or lease and identify the most active Realtor for that city, for your type of development property.  Ask them for 2 or 3 commercial developers.

If you're near the corners, your traffic count is the 85k. Gas, fast food, etc.   If you're in the middle between interchanges, your traffic count is the local street count.  Shops, oil change, tire repair, etc.  Also depends if you're on the way going out or coming in and how far to the next city, example Edmond or Norman.

 Hello Henry

I appreciate your feedback. I will follow your suggestion to find an active local agent and see if he/her can provide 3 commercial developers.  Presently I do have a franchise commercial RE broker (NAI) but I do not feel he is hustling for the $80k commission he is contracted to receive for just marketing my property on their website and told me he made some phone calls. I think he is working with a small circle of brokers in the City and is complacent with his minimal duties. I just get that feeling. He didn't even have a For Sale banner nor even suggest they would provide one. I ended up encouraging this banner idea to him and he agreed. I paid for the banner and the installation. 

This is why I love this BiggerPockets site because it brings like-minded real estate investors from different fields who come here to seek and provide opportunities to others and not be complacent in life and grow their experience and portfolios. 

 Realize you want to develop.  BUT, I would list if on Crexi or Loopnet for Sale.  Just to get an understanding of the value of the location from others perspective.

Quote from @Ronald Rohde:

Do you think you optimize towards your self stress/sleep at night?

The single digit percentage optimization is not worth balancing on razors edge all the time.

Normal investments and life we are fine..  All of our assets have significant cashflow, large built in capital gains, great LTV position, Loans are at 7 year, 10 year and 20 year balloon terms.  

My view of world economics has solidified over the last year.  Possibly Chicken Little, but it impacts my world risk tolerance.

Not trying to sell my view point.  

The U.S. dollar is the Fiat currency but we have told the world it is not.  We have taken Russia, Iran, etc off the system.  Sounds good but it signals to other countries they can be excluded.  We have told Saudi Arabia we are moving away from petroleum.  They have no reason to live up to our agreement with them to do petroleum dollars in USD.  Defense they can get from China and Russia without our questioning their social and political alignments.  They have joined BRICS.  

US national debt. We are past the tipping point.  We are not at war, but our budget is greater than national GDP.  Keep in mind GDP is not income and taxes, thus we are far above our economic spending level.

Drunks, drug addicts and gamblers have to hit bottom before they will self correct.  Our government and Federal Reserve must let our economy free fall so our free economy system will self correct.  Other than the depression of 1920’s no government has had the wisdom and discipline to do that.  

China is no longer the world’s low cost producer and all of those production facilities have to make a move along with the distribution channels. That will be a disruption for the next 29 years.  

Immigration issues. The bottom 1/3 of our population has to pay with a lower standard of living until????  Our social costs will be overwhelmed.  Means we get taxed more.

One or all of the above trip my trigger.  

Recommend you use Loopnet.  Look up properties for sale or lease and identify the most active Realtor for that city, for your type of development property.  Ask them for 2 or 3 commercial developers.

If you're near the corners, your traffic count is the 85k. Gas, fast food, etc.   If you're in the middle between interchanges, your traffic count is the local street count.  Shops, oil change, tire repair, etc.  Also depends if you're on the way going out or coming in and how far to the next city, example Edmond or Norman.