All Forum Posts by: Henry Clark

On the cashflow and also land appreciation, two different business models in one entity.

Mainly talking about a Franchisee.

Cashflow- cost of money.  Payroll paid weekly, utilities monthly, meat/produce 3 day.  Their inventory turns over daily.  They are using OPM.  

Land/Building Appreciation- Payment longterm.  Which considering the location can only increase in value due to a limited number of locations like theirs.  Like buying Beach front property.

I had the same question years ago.

@Scott Mac

Thanks for next level thinking.

Got a bank top 25 safest banks in the US.  Stayed open thru the depression.  Friends with them.  Our second bank is both family and 70 year family friends.  All within 20 miles.  

Mrs is taken care of.  She knows the plan and she is in control.  

Got the pocket change already.  

Thanks for input.  Still have a few things to do.  Plus any holes I find.  

Luckily I’m probably being Chicken Little.  Doesn’t matter whether I’m right or wrong.  Good either way.  

Thank you.  

Pay the taxes. Got to do my part to pay the $34T plus the $110T.  

Have done 1031 before.  Prefer to pay the taxes.  Our returns are high enough to recoup the tax impacts with future investments.  Our “last” and “final” deal I will look at avoiding all taxes.  

My personal assessment of the overall economic risks has hit a tipping point.  

Decided to sell 4 of our Self Storage locations.  They are great cashflow investments.  But my overall investment strategy and Risk/Reward needle is leaning negative for the overall economy.  Want to move to a really great Debt/Equity position.

Paying off debt goes against both REI strategy of leveraging debt and also inflation, paying off with cheaper dollars and having hard assets to ride the increase in value due to inflation.

Our strategy. 

a.  We are retired so no concern on the W-2 side.  

b. We were already in a great Debt/Equity position but will solidify further by selling the 4 locations. 

c.  Stocks, moving out of any overseas investments.  

d. Control more cash in MM or CD's so we don't take the full inflation bite, holding cash.  But liquid to ride any waves or take advantage of any buying or development opportunities.

e. Gold??  Have to research further.

f.  If Farm ground comes up near us that also has development potential will take a look at that.

g.  Teak farms- this already fits our risk strategy since this is a 10-to-25-year play.

h.  Pulling out of building additional buildings we had planned.

i.  Inflation- still have plenty of hard assets and development land sites, to ride any high inflation moves.

Let me know if you recommend any changes/adds to the above action items.  Thanks.

Start small and Make Your Big Mistakes Early.

The above sale move could be a mistake and it will be another lesson I learn.  But my risk/reward needle for me personally is in the red for the overall economy for the next several years.  Either way, we still are in a great position.

Couple considerations.

1.  Dependent on the countries style of ownership or lack there of.

2.  Are the owners like minded in length and type of property?  Do they want it for 1 week, 1 month, 1 year?  Is this for vacation, temporary living, etc.  I want the xxxx spot for 1 week, but the other owner has for 6 months.  How do you resolve?  Point system?

3.  Although 10 locations are a lot, I prefer a 1,000,000 and not tied to it.  For $5,000 per week, I can get a great oceanside house with no maintenance, taxes, security or upkeep.  My $300,000 at 5%, is $15,000 per year before taxes.  Thats 3 great $5,000 rental units.  If I don't like it, I can go to the next house.  Actually, considered this on a beachside house for $1.2mm.  Decided to rent instead and have the flexibility.

4.  Investment Time windows.  Like RV's, Boats and Time Shares.  People go through life phases.  How and when can they get their $300,000 back out.  Your exit plan for investors will be more important than the initial investment plan.

 Thanks for the look behind the scenes.  I think my biggest misunderstanding is comparing developing Self Storage/Subdivision lots/Flex buildings versus MFH development or acquisition. 

Thanks for your view and input, @James Hamling.  Can remember personally $300, sack of clothes, box of books and a $100 flatbed pickup, I can understand starting small.  That was actually the happiest day of my financial life. Everything was up from there.

Deal creation is not a big effort for us the way we approach markets.  If we wanted to go do $60mm of developments or deals in one town, we can start the ball rolling very quickly.  Especially since we can take a bare piece of ground and add value.  Being on Bigger Pockets and helping people out has really opened my eyes to the market potential still available for Self-Storage.  

The banks are part of our team, community, friends and relative, so I'm okay having them take a bite.  All of our contractors and vendors are part of our team.  We don't go shopping for discounts or percentage points.  I can call any of them on a Sunday or late at night and they are happy to talk.

Still back to my GP question.  Why share with other investors?  Again, forget scaling, doing more deals, spreading risk.  I can, understand if we needed cash to get started.  But after the first deal if we sell it, we have more than enough cash to get rolling on our own.

Talking with investors and people is fine, by me.  Used to give financial updates to over 500 people every month.  But I would rather not have to report on the ups and downs of development.  Rather talk with just our banker.

The payout is so large, and the GP can dictate the size of deal they make, so why bring other investors in?  GP's???  $350k down/$1.1mm profit before taxes; $350k/$$1.7mm; $1mm/$1.2mm; $250k/$1.1mm.  2-year turnarounds, really 1 year, but an extra year to get Captial Gains tax treatment if you sale.  Why share?  Bankers supply the cash, Risk is minimal based on our market analysis- even with failure we make money; Investors don't bring and knowledge on resources to the mix.   The only times I have run across where I might bring in investors, if they own the ground and won't sell outright or the GP was also the General Contractor and made additional profit.

I am starting to think there are no GP's on Bigger Pockets. To busy making money.

@James Hamlingundefined

List them (make something up, not to specific) on loopnet or crexi for lease.  See the interest. Look at similar properties for sale or lease, see availability and price point.

As mentioned, talk with a broker.  I would talk with a Listing Agent up front.  Get terms, say 1 month rent for fee.  Then get their analysis of each property.  

Commercial is different than housing.  You can always rent a house, just a price point question.  Commercial can sit.

Also go try to lease the same type of product in the same location.  

Always calculate Failure.  Occupancy %, turnover costs, rent reductions.  See what you can digest, your lender will appreciate that.

Prefer to have a business to put into the location.  Look at what you are short of in those areas.  Dentist, Chiro, dance class, TKD,  Market to those.  This adds value, versus just listing.