All Forum Posts by: Scott Krone

@Brie Schmidt @John Casmon  looking forward to networking, learning and participating!

@Beliria Sims - When I first started my own firm, I established systems for the company (filing system, book keeping, specifications for each trade, draw requests, loan packages, etc).  Most of which we still use 20+ years later.  More importantly, we can still reference back to earlier projects.

Your question is what was our biggest lesson.  Well approximately 15 years into our firm, we implemented additional systems.  It was through the use of these systems that I discovered the biggest issue to date that we have had to deal with.  In order to address it, we had to re-organizing the company.   I realized that despite the fact we had good systems, and the systems revealed the issue, we needed to further develop the systems so the company could 1.  recover and 2. grow.  I had a choice.  Either build them myself or purchase them.  I choose to purchase them due to timing.  Now everyone in the company is hired and trained within those systems.  We incorporated them into the existing systems.  

So, the biggest lesson, create a strong foundation for the long haul, not the immediate.  When you look back you will be grateful you spent the time early on focusing on the fundamentals.

@Julian Sanchez Lots of assumptions to be made based upon the info you provided.  Is it worth pursuing?  I would say worth getting more info.  "Grossing close to $10k" sounds like Seller marketing.   With massive assumptions as well as no verification of numbers it could be ~8% cap-ish.  Based upon experience, it could be ~5%-ish.  Possible at 8% not serious at 5%.  Depends on your goals as well.

Keep an eye out for @Paul Moore new book by Bigger Pockets

@Jeremy Johnson.   I know @Jay Hinrichs, and I know he knows development.  I have either developed for others or developed for myself over ~$250,000,000 of real estate, new construction, mixed use, or commercial.  The common message is this:  raw development is extremely difficult if not impossible for a beginner in real estate.  Close to 30 years of doing development is the basis for the responses.

For instance, I provided you a good amount of information to get your feet wet.  You responded, perhaps unknowingly, with a partial answer.  R-3.  That literally means "0" to anyone without knowing the municipality to determine what the definition of R-3 is, what is permitted, how much is permitted, set backs, lot coverage, FAR, etc.  In addition, you need the size of the property, topography, wetlands, lakes, etc.

The above comments are a word of caution for you, not a criticism.  @Jay Hinrichs offered great advice.  Begin working on the answers to the questions posed to you, and flip it to a developer.  Gain the experience, learn from it, and build upon it.

@Jeremy Johnson  Welcome to BP.   Real estate development is "master level" investing.  My experience is most custom builders are not familiar with land development.  It is a separate animal all together.  In order to best present your idea, I would offer knowing:

1.  size of property (acreage:  43,560 sf in an acre)

2.  how much of the property is covered by water, conversely how much is buildable

3.  any wetlands, flood plains, flood ways on the property

4.  underlying zoning  (no 1-3, will determine what and how much you can build)

5.  access to municipal services (cost and how much land is necessary for septic, well, retention, etc)

6.  ability to re-zone  (see no. 4)

All these things and many more will begin to determine if your $700k asking price is even realistic.  It will also allow you to have productive conversations with the seller, developers, architects, builders, etc as you make your way through the process prior to discussing at meetups.

@Christine Myers.  The answer to your question, "How to find the creative financing properties" is there is not one way.  It requires lots of ways.   The more sources of deals you have, the greater your likelihood of finding those opportunities.  The other side of it is your ability to problem solve.  Not solving your problem, but rather solving the seller's problems.  That involves time and getting to know them.  Don't make the transaction about the dollar amount, make it about the person.

My mentor refers to this as Differential Advantage.  We all have one, it is a matter of recognizing it, and emphasizing it.  Ours is this:  We are able to evaluate and assess real estate from 3 perspectives:  developer, architecturally, and from a construction point of view.  Most investors are only able to do one, a few two.  I have only run into a few that do all three. 

@Tyler Fry.  Your question was, "How much would it cost to build a 50,000 sq foot building along with 400 units for storage?"  Please clarify for me, you desire to build:

A.  50,000 sf building + a 400 unit storage facility

or 

B.  50,000 sf of self storage consisting of 400 units.

Sorry if I am being nit-picky, just trying to clarify.  One reason I ask is 400 units in 50,000 sf can range from ~90 sf per locker (assuming 72% efficiency layout) on average, up to 125 sf if a drive up facility.  125 sf per locker is on average large lockers.  

I agree with @Michael Wagner for general building costs for Class C and A.  However, there are also other factors to consider, site development, retention, utilities, permits, soft costs (architectural, taxes, insurance, legal), etc., if the building is multiple stories (elevator), construction technique (fire suppression) etc.  So, before you jump into anything, make sure you consider all three costs:  land, soft (architectural, appraisal, taxes, permits, utilities, insurance, title, bank fee, interest) as well as hard costs (hammer and nails/actual construction costs).

@Faith Hill  @Will Fraser Way back in the end of March (seems so long ago) we hosted a webinar posted here in Bigger Pockets as to how self storage does in recessions.  In the presentation we discussed how self storage has performed historically over the past 4 major recessions going back to 1991.  In each of those recessions, occupancy dropped 1% to 2%, and then rebounded 3% - 5% within a year or two.  This lead me to describe it as "recessionary resistant".  Because we are in the industry, we know operators across the country with A, B, and C class assets.  The reports we hear from our friends is consistent with the historical performance of self storage.

@Joe Splitrock we also discussed the reason we feel self storage tends to be recessionary resistant.  There are the D's - Downsize, Divorce, Death, Displacement.  But why?  That is the reason we were seeking, not the facts but the why.  My experience in almost 30 years of real estate development, design and construction, is this - people resist change.  They don't like change.  Self storage helps college students, businesses, people in urban areas, as well as rural areas in good times as well as bad.  Which is why it was deemed "essential" by the government.  In the times of the (4) D's it is because (in my opinion), it helps avoid pain.  In each of the (4) D's there is major change occurring in peoples lives.  Self storage allows them to having to address one additional tough decision - what do I have to get rid of that has so many memories, value, and meaning.  In difficult times, we long for the better times.  We hope we will be able to use the items we place in storage.

@Jenifer Levini  Do you have to be a developer to make money in self storage?   It helps, but not necessary. The other point we talk about in the webinar was the distinctions for the three classes A, B and C in comparison to stocks.  C - penny stocks (consistent low yield returns), B  Blue Chip - good in up or down economy, and A growth stock, appreciation as well as cash flow.  The challenge is to determine which asset class meets your investment strategy.