Self Storage- Making an offer on land

[Henry Clark]

We operate in a 40 mile radius from our house. Anything is fair game within that driving radius. We have been really hammering one town trying to expand there and looking at all potential properties with a realtor there. There are several properties that either are zoned correctly or would need rezoning, but priced out of our range, so hadn't made any offers yet, there. We really "NEED" to buy in this town, but since we operate in a radius we can offset with other market areas. Then this offer in a different town came up.

New listing $1,400,000 for 5 acres.  Middle of city, shovel ready with electric/water/sewer/roads/entrances, etc.  Very little competition within 3 mile radius.  Very little land available for proper zoning or pricing.

Realtor/Owner of property offered to us at $900,000.  His partner is in financial duress.  We have bought through this realtor before.

I selected a Buyers broker to represent me, versus working with the Owner/Realtor to buy his ground.  I will pay a Buyers commission.

Looked at similar pricing with my broker in the area and determined their $900,000 was a fair price, but not a "duress" price.  We weren't really looking in this area, so made "Final Offer" of $800,000 for the property.  

By working within a territory versus a specific town/city, we are able to take ourselves out of "NEEDING" to make a deal.

This in turns allows us to "WALK Away" from an offer, thus we can make a "FINAL OFFER"; knowing the Seller will accept or we are okay walking away.  

This is another reason we like Self Storage.  Whether buying land to develop, buying existing Storage locations, reduce risk of over inventory of storage units in one market, TIME waiting for either land or a location to become available for sale, while we are trying to grow our business.

Start small and MAKE YOUR BIG MISTAKES EARLY. 

Also, be prepared to WALK AWAY from a deal.

[Zack Gill]

Any further developments on this project mr Henry?!

[Henry Clark]

@Zach Gill

No changes on this property as far as itself.  The Interstate and exchanges around it have been completed, making this more accessible, thus inherent value has gone up.  We bought this since a realtor we knew approached us, we didn't seek it out.  But due to location/location/location and price, decided to buy it as an investment, plus the potential Self Storage development there.

We don't actually pick one town or one property and zone in on it.  Wherever the best outcome and reduced risk is where we move forward.  For example, we have several properties we are either sitting on, or letting percolate: A.  This 5-acre great location., B.  75-acre country subdivision working its way thru engineering and Subdivision approval, should start selling lots this fall, C.  4 acres we divided off from our 4-acre storage location.  Have planned to do Flex buildings for the last 5 years but have always had other projects with greater returns and less risk.  5.  Actually, looking at some new land, possibly making an offer, to develop a new self-storage location.  Market is great and risk is low.  Our banker who has done a Self-Storage deal with us before.  Took him thru the Market analysis and he is excited.  Talking with him on Thursday.  He has already given us a preliminary Loan Term sheet.  Looks like a boring Corn field in the middle of nowhere.  But great location next to "A" market. 

My big concern is not the above deals but being caught in the middle if any future Black Swan events.  The Feds just lowered rates by the .5% which looks great, but I view that as creating massive Inflation by the end of next year if they keep it up into 2025, which creates issues.  They had to do it, otherwise many banks and commercial customers are at the point of refinancing and the Government itself is at a strategic debt refinance point; thus, if they didn't lower rates, it would have been a catastrophe short term.  Versus inevitable high inflation in a year.

If you're going to do a deal, I would do it in the next 12 months.