Self Storage- 10 days to Closing

[Henry Clark]

10 days to Close on Land

Helping a friend out purchasing some property and then building storage units on it. Not closed yet, so I won't show you location and Market analysis first. Below is the Layout/Unit analysis, Cost analysis, and then PL and payback analysis. Have 10 days till close.
Our survey has yet to be completed, although we have the dimensions from the prior survey. For a building permit you have to have a recent survey. When we get the survey done, they will be able to lay out the roads and buildings so we can be precise. We are also a little behind in the analysis because we got "stuck" when we went to manually measure the property. The West line which should be 289 feet, kept coming up 200 feet, even though we measured it 4 times with a Roller Wheel and a 300 foot tape. The wood fence was built in the wrong place on the West side, correct on the East side. Survey showed a perfect rectangle, but the fence was at an angle. Always Survey.
Got past that, now we still need to resolve the highway set back. This is in a "Housing Authority" district, not a Subdivision. Their setback says 15 foot all around for Electrical, which is what the county requires, but along the frontage road they require 50 foot, because they thought that is what the county requires. Checked with County and they have no setback rules, other than electrical 15 foot. We have a request in to move the Highway setback from 50 foot to 25 foot so we get more space to build on. Thus we are doing two sets of layouts and financial analysis just on the "Fewest" unit layout.
Dimensions: West 289 feet/North 465 feet/ East 188feet, then curve at entrance of 141 feet/ South 373 feet. The North and South sides are both 465feet except for the "Housing Subdivision)" entrance has a curve on our East and South side. We are at the entrance to a large Housing area. No Zoning in the county. You can build Storage anywhere. Which makes for a dangerous investment.
This property has an existing Steel building, which we will rent out, but we have to build around. Normally we would build in phases, but the site layout, quantity of units and our market analysis, we decided to build the whole location at once.
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50 foot setback on Highway side. 

Spreadsheet did not copy the columns to proper spacing. Distances across will be 50/40/25/30/25/30/25/40/24. The 40/30/30/40 are the building widths. With this layout, we did not get our Office as a standalone building. Will have to figure out. This results in 196 units. 196 units will the units we use for the financial analysis.

			New Location Layout
			50 foot setback on Highway side
			West
Highway side										15 electrical
						Short				Short				289
50	40	25	30	25	30	25	40	0	0	24				289
	50								50
	bldg		bldg		bldg		bldg		no bldg
	2 sides		2 sides		2 sides		2 sides
					200		200
											Units Possible:
	270		310						0		54	62	40	40	0
	50														196
									No Office						Units
					Existing building										Possible
								Entrance
								50 ft in
	370								50
	373		East
		100						188
									100
									464

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25 foot setback on Highway side. 

Spreadsheet did not copy the columns to proper spacing. Distances across will be 25/30/25/30/25/30/25/30/15. The 30/30/30/30/30 are the building widths. With this layout, we do get our Office as a standalone building. This results in 260 units. Did not do the Financial analysis since the previous model turned out satisfactory. More units will only make it better.

			New Locaiton Layout
			25 Foot setback allowed on South
			West
Highway side
										Short				289
25	30	25	30	25	30	25	30	25	30	15				290
	50								50
	bldg		bldg		bldg		bldg		bldg
	2 sides		2 sides		2 sides		2 sides		2 sides
					200		200
											Units possible:
	270		310						320		54	62	40	40	64
	50														260
									Office						Units
					Existing building				30 by 30						Possible
									40		40 is office and 10 ft space
											between storage bldg and office
								Entrance
								50 ft in
	370								50
	373		East
		100						188
									460
									464

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Cost Analysis on 196 Units with 50 foot set back along Highway.

Rough cost comes in at $1,200,000. This includes the pre-existing building, which is about $100,000 3,200 sq ft. Soft numbers are the Office cost. To make into a living space. Fence we don't have a quote on yet. Not included is a lot of sweat equity taking out about 30 oak trees. Luckily sandy soil.

This is an example, for discussion only.
A. Project Cost estimate from ground up.
B. P/L revenue stream
C. Valuation Buy/Sell
Adjust all of the above to your local market and situation.
	A. Self Storage Project Worksheet
	Drive up Storage
			Notes:
Land	$310,000		3 acres
Survey	$3,000		Site, elevation and building layout
Fence	$20,000		Black rectangle
Gate system	$30,000		Automated rolling 20ft
Engineer	$		if needed; $30,000 to $60,000
Dirt work	$10,000		Slight roll, no dirt brought on site
Building demo	$		if needed, $15,000 to $60,000
Electrical- site	$20,000		building lighting and office if needed, LED.
Electric poles	$		if needed; $2,000 per pole. First is free if nearby.
Security	$20,000
Storm drains	$		if needed; $50,000 to $150,000
Water	$5,000		if needed; $5,000 just plumbing
Water line	$		?? if an extension could be $10,000 up to $150,000
Fire Hydrant	$		if needed, $3,000
Sewer	$1,000		if needed: $5,000 plumbing
Sewer Line	$		if needed; $10,000 up to ????
Buildings	$627,200		Phase 1					196	3200	cost per unit
Office	$50,000		if needed, plain storage unit 20x30; $25,000 insulated.
Office setup	$5,000		if needed, $5,000- computers, printers, HVAC, frig, cabinets, etc
Footings	$		if needed. ??????
Roads
Gravel	$		if needed, ?????
Asphalt	$80,000		rolled chip seal
Concrete	$3,000		6 inch Cubic yards, framed, poured, sawn,
Retention Pond	$		if needed, part of dirt work cost, less land for buildings
Landscaping	$		I like trees and bushes. Less sterile
Road Sign	$15,000		For highway 55mph billboard sign
Total	$1,199,200

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P/L and Payback Analysis:

This is based on the 196 units and a 50 foot setback on the Highway side. If we get the approval to just do a 25 foot setback, the units will increase to 260 units and we get the live in Office building.

This is an example, for discussion only.
Adjust to local estimates
				Green change or fill in.
		Combination PL/Cash flow
		Intentionally leaving out Depreciation and Taxes
	Annual		Notes:
Revenue:
Gross	$148,176	196	@ 90%, after rent up period
Contractor	$21,600		Bldg rental at 90%; $2,000 per month
Late fees	$0		as needed
		$169,776
Electricity	$2,400
Water	$1,000
Sewer	$1,000
Grass	$0
snow removal	$0		as needed
manager	$0		as needed, I do self service by phone; do you pay yourself.
maintenance	$3,000
Insurance	$4,000		Property/Liability
Property Tax	$40,000		use local
Loan P/I	$75,000		Bank do 20 year amort, adjust based LTV 10%/15/25/40/etc.			$1,069,200	Use $130,000 downpayment
Depreciation			left blank for Cash analysis			20	loan amort period
						53460	Principal/yr
Cash pymts		$126,400				0.03	Int rate
						$32,076	Annual interest
Pre tax		$43,376				$85,536
Tax		$13,013	as needed, adjust Loan P/I for Depreciation expense			75000	Use for Amort figure
Net cash		$30,363	Less P/I and income taxes
		Payback:
Total Cost:		$1,199,200
Less Equity infusion:		$119,920		10/15/25/40%
Net loan position		$1,079,280
Annual cash flow		$105,363
Payback years:		10.2
Financial Objectives:
Change calc/terminology etc to your objectives. Example: cap rate, COC, etc.
I normally shoot for an 8 to 12 year payback, with a 20 year loan amortization.
This is based on the location/deal on hand. Any improvements in performance on top of that will be gravy.
Phase 2 is where you make your real money. I always have phase 1 pay off
the land, fence, Electrical, sewer, grading, etc.; here we are building out the entire project.
How many phases or units should you build to start?
You can always build more buildings. I always shoot for 65% occupancy covers all initial costs for Phase1.
In this example, we are building the full location out. Due to financing and market assessment.

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Financial Objectives:       

Change calc/terminology etc to your objectives. Example: cap rate, COC, etc.        I normally shoot for an 8 to 12 year payback, with a 20 year loan amortization.        This is based on the location/deal on hand. Any improvements in performance on top of that will be gravy.        Phase 2 is where you make your real money. I always have phase 1 pay off        the land, fence, Electrical, sewer, grading, etc.; here we are building out the entire project.        How many phases or units should you build to start?        You can always build more buildings. I always shoot for 65% occupancy covers all initial costs for Phase1.        In this example, we are building the full location out. Due to financing and market assessment.       
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LAST things to check on:

A. Survey and then layout of buildings/roads. B. Approval on 25 or 50 foot highway setback. C. Since the North Fence was in the wrong location, we have to check with the North neighbors and explain. Then make sure there is nothing in our property line from their house such as Septic tanks or drain fields.
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Summary:

Again, since this is not closed, not walking you through the property search, marketing analysis or Deal structure until closed.
Our target level is a Payback of 8 to 12 years. This hits 10.2 years with the fewer units. We are achieving some other targets, making this a sweeter deal, but won't go into them until later.
Other metrics. $30,000 additional cash flow above P/I. This comes from seeking an 8 to 12 year payback, but a loan on 20 year amortization. This extra cash can be used to pay off earlier, cover any marketing short falls, Cost over runs, or Competitor pricing issues.
Cash on Cash: We will put down $120,000. Cost basis of project will be a $1,200,000 project. Pays for itself, plus additional $30,000 cash stream. Cash stream NPV of $105,000 including Principal/Interest, for 30 years, using 5% IRR= $1,614,000 as of start. Thus $414,000/$120,000= 345% before tax impact. If sold.
Sounds great, logic is good. But we haven't rented a unit yet. That's why I am always happiest when we hit our 65% occupancy breakeven.

Start small and Make Your Big Mistakes Early.