Self Storage- Deal 6, Choo Choo

Start Small and make your big mistakes Early.

Deal breakers- market, finance, zoning, footings, road type, water/sewer availability, Storm sewers, Storm retention ponds, over Analyzing, too Greedy. Everything else you can mess up and not get too hammered.

I almost wanted to give up on this deal.

Setup:

A. Town I used to work in. Right size, right distance, right community.

B. I always like to approach a new town by doing both a "Buy" and a "Build" search at the same time. See the Broad discussion on Financing Discussion I posted. I like to "Buy" because it takes out some competition and leads me further towards "Price" control. I like "Build" because most small town storage locations are built there for the owners convenience versus the customers. Thus I can out position them to the customers. Also the harder it is for me to find a piece of ground (right size, right price, right zoning, right location) the harder it is for competition to come in. Our investment is safer from "Stupid" money.

C. Buy- Fellow had a 90 unit location, House, and a metal building. Wanted $1mm. Great location on the main drive from one end of the town. Right on the road. 90 units I could see around $350k. Had a little extra land for maybe 40 more units. House around $225k, but I wanted no part of an old house. Metal Building maybe $60k, he wanted to keep renting, he was running some sort of part time cigarette or E Cig business out of. On that end of town, all of the correctly zoned properties for storage were already filled, so no future competition from that end. I just couldn't figure a way to get close to his number and also not buy the House. He was stuck on the $1mm because he was a contractor and had bills to pay. Which means nothing to me. Took a pass since we were not even close.

D. Build- When I used to work here, I drove past a piece of land and had known it for 20 years. Looked up on the local GIS map and found out it was owned by the Railroad. I thought someone else owned it, because they always had some pet animals on it.

1. 3 Acres, triangle shape.

2. Next to railroad

3. Between the major street and the two largest employers

4. Slight roll to the property.

5. Prior to the Survey, I was able to gauge the property based on the GIS property line map, compared to the housed across the street. Figure out how many units we could build.

6. Had a large dirt pile on it and someone had dug some dirt from the entrance, leveling the entrance.

7. 50% of all the storage for the town was in a location 4 miles out of town on a highway all by itself. I could out position them, by being in town.

Talked with the Railroad. The property was for sale (see my Discussion on "Zoning- I 3 right?". It was zoned residential, but the Railroad due to potential future lawsuits, required a covenant that no human habitation (housing, daycare, schools, etc) could be built on it. Across the road was industrial. On our side was all residential. Made an offer subject to re-zoning.

Started the re-zoning process. Had to tell the city this partial was adjacent to Industrial thus it was not "Spot" zoning. Would never be used for any residential purpose per the covenants, thus their zoning would not work. Also instead of $0 per year in property taxes (railroads don't pay property taxes); I would be paying about $7,000.

Two people kept showing up at the zoning meetings against my project. One was a neighbor who lived across the road and had 4 rental houses there. The other I found out was the local dirt contractor, whose dirt was the pile.

The dirt contractor tried to go behind me and make a deal with the Railroad to buy the land. He owns the property next to it. I wanted to know how a professional dirt contractor didn't know he didn't own the land. You can see it on the GIS map. His tax record said 6 acres, not 9. Again, he's a dirt guy and can "see" acres. I can.

Now things start to unravel.

I come down on a Saturday to spray weeds and find 3 dump trucks and an excavator hauling and digging dirt off the property, which I have an outstanding offer on, subject to zoning.

I blocked the drive access. Ask him what is he doing. He says he is taking his dirt. I had bought "as is". Call the cops to stop him. He has a letter from the railroad saying he can take "his" dirt. I have a letter showing I have an offer on the land. The officer says he can't do anything about it, since it is a legal matter.

The Railroad person is unavailable on a Saturday. I proceed to call and message every number and email, I can find at their corporate office. The dirt guy keeps hauling dirt off thru Sunday.

The railroad guy gets in Monday and is floored by all of the corporate offices at some pretty high levels that have reached out to them with my 800 pound gorilla story of them. Does not even apologize. His boss wants to know how much dirt was taken that was potentially mine. I asked, if the Dirt guy didn't even know what was his property, how could you trust him to know what "his" dirt was. I could tell he took about 6 extra feet of dirt off, because he wanted the "black" soil which is worth more than just fill dirt.

I said he took about 100 extra loads, at $100 each and thus they were going to reduce the price by $10,000. I said no, you have to haul dirt back, compact back it and delay my project. They said take it or leave it. So I took it.

Deal closes. I then do my survey. Find out the GIS map, is off by about 30 feet unfavorable to me, on the fat side of the Triangle shaped property. Entrance is at the tip of the triangle. My 150 unit project, just went down to 110 units. Self Storage and Triangle shaped properties don't go together.

We filled up in 6 months. Built another smaller building and it filled up in 2 months this covid year.

Did not turn out as profitable as I wanted, but the market was good.

Deal Breakers- I'll have to add to the list above. Until you own it, you don't own it. Until you survey it, you don't "know" the acres. And back to First Grade, I now love Rectangles and Squares; far more than triangles and circles.