All Forum Posts by: Henry Clark

@Caleb Haynes

You must like Roses, Patrick Mahomes or Earl Campbell.

Get back to basics.  

1. What are your financial goals on a deal? Minimum $size, Monthly payment, appreciation, Rate of return, type of investment grade A/B/C/D, BRRR, Fix/Flip, make some money, how much are you willing to "lose?", etc.

2.  Realize data systems can be dirty, but one of the Realty search engines, notes 314 properties in Tyler, Texas on the market longer than 30 days.  There's a deal and money to be made, on properties that are for sale.

3.  Your getting beat to the punch.  Go after properties that aren't for sale.  Offer them a "Solution", don't make it about buying their house.  Use your GIS or property tax map, drive the town and look for your candidates.  Call them and their kids.  Come up with a brochure of solutions. 

4.  Develop or build a house, versus looking to buy.  Part of the rise in housing and everything else rising, is material costs have skyrocketed and availability of material is becoming an issue.  Sell prior to completion, at rough out stage.  Keep in mind Developing has the greatest potential for both Profit and loss.  The main issue is the time from starting a project to selling.  Interest rates and demand are locked in for the next ?? months.  Pick a product you can deliver under that time frame.  This takes out the majority of the financial downside to being a developer.  Pick a cookie cutter product, you can replicate and sale easily.

5.  Key is re-evaluate your approach.  The below is "you", correct.  If chemical reactions aren't working for you, try other chemicals or a different approach.  

Chemistry enthusiast looking to grow and discover new things every day.

You already have the skill set to to evaluate 1 thru 4 above, even though this is real estate and not Chemistry.  Don't worry how or why other people are making deals. Define 1 above and seek out deals that fit your targets.  For example: If a person bought a home in California for $200,000 and is now selling it for $1,800,000 and want to do a 1031 exchange and have only 90 days to do that; they will pay more than you are willing to pay.  Don't worry about them.

Direction:  Look at a  listing of the Tyler properties that have been on the market longer than 30 days.  There is no way you can't find a deal that won't make $30,000 in the next 6 months.

Need more particulars, but will throw out some ideas.

1.  Don't buy the business, buy the assets.  Again don't have enough info from above.

2.  Cost Segregation, from 1 above.  Buy the assets by type.  This will provide more support to any IRS review.  See my post on cost segregation.  Roads and parking can be written off in year 1, etc.

3.  Add in a noncompete agreement.  Try to lower value put to land or building.  Noncompete can be expensed sooner.  Depending on Seller's tax positions, they won't or will go for this.  This will also help on any property tax challenges, to lower value.

4.  See if they want to do a 1031 exchange for another piece of property and be flexible on Closing date.  Put in place a deposit/1st right of refusal structure, so deal doesn't walk away from you.  This helps them out.  Offset that with larger Seller financing or more years before balloon payment, or lower interest rate.

5.  Are there any repairs or major upgrades that need done?  Have them done as part of the deal, so you can roll into long term financing, versus paying cash once you take possession.

6.  Lien position.  Ask the seller to take a lien position or other collateralization, than the building.  This will free up the asset for any future re-financing with a bank.  If the Seller has first position, a bank won't take a second position.  Thus you can't use this asset to collateralize another deal.

7.  Contact Blue Street Capital at Huntington Beach, CA, tell them Henry Clark from Iowa/Nebraska said hello.  Ask them to review your situation and run some numbers for you on a Lease option.  This long  term will cost you more than a straight up purchase, but don't know your financial objectives or collateral/expansion position.  Again, don't know Asset type from the above.

Before getting complicated, go to your county or city Treasurers office and tell them your question and situation.  Make sure there is an issue, before looking for a solution.

Gifting will create a tax event, and you will need cash to pay the taxes.

@Weina Shi

Self storage is very location specific within 1 to 5 miles.

1.  Check with your zoning department and see if Light industrial allows self storage, if you will need to get a Special Use or Variance approval.  What other zones allow storage.  This will answer any "assumption" on expanding if allowed or not.

2.  Same as Zach Quick mentioned.  Expand as you need it.  So if your at 90% occupancy and the next "run" of buildings adds another 50 units, then do it.  Don't build to the extra 500.

3.  Assessing Market:

3a.  How many units are in the area, within 3 miles?

3b.  What is the population in the area.  Use a market rate of 6 units per 100 population (don't trust me, you need to validate this).  

3c.  Example analysis:  Use your town of Wellesly, MA.  28,700 population;  Then potential is 28,700/100 * 6= 1,722 just for the city.  Lets say there is no storage outside the city, but there is an additional 5,000 people nearby, then another 300 unit market.  Total market of 2,000 units.  Now go count the number of units.  1.  Lets there are 2,500 units in total; but they are on the West side of town and your location and most of the population is on the East side of town, then great.  2.  Lets say there are 1,500 units, compared to the 2,000 potential.  Great, both build more and raise the prices.  Make sure you are in a good location and can't be out positioned as in "1" above. 

4.  If 3c, says not to build, then see if zoning allows you to do parking space rental.

Call Ponderosa Insurance:  David Gonzalez 8663033990 x544304.  Give him some rough numbers.  They only do Self storage insurance, thus their rates are lower and they are specific to self storage coverage (example Auction coverage).  They also offer customer insurance, so you kill two birds with one insurance company.

What we have used.  Not making an outright recommendation, but have used them for about 7 years and they have been great on coverage and rates.  Check out other Self Storage specific insurers also.  Get one that can be tied into your Operations software, and not maintained on a side system.

@Greg Page

Please read notes above. Before you do to much investigation. Take some stakes and strings and a semi with trailer.  Lay out your operation and get the feel for it.  Think your minimum size will be 10 acres or more.  

Go with 30 wide buildings.  Offer a mixture of 20/15/10 units.  Never go with one size.  Run your numbers and you will see self storage is the the better investment.  If you can find land for $10,000 to $30,000 per acre and a minimum of 4 acres or more, then do parking there.  Go with a mix of 20/30/40 foot spaces. Don't do 50 foot for Class A, there aren't enough of them and they will want enclosed.  

If your within 20 miles or a larger metro area, offer Semi and Trailer parking.  Great demand for this.  But again you will need even more ground, 10 acres or more and you have to have hard surface.  Rock probably won't cut it.

Please take the following logic and adjust to the land and your market.

Is land square, rectangle, or odd shaped.  Are the existing buildings put off to the side or in the middle of the property?

Lets say you have a rectangle and the existing units are to the side, allowing full use of the remaining property.

Option 1:  2 acres, you should be able to put about 120 storage units on it.  You have 40.  Thus another 80 at $4,000 per unit at current market erected prices.

80 units at $320,000.  Add in road, excavation, electric, security, etc.

80 units revenue at say $80.  $6,400 per month at 90%= $69,000  annual.

Option 2:  Add about 1 acre of parking.  Lets say rock surface.  About $15,000 grading and rock.  Assign some land cost to this.

Say 30 to 40 foot units, then about 50 parking spots at say $45 average.  At 70% average occupancy.  $19,000 annually.

Update the figures to your market and situation.  You will find there is a great demand for parking, but it doesn't pay very well; unless you find some very cheap ground that already has rock or concrete paving on it.  Also check your zoning first, to see if they allow dirt or rock surfaces.

You will also find that RV's are the worst when it comes to break in and theft.  So have a good security system set up.  Offer them a wireless alarm system such as Asset Angel.  I just purchased one and am about to try out.

If your near 100%, would recommend the following moves:

1.  Raise rents, you already noted.

2.  New customers, make them all do Autopay only.  Slowly move all of your customers to autopay.

3.  Trouble customers, increase their rents even more, and force them to move to autopay if currently cash.  Basically get rid of them.  This will allow you to scale without investing more time into collections.

4.  Go to all of the local competitors and offer to buy them.  Keep checking with them every 6 months.  This does two things.  It bundles locations, and makes your properties worth more than individually.  Plus you control the rent rates when you start to get to 60 to 70% of the market.

@Jeff Gardner

Look up my post in the Commercial section or in the members blog.  What happens if you die?

To your base question.  Why so many tax returns, insurance policies, etc?

If you get sued, it will be in the state where the property is. Having an LLC in that state versus your home state won't lend anymore liability avoidance. This is where your insurance coverage would kick in. It will be cheaper to cover all properties under one policy than one by state.

The first question should be how big do you plan to get and how many states?  Recommend to keep it simple, unless you plan to get to some critical mass level in each state, and there is a specific benefit you are looking for.

Either way, keep on growing.  Success breeds decisions.