All Forum Posts by: Henry Clark

Things starting to move again on project. We are doing the inside of the office, which like a house requires different Trades at different times. Thus this part of the project is a lot of waiting for one Trade to get done, so the next can come in.

Spray Foam Insulation:

We decided to insulate the interior walls for both sound and climate. Went with an Open Cell versus a Closed Cell spray foam. This actually is what slowed progress down. We had to wait for a day that was over 40 degrees. The Truck with the equipment sits outside and the foam won't flow right if near freezing. Decided to do Spray foam since not only does it insulate by the material, but it provides a near 100% air barrier versus Insulation rolls.

Won't get to much into Open versus Closed. We picked Open because it has better Noise insulation. Generally Closed is better, for temperature control, rodent control, Building Structural support, but is more expensive. Ours was applied 3.5 to 4 inches thick. This was a 20 x 30 building. We used the normal manufacturer insulation for the roof. This had 10 foot walls, outside walls and interior walls. Total of 1,500 sq feet. Total applied cost of $2,755.

Provides a nice fit and your not cutting rolled insulation to size. Took about 2 hours to do the whole building.
Second photo shows the spray foam overlapping the roof insulation. If you look at the red or dark metal strip along the edge of the ceiling bottom, this is where we will attach the ceiling. Thus there will be an additional air barrier in the "Attic" for insulation.

Below we use a very small Air conditioner unit and 3 small wall heater units. At our existing location, which is built and insulated in a mirror image, 100 degree days and minus 10 degrees we are very comfortable due to the spray foam insulation. Spray foam may cost more, but we only have about $500 into Heating/Cooling units, which are easily replaced.

We do Self Storage, but take the concept and adapt to your own.  

There are three concepts or thought patterns a New person should adopt to help both themselves and people helping them.  This will help in developing a Focused communication path and prevent asking/answering the same question twice.

A.  Numbers

B.  Contact List.

C.  Checklist

Numbers:

Determine your goals. Deal size, financing, Cash on Cash, IRR, down payment size, Cap rate, etc. Then find or develop a template to estimate your project and compute your costs and measurements. Since your in SFH/MFH, look at Bigger Pocket calculators as a starting point.

Contact List:

Develop a contact list.  Don't worry about "Finding" them right off the bat.  But as you move along your path keep asking for these or recording them.  Bank, property managers, Zoning dept, surveyors, plumbers, electricians, realtors, etc.  Sit down and make a list of types of contacts.

Example:

Name        Company        Skill set       Phone number    Email   

Checklist:

You should add sections like, plumbing, roof, foundation, windows, electric, zoning, permitted, parking, water/sewer, hvac, etc.  This will help both control your thinking and make the project more bit size, (how to eat an Elephant).

@Jim Kittridge

@Steve S.

Jim, feeding off your basic question below:

How do you measure the risk-adjusted returns of a syndication or investment?

All items in the above posts are noted. 

Keeping it simple.

Factor 1 Return: IRR% 15% versus 30%; 30% is always better.

Factor 2 Risk: Unfortunately there is not a similar Bond Rating system or service, showing AAA rating versus cc for REI. Thus it is imperative on the IRR 15% offering to reflect their Risk Aversion (value) versus the 30% to create their Value comparison. Otherwise the 30% will always win. Most investors will always pick the higher return, especially given a better sales pitch. Look at one of the forum posts, where the investors are negative on the syndicator. If you look that syndicator up and see the BBB comments, one investor notes they researched their MFH property after issues came up and the properties around, I forget specifics were in the $80 to $120k range, but the house they bought cost them in the $220k range from the Syndicator.  Another investor notes they paid for upgrades, and when things went south, they noted the upgrades were not performed. Versus getting pictures as they were sending money in to the syndicator.

Also feeding off of Steve S response above.  Not all products are the same.  Steve S mentions a mix of returns from rent and also sale proceeds 5 to 7 years later.  Looking at your company background looks like your average investment turnover is 8 months.  Thus not apples to apples.  But as Steve S mentions, the quicker you get your money back the lower the risk, thus your deal from that standpoint is less riskier.

To me the Value creation for the 15% return investment is the following:

a.  We provide comp rates for similar properties in the area.  On a before and after retro basis.

b.  All upgrades are photo documented/communicated before/after for your review.

c. Our investment holding periods average 8 months versus a 5 year payout. Basically a Fix/Flip, versus a BRRR. Greater liquidity in the "Same" market time period.

Please expand if I misinterpreted the direction of your question.

We do Self Storage, and it can be hard to differentiate value between our competitors and us; since they are both just metal buildings.  We have the same issue as your are noting, Value recognition.

@Bryan Mitchell  thanks for shout out.

@Tyler Hardy

$30,000 an acre isn't to much.  Run your numbers, the difference between $30,000; $20,000; $15,000 per acre over 25 or 30 years isn't much.

Bigger pockets doesnt allow Excel attachments, so I will just past below.  Format might not come across.

CONSIDERATIONS FOR RV OR VEHICLE STORAGE

A. Pull through- The front, pull as far forward as possible, gives the person next to you an easier angle to turn into, from behind you. Align your front with the fronts of all other vehicles. Be courteous and leave enough room on the Driver side, so that RV can open their doors.

B. Back to back parking- our locations are set up at 60 degree parking. Also, they are setup for the driver to back in on their side, so they can use the lot next to them for alignment. This way you only have one blind side on the right side backing in. Otherwise you have two blind sides.

We have 20/30/40 foot parking at our location at 26763 Highway 34, Glenwood, IA. Each size has a different width due to how hard it is to park a longer unit at the very front angle of their turn in. 20’s- 10 wide; 30’s- 12 wide; 40’s- 15 wide. Although you could park an RV in any of these sizes, it is easier with a wider width to make the “front” turn. Or ask for an end parking spot, so you are doing a 90 degree parking, but have the whole drive way to back in with, without a turn.

C. Canopy- same issues as others, depending on if 60 degree or 90 degree parking.

D. Enclosed- Really a matter of width and depth. Keep in mind all measurements for storage are relative. For example: A 10 wide x 20 deep x 8 tall unit, with studs, roll up door and door jambs; is really 9 wide x 19 ft 6 inch deep x 7 ½ foot tall. Also if you have a 20 ft boat or Camper, its really 22/23/24 ft depending on Propeller, bumper or front hitch.

E. Surface- Rock or hard surface (concrete/asphalt); If on rock/asphalt put your tongue leg or stabilizer pads on wider pads to spread the weight out. These pads are needed on Asphalt since in hot weather they will sink into the asphalt.

F. Pest control- we put mouse bait out along the fence lines and under the units, mow excess weeds and grass. You should put both rodent and bug control in your unit. Dispose of all food sources, for long term storage. If you want to be really diligent with pest control, don’t park next to overhead lights. They attract bugs at night and then mice underneath. Put scented drier sheets in all compartments and rooms. Open all cabinets and doors.

G. Stabilizers- if doing long term storage put you stabilizers down. Most parking is in an open area and the units can rock and move with the wind. This will also help with taking pressure off your tires so they last longer.

H. Security- Put a lock on the hitch. Although you are in a secure location, RV’s and trailers are the easiest storage to break into or take without notice. Recommend you put in motion sensors or GPS tracking security. Check your vehicle at least twice a month. Most Security systems only maintain footage for 2 weeks due to camera memory capacity.

I. Propane Fuel Tanks- disconnect and store if leaving for long term storage.

J. Electronic Lifts- disconnect the battery if leaving for long term storage.

K. Insurance- most storage unit insurance policies do not cover vehicles. Keep your insurance, just have them adjust your automobile to fewer miles or just comprehensive coverage. Wind, Flood, tornado, Hail, or third party damage or theft can still occur. Traditional insurance coverage, RV’s normally stay a flat rate throughout the year, thus you will still need to maintain full coverage. Or, if you seek out a specific RV or rec vehicle insurance company, you can move in and out of winterization rates.

L. Pricing- use a 30 foot vehicle as an example:

-In the country about a $1 per foot on rock.

-With Paved access and parking spot, this might run $60 to $90

- Enclosed parking this will cost about $120 to $170 for a 30 foot.

- Enclosed parking for a 50 foot, might cost $225 to $350.

The price extremes are the cost of the concrete/asphalt road and the storage bay. Also the longer the unit the price goes up significantly because it takes more driveway width to park and the type of door changes in both size and type (remote operated). A 50 ft RV will require about a 70 foot wide driveway to back in.

We are only addressing the long term Parking portion of storage. Other items are specific to each vehicle such as water clean out, Tire/window shades, etc.

Quick non Parking list:

Wheel/tire covers; Vehicle cover.

Remove and store your tires.

Store with a full fuel tank to prevent condensation

Add fuel stabilizers

Place RV completely off the ground to prevent flat spots on your tires, if left for a long time.

Cover your HVAC, skylights, vents and windows to prevent exposure to sun and breakdown.

Boats leave your plug out, whether covered or not.

PROJECT ESTIMATION TEMPLATE

Whether I am building or buying a location, I always run the Estimation template to dial in whether I can or should do the project. Each of us will have our own Payback, CAP rates, cash flow models and Tax implications thresholds; I am not covering that. This is a back of the napkin estimation, just on a spreadsheet.

We are in 8 locations and 5 towns; and we have used this approach to determine upfront whether to invest or not. Six of the locations are in towns of less than 5,000. Two of the locations are in a 1mm metro area (630 and 330 units). We will have built 47 buildings once we complete these last two sites.

This project list is for outside Storage and for the locations/cities we have looked at. Own the thought process. Example: HVAC, Fire Sprinklers, Facade, frost free footings, Storm retention ponds, road type, fire hydrants, etc. These and others, are the items that will hurt you, if you don’t own your knowledge. This spreadsheet is not all encompassing. For example on this project, I was “done with the spreadsheet”. I missed that there is a “Wet” spot in the middle. We will need to put in a $30,000 drain tile not reflected in my estimate. Still learning. You might want to put a SWAG factor (5%) in, up front.

Fill in the green areas. For the building quote, get one in your local area. This should represent the Building material, concrete base, and erection all delivered on site.

Side notes:

A. You can also use this template in reverse without knowing your site. Leave the “Land” amount blank and plug numbers in. This will give you a range of how much you can pay for the Land.

B. How many buildings should you build Phase One? I always have my first set of buildings pay off all of the land, fencing, initial ground/electrical/plumbing work. We use a 65% break even factor. This is a Cash flow estimate of how many of the units need to be filled to cover all expenses (except Depreciation) plus Principal/Interest payments. Although this is a little Chicken and Egg, or Circular logic. If you need 150 units to pay these costs, then add 80 more units for a total of 230. 230= 150 divided by 65%. Your building/road layout might dictate you build 240 or 204, then that is what you build. We never want to build just enough units (65%). The most depressing (counter intuitive) time for a storage owner is when you hit 90%; you have to decide if you build another building.

C. Phase 2, you will find your break even is around 35%. This is where the money starts to roll and your occupancy rate risk starts to decline.

See spreadsheet on our website (ClarkstorageLLC). Where ever it says spreadsheet, then hit the open button at the bottom. Change it and adapt it to your needs.

Again, don’t Trust anything I tell or give you. Own your info and data. Anything in the Storage Business can be validated. 

Start small and make your big mistakes early.

Always pay your own insurance and property taxes.  Makes no business sense for him to pay. Especially for that small

Every year not only do you need proof of insurance but you need a copy showing you listed as “additional insured”. If someone slips and breaks their leg they will come after you and not him. His insurance lawyers will not represent you.  You will have to hire legal counsel.  Settle “cash out of your pocket” then approach his insurance. $1,800 insurance fees doesn’t cover much legal fees or anxiety. Two years later.  

No sense for him to pay insurance or just in case property taxes. 

Always pay your own insurance and property taxes.  Makes no business sense for him to pay. Especially for that small

Every year not only do you need proof of insurance but you need a copy showing you listed as “additional insured”. If someone slips and breaks their leg they will come after you and not him. His insurance lawyers will not represent you.  You will have to hire legal counsel.  Settle “cash out of your pocket” then approach his insurance. $1,800 insurance fees doesn’t cover much legal fees or anxiety. Two years later.  

No sense for him to pay insurance or just in case property taxes. 

1.  Ask them all what their loan cap rate is. If it is say $1.3mm and you will go over it in the next few years don’t go with them.  Even if they outsource part of the loans. 

2.  @Jill F.

Mentioned. Best to stay with one bank for cross collateralizarion and you want them to know you

3.  Ask for lower rate.  If you have cds or Mma at another bank move to this bank.  Build the relationship and they can use this to lower your rates if they can tie them down at this bank. 

4.  Don’t go with a large bank.  That bank officer will be fine in two years

5.  If your building will have a rental component to it.  Ask for interest only till filled or for 18 months. This won’t help your interest rate but will your cash flow up front. 

6.  350 basis points somethings wrong.    Go back and clarify.  No banks are that far off.  There is a piece of info missing. 

@Account Closed

Look up my post on cargo containers 

Omaha and San Antonio 20 foot $3,100 and 40 foot $3,900. They have gone up since last year from $2,100 and $2,800 due to less shipping from China.  

Delivered 30 miles $120 for two 20’s  

Insure as personal property.  They are not covered as buildings. 

Write off in year one

Not attachedntonground so no property tax  

Use trailer roof paint  silver.  This will drop the temp by 20 to 30 degrees.  Also stacking side by side reduces temp.  If on dirt lay and level 4 inches of limestone at the front and back to keep off ground.  Don’t put on asphalt without putting some plates underneath the footings.

Financing as noted above.  You can also try a sales leaseback agreement. Terms won’t be as good as straight finance.

If your down South leave space between some and put mounted canopy between for parking storage  

Read rest of my post.

Just got our latest estimate for our Phase 2 of a location. This is for your normal drive up units. Last fall Phase 1 we were $3,200 erected for 10 x 15 or 10 x 20. This was contracted around February of last year. Latest quote is $4,000 per unit erected.

Steel for buildings, rebar steel and Concrete caused the increase. Erection cost didn't change that much. This is for 7 buildings. About 198 units.  About $150,000 increase on the project for the erected buildings.

Still moving ahead, since the project "numbers" only work with the whole site completed. Our builder is actually going to buy the Steel rebar now versus in 3 months, and store. He does other Steel work and thinks both the price and Availability will get out of reach.  I agree with him.  I think there will be a Choke point on the West coast Cargo Ship ports as the economy plays catchup from last year.  Steel will have to battle, staplers, lawn mowers and plastic tubs, to get on a ship and get unloaded and distributed.

This is a solid location from both a Customer and a competition standpoint, so we can take on the additional costs.  A weaker location, would have to do some re-calculations.

If you have used historical data on a project you are running the numbers on, you might re-do the figures and challenge them.

"Start small and Make Your Big Mistakes Early."  You will still get Whacked sometimes even when you have learned a lot, but you can absorb it, when your bigger.

@Michael Kim

Recommend you put more thought and description into the type of CRE. This will help both you and the realtor to focus.

Retail store fronts, offices, Medical complexes, Storage, Truckstops, Parking lots, bowling alley, Governmental, contractor buildings, etc.  Narrow down your investment search.  Would also narrow down a geographic location.  

Be able to understand this situation. Given the same Dollar investment, same ROI, same Cap rate, etc. Why would you pick location A over B? Future value growth, stable market areas (college, government, airports, hospitals, etc). More square footage, more parking, better road access, next to anchor businesses that compliment yours.

Define the above to help you and your realtor narrow your focus.

Don't recommend you approach this from a purely financial Target standpoint and end up with a mixed bag of investments, unless that is part of your investment strategy.