All Forum Posts by: Henry Clark

@Christopher Porter

Read my post, "Will they come?", to view your market.

Here is a tool to quickly analyze a potential Storage location or to analyze the strength or weakness of an existing location.

Your going to do the following excercise using Sparefoot and then Googling Self storage for a particular city.

Lets use Roanoke, VA; just because I just did that one for someone else.

Pull up Sparefoot for Roanoke, VA; then click on the Map in the upper left. As you move around to an area storage locations will pop up. Your looking for where storage locations are and are not. Then look at where the people are, based on the increased road marks.

Then Google "Self Storge Roanoke, VA". Do the exact same thing. Not all locations, sometimes only half use Sparefoot, thus we are doing Google, because most have a website. Sparefoot gives you pricing to do price studies.

See the large spot where there are few if any storage locations?  But there are tons of people.  Now go read my "Zoning, I3 right?" post.  And then go find a spot.  To either buy or build.  If I lived near there, I would pursue buying all of the locations and building about 3 more locations.

A.  There is not a town in the United States, that does not need more storage, or "you" can't competitively build more storage there.  Mom/Pop model.  One town we are in, we are waiting for some land next to us to be offered for sale to us by the contractor who I have talked with, they don't need it all for their purposes.  The major storage location is 4 miles out of town.  We out position them.  Sounds like aerial combat strategy.

B.  The reason I said the next 10 years.  Most Mom/Pop is owned by Baby Boomers.  I'm 60 and at the tail end of the Baby boomers;  and the chance my son takes over by the time I'm 70 is pretty low.  All of those locations will need to be sold in the next 10 years.  Never been a better time to get into the Storage business.  I would recommend you pick one area covering 40 miles (drive time); and get to know all of those owners.  And visit with them once a year.  Give them a way "out".  Buy out.  Seller finance (better return for them).  Management agreement with first right of refusal. Etc.

See our website youtube on Self Service.  Hook up with a local realty office to handle for you, if you move.

We do Self Storage development which might cover 18 months.  Use our local State Farm agent.  Relatively inexpensive.  Talk with your insurance company.  Might be cheaper out there, but I know them already and it only costs a couple $xxx bucks on a $1.5mm project.   Don't want to spend my time on a $400 expense, trying to save $100.

If your in Real Estate, talk with your team.

Second talk with your bank.  You should have a history with them.

Do a construction type loan, so you can roll the $15k upgrade into the loan, so you don't have to put cash in.  Then give tenant one month notice.

Quick answer:

Hire an Attorney who specializes in Trusts.  Not a regular attorney. Don't do the LLC yet. The Trust attorney will want all assets and accounts, under the Trust name. Also a bucket trust. Throw the "will" away, because you have enough assets to justify a trust. You don't want your estate to go through Probate because of a "will" and be tied up.

Long Answer:

All bank accounts, safety boxes, etc. Should have POD, payable on death to your brother.  Lawyer will have a long checklist of things that need to be re-named to the Trust.

Assign legal and medical power of attorney to your brother.

Assign End of Life to your brother.

Marriage- prenup definitely.  You can always adjust your Trust.  Also depends on the state.  

Your Trust Attorney will go through all of these.

Simple Answer #1:

Your time frame of interest should be your loan payoff or amortization period.  Lets say 20 years.

Self Storage will be a great investment for the next 30 years, at least.  There is really only 1 dynamic that can change that.

Simple Answer #2:

You could go broke in 2 years.

Lets narrow the discussion down just to "you."

What is the nearest town you live in?  I don't know where you live, but that is a great place to invest.

What is your financing mechanism?  SBA 10% down, SBA 20%, conventional 25%, Conv 35%, Conv 40%, owner financed.

How much money or collateral do you have?  Say $50,000;  don't really need to know, this dictates your search/investment process focus.

Size of investment you can do:  With $50,000 at 10% then $500,000 total project; 20% then $250,000.

Are you a financial investor or a entrepreneur business owner?

How much have you invested into learning Self Storage to this point?

There are two business models and two product offerings:

A.  Class A or institutional- 

Business model- 300 units or more, usually Climate Controlled, multi story, on site manager, higher land cost, higher population center, great SEO power, well financed and managed, newer REITS/corporations.  Project size- $2,000,000 and up. 

Product- Climate controlled, generally smaller units to make more $/sqft efficiency, elevator or cart, higher priced.

B.  Other-  

Business model- this is the greatest number of locations, not necessarily units or sq ft in the US, normally less than 300 units, lower land cost, anywhere, family owned, single location owners, lower to nonexistent SEO power, Project size- normally less than $1,000,000; usually underfinanced and managed, older owners. 

Product- managed, unmanaged onsite, security, no security, drive up, lower priced. 

Both of the models can exist within 10 foot of each other.  Both can be successful.  One can be unsuccessful and the other can be successful.  Your serving two totally different price points and products.

There has never been a better time to invest, than the next 10 years.  And I'm not selling you anything.

Start small and Make Your Big Mistakes Early.

@Chris Gossett

Might not have followed the above correctly.

a.  Did you do a down payment on the original loan? Example:  If you did not do a Down payment on the original loan and then turn around and have to do a 25% down, you may not be able to refi and pull cash out, even with appreciation.

b.  You could go for an SBA loan 10% and refi out cash.  But then it is almost impossible to pull cash out in the future with the SBA.  Plus you couldn't use any appreciation as collateral for another deal, unless it was with the SBA.

c.  Interest rate.  We currently are looking a fixed 2.66% on an SBA 20 year amort loan; 10% down.  But the participating bank, is on a 10 year fixed, then switch to a normal 5 year refi, on a 20 year amort.  Texas- we are looking at financing in Texas and the four banks we have talked with are way off.  They wanted 35 to 40% down.  SBA, they wanted 20% down versus 10%.  I can get 25% all day in Iowa and SBA 10%, but the collateralized asset is in Texas, thus looking there first for financing.  

d.  4% versus 2.66%, is worth refinancing, but you are having commercial appraisals at $2,500.  Refinance charges.  Is this without down payment, and then with down payment.  Make sure apples to apples.  I would be happy to pay 4% with no down payment, versus 2.66% with 10% or 20% down; from a Cash preservation standpoint.

e.  Cash flow- 35 storage units at $100/month= $3,500;  Warehouse 3,500 sq ft at $.85/sq ft= $2,975.  I normally use 90% occupancy, your using 100%.  Total monthly rental $6,475/month.  With the apartments, your cash flowing $2,000; this is after the P/I payment?  With the 3 efficiency apartments $500 each, say,  $1,500;  this is using the existing square feet within the building, thus your total Revenue might be $7,500.  What I'm trying to get to is how much money do you want to pull out, versus the Cashflow your getting currently.  How many months to accumulate that much cash.  Might not be worth "Refi" out to get that amount of cash.  You will need to crank the figures to see.

f.  Second lien position- I wouldn't fight the fight with the banks.  They are not going to take that path.  Pay the original owner off, to me would be the only avenue, I would go down; as part of the refi.

g.  1031- if/with a 7% commission.  After holding the property 2 years, with adds.  Don't know that you have enough equity to make it worth the sale.  Also will you get another good cash flow property, like the one you have "in hand"?  As you mentioned, 1031 into the high priced market. With the 1031 you will be on a clock watch, which doesn't make for a good buy.

Subject to crunching the numbers, to refi or sale.  Looks like you have a good cash flow deal.  Just sit tight and let it generate cash.

First thing, sounds simple, but there is YOU and there is HIM.  You have to think in those two terms.

YOU:
Why are you doing this?  How much are you getting paid?

Do you have a day job?

How much time does this take?

Lets say you do this for 20 years.  What was the value to you?  Just a paycheck or equity?

Are their other siblings.  Are they/will they be treated the  same as you, even though you are taking care of the business assets?

Age- you want to grow assets and wealth.  He should want to protect and preserve wealth.  Two different objectives.

Him:

See my post on Trusts.

He should talk with a Trust Lawyer. All of the assets should be owned by a Trust. They will answer the LLC/S corp question.

Should separate the business, versus personal bank account.

Bank account, you need access and POD.

Age-  Develop an investment plan and goals.  He normally should not want to be expanding his portfolio if he is retiring. 

Insurance, both business and life if needed.

Legal- power of attorney for business to you.

Cash flow- if at some point he needs extra cash flow, then have him do seller financing to you.  

Stepped up basis- from a tax standpoint, it is best if properties are transferred at the time of his death.

Cargo Containers. Tiny House air bnb rental.  Self service.  Off grid (no water, compost toilet, electric, solar shower).  Or on grid.  Really depends on what your lands recreational value is.  Why would someone come to it, or that area?

Don't stack them tight.  Scatter them around.  Leave as many trees and brush as possible.

Costs:

Come in 8 x 20 ($3,100; $120 for two delivered; $80 set in place); 8 x40 ($3,900)  check local.  Regular height or high Ceiling.  

Road- rock, use skidsteer to prep site.  $????

Paint- $50, not including labor.  Make it fun, each one has a painted picture theme.  Example:  Yogi Bear, Sunflower, Buffalo, etc.

Product:

A.  Off Grid  $$$$$  No beds,  Rent $50/night, minimum 2;  Higher on holidays starting Friday.

B.  On Grid  $$$$$  Electric, A/C or Fan, small fridge.  

In unit Self Service (seal broken):

1.  Hammocks or fold out camp Cots- $10 per night.

2.  Firewood- $20 per package

3.  Water- $5 per gallon

4.  $100 if not swept out.

5.  Renters insurance.

6.  Prepay base rental.

7.  Fire pit and barbecue grill

8.  Fridge- $5 per night,

9.  Anything else people would need for camp out.  Self Service $$$ broken seal.

See my post on Cargo Containers.

Semi/Reefer Parking:

Depends on location, near town.  Lay some rock down and charge $70 per month, example.

@Tanh Truong

Day care buildings.  Industry is stressed and either the business and property will be for sale; or check with the owner of the building with their tenant going out of business.

Re-purpose to MFH depending on size and layout.  By default should be in a good location.  Obviously check zoning.

High end commercial, check on KinderCare locations.

Check both listed and off market.

@Jeff Halverson; everything @Austin Martel said.

Our appraisers have always done a best use section.

Also look up and down on Google earth for similar intersections and land, along your highway.  Look at those businesses and also contact them.  Don't re-invent the wheel.

Also your access will be key in what is possible. Turn in and out.  Crossovers.  Lights.  On/off ramps.  Side road access.

Tried looking you up.  All I saw was Western Michigan.  Used to work and live in Muskegon and Grand Haven.  Best beaches in the world.