All Forum Posts by: Henry Clark

@Jay London

forgot the @.

3 September 2020, 05:54 PM   Movin on up. Today bulldozer work almost done. One more day before the Labor day weekend and we will be done with all the major dirt work. The Contractor who got in the accident actually drove his car to the site to check on it.

Had some Rip Rap 6 to 18 inch rock brought in. See the pictures. This is on top of the Black mesh you can see in one picture that I am driving over. These are where the site water run off that discharges into the Storm retention pond will hit to slow the water down so it does not scour out the pond. The Black material is "Engineer Fabric", get the Woven kind. This comes in 12 foot wide or 15 foot wide rolls. Bought two 25 foot sections from the local landscape supply house. This is place under the rock, so the water does not eat away the soil. Use this same material if you are doing rock driveways. You don't need as much rock and you will never have potholes.

Next week the contractor who is putting in the Drain tiles and Apartment drain tiles will start to put his pipe in. The ends will be pointed at this rock, so I got it in ahead of him.

Updated Retaining wall contractors to come finish small wall.

Underneath this pond is a private sewer line going up to the Apartment complex on the left. Our Attorney is working up an easement to allow their line on our property. This was never recorded. The Development folks won't give us a build permit unless we get this in place.
We were originally going to tap into it, but our Engineer said to tap into the Main line. That way if any maintenance is ever needed on the Apartment line there is no dispute who has to pay. About the same distance and cost either way.

Building contractor is working up both his final bid and the order for the Phase 1 of the buildings. He can start working on building pads next week after the holiday.

Will meet next week with the Electrician to put in a temporary service so the contractors can have electricity.

Road curbs will get cut next week so we can drive in smooth versus over the 4 inch curb.

Everything is now going smooth, just need to stay ahead thinking for the various contractors.

Market Analysis:

1.  You need to check out zoning in the area.  How easy is it for other people to build storage.

2.  Market size- Newcastle has 10,000;  equates to 600 storage units.  Have population outside, say 700.  But your getting into rural fast.

3.  Highway 277 doesn't lead to the major metro areas, so that doesn't pick you up more customers.

4.  This location is sandwiched between two large locations to the North and the South.

5.  Feeder roads 16th and 24th feed into 277 and they would have to go past you to get to the school systems; so all those neighborhoods, you would command over your North/South competition.

6.  Google earth is probably and old picture, but someone is building more storage next to the South competition location.

7.  Marketing, no one in New Castle has Sparefoot turned on.  They are either full and have it turned off, or if you join, you will be the immediate number one on the internet.

8.  Competition rates are about the same.  Won't be able to increase prices.

Always recommend if your interested make an offer that works for you.  Doesn't matter about their cost or their asking price.

You might look at the Chickasha #1 property for sale , which is close to you.  Then buy some land to the north of town and add a second location.  Way less competition.  Smaller initial investment for a learning curve.  Do a rate increase.  Move to Self Service.  Get on Sparefoot.

Start Small and make your Big Mistakes early.

Good luck.

Revenue/Income approach:

This is rough calcs to compare against their proformas.  Theirs should be more accurate.

Don't have their size mix.

55,850 NRSF average at 150 (10 x 15)= 372 units

372 average units x $65 their price x 12 months x 85% full their figures= $246,000

Close to their $245,000 figure.  Not including Office rent $21,000 since not included in Cost analysis.

Upside at 100%= $290,000

Can't tell if there is extra expansion land to factor into value.

Lets leave revenue at $246,000

Expenses:

Insurance $13,000 their figure, close to what I pay.

Property tax $20,000  jumps from $6,000 to $20,000.  Ask and understand.  $20,000 seems a little light, but don't know their location.

Leave out Depreciation for cash flow discussion.

Wages $50,000 average for them.  You don't live very far.  I would do Self Service.  You, wife, kids, office help can do this.  Do $5,000 for a local person to walk through and check, pickup trash, weed, send you update pictures.  One of you just drive down once or twice a month to reload units that have moved out.  Go see how I do it on the internet.  Use $5,000.

Other $15,000; to me seems high, but lets leave it.

Net before taxes and depr= $193,000;  remember try to have the purchase price broken out.  Year 1 write offs, your shooting for zero taxes this year and next, from a cash flow standpoint.

I'm keeping this rough, you change figures as you see fit.  Example if you want to throw back in the full $50k wages. Go through Income tax and depreciation calcs to refine.

$2,800,000 / $193,000= 14.5 years.  My objectives are 8 to 12 year payback.  With bank amortization of 20 to 25 years.  I would only go this high if it: a.  Had extra ground to expand on, b.  Had Vehicle storage, I could convert to building storage, or if rental rates are so far below Market and I could raise them 20% and still maintain occupancy percentage.  Instead of their $65 for a 10 x 15; around $75/$80 per unit.  Do a price comparison on Sparefoot in the neighborhood.  Should be a lot cheaper than nearby OKC or Norman, so don't use those as comparisons.

I'll do a market analysis next.

Cost approach:

Land  5.89 acres.  There is 6.1 acre commercial lot for sale there for $900,000; lets say the same

Buildings 55,850 NRSF= $1,190,000

Concrete roads= $730,000

Footings required?= $?????????

Storm drains= didn't see any

Fence= $40,000

Gate code access= $25,000

Electricity/lights= $70,000 cant see clearly what they have

Security= $60,000 can't tell clearly what they have.

Office bldg= not added above, can't tell if part of the sale.

Total= $3,105,000  vs asking price $2,800,000  Don't know how old they are.  If you do the deal, ask them to break out the purchase price by asset type above, so you can do year 1 writeoff for tax advantage.

I'll do a revenue pass, next.

Hope this is helpful.  Have to get the revenue numbers to answer your question.

Market size.  Read my post “Will they come?”  So the homework. Own the data.  Contact me with the figure you come up with

Make Shurway an offer. Your not in a rush let them start to think about it.  They will convince theirselves as family dynamics change.  Stop in once a year and say hello. Do this in a 40 mile radius. 

@Kendrique Coats

To help narrow the discussion down to "you".

See my notes above.

A.  What is your initial investment level?  $xx,xxx or $0;  What ever the amount is fine.  It will help determine the path, the posters will help advise you on.

B.  What is your finance plan?  Just your money, Traditional Financing, SBA, Hard money, etc.  This will determine collateralization %, which will determine your deal size.  Go talk with all of these, and start getting to know them and you plans/thoughts.  Don't wait till you have a deal.  At first money is hard to find.  After you have a track record and several deals, money starts gushing out of the ground, and you have to be careful using it.

C. Are you looking for a Fix/Flip, Long-term passive revenue stream or just start learning?

D.  Recommend you stay local for your first deals.  More hands on learning.  If you know trade work great.  If not, recommend you work with Habitat for Humanity.  Even if housing isn't your investment goal, it will start to get you familiar with the trades.

E.  Have you found  an investment group in Chicago to hook up with?  If not, ask these folks, they will be glad to help.

F.  Make an outline of your "Tool Kit".  Zoning, permit process, electricians, plumbers, financiers, neighborhoods, legal, accountant, realtors, wholesalers, property tax rates, property insurance,  etc.  Don't worry about going out and getting these lined up.  Just know you need to, and as you talk with folks, start filling in the blanks.

Which of the above have you got knocked out?  Which do you need help with?

@Kendrique Coats

Reading through your other posts to determine the most beneficial response.  

Recommend the following at this stage

A.  Financing level-  determine your finance capacity.  Example:  10% collateral on an SBA loan and you have $10,000 cash or collateral means you can do a $100,000 deal.   If traditional mortgage with 25% collateral then you can do a $40,000 deal.  This will help narrow your thought process

B.  Determine if you want to be an individual investor or an institutional investor.  Example do you want to invest $10,000 with an organization or do you want to be the one leveraging $10,000 into a $100,000 investment?  This is a risk reward decision

C.  Since your just starting out how much can you risk?  Risk means your lifestyle won’t be impacted.  Still have a place to live.  Family will have food.  Kids will still be able to go to college.   Etc   This is how much you should invest.  Asking a general question on BP means you will get a ton of variants that probably won’t fit your situation or risk reward levels

D.  Your in the Chicago area.  High price, few low $ entry points.  

Recommend:

1.  Go to local meet ups and find someone to do a tag along with the type of investing your interested in

2.  Start doing deal analysis on the type of investments your interested in.  Get other people to challenge it on this forum.  Keep building a “tool chest”.  You will note most of the people say anytime is a great time to invest.   Others say as long as the numbers work and meet your objectives.   Do this step so you get to their level of decision making  

3.  Offer your help and work with someone on the weekends in the investment area your investigating 

4.  Decide if you want quick profits (fix flip) or long term passive revenue.

Even if you have zero dollars you can do a real estate deal in Chicago.  The reason I note that, is there are tons of options out there.  You just need to find them and the ones that fit your risk reward level.  

@Daniel Krantz

First don’t trust anything I say.  All things in self storage can be validated.  You need to own the info

Storage is about life events.  Death, divorce, moving, fires, remodels, etc

Rich, poor, city, country, etc.  They all have the same life events noted above. 

Pick smaller towns. Get the populations off google

Either google all storage locations and look on google maps street view and count the units.  Or preferably go count them yourselve.

Once you do this exercise you will own the metric.  We own 8 locations.  This metric was used to select the town and sizing for each location. We have tested this and used it for all deals.  There is some leeway in this metric.  My town has the highest ratio I have seen and we are still building.  

@Daniel Krantz

Look up this post I did.

Self storage-  Will they come?

Do that then contact me to discuss the metric.  Of all my posts this is the “one”.