All Forum Posts by: Henry Clark

Can you provide more info.  What is the building type, what type of clientele, parking, accessibility, etc.  

Commercial- gas station, offices, warehouse, retail shops, garages, etc.

@Raimmi Khan

Hello Mr Khan.  Although I have never been to Round Rock, I need to go there.  My grandmother grew up there, but I never made it.

Look out on Loopnet.  Just a 1/2 acre of land is running $350,000 for commercial.  Unless you are going to develop a piece of ground into a business and use the $300k as a downpayment, there are no "Traditional" opportunities at that size.

With that said, can you be more specific in what your desires are?  If you don't plan to manage or develop, it may be better to invest in a Syndication instead.

There are potential investments at $300k, but have to understand your objectives.  Both managerially, risk and return.

Actually Self Driving Trucks will create additional demand and a new market.  Actually had this conversation with a truck company owner/driver.

Premise- These self driving trucks will be used between cities and markets, but not within cities.  There will be staging/depot area on the outsides of each city.  Similar to rail yards.

Might be okay for a truck to drive down a highway, seeing what's on all sides of them.  Even being warned of accidents and detours ahead.  Don't know about Black Ice situation.  But now put it in a tight area, with vehicles making sharp turns, people walking, new Obstructions- open road sites with small barriers, etc.  It will be a while before that occurs.

20 years ago we had self driving Forklifts in our large warehouse.  The driver got a schedule.  The computer knew where each location was.  4 tiers high.  The operator was only on the machine to reach over and get the product.  The forklift went down the rows, elevated the lifts to the proper spot and then went to the staging location to unload.  So a lot of this technology and thought process is old.

@Chapman Walsh

There is definitely a market.  Success.

As always check with Zoning first. Both on usage and also on road surface (rock versus concrete).  Some places may be on rock, but they are grandfathered in.  New person may have to do concrete.  Don't do asphalt with trucks.

If you do rock, put Engineering Fabric under it.  You can then put 1 to 1 1/2 inch with the fines, versus a base of 3 to 4 inch rock.  This will also prevent all potholes and ruts.  Disperses the pressure of the tires.

Recommend you take some stakes, strings and flags; and a semi.  Lay out the driveways and parking spots.  That way you can "see" it.  Don't think you will get 70 spots on 35,000 square feet.

Normally I say "Start small and Make Your Big Mistakes Early"; but in this instance you need a bigger spot.

For this smaller location, I would look to rent out to just one company.  Most owner/operators will have a Reefer or Flatbed; which they would prefer to leave hooked to their truck; thus larger lot needed.  View your customers as follows:  A.  Large company that wants to rent so much space, B.  Semi parking, C.  Trailer parking, D.  Semi/trailer attached parking.  You wont want to mix them, since they take different Driveway widths.

Below are some notes on RV and Vehicle storage, please take and adapt to your situation.

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.

@Michael Kim

Look at Loopnet, Google commercial real estate or MLS, drive in the area your interested and look at for sale signs. Find the top two most active Agents with the most listings. Go meet with them.

Bring along a deal sheet defining the property types your looking for.  Have a letter from your Financial entity saying your good for $xxx,xxx.

You want to catch the deal as it comes to their table, and before they list it.  As mentioned above they get both sides of the commission and also they do very little work, if not listed.  And can do more deals.

If you can be more descriptive of the type of CRE you are looking for, the folks here can give better info or recommendations.

Don't worry about Cap rates, you don't get to "pick" them.  

Now, you can engineer them with your asking price or your NOI.

Price- your decide the asking, but the market decides the value.  How long do you want it on the market? How are you marketing it?  What usages can it be marketed for, "Best use"?  Comparisons versus market competition- Door sizes, cleanliness, location- can't change- unless you market to a certain business that fits that type of location, parking, How do you create more value versus similar properties?, etc.

NOI-  keep in mind you are basically talking financials. Specifically Operating expenses and not Depreciation, interest, or income taxes. Pick your largest items and make plans to reduce them in your last year, prior to CAP rate year. You then have to decide what you reflect in Pro Forma if you do them. Sales Adjustments or write-offs, utilities, property tax, insurance, labor, repairs/maintenance, etc. Now you have to ask yourself, your business ethics, horse trading, or Caveat emptor position.

Sales Adjustments or write offs-  if you have receivables, clean them up the year before and don't clean them up during the year of your cap rate calc.

Utilities- adjust them down if possible.  Turn your night lights from dark to 3am versus dark to 7am.  Turn heating and cooling down.  "Cash Basis" accounting- prepay in the prior year and don't pay until after your Cap year.

Property Tax-  "Cash Basis", prepay in the prior year and don't pay in the Cap year.

Insurance- reduce insurance or don't have it at all.  Or "Cash Basis", prepay in the prior year, or move your coverage period to the next year.

Labor or management fee-  don't report it.  Pay Cash.

Repairs/maintenance- figure it out.

Don't worry about Cap rates.  

1.  We always reconstruct the financials on properties we are analyzing.  That way we "own" our numbers. We have looked at properties with CAP rates, where unknowingly or who cares, the Property tax and management fees were left off the financials and listing; and the projections.

2.  Property Aesthetics, value- we inspect the properties.  If we miss something its on us.  We "own" the analysis of the property.  When you go to market, show the non-numerical or the hidden value.

3.  Are the financials and market (rent rates) sustainable.  Again, we analyze and "own" the analysis.  If the owner/realtor says the current tenants have 5 years remaining, I want to see the lease.  Want to see the terms of the lease.  A 5 year lease with exit upon 1 month notice, is not a 5 year lease.  Have they actually been paying their rent, or is it tied up in receivables.  I have seen 10 year leases with 1 month out notices.

Worry about CAP rates:

Most investors are Financial investors and not operators. Thus CAP rate is important in marketing to them. That is how they are filtering and comparing similar assets. We looked at an investment 1,000 miles away. Did the numbers. Looked at it on Google, looked clean. Realtor said he had over 70 calls, even from Mumbai on the property. Thought 50 were serious buyers. I decided to drive down and look at the property a week before, they sent out an "updated" offering. Was priced at a ridiculous price. No one had made an offer. I was prepared to make an offer, which the Realtor thought would be acceptable. Got out, looked at the property. Very clean operation. Decided within 5 minutes we could not make an offer.  "Saw" something.

Property A- $1,000,000 list; NOI $125,000

Property B- $1,000,000 list; NOI $125,000

See one of my prior posts. I pick Property B, hands down, all day long. Even though CAP rates are the same. Look beyond CAP rate.

My point is CAP rate will get them to look or not look. After that it is Caveat Emptor.

"Start small and Make Your Big Mistakes Early"

Property tax and appraisal districts don't care.

$1,000,000 property empty.

$1,000,000 property fully leased.

Same property tax and assessment.

If your having trouble filling or getting the correct revenue, and don't see the numbers working.  You might try to rezone and convert to housing depending on the building.  Moving from Commercial to Residential will lower your property taxes where we are at.  Before you do it, make sure your "numbers" work and talk with the Taxing authority.

Or, look for alternate usage.  Liquor store, fire works,  Contractor building, etc. 

@ Mason.  Cargo Containers.  Add and sell as needed.  No property tax.

Ok.  Look for property that has roads on two or three sides of it.  Contact your county zoning and see how few acres can you split the land and subdivide.  Internet.  Trees and slight hills.  Valleys for ponds.  Bus routes.  Side where the town is growing or towards a larger metro area.   etc etc.  Look for attributes that when you are done with the property if you choose to sale you can add value very cheaply and where over time, the property value will grow on its own.

Success story.  Bought land for $500 in 93.  Valued as ag today at $7,000.  Subdivided and selling for $50,000 per acre.  A lot of people have the $500 to $7,000 story.  What is different is our ground was located properly for further escalation.

Do you like to gamble?  Save $307  versus losing your house.  Its just part of home ownership.

Do you have a kid shovel your snow or mow your grass?  Will you have a "local" guy re-shingle your house or do landscaping?  Will you have some friends over for a barbecue?  Did you salt and shovel your sidewalk down, always?  Are you going to fix your sidewalk that sticks up two inches?  How's that large tree doing?  You changed your landscape and flooded the neighbors basement.,  etc, etc.

Check out a $2mm policy.  Shouldn't be much more than the $1mm.

You don't want to insure against all things in life, but cover your basics.