All Forum Posts by: Henry Clark

Well its supposed to get up to 100 degrees today. Decided to move and store our Bollards that were delivered yesterday. 7 foot long, 6 inches diameter, oil drill stem, $40 each. The ones below are for a future project the rest are at out CB- RR location for our upcoming new buildings. Bought about 100 in total. They are hard to find.

Thought I would take a break and write a post, I thought about 2 days ago. Had a guy I have been helping say he got beat out on an offer by a cash buyer. My wife said we have $17,000 in that location account and have to pay the ½ property tax $19,000. Couldn’t think why the above two are issues. Lack of communication and understanding on my part. You will see below.

Today is September 11th. Thanks for everyone. September 11th for me was a surreal day.

That week was one of the happiest in my life. We just got back from South Korea with our adopted son. Was at work and went to the TV to see what was happening. Saw a “speck” falling down along side the towers. Realized it was a person jumping to their death. It wasn’t TV, I could feel the person dying. Went out to mow hay in a field that afternoon. Was like I was 200 years back, so peaceful. No planes or plume trails. No car noise on the highway 2 miles away. No noise, could picture Indians walking across the field. Went on the back porch later that day to drink a tea. Saw 3 Boeing's racing off in a close row, with two fighters alongside. It was the president heading back to Washington. All I could do was yell at him, to get his butt back to Washington.

Well lets dissect Cash management:

1. Purchase- SBA 10%; Seller financing- part now, part 5 years from now, no interest; Conventional- interest only Construction period. Save as much Cash outlay as possible at the time of purchase or development.

How did my acquaintance above, get beat out by a “Cash” buyer? I don’t understand this, because we are all cash buyers. If your making an offer with Seller financing, make sure your offer is only good for 3 days or less. That way if Seller financing doesn’t work, they have to reject your offer. Then you need to come with 100% financing or “Cash” purchase. You need to be pre-approved or have a 30 day due diligence period to cover your loan approval period.

2. Occupancy Ramp up- “Interest only” during occupancy ramp up. Make it in terms of Months or Occupancy %. We use 18 months and/or 65% occupancy. This will cover Principal/Interest and all expenses in Phase 1. Phase 2 usually only requires about a 35 to 45% occupancy to cover new building needs. If you have an operational Facility then you should be positively cash flowing already.

Value Add costs. Make sure your bank understands you will be coming back to them for additional loan capacity. Your banker would prefer to know this ahead of time, so they can write it into the original loan document, versus create a new loan.

3. Ongoing- no issue. As long as you did your numbers and now hit your targets, your in positive cash flow. The key is to not treat “Storage” cash, as a piggy bank for your other cash needs.

4. Large lump payments- Your largest lump payments will be Property Taxes, Insurance and Income taxes. Above, I didn’t get why our $19,000 property tax bill and our $17,000 cash on hand position were an issue. You don’t have to pay the property tax when it is due. This location is running $12,000 per month at this stage. Also when we get cash positive, I always pay the two payments off up front. That way there is no forgotten cash need in the future. Again, you should be positively cash flowing and not need to hold cash. Use the Cash you have to take away future bumps. Or pay more down on your loan.

5. Operational- Bank Account, one solely for the Self Storage location. Don’t mix with your personal or other business. Credit Card- one just for Self storage. Provides better tracking versus just paying with cash, when you don’t have your check book with you.

6. Cost Segregation- Depending on the size of your location always do a cost segregation study. If your developing, make sure your Road bills are segregated from your building pads or dirt work. Example: On a $1.5mm deal. Say $300,000 concrete roads, $50,000 Electrician, $50,000 Security, $5,000 landscaping, $60,000 Fence, $10,000 Office equipment, etc. This is 15 year life or less assets. These can be either written off in year one, or over the first 5 years. I prefer to write these off in year one, while you are short on cash. Hopefully don’t pay (cash) any taxes for the first 1 or 2 years (Loss carry forward).

Fix/Flip- don’t do Cost segregation since you will need to do depreciation recapture.

7. Auto pay only- credit/debit card or bank account ACH. Our two latest/largest facilities we moved to Auto pay. This is more of a reduction in management time versus a Cash decision. At our other locations, we have started moving all new customers to Auto pay. The reason this is a “Cash” discussion is it improves your Cash Cycle. No more payment is in the mail. You get to “lock out” quicker. Which means more “good” stuff is left in the unit, which means they are more likely to pay.

Prefer Credit/Debit card since this is an immediate notification. Bank ACH may be a week after your system charged before you know insufficient funds.

8. Unit Auctions- Only accept cash or money orders 3 days before the auction. If they pay with a credit card or a check one day before the auction, they can cancel after they get their valuables out.

9. Cash “Control”- if your not managing your facility you need a weekly cash/rent/bank reconciliation report and every few months take a Rental unit audit and Rent price audit. This becomes less of an issue when you move to Auto pay. You still need to do the above audits.

10.  Contractors- Always pay the "next" day after you get the bill.  They are your team.  I can call at 7 pm on a Sunday and they are happy to talk with me.

Start small and make your BIG Mistakes Early.

@Bryan Danger

Actually had to look up FIRE.  We really do our own thing and don't really follow the rest of the world's drive.

When you start a post like this, you should put your cards on the table first, versus asking other people to.  Define Financial Freedom and your "positions" as a starting point.  You could have a Woman with net $10,000 with Financial Freedom and a man with net $10,000,000 who doesn't have financial freedom.  Each person has their own values, positioning, risk management and assumptions.

I'm glad everyone doesn't have financial freedom or is even proactively looking for it.  You drove a Van.  The person that made the Lug nuts probably doesn't even know about financial freedom.  Which I'm glad, because we probably would have a shortage of lug nuts.

Lets look at your position.  Change the figures, add/subtract concepts, etc as you see fit.

1.  Liquid cash/cds/money market/etc.  $100,000  How many years of liquid cash do you have on hand.

2.  Net worth.  Investments.  $1,000,000

3.  Monthly incoming cash flow.  $2,000

4.  Monthly outgoing cash flow.  $2,000

5.  Planned costs.  New boat motor, new roof, new HVAC, etc.  How much do you have set off to the side?  $50,000

6.  Financial Asset Risk Analysis.  60/40;  40/60; etcetera.

7.  Health insurance

8.  Long-term care

9.  Long-term health insurance.  Federal- Are you paying your minimum Medicare/Medcaid?  

10.  Lifestyle.  Kids.  Family. Neighbors. Community.  Interests.

11.  Investment "financial" management.  All in Portland with same bank, great.  Same thing is bad, diversification.  Spread out across the country great, diversification.  Same thing bad, can't cross collateralize, your an unknown investor.

Credit Score.  I have never discussed my credit score with my 3 different bankers.  I don't know what mine is.  Why is this so critical for your RE investments.  No answer needed, just we have two different investment approaches.

Can't tell your W2 income generation history.  Your investments, looks like it was great timing to be in Portland.  Was this true for other people?  My point is, was this timing or business skillset?  Like getting an inheritance without knowing how it was originally earned.

A.  Forbearance, is not a Financial Freedom solution.  Look at 1 thru 11 above.  You should have the liquid cash.  Also you should have been able to sell one property into the market.  Re-analyze your 60/40 40/60 asset positioning.  Re-analyze your Analysis of Financial Freedom.

B.  Liquid cash investments versus Short term needs.  Long term investments versus long term needs.  Re-analyze your positioning and needs.

Your original question.

FIRE, Overland, etc versus BP.  FIRE is looking for financial freedom 100%.  BP is looking for another way.  They both will probably end up at the financial freedom question.  Just not the same starting point of discussion.  And if you look at most of the people above and their background, Financial freedom is not what "drives" them.  Its a by product.  Also its hard to get your "Momentum" going again, both mentally and your "Team".  Whereas these other groups are already "Gone".  Most BP people are not "Gone" they are either getting started or growing.

We're living the dream also below.  Just that's not our end game or number.

@Jacob V.

Just rough numbers.  You change as you see fit.

Couldn't see all doors, thus estimated below.

5x10   120  say at $50=    $6,000/month

10 x 10 20  at $60=          $1,200

10 x 20  35 at $100=         $3,500

Total=                               $10,700

Occupancy                         70%

At 70% occupancy             $7,500/month

Used the lowest rates in the area since this is an older location.  Think you will need to be even lower.  

$615k loan.  Say 25% down.  $150k down.  loan $465k.  5% conservative.  20 year amort  = $3,100 per month. Not including upgrades below.

Change expenses below as needed:

Property taxes  $25,000

Insurance  $4,000

Electric $2,500

Advertising  $5,000   Sparefoot

Management  $????????

Security         $?????????

Misc              $???????

Rough upgrade estimates:

Recommend you get the doors painted.  There is a group that just does Storage doors.  Say $30,000.

Security system   $15,000

Lights    $10,000

Automated gate   $25,000  might need two with configuration.

Roofs????

Block looks good.

Few door repairs   $2,000

Would do a road seal   $30,000

Road sign across the way, do you get to keep.  If so $5,000 facelift.

Again, get a construction loan for 18 months.  Get the above updated and your occupancy up.

Competitive edge:

1.  Be the lowest price in town.

2.  Join Sparefoot.

3.  Get the google map pin moved to correct location.

4.  Best security system in town.  Look up my Security system post and gate post.

5.  Check out our self service youtube.  You want to be a hamburger joint.  Can rent in the next 2 minutes any time.  No meetings or onsite management.  Your smaller doors, you will get a more transient customer base.  Would move straight to Autopay only.  This will slow your rent up rate, but your will reduce your headaches by about 80%.

6.  Add website.

7.  If this going to be your only Self storage and you plan to flip.  Would call it "Odessa Self Storage Near Me".  Make your website the same.  Already an Odessa Self Storage, and one North.  Get your management software, one that also has an SEO option.  This way you will get up and going faster.

I mentioned a banker above. This is a specific SBA lender in Texas. Take it you haven't called him, with the high LTV/LTC's your mentioning. If you go local, for whatever reason Texas does not like Construction loans, and have very high LTV/LTC 40%. Probably due to the roller coaster ride of the oil industry. Plus keep in mind, if this is your first time out, they will want to cover their bet on you.

@Paul Clement

Many softwares out there.  Google a review or look up articles on Self Storage magazine

I would focus on the following items:

1.  Figure out how to offer insurance. That can be processed thru the software. Or offer literature but don’t process the insurance.  RVs are so easy to break into.  I almost don’t want to service them. By offering insurance, one less reason for you to Ben sues

2.  Security systems. Cameras everywhere. Due to the height of rv’s hard to get coverage

3.  Sell or offer motion sensor alarms for inside units 

4.  450 is a lot.  Plus a portion inside. Do you have a market for $225 to $350 in door parking?

5.  Concierge service. If your going for it, make sure your software has a calendar and maintenance or messaging feature. 

Read my post on rv Storage. 

Haven’t researched training before.  Recommend you find a seminar or course online or go to.  Narrow it down to the operation side versus the finance side.  That way you get a more focused training session. 

Future.  Always make an offer with a deadline.  Otherwise they will keep it in their pocket and wait for a better offer.  Good luck. 

1.  Make sure they support tenant insurance. 

2.  Web based

3.  We use Uhaul.  Web Selfstorage.  $44.95 per month. Do a test demo

4.  Try Storedge.  Think they have an SEO portion. 

5.  They should all do autopay. 

If your planning to expand in Self storage I would get the software to support your growth. 

Look at competitors in your area you might immolation.  Check their websites out.  See who is ranked highest on the google map listing.  Or google website placement.  Check their software out. 

Risk analysis- 

1.  Find out the zoning for Self storage in your area.  Get the zoning and future/planned zoning map.  See how easy it is for other people to build from a zoning, price and availability standpoint.  Can people out position you.  Are you 4 miles out of town with no one around, and someone can build in town near the population?  

2.  Existing competition-   Look on Sparefoot map and Google Self Storage map, and see how you, competition and customers are aligned.  Also check out pricing.  Does it fit your model.

Management fees-  How close do you live to the location?  What style of management do you plan?  Validate your numbers in your model.  See our Youtube on our website for self service management.  We stay within a 40 mile radius.  Right now I am 70 miles away from this location to the farthest location away; but can get you rented in 2 minutes over the phone.

Again congratulations on moving forward.  Do more reading, podcasts, deal analysis, and go to training sessions.

@Eric Olson

Water, clear water, cheap, Real estate people normally don't think of these, easy to bulldoze and land scape.

Sand and Gravel pits are great also.

@Stephen Brown

Commercial Real Estate is pretty broad.

Use your Real estate background, so your building off a starting point and start doing country Subdivisions.  Make a Subdivision so you control the type/value of the homes.  No Pink Trailers that wipe out your value.  Look up Journeys End subdivision, Glenwood, Iowa.

I'm showing you the concept and not specifically analyzing the following example.

Tontogany, OH there is 16 acres land for sale.  $190,000 listed for 639 days.  Again, go with the concept.  This could be an old listing, it could be sold, it could be whatever.

Could be in the city or county.  Zoning.  Road access.  Etc Etc Etc.

This location has two access points.  See if zoning will allow shared drives, then take the parcels and re-plat and subdivide into 4 lots.

Spend $10,000 on everything.  Survey, subdivision, etc.  

Make the 4 plots into $80,000 plots.  Make different selling prices based on Lot appeal, so you hit different price points.

Do minimal work.  Leave for the owners to run in electrical, water, sewer.

First check everything is possible.

Run your numbers.

Make an offer that works for you.  Then walk away.   Start your next deal.

Say you make an offer of $140,000 versus the $190,000.  They say no, then you say $150,000.  They want $180,000 you say no, but will do they do Seller financing on $90,000 no interest for 5 years.  They agree to the replotting of the land and releasing each property as sold, and you pay them that portion.

As all ways, market and do the numbers work.

Low input costs.

Carrying cost is usually what eats a deal up.  But we are at low interest rates.  See if you can lock in a 5 year note.

Do some landscaping.  Grass the area.  Buy some trees and have tree spaded into key visual areas.  Plus plant some fast growing screen trees.  $6,000

Maybe spend $10,000 and dig a pond out in the middle adjoining as many of the lots as possible.

This one doesn't work, look for the next deal.  No one else will be doing this in the Toledo area, and that's a lot of area.  No bidding wars.  Look for property that has multiple sides or access points.  On listings for a while, 180 days or longer.  Learn zoning requirements.  

Actually like this one.  Across from High School.  after landscaping in the country, yet in the city.  Bowling Green nearby.  Toledo easy to get to.  Been on listing for a while, seller understands market now.  With that said, it probably won't happen.  Just keep looking and checking.  See if there are any Rock quarries around.

@Mark Berge

Another way?

Know gas is big on the East coast.  You might take a look at using a electrical "Split" system since the house is only 1,000 square feet.  Especially if just one level.  Check in your climate first though, with an HVAC person.

Compare your operating costs.  Gas versus electric; system to system.