All Forum Posts by: Henry Clark

@Tanner Grindel

Renters pay the insurance.  Look up my post.  We sell the insurance from an outside provider

@Daniel Lioz

They stand up really well.  You actually don’t want them to float otherwise mine would have been 100 miles down river.  Inside power washed out and no water damage after a month under water

I forgot we built an extra concrete slab, that we are not putting a building on this year. This is included in the Bldg Slab cost. Backing it out, the total Concrete slab cost is $92,000 versus the $128,000 shown above. This was a 40 x 220 building, which is not shown in the buildings above, but which was in the Bldg Slab cost.

Total erected building is now $225,000 plus $79,000 plus $92,000=$396,000

22,000 sq ft is correct, it did not include this extra slab.

New cost per sqft is $396,000 / 22,000 sqft= $18.00/sqft.

This is only for the erected building, not land, fence, roads, electric, security, etc.

@Zach Quick

Glad to give info, but not done yet.  Below is a rough estimate. The total project will cover 4 acres, but we only will get half built this year.  

Also this city requires both hard surface roads (we chose concrete) and Frost free footings.  Don't know if that is comparable to what you are looking at.  Also had some extras.  This property did not have a "Main" waterline in front of it.  Required.  $130,000 add.  Some other things also, not normal on our other sites.

Disregard the unusual items noted.  If you leave the frost free footings out and if you adjust the road to gravel or your preferred surface.

a.  I would say double the Erected building cost.  Lets call it $870,000 all four acres.

b.  You put in your roads and frost free footing cost as needed.

c.  Security system $70,000- we have a set package we go with. One camera per 6 units.

d.  Electric/lights $50,000- LED

e.  Fence/gate  $50,000 automated Roll gate.

f.  Finish office  $20,000 

g.  Signage- $25,000 road side advertising and premise instructions

h.  Put your figure in, for 4 acres.  We got a great price, had been on the market for 10 years.  Great "B" street location.

i.  Grading- $30,000

j.  Landscaping- $5,000

k.  Engineering- $80,000 about double what I had planned.  To make it "work" on this land we did a lot of changes.  Most buildings are on a 1% slope, which had no impact on any of the costs.

Total $1,200,000 plus others above or your adds.  Add road/land/frost free footing, etc.  This will get us a mixture of 340 units 10 by 10/15/20/25 etc units.  The number of units will probably go down.  Thinking about changing a few to 12 wide and 12 tall for a different market mix.  Lower rental per sq ft, but I like additional product mix to increase the versatility.  I'm off a little on my square feet, just doubling, but gives you a picture.

The end numbers work for us and even better, this location is in a very protected area from competition (zoning, land availability and hilly) and high income.  So it will be one of our most safe investment locations.

@Tyler D.

Hope you don't mind me borrowing your thread.  Also hope an idea pops from my comments.

I'm not in the SFH/MFH field. But I'm in another extremely HOT REI category. Everyone in my category, says the same thing, overpriced, Silly money coming in, no inventory, etc. My approach is to either Build/Develop or buy depending on the value proposition.

A.  My question to this group, is why are more people not "Developing"?  The major risk in developing any product is the time to market and its impact on cash flow (do an interest only construction loan), will the market still be there, and interest rates will they significantly change from say 3% for the buyer during the construct to market time frame.  To me the risk of Developing is really low right now.

I'm actually familiar with the San Antonio market, since my brother lives there. We have discussed housing demand and prices. Flying down Monday thru Wednesday to help him get into the REI category I'm in. We've done our Cost build up, Cash flow and revenue models, risk analysis, working on financing and its a go. Since its my brother, I want to take the extra step to stand on the property and take a drive around the surrounding area. There have been 60 interested parties and I'm going down to try to close the deal, before it gets repriced on the market.

We've identified 4 different Build or Buy projects within a 5 mile radius, which are all viable.  Even with all of the same HOT market items you have identified, I couldn't even do all of the deals I have identified, where I live.  We look at Cashflow.  Payback in 8 to 12 years.  Loan terms 25 years.  This is our model to pull the trigger on a project.  So we aren't lowballing our Profit model to get more projects.

B.  Your in Texas.  Your in the greatest state for Sheriff, tax sales, off list sales, middle of an Oil bust.  My brother picked up two properties for $5,000 each, cleaned them up and was offered $25,000 for each in less than 3 months in 2020.  He has done the same thing over the years, just looking during lunch break or on the weekends.

C.  Drive for Dollars.  Put the keys down.  If your ready to go big time try the following method.  We don't do houses, but a buddy brought this thought to me.  Identify an area and types of investments you want.  Get on your GIS map and dial them up.  Look at the bottom for related properties.  Contact info at the top.  Your looking for a "Baby Boomer" with a lot of rentals.  Make them want to sell to you.  Give them a solution to their dilemma.

And I agree with the folks above.  My passive income is a lot of hard work up front.

@Bennet Sebastian

Metal also.  Can't really see on this picture.  At the seams between two sheets they are glued together.  So you just can't unscrew and lift off.  It is super hard to take a sheet off since they are glued on both sides.  There is a roof product that does not require screws.  Thus no future issues in 15 to 30 years.

Was responding to a person on Cost to build storage.  Just the building and not land, roads, sundry.  This is for a drive up metal building with rollup door. 

This is a project we are actually building now. This was contracted about 6 months ago. Steel has taken a recent increase and I was informed our next buildings might cost 20-25% higher for the building itself. 

$225,000 Building 7% sales tax included
$ 79,000 Bldg Erection
$128,000 Bldg slabs, with rebar.  18 inch footings normal.

$432,000 Total Building installed.

$51,000 Frost free footings, this new town requires, not included above.


Buildings:
15x160 2,400
40x50 2,000
40x40 1,600
40x200 8,000
30x220 6,600
20x30 600
20x40 800

Total 22,000

$432,000 Erected building
22,000 Total sq ft

$19.64 per sq ft

Due to water, sewer lines and drainage, we had to put several small buildings up front.  This slightly increases the cost on the buildings, erection and building pads.

@Brian Garrett

Your lucky its snowing and I'm tired of moving snow in the skidsteer and salting the roads.  Also went to lunch and long line at BK, had to have a Whopper with cheese.  Made me think.

Given you new investment and funnels to look at, in prior posts.  

Here is an option for staying in your lane and your neighborhood; and it takes cash.

Buildup:

A buddy of mine was in the Federal pen for 18 years. He started hanging out with a real estate investor doing odd jobs for him. The REI guy stopped by to say hello to me one day. Just wanted to see what I knew about my friend and if there was any danger.

Key is this REI guy is about 82 years old. Recently widowed. Some health issues and the kids don't want to take over the 37 SFH and MFH properties he owns. We talked about both of our business models. The thing is he knows he should sell at his age and health. He should sell because the market is right. But he doesn't want to sell, because without a reason to get out of bed, he would just pass away.

So here's the master plan, if you haven't done this already.  Similar to driving for dollars, but your doing it on the computer and phone.

a. Move up to buying 10 to 30 SFH or MFH at a time. Off market. Don't want them all, then Wholesale.

b. Use your local GIS map, to look up properties your interested in. Pull them up. Look at the bottom of the pages and look for other related property listings. Check them out. Your looking for someone that owns a lot of SFH and MFH. Contact info is at the top.

c. Start calling all of these people or doing background checks. Your looking for a Baby Boomer who is ready to get out of the SFH/MFH; but doesn't know they want to. This will take them getting to know you over time.

d.  Now the sale.  Forget your needs, forget the price, etc.  You will make sure it works for you.  Lets concentrate on the owner's needs.

1.  He/she see's them in you, about 20 to 30 years ago.

2.  They can trust or be comfortable with you, because they know your path.  And will know if your BS.

3.  Offer a Staggered sale of the units.  Helps them with their taxes short-term.

4.  Offer them to do Seller financing, with a balloon at the end.  Better than them parking in the bank and they should be hesitant about the stock market.  You answer what do they do with their money.

5.  Offer them to buy as needed to help them with 1031 exchanges.  This is a big benefit, since it is hard to sell multiple smaller units and buy big in the time window.  But explain your looking to buy so many units per year.

6.  Let them know you "need" them.  Offer them $10,000 per year to stay on and help out 2 to 3 hours per day.  Give them a "Reason".

Key is to address their needs.  

@Brian Garrett

Your beginning question was basically your having a hard time finding equitable deals in your normal MFH lane.  Where else can you investment some money.  Most folks have given you suggestions within your lane or similar, and rightfully you have said show/tell me.

Understand you have a lot of experience and background, but your potentially crossing the threshold of staying in your lane.  I'm in the same boat.  We do Self Storage.  I love that lane.  Paid my dues, made my mistakes, have my team.  Looking at doing Contractor rental units and even though physically and contractually close to the same as Self Storage, I'm hesitant to build the buildings with the site in hand.  Different market.  

I will give both you and me, the same advice I tell new investors who can't quite get their.  They don't have all of the facts.  Success is not guaranteed.

My first deal, I only got to about 65% of the info needed, had to make a decision:

a.  How much could I lose?  $50,000 to $80,000

b.  What impact would that loss have?  Still eat prime rib on Fri or Sat.  Son would still go to college.  Would not have to sell off any assets.  Not knocked out of the investment game.

c.  Passive income- if I didn't do this, would I ever do a deal.  Probably not.  I had invested a lot of time and research.

Whatever the above costs or impacts to you, is your cost to change investment lanes.

The following are some Hard actionable items, that are for sale or can be done in your neighborhood, you just need to pick up the phone and do the background work. 

1.  Someone mentioned Self storage.  Build (subject to zoning and availability) along "Donald Ross road" Juno Beach to I95.  I can explain how/why I picked that location.  Keep doing more self storage.  No point stepping into a new lane and only doing one deal.  Not worth the learning and building a new team.  Actually you already have most of the team from MFH.

2.  Look at a different funnel- already noted to you in a previous post to look on Loopnet and look at Commercial buildings to convert to MFH.  Next week all you have to do is pick a property as an example and call or visit your local Zoning or Development group to go over potential.  Commercial buildings have more exposure due to their clients covid impact and on line sales.  Makes a great Value add proposition.

3.  Child care.  Yep Child Care.  Can you think of a more financially challenged industry in the last year?  Reach out to "Schools for Sale.com".  One of your neighbors.  Think several routes.  a.  Buy the pre-school and run as business., b.  Rent the building and sell the business., c.  Convert to MFH.  Great value add proposition, good location.

4.  Old School Buildings- look for old school buildings for sale and renovate to MFH.  My road contractor has done two of these and is approaching a third.  His wife converted the school gymnasium and kitchen to an event center.  Had 27 events lined up this past summer before covid.  Great value add proposition, good location.

Best wishes on your decision or path.  But, I actually have to make my mind up on the Contractor rental units.  Uncomfortable switching lanes for me.  Folks, please stay on Brian's topic.

@Mark Hulsey

Greetings from next door to Omaha.  Don't know Mr Buffett, never seen him, haven't read his thoughts.  My wife and son go every year to the Berkshire stockholders meetings for the gadgets. 

Two thoughts, one business and one entertaining.

Commercial-  We do Self Storage, 8 locations, 5 towns.  That is our lane.  Saved 4 acres road side on our latest project and built the storage in back.  Zoned Commercial.  15,000 per day road count. Between Council Bluffs and Omaha.  Planned to build Contractor rental units.  100 x 400 building.  Split 50 foot in the middle and in 25 foot widths.  14 foot tall by 12 foot wide doors.  Etc, Etc.  Numbers work.  Different customer and risk pattern than we are used to in Self Storage.

Based on the wisdom above and your background, do we build ourselves or sell the land (appraised $600,000).  We have $100,000 into the land.  All hookups are at the front, storm pond already installed, zoned, fenced, land leveled, just need to build.

"Curve" questions for the above.  Mr Buffet's advice only holds true if you generally speaking know where you are on the "Curve".

a.  Where are we on commercial land price curve?  Nationwide primarily.

b.  Where are we on Contractor rental buildings curve?  Local decision.

c.  Where are we on our personal Risk/Reward curve.  Financial risk is fine.  Its the knowledge Risk difference between Self Storage and Commercial Contractor rentals.  Only plan to do this one time.

Where do you think we are on the Curves?

Entertainment:

Mr Buffett is walking down a sidewalk.  As usual he has another 3 people following/with him.  There is a dollar bill on the sidewalk.  Doe he stop to pick it up?

- Economic efficiency- his time, the three peoples time, and cutting his next meeting short 1 minute while he picks up the dollar; is it worth it. Time- checks the dollar out, determines its clean and puts it in his wallet; takes a minute.  He decides not to pick up the dollar.

- trained by parents coming out of the 30's depression.  Picks the dollar up.

- Ego- both ways.  Doesn't want to be seen picking up the dollar, some things are too small.  Does want to be seen picking up the dollar, nothings to small.  Every dollar counts.

What is Mr. Buffett's and/or your thought process, on picking up the dollar?

@Rakan Khalid

Just googled your town.  Look up Renz and Renz realtors.  They have 4 acres for sale for $650,000 on Monterey road.  Ask them your question.  Local knowledge is always better.

Not knowing the location or the property, I will use a $500,000 magnitude figure:

a.  You might be able to subdivide and do road frontage subdivisions or 1 to 2 acres depending on your Zoning.  To see if this is worth it: 1.  See if you can do it., 2.  See what 1 to 2 acres lots are running in that area.  Don't do a traditional subdivision, the roads and utilities eat into the profit and are a lot harder project.

b.  As mentioned storage.  This is a viable option, depending on Zoning and market.

c.  Do a 1031 into a property type you like.  Or just sell and pay the taxes.

Nice problem to have. Worst case you sell it and have $500,000.  Depends on what you paid for it.