All Forum Posts by: Henry Clark

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.

@Michelle Werner

Forget whether this is a financially viable deal.  Got some "research/approach" questions you need to address.

Approach- first of all, don't trust me.  Even if I am telling the truth and it makes sense, don't trust me.  Even if it is what you want to hear, don't trust me.  Verify all things about the investment and information.  This is your money, don't trust anyone, until you have done business with them several times and you have a track record.  Now apply this to some of your info above.

Bank approving conventional loan won't approve a new shower and toilet-  Virtually every older home ever sold has needed a new shower and toilet.  The question is not whether that is true or not, but how did you get to the position a bank won't lend against that?  Need to challenge your research and approach to pulling together info.

Mixed Use loans- can't figure out how to find a bank.  Mixed Use is a Zoning designation, not a loan type.  Yes you have a billboard on the property, but that is a separate question.  How did you get to this position?

Property is not financeable- normally the properties I see as not financeable have EPA problems, Meth house or has asbestos issues, investor doesn't have collateral or business plan, etc.  Only you and your banker know whether this is financeable.  

Action:

a.  Develop a checklist, to cover the entire project and to help you narrow down your review.  Example:

    Structure section- put line items in for roof, plumbing, foundation, ceiling, windows/doors, floor, HVAC, electrical, etc.

     Finance- terms, down payment, collateral, income based, etc.

     Team- banker, plumber, electrician, carpenter, hvac, lawyer, Realtor, etc.  Don't keep shopping for the cheapest.

b.  Take this list and add to it.  Have two or three other people review it and improve it for you.  Try to get contractors, roofers, etc to look at it.

c.  There are a million items to check off.  Keep adding to your list as you do real estate deals if that is your plan.  For example, a 900 SF house is small.  Does it also sit on a small lot.  If you tear down the house, you might not be able to re-build on it, even a similar 900 SF house.  City code may have changed requiring larger lots.  Key on the 90% issues, that might make this a failure, or take you out of the investment arena.  If you fail on the final 10%, they will be to small and not hurt you to bad. Example:  No hand rail up the stairs.  Not on your checklist.  Inspector requires.  Costs you $1,000.  Doesn't take you out of the game.

Timing-  you won't build your knowledge base up in time for this deal.  Or you will need to get someone you trust, to walk through with you.

Start small and Make your Big Mistakes Early.

@Jaime Bisbey

Short answer, look at RV/Trailer rentals.  Buy ones already in a park.  Lets say you live in the middle of NY, Chi, or LA, doesn't matter.

Long answer; REI is to broad, narrow the field. Supply more background on your personal background/experience and REI model you prefer. Even if you don't have the funds yet, BP will be able to give you options to get involved and learn. For example: If your a dentist, start looking at Medical buildings/storefronts, so you could be a major tenant, even though you don't have the funds to do that now. If your an oil field worker in South Dakota who hasn't been laid off, look at RV/Trailer rentals. There's probably a lot to sale in the oil field states today, with Oil down. Buy a bunch and move to your town.

Revisit the house you just bought; not that you would sale, but this was probably the best REI opportunity you had. Go through the thought process as if you had not bought a house yet.

Fiance- make a decision. This is both from a positive and negative standpoint. Both legal and personal relationship. If you do a BRRR, you will probably spend more time there, than with your Fiance, other than sleeping. Check if she is into this.

Good luck.

Start small and Make your Big Mistakes Early.

@Vijay Kurhade

Usually before I respond, I will look at the person's background and other posts.  This helps guide me on how to respond.

Looks like your looking for the Rule, the equation, the decision tree to make REI decisions.  Although you could do this to a degree there are so many variations and "if then" situations.

My background is as a CPA/Controller/CFO. I want to know the answer mathematically and assumption based, before I make the decision. Our first investment into Self Storage, I had never done an REI deal, other than buying our house. Got to what I would say was about 65% of the information and I could see I would not get any farther, no matter how much more research or reading I did. We had to make the "Jump". Before I did this I asked myself the following questions:

a.  How much could we lose?  Say $50,000 to $80,000 loss

b.  Can we take that hit?  Yep.  Still eat prime rib on Fri or Sat.  Son still goes to college.  Don't have to sale anything to cover.

c.  If I don't do this, will I ever do a Passive investment?  Probably not.  After I had invested this much time into researching and couldn't pull the trigger.

My point is:

1.  Start small and Make your Big Mistakes Early.

2.  Address the above loss questions, then think about what you might gain.  Experience- you will learn the answer to your questions and a bunch of other ones, you haven't thought or read about.

3.  Then make the jump.

Action Steps:

A. Narrow down your REI investment strategy. This will help with your questions and responses.

B.  Narrow down your investment funds.  This will help in analyzing the deals you can do.

C. Make an outline of all the major areas and start developing a Checklist. Example: If a SFH house, then add a structural section and put Roof/Foundation/Doors-Windows/HVAC/Ceilings/etc; another section on Financing, etc. Have other people review to add from their experience. This will cover the 90% of issues. If you fail on the last 10% they will be small.

D.  Develop or use a Bigger Pockets spreadsheet.  Matter of fact go through one of the Bigger Pockets spreadsheets.  This will both force new thinking and channel your thought process.  This should fit with your approach, which seems to be analytical.

Your questions, I will address, but at this time can't be very useful:  I will use our Self Storage business as a model.  Again, narrow down your model.

a.  Horizontal or vertical.  We choose Horizontal, most National Big Box go vertical.  Decision points, Cost of land, Availability of land, Customer service- drive up versus elevator, Business model, etc.  You have to get into each model.  If you had 5 of the National Big Box locations side by side in vertical, climate controlled; they all were only 75% full after 5 years; if I could buy land next to them in my model I would and be very happy.

b.  Better Salability- Again, pick your REI model. We have 8 locations, in 5 towns. When we approach a town, we both look to buy and to build. Even if we have a deal to buy, we still go through the build approach. This addresses how hard it is to find correct zoning, land price, availability, location relationship to neighborhoods, etc. The harder and harder it is to find a spot, the more valuable is the Purchase or build in that town. Less chance of "Stupid Money" coming in and building right next to us and devaluing our investment. This makes the property more "Salable" in the future and a better investment.

c.  Project pricing, mix, branding-  Again, pick your model.

Pricing-  Our product is priced below big box due to different cost structures but also different pricing strategies.

Mix- We chose Drive up self storage.  We do Self Service and hardly ever meet a customer.  We focus on 10 by 10/15 and 20 foot unit sizes.  We have dropped 5x10 because we were having a lot of vandalism issues.  Pick a Strategy and stay with it, until you have it nailed before branching out.

Branding-  Named it using our last name.  Do You Tubes with a local touch.  Basically you "know" the owner, even though we will probably never meet.  Our market area is within a 40 mile radius.  Want them to know we are there for them and their valuables.

Action:

Narrow your REI focus and discussion.

Develop a checklist. Will fit your personal approach. Go find my Forum post, Self Storage 101 Checklist and adapt to your REI needs.

At some point it will be time to "leap".  

Start small and Make your Big Mistakes Early.

Step 1: determine your financing route.  This will determine your investment size. Try not to put all cash in.

$50,000 SBA 10% LTV equals $500,000 loan

$50,000 SBA 15%                     $333,000

$50,000  Traditional 25%         $200,000

so forth.

Step 2: don't go for the "best" investment.  Go for the one that works with your family and career timing.

Step 3: Google "Contractor Garage Kansas City" model.  Doesn't work with SBA loan.  Don't go this route now.  Build up some more equity, then look at this type of product.  Might fit your construction background, reduced customer interaction while on your career path, and Family mode, better long term.

Start small and Make your Big Mistakes Early.  Looks like your following that, which is great.

Update

Our newest location we decided to put the insurance brochures in the unit along with the contract.  Does a far better explanation and sale on the policy than we do.  These units are at 33% renters buying insurance policies versus about 0% at our other locations.  You make very little money on this, but the major point is to both inform the customer they are the ones who must insure and that you have no insurable interest or coverage for their belongings.