All Forum Posts by: Henry Clark

Have saved the front of one of our properties to do "Contractor Incubator Buildings".  Rental units for contractors.  Have a few specific questions.  Have most of the build, demand, finance and location questions already addressed.  If there is something specific to this type of customer or lease please note.  Mainly do Self Storage, would greatly appreciate your input.  Thank you.

1.  Insurance coverage- recommended companies and any specific types of coverage beyond normal Liability and property.

2.  Electrical- build to suit, or install ahead of time.  200 amp services?

3.  Rent terms- I want as little work as possible. Should I go short (1 year) or long (3-5 years) NNN. Also want a clean operation on the outside. Want terms that keep me in control of the external property, to where I can terminate the lessees if they keep falling short on cleanliness.

Overview:

a.  100 by 400 ft building; 16 foot high.

b.  14 x 14 door, with walk thru steel door.  Insulated.

c.  Metal frame; seamless roof. Heat transfer barrier to beams.

d.  6 inch concrete, moisture barrier,

e.  Building will be "able" to be segregated on the two ends.  25 ft wide by 40 ft deep.  4 of those along each end.

f.  Middle will be along the front 25 by 60;  (400-40-40=320).  Will be 8 bays across the front with 20 ft extra in one bay, with extra 14 x 14 door.  Back of building will be the same but 40 ft depths.  Bays can be combined as needed.  example:  two 25 x 40's; can be leased as a combined 50 x 40 and so forth.

g.  Water and Plumbing to each.  No office space built out to begin with, build to suit.

h.  Current market running $1 per sqft per month.  Lowest I have seen is $.85/sq ft. 1mm metro population.

Potential customers, anyone.  Electricians, plumbers, landscape, car enthusiasts, etc.

Well it rained, so that is great. We were bone dry. Can't do any dirt work at our new Self Storage site today. Here are some notes on Customer Self Storage Insurance. Enjoy sharing our experiences whenever we have down time. Building our last location and none of you will be our competitor so want to share the info, before I forget it. Moving on to another type of investment and enjoying life more. Another 5 years we will be picking our own coconuts off our 100 trees. Living the life of Jimmy Buffett.

1. CUSTOMER INSURANCE COVERAGE

Storage insurance is recommended for all tenants. Since the Storage Facility owners have no ownership in the contents and are not performing as a warehouse, our insurance does not cover any contents or impact to the tenants valuables.

We supply access to Storage Insurance through XXXXX Insurance company. This is automatically billable and payable through our Self storage management software.

The following is a summary, but is not all inclusive of the coverage:

1. Why insure your stored goods, because it is your responsibility.

2. Coverage: Fire, Hurricane, Tornado, Wind, Earthquake, Vandalism, Vermin, Lightning, smoke, hail, building collapse, Explosion, Leaking water, burglary.

3. Not covered: Jewelry, furs, watches, money, securities, documents or motorized vehicles, loss from war/flood/climate conditions (rust/mildew). Burglary is only covered if there is a sign of forced entry and a police report has been filed.

Coverages and Monthly Premiums (07/2020):

$ 1,000 $ 7.95/month

$ 5,000 $10.95/month

$10,000 $20.95/month

$15,000 $35.95/month

with $100 deductible.

The Storage facility is collecting and transferring the insurance premiums as a courtesy and is not representing the insurance company in any capacity.

Should you have a claim:

a. Take photos of damaged items.

b. Use the online claims filing system at xxxxxxx.com

c. Speak to your claims handler before discarding damaged items.

Storage tips:

a. Make an inventory list and/or take photos of your stored items.

b. Use a cylinder lock.

c. Store items on shelves or pallets, and cover them to protect against dust/moisture.

Should you have a question or claim, call 800-xxx-xxxx Insurance company.

2. Facility Owner points:

a. Note to the customer they are responsible. Since you have no ownership of the stored goods, you can't insure their loss.

b. By offering insurance you are creating one more reason they can't sue you, if they have a loss. They had the chance to insure.

c. You can make some money selling these policies, but it is like $2 on a $10 premium per month.

d. When you pick your Storage Management software, see if it has a suggested Customer insurance policy tied to it. Makes it easier to process the payment and bookkeeping. Otherwise you have to operate another payment method outside your storage software for the insurance and also another tracking system.

e. Currently we have 54 out of 494 tenants (10%) using our insurance. At one of our locations, we started putting the information pamphlets with the contract and we are at 33% usage.

We had a flood last year. Only 1 of the 70 tenants used our insurance, which covered them. If your in a flood plain, which we were not, make sure your customer contract notes that, otherwise you will be liable.

Investment Info:

Industrial commercial investment investment.

Purchase price: $200,000
Cash invested: $1,600,000

Self Storage build out. Phase 1 230 units. Phase 2 200 more. Phase 3 200 more.

What made you interested in investing in this type of deal?

Its a Financial business. No plumbing or HVAC to fix. Little Sales effort

How did you find this deal and how did you negotiate it?

Purchased ground, then built.

How did you finance this deal?

SBA 504

How did you add value to the deal?

Developed the location.

What was the outcome?

Covid is slowing the occupancy fill rate. Otherwise fine.

Lessons learned? Challenges?

Mother nature always wins. Took two years versus one to develop.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nope

@Sarah.  The concern is making your indoor space more rentable for "future" renters that require outdoor storage space.  Your potential customer base is larger.

How much land are you talking about?  Other considerations.  Examples:

1.  Controlled access? Security camera system- RV's are the easiest thing to break in to.  I have 3 acres of RV storage along with our Self Storage.  They are the most headache.  Breakins, people leaving without notifying you, Parking across to spots.  Not a 12 month rental.  Some stay forever. Others just want for the winter.  

2.  2 acres compared to a 10,000 square foot building.  Tenants will probably never use, then rent the space.

3.  50 x 100 lot compared to a 30,000 square foot building.  Its not worth the effort or time for small revenue stream.  Plus it is more value for a potential "future" tenant who can use the space.

4.  Another option with less headache.  Throw some rock down and put in Storage Containers for storage.  You can buy as needed and sell if needed.  No property tax.  Insure as Personal Property.

If you have quite a bit of ground for RV storage, here are some notes from another post.  May seem a little disjointed, since you don't see their posts, that I am referencing.

We have about 130 parking spots over 3 locations. Not at a point where we are pushing extra income from them. Primarily using the extra land to generate some income before/if we move to more storage unit buildings.

As @G mentioned if your near full occupancy, increasing rent will be your greatest impact.

If not full up, here are some other avenues, I have not pursued, because we are are not big enough yet. I actually dont like RV storage since they are the source of most of my break ins, even with our camera systems.

a. Build regular storage buildings.
b. If zoning allows, switch out "some" parking spots with Storage Containers. Don't know your set up, but the containers will bring more money in, and some of the customers will prefer to both park their vehicle and store in a container next to it.
c. Look at installing Canopy parking.
d. Attached below is a blog for my RV/Vehicle tenants on things to take a look at for Storing their RV/vehicles. Recommend you go through that and pick out items that you can convert into Sales $$. Example: sell Hitch locks, tire covers, vent covers, vehicle covers. Provide propane fill service. Provide a dump service with a card system (don't know if it is worth it, if you only have xxx units in one location), just like you pay at an air pump. Paid air pump, wash down area.
e. With theft in the lot or on the road. See note below on motion sensors or GPS trackers. Sell them.
f. One of the RV storage locations nearby has very cheap parking (they park for you, very tight); but they have onsite maintenance facility and services.
No Weekend in/out though; and they close at 6pm.



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.


Good Luck.



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.

Self Storage – “Company” Liability/Property insurance.

Below is a summary of our Storage insurance for one location for your information. This location is in a 1mm population metro area, 230 units, and cost is about $1,800,000 all in.

Limits of Insurance: Coverage:

Liability and Medical Expenses

$2,000,000/$4,000,000 Occurrence/Aggregate Comprehensive Business Liability

$2,000,000 Any One Person Personal & Advertising Injury

$4,000,000 Aggregate Products Completed Operations Aggregate

$2,000,000 Any One Fire Fire Damage

$25,000 Occurrence Customers' Goods Legal Liability Deductible: $0

$25,000 Aggregate Sale and Disposal Liability Deductible: $1,000

$10,000 Any One Person Medical Payments $1,000,000 Occurrence Hired Non-Owned

$300,000 Each Employee Employee Benefits Liability

$25,000/$25,000 Per Claim/Aggregate Employment Practices Liability

Loc Class Desc Coverage Limit Ded Valuation Type 1 Self-Storage

Blanket Building & Business Personal Replacement Cost Property $2,100,000 $25,000

Earthquake Included

Sinkhole Included

Windstorm or Hail Included 5%

Business Income Actual Loss Sustained 24 Months

Pollution Clean-Up & Removal $100,000

Employee Dishonesty $15,000

Money & Securities - Inside $10,000

Money & Securities - Outside $5,000

Accounts Receivable $25,000

Electronic Data $20,000

Valuable Papers & Records $25,000

Fine Arts $10,000

Employee Personal Property $10,000

Limited Pollutant Removal $25,000/$100,000

Cosmetic Loss Limitation Included

Equipment Breakdown Protection Included

Premium, Fees, and Taxes: BOP Premium: $ 7,760.00

Optional Terrorism Premium: $ 31.00

Total Premium: $ 7,791.00

Key notes:

a. The above insurer specializes in Storage units. If you go with your traditional family insurance premiums will be about twice this, since they don’t specialize in this market.

b. Flood insurance was taken out from last year. I will have a separate topic on Flood damage.

c. We offer their Customer insurance and follow the state Lien/Auction laws.

d. Earthquake, is not offered if you are in a fault zone.

e. Hail insurance went significantly up. Talking with an adjuster, Companies were buying hailed properties, holding them for a year or two, switching Insurers, then making a claim, when another hail storm came through.

f. Business Income loss is 24 months. If you think about the time it takes you to clean up and repair. Then go through rent up phase, the 24 months is pushing it.

g. Between the “Replacement” cost $2,100,000 and the Pollution Clean up and removal $100,000; it looks like I am covered, with an all in cost of $1,800,000. If you back out the cost of land $1,800,000 less $200,000= $1,600,000.

Followup points:

1. I need to check if the “Replacement” cost covers clean up also. If a tornado was to hit our operation, the $100,000 would not cover removal.

2. I need to check if the $100,000 cleanup and removal is just for Pollution or does it cover material debris.

3. If you see any holes in coverage or other followup items, please comment. Also expand on any insurance shortfalls you have had through a claim process. Greatly appreciate that.

It could easily cost $300,000 in clean up, debris haul/disposal, security guard during cleanup, etc. Make sure your insured beyond just replacement costs. Also claim as much as possible. Your roofs might look good, but they might leak later.  Will do a separate topic on going through a Flood.

Primary question to check on with your local zoning group, are they allowed.  Same goes for individual collapsible storage units.  The following discussion is just on Cargo Containers.

Only if you have cheap/extra land and can do rock roads (if you have to have concrete/asphalt roads, you need a higher return unit).
If your in the country and your zoning allows it, go with 20 foot Cargo containers as a good part of your mix. Put some gravel down at the front and back of the unit to get it off the ground. If two rows, put them back to back.  Buy in groups of two.  They can be delivered two at a time on a tilt bed truck trailer.  Delivery cost will be the same for 1 versus 2, about $120 within 30 miles.  Tell them ahead of time how you want them to face when they are unloaded.  They will not get placed perfectly so plan to unload then 20 to 30 feet away and have a crane truck set them in place.  I would recommend buying about 20 at a time, to make it worth everyone's time.

Depending on how close you are to shipping areas, your container delivered may run $2,100.  Rent for $50/month.

A 10 x 15 or 20 traditional outside access unit will run $3,100 installed.  10 x 20 same market rents for $65/month.

Containers are only good for clients who can open/close them. Appreciate their airtightness.

They will rent for less. Example: 8 x 20 ft container $50; 10 x 15 traditional $55; 10 x 20 traditional $65 in the countryside.

No property taxes since they are not attached to the ground.

You can buy as you need them.

Have to many, just sale them.

Talk with your tax person. Should be able to write them off in year one.

Recommend you use silver trailer roof paint. This lowers the inside temperature significantly. Also paint the Visual exterior sides a consistent light color to reflect the sun. Sand down roof and side rust spots first, then prime. We have 40 of them and they look great painted one color. Everyone wants to buy one.

When you buy, pick no leaks in roof or floor. Side dents are okay. Easy to open doors. Don't buy single trip containers they cost to much.  Also don't plan to fix them up.  If you replace one of the plywood floor panels with original material it will be about $800 per 4 x 8 sheet.  Door hinges and bars will be costly to replace.

For Property insurance these are treated as Personal Property and not as buildings.  Make sure you have enough coverage under Personal Property, along with your lawn mower, office equipment, etc.

Recap:

- Cheaper than traditional

- rents less $50 vs $65 but more profit

- no property tax, since not attached to the ground

- Can add and sell as needed.

- Insure as Personal property and not Property.

- Bank may not want to loan against, since moveable.

- Harder to open, so not good for some clients, others like them because the are more secure and for pest control.

Separate topic.  The units below were 2 foot under water, over the roofs for a month.  One year ago.  Floors, metal and door hinges are fine.  Very durable product.  Not a product for every location, but works well where possible.  Would go good with a Boat/RV/Vehicle storage location for onsite storage.

Sorry for the choppy view.  Couldn't attach actual spreadsheets.  Please change and make it yours.  Improve on it.

Valuation/Broker/Buy- Sell discussion points.

PL/Cash flow estimate

Revenue calc and Concrete estimate;