All Forum Posts by: Henry Clark

Market Analysis:

1.  You need to check out zoning in the area.  How easy is it for other people to build storage.

2.  Market size- Newcastle has 10,000;  equates to 600 storage units.  Have population outside, say 700.  But your getting into rural fast.

3.  Highway 277 doesn't lead to the major metro areas, so that doesn't pick you up more customers.

4.  This location is sandwiched between two large locations to the North and the South.

5.  Feeder roads 16th and 24th feed into 277 and they would have to go past you to get to the school systems; so all those neighborhoods, you would command over your North/South competition.

6.  Google earth is probably and old picture, but someone is building more storage next to the South competition location.

7.  Marketing, no one in New Castle has Sparefoot turned on.  They are either full and have it turned off, or if you join, you will be the immediate number one on the internet.

8.  Competition rates are about the same.  Won't be able to increase prices.

Always recommend if your interested make an offer that works for you.  Doesn't matter about their cost or their asking price.

You might look at the Chickasha #1 property for sale , which is close to you.  Then buy some land to the north of town and add a second location.  Way less competition.  Smaller initial investment for a learning curve.  Do a rate increase.  Move to Self Service.  Get on Sparefoot.

Start Small and make your Big Mistakes early.

Good luck.

Revenue/Income approach:

This is rough calcs to compare against their proformas.  Theirs should be more accurate.

Don't have their size mix.

55,850 NRSF average at 150 (10 x 15)= 372 units

372 average units x $65 their price x 12 months x 85% full their figures= $246,000

Close to their $245,000 figure.  Not including Office rent $21,000 since not included in Cost analysis.

Upside at 100%= $290,000

Can't tell if there is extra expansion land to factor into value.

Lets leave revenue at $246,000

Expenses:

Insurance $13,000 their figure, close to what I pay.

Property tax $20,000  jumps from $6,000 to $20,000.  Ask and understand.  $20,000 seems a little light, but don't know their location.

Leave out Depreciation for cash flow discussion.

Wages $50,000 average for them.  You don't live very far.  I would do Self Service.  You, wife, kids, office help can do this.  Do $5,000 for a local person to walk through and check, pickup trash, weed, send you update pictures.  One of you just drive down once or twice a month to reload units that have moved out.  Go see how I do it on the internet.  Use $5,000.

Other $15,000; to me seems high, but lets leave it.

Net before taxes and depr= $193,000;  remember try to have the purchase price broken out.  Year 1 write offs, your shooting for zero taxes this year and next, from a cash flow standpoint.

I'm keeping this rough, you change figures as you see fit.  Example if you want to throw back in the full $50k wages. Go through Income tax and depreciation calcs to refine.

$2,800,000 / $193,000= 14.5 years.  My objectives are 8 to 12 year payback.  With bank amortization of 20 to 25 years.  I would only go this high if it: a.  Had extra ground to expand on, b.  Had Vehicle storage, I could convert to building storage, or if rental rates are so far below Market and I could raise them 20% and still maintain occupancy percentage.  Instead of their $65 for a 10 x 15; around $75/$80 per unit.  Do a price comparison on Sparefoot in the neighborhood.  Should be a lot cheaper than nearby OKC or Norman, so don't use those as comparisons.

I'll do a market analysis next.

Cost approach:

Land  5.89 acres.  There is 6.1 acre commercial lot for sale there for $900,000; lets say the same

Buildings 55,850 NRSF= $1,190,000

Concrete roads= $730,000

Footings required?= $?????????

Storm drains= didn't see any

Fence= $40,000

Gate code access= $25,000

Electricity/lights= $70,000 cant see clearly what they have

Security= $60,000 can't tell clearly what they have.

Office bldg= not added above, can't tell if part of the sale.

Total= $3,105,000  vs asking price $2,800,000  Don't know how old they are.  If you do the deal, ask them to break out the purchase price by asset type above, so you can do year 1 writeoff for tax advantage.

I'll do a revenue pass, next.

Hope this is helpful.  Have to get the revenue numbers to answer your question.

Market size.  Read my post “Will they come?”  So the homework. Own the data.  Contact me with the figure you come up with

Make Shurway an offer. Your not in a rush let them start to think about it.  They will convince theirselves as family dynamics change.  Stop in once a year and say hello. Do this in a 40 mile radius. 

@Kendrique Coats

To help narrow the discussion down to "you".

See my notes above.

A.  What is your initial investment level?  $xx,xxx or $0;  What ever the amount is fine.  It will help determine the path, the posters will help advise you on.

B.  What is your finance plan?  Just your money, Traditional Financing, SBA, Hard money, etc.  This will determine collateralization %, which will determine your deal size.  Go talk with all of these, and start getting to know them and you plans/thoughts.  Don't wait till you have a deal.  At first money is hard to find.  After you have a track record and several deals, money starts gushing out of the ground, and you have to be careful using it.

C. Are you looking for a Fix/Flip, Long-term passive revenue stream or just start learning?

D.  Recommend you stay local for your first deals.  More hands on learning.  If you know trade work great.  If not, recommend you work with Habitat for Humanity.  Even if housing isn't your investment goal, it will start to get you familiar with the trades.

E.  Have you found  an investment group in Chicago to hook up with?  If not, ask these folks, they will be glad to help.

F.  Make an outline of your "Tool Kit".  Zoning, permit process, electricians, plumbers, financiers, neighborhoods, legal, accountant, realtors, wholesalers, property tax rates, property insurance,  etc.  Don't worry about going out and getting these lined up.  Just know you need to, and as you talk with folks, start filling in the blanks.

Which of the above have you got knocked out?  Which do you need help with?

@Kendrique Coats

Reading through your other posts to determine the most beneficial response.  

Recommend the following at this stage

A.  Financing level-  determine your finance capacity.  Example:  10% collateral on an SBA loan and you have $10,000 cash or collateral means you can do a $100,000 deal.   If traditional mortgage with 25% collateral then you can do a $40,000 deal.  This will help narrow your thought process

B.  Determine if you want to be an individual investor or an institutional investor.  Example do you want to invest $10,000 with an organization or do you want to be the one leveraging $10,000 into a $100,000 investment?  This is a risk reward decision

C.  Since your just starting out how much can you risk?  Risk means your lifestyle won’t be impacted.  Still have a place to live.  Family will have food.  Kids will still be able to go to college.   Etc   This is how much you should invest.  Asking a general question on BP means you will get a ton of variants that probably won’t fit your situation or risk reward levels

D.  Your in the Chicago area.  High price, few low $ entry points.  

Recommend:

1.  Go to local meet ups and find someone to do a tag along with the type of investing your interested in

2.  Start doing deal analysis on the type of investments your interested in.  Get other people to challenge it on this forum.  Keep building a “tool chest”.  You will note most of the people say anytime is a great time to invest.   Others say as long as the numbers work and meet your objectives.   Do this step so you get to their level of decision making  

3.  Offer your help and work with someone on the weekends in the investment area your investigating 

4.  Decide if you want quick profits (fix flip) or long term passive revenue.

Even if you have zero dollars you can do a real estate deal in Chicago.  The reason I note that, is there are tons of options out there.  You just need to find them and the ones that fit your risk reward level.  

@Daniel Krantz

First don’t trust anything I say.  All things in self storage can be validated.  You need to own the info

Storage is about life events.  Death, divorce, moving, fires, remodels, etc

Rich, poor, city, country, etc.  They all have the same life events noted above. 

Pick smaller towns. Get the populations off google

Either google all storage locations and look on google maps street view and count the units.  Or preferably go count them yourselve.

Once you do this exercise you will own the metric.  We own 8 locations.  This metric was used to select the town and sizing for each location. We have tested this and used it for all deals.  There is some leeway in this metric.  My town has the highest ratio I have seen and we are still building.  

@Daniel Krantz

Look up this post I did.

Self storage-  Will they come?

Do that then contact me to discuss the metric.  Of all my posts this is the “one”.  

@Dan Goeckel

1.  Our deal metrics for our storage from a financial perspective:

a.  Payback in 8 to 12 years.

b.  Finance 20 to 25 year terms.

2.  Stupid money test:  How hard is it for someone else due to zoning and land/price point availability to build next to you?  Given the exact same two properties, the one where no one can build next to me, is more valuable.

3.  Your location: 

a.  Does it have any extra land to expand on? 

b.  Does it have rental parking spots that can be converted to storage?

4.  Lets do the location you mentioned, just from a financial standpoint.  Change data with your Boots on the ground knowledge.

a.  Cost method, 

     Buildings-  22  10 x 30 units.  if these are typical roll up doors,  roughly $141,000 assembled on site.

     Land- making this up, you change.  1 acre, $50,000

     Security-  $7,000; take out if non existent, add in if you will put in.

     Electric-  $7,000

      Fence and gate- $25,000

      Road- $50,000 if concrete; $10,000 if rock.

     Lets say total of $280,000;  again take out and change based on your knowledge.

b.  Revenue method

     22 units at $140, 12 months at 90% occupancy.  $33,000 revenue.

     Interest- ??? or your cash in.  Small either way.

     Property tax- $3,000; change as needed.

     Insurance- $2,000

     Electric- $1,500

     Depreciation- not the land.  Say $6,000 per year, for 30 years.

Income= $20,000 x .3= $6,000 tax; $14,000

Cash flow, with depreciation added back= $20,000

c.  Payback= $260,000 your number / $20,000 = 13 years.  

Summary:  If you wanted to just get into Storage, this would be okay.  I would recommend a closer location like in Muskegon, SpringLake, Grand Haven (just for fun, because I worked and lived there for a while); or closer to you.  Oh, I forgot snow removal and lawn, plus management.  Your 13 years becomes more like 15.

Especially ok if it has extra ground to build on.

5.  Competition:  Two methods to look at.  

a.  Pull up sparefoot and put the town in.  Then click on the 10 x 30 on the side.  No one in Tipp City, rest about 6 to 20 miles away.

b.  Pull up Google Tipp city Self Storage.  Click on the map and move to Earth view.  Look at your location and see how easy access it is, how much closer or farther to the customers, versus the other competition in town.  What is its strengths.

Summary: 

Unless your about to do the deep dive into Self Storage, I would take a pass on this.  Even if the numbers are good.  This is a preference for me, because I like to focus on one type of investment versus several.  Helps me get my failures out of the way faster, versus learning new issues in different investment types. 

If you are about to jump into Self Storage, I would do my first one closer to home.  Walk over and talk to Shurway.  Looks like they were established in 1988.  If the kids didn't stay, they are probably ready for retirement.  Even if you don't buy this one, I would use it as a test to come up with how you would price a unit to either build or make an offer.  Portland has a market for about 250 units.  See how many they have and if there is any other competition.  I like this because the town is to small for the big boys to come to, thus it is a safer investment.  Also if it is the one and only, it dominates the market.  Plus they have extra ground to build on.

Sept 2nd,
Excavators re-leveled site. Need about 15 more loads of dirt to be brought in. They pulled off to work on another job, until dirt comes tomorrow. So close to done with dirt work. Once they are done, a small retaining wall needs to be put up.

Met with storm drain contractor and went over what he needs to do. He has to wait on the excavators to get done. Like standing up dominos, one has to fall before the other.

Fall tree supplies are showing up at stores. Attached below is the Landscaping Tree and shrub plan. Running around trying to find them and buy while the supply is new and fresh. Just stock piling until a little cooler. Note the Engineer group puts together the tree/shrub planting list and spacing. You could tell them up front. If you want to change you have to get the city planner to approve. Second picture is the code map. Example: "R" for red oak.
Set flags for them today. Will rent a miniexcavator and dig the holes first to loosen up the dirt. Then plant by hand. Mulch/Stake/Water.