All Forum Posts by: Henry Clark

Both of the types of locks we use for Self-Storage are Made in China.  Just ordered a years' worth.  

With the Tariff and trade war.  Our vendors will need to source from elsewhere which will drive the cost up as others also switch there sourcing to a limited vendor base.  Or no locks will be available as stocks here run out.  Even if China came to the table and things were settled.  Just like Covid there will be a backup of container ships being able to be offloaded in our US ports.  

Also, Chinese ports are packed full of cancelled orders.  Even a new production order of Locks would have to make it through a Chinese port that is already full of containers sitting, plus you would need to find an empty container to ship.

Main point- identify what is critical for your business and make a plan.  Although we bought a years' worth of locks.  We will always be able to use them.  Also, they are small dollar but critical to our business.

Start small and Make Your Big Mistakes Early.

OP    Would only own the Storage facilities, never lease.  If you leased a facility from me and turned it into self storage.  When the lease came due, I would tell you to leave, or I will buy for 30% of value.

Your business doesn't travel.  And you renters won't move with you.

Believe I noted in an earlier post.  My brother oversaw fire efforts south of LA to the border one year with the military. But when their resources weren’t need they helped LA and up to Washington state.   For LA specifically they gave them a recommendation to put pre filled water tanks up in the hills.  From there it was gravity fed pressure through the fire hydrants.  LA did not want to do it.  

OP. 

See if a new Chiropractor came in the area.  Assume the other retired.

Reach out to your closest Chiropractor schools.   Interview current and recent graduates.  Set up a good startup lease deal with option to buy after 5 years.

OP.  I would disregard cap rate in those two situations, actually in all situations.  They are both very high from a price standpoint.  Example for a grade of A. What is the difference between a 97 versus a 99?

As mentioned just above look at the specific market dynamics, the location dynamics and then the actual deal dynamics. Growing communities, school systems, location within the community, can you ADU or split a lot off, which has lower current rental rates compared to that local market, which has more or less Capex coming due, etc. etc.

Who gave you the Cap rates?  I would challenge the numbers unless you developed them.  Plus is this based on their asking price, or what you would pay?

OP your major issue will be the owners transition from home care to a retirement home.  

Since they are wealthy.   Could live for 6 or 7 years.  Normal folks $6,000 to $10,000 per month.   This person could be $15,000 to $25,000 per month.   If funds get used up then government goes after assets such as the house.

Recommend power of attorney just over the house once they go to a retirement home.  You will want set aside funds and a standalone account do house upkeep.  Otherwise you will personally fund maybe with no recourse.  

OP.  Would need to know your resources, skill sets, risk tolerance.

Looking at your background your in Texas and are a real estate agent?

Your objective by 50 55. You're not going to get there parking our money. Your going to have to make it in your families living costs and I would say REI since your an agent.

1.  Family living.  Want you to build or buy a small storage location.  Build a managers living quarter big enough for your families needs for the next 5 years.  You’re going to sell and move at the end of 5 years or sooner.  Then build bigger.  This will give you cheap deductible housing and all support costs.  Even your water hose can be deducted.  

2.  Food and clothing.  Look for one of my posts or responses on this.  Cut your food and clothing costs to a 1/4 of your current costs.  

3.  401k your going to lose money for the next 5 years.  

4.  Real Estate agent will be kind of da generous unless your the top 5% to make a living.  

5. REI- approach. Appreciation, cashflow, cash snowball. You need to focus on Cash snowball approach while looking for the other two approaches.

6.  Texas is the greatest state for property total sales.   Learn the rules.  Do just “off list” tax sales.  Don’t go to the auctions.  Buy for $5,000 sale for $25,000 example.  Dont worry about paying taxes.  As you accumulate cash start adding Appreciation and cashflow assets.  

7.  Research paying for college.   Either Texas college fund or see if you can join the Reserves and College may be free at Texas schools.   Check this. I know for military but don’t know for Reserves.  
   
8. Start attending REi meetups. Don't tell anyone outside your REI acquaintances your plans or objectives. Not even your family or coworkers.

Keep learning. 

OP ask your local realtor for suggestions.  Then go sit down with them.  Tell them your plan. Then have them educate you. 

OP recommend you take a different approach looking for weaknesses.  Your background shows Financial professional and you have already invested. 

Make your failures on paper first.  See the path ahead of you versus when you hit it.  Grab a spreadsheet and make an outline.  Then post here and ask people to help expand it.  Make both a deal analysis checklist and a Syndication outline.  

Your objective is to narrow down your potential failures to smaller items.  This will also help in the investor side. 

We do developments and not syndication.

Make an outline.  Then make sub categories.

Deal analysis.

Legal needs.

Execution.

Investor communication

Exit plan

Financial management

Stress tests

Market study- competition, occupancy levels, demand, pricing, amenities, location, etc

Financing- who and how, match the financing to the exit plan, 

Sales pitch- the deal, your teams experience, your skin in the game, 

COO, permitting, zoning, inspections,

Materials- what if-stress test.  inflation, availability, leadtime, tariffs, China, Canada, 

Once you have this done who is on your team, strengths weaknesses, stress points, timetables, 

Use the lookup function and read all of the syndication posts.  

OP. Sit down with a Qualified 1031 Intermediary and tell them what you want to do. 

1.  Let’s say you sell for $100k.  Let’s keep simple and forget selling costs.  You then have to buy for that same cost or higher.  Say you buy for $110k.  You have to bring $10k to the deal.  
2.  Same as above. But you only find a new property for $90k.  The $10k difference is all considered incomes.  No cost basis is applied.  
3.  Say you sell then want to buy 2 properties.  Understand the time frame to identify the two new properties.  It is pretty tight.  You won’t have as much leverage to walk away from a deal.  Thus you won’t make as good of a deal.  
4.  Compute the difference between selling and 1031 versus using your current investment as cross collateral for your new purchases.  You would need to stay with your same lender.  
5.  You could do a reverse 1031.  Buy first then sell.  Since you control selling your property takes some of the timing pressure off.  But you need to work with a lender since you won’t have the cash available to make the purchase.