All Forum Posts by: Josh Collins

Investment Info:

Other commercial investment investment.

Purchase price: $3,400,000
Cash invested: $520,000

Property was a marine services business with 70,000+ SF of indoor storage. We converted the largest buildings to group storage with in-out access for tenants (the buildings used to require the owner to have someone onsite to get their boat out of storage), added outdoor parking stalls and developed the vacant 6.5 acres into Maxi-storage. Property will be a total of 128,000 SF with approximately 85 outdoor parking stalls.

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

1000' from another facility of ours which would make it easier to manage.

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

A broker we have a relationship with reach out to us.

How did you finance this deal?

SBA 504 loan. I have a 50% partner who also put down half of the 15% down payment required for the SBA loan. The expansion project was 100% funded with SBA loan as stabilizing the initial property added enough equity to qualify us for the addition without an additional capital infusion for a down payment.

How did you add value to the deal?

We made the property self-service. We cleaned up the property. We added outdoor parking stalls. We rented out the existing shop areas. We added 56,000 SF of storage and 45 outdoor parking stalls to the 6.5 vacant acres the property came with.

What was the outcome?

Rent up is still happening but is going very well. I expect that we added $1M of value to the initial property and we should add another $1M of equity to the expansion project once it is stabilized.

Lessons learned? Challenges?

Verify contractors' availability and staffing. It seems that nearly all of our contractors had some sort of short-staffing that affected construction timelines. Also, use the most professional contractors you can afford. It will ultimately save you stress and likely money in the long run.

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

Yes, I worked with Telus commercial real estate brokers out of Lakeland, MN to broker the deal. I also recommend Lake Elmo Bank for financing and TCM CDC for the SBA loan.

Investment Info:

Other commercial investment investment.

Cash invested: $75,000

Investor in a syndication deal on an RV and Boat storage facility in Punta Gorda, FL. People's Choice Storage

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

Outdoor storage is getting harder and harder to come by in metro areas.

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

I am part of the Self Storage Investing network.

How did you finance this deal?

The General Partners got a commercial loan and syndicated investor money for the down payment and improvements.

How did you add value to the deal?

Better website, ability to take online payments, better gate access, better online searchability, raise rents.

What was the outcome?

N/A

Lessons learned? Challenges?

N/A

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

Scott Meyers 

@Scott Kelley - If I had to pick just one thing, I'd say that there will be some very good opportunities in Note Investing but you'll have to wait a while.  The risk is if it turns out that the deals aren't that good, you'll have missed out on everything else too.  Hence the reason for my other hedges.  

The biggest thing you have to ask yourself (and not look back) is whether or not you think this is going to be a short term downturn in the economy or a longer recession-type of a downturn?  The trouble is if you think it's shorterm pain and it turns out to be longterm pain, then what?  I think you have to be conservative with the money you need and you can be aggressive with your "fun" money.  

I think I got off the original poster's main question in that they have $12k to invest and what would I do with that.  I'd say that person should figure out what they want to invest in, learn as much about it as possible, and be ready to jump when a good deal presents itself.  If it's your first, last, and only $12k to invest, I think you get a little protective with it and try to get your hands on something that is guaranteed to grow, albeit slowly, to protect your principal.  Once that's done a few times, then you can get aggressive.  

This is my opinion and is probably based on some preconceived notions that I drew based on the original post.  I'm assuming it's their first $12k to invest.  I'm assuming they need this money to perform.  And I'm assuming they are risk averse to losing it.  Some others would say, it's "only" $12k, put it all on black until you have $100k, $1M, etc....

I have a feeling that the best performers over the next 2-5 years are going to be the following (other than self-education because that's going to be the best ROI if you actually put the knowledge to work):

1.) Gold as a savings account (10%)

2.) Cash - you'll be able to convert your knowledge into an asset (50%)

3.) Note investing (15%)

4.) Self Storage Real Estate (25%)

I don't hate SFH but you have to pick the right markets. And honestly, I don't know which markets at this point. It'll probably depend a lot on income to rent ratio, job market and how quickly those jobs come back. Very area dependent.

My wild card in this is finding STRs with a wilderness aspect to it.  So people can get away from the crowds of Nat Parks.  This has to be close enough to population centers to support during downturns, pandemics, etc.  

Feel free to argue with me but I don't like hotels and STRs all that much.  I know it's a long shot, but what happens if we have another pandemic to follow this one up?  Okay, so that's a long shot.  What if just 25% of people can't afford to go on vacation and/or don't want to stay in a hotel for 5 years?  That kills a lot of your demand.  I would want something that performs no matter what in the next few years.  I don't hate apartments but I wonder if people will be fleeing these high density living in years to come.  I'm only thinking 10-15% of the population.  I think that's enough to raise concern.  I'm not saying no, I'm just saying I'd like to see how this plays out.  With that said, because of my conservatism on this, the market would likely pass me by - all the good deals would be taken by the time I'd have the "all clear".  

This is fun.  I'd love for anyone to poke some holes in my theories or give their recommendations.  But I don't want your hyperbole, I want to know what you're going to spend your hard-earned cash on!  ;0)

Stay safe out there!

@Kirby Davis

Not all Cash on Cash returns are equal. If I could put money into a deal and do very little, I'm looking for 10% CoC. If I'm developing a self storage facility, I want 25% or more for all my effort (maybe more if you're the managing partner rather than the equity partner). Returns should be adjusted for time spent and risk assumed. The rest is up to you on what you're comfortable with. More time spent and more risk should equal higher returns.

Lastly, there are some very stable deals that reputable syndicators are advertising that suggest 8%+ returns are expected with little, to no, work for the investor.  I like to use that as a benchmark.  Should I put in a ton of sweat equity and time to manage a property that brings home 8%?  For me, that's a no.  For others, maybe it makes sense.  You do learn something by doing rather than signing over funds, so that should factor in as part of the equation if you're just getting started.  

Hi @Byran Hyatt.  I'd say you should check out Scott Meyers stuff.  He also does workshops and academies that are worth their weight in gold if you have the time and resources to attend.  

At the end of the day, you just want to make sure the market isn't saturated and that your income is greater than expenses.  Same as most other real estate.  Obviously that's oversimplified but it rings true for most deals.   

@Caleb Webster

Based on your posting of the zoning ordinance, it looks to me that you'd want it classified either as Retail Sales and Service or Hotel/Motel depending on the lesser of the building code requirements (assuming you're looking to minimize costs).  You may have to have fire suppression in both, I'm not sure.  But with that being said, if your model supports the cost of fire suppression and any other upgrades, it seems as if your use would be allowed.  It might be a conditional use but technically, the City Council shouldn't be interpreting this based on what they want to see but rather on the code requirements and that you meet and conditions to the use.  But that isn't how it always works so it depends on the Council's feelings.  As @John Woodrich said, you'll want to take their temperature at a Planning Commission meeting first and a City Council meeting second.  For conditional uses, the Planning Commission needs to recommend it to the Council and the Council can then review it for approval.  They typically go on the Commission's recommendations.  

This seems doable to me but you'll have likely to go through the proper channels.  Not that you're try to pull the wool over anyone's eyes, but I understand that you'd like to find a loophole to exploit (in a good way).  

@Gino Barbaro 

I don't have a ton of experience with this other than reading and listening to as much regarding this subject as possible.  I am seeing a lot of 8% pref rate deals.  The blue sky (everything over and above the pref return) is where things get interesting.  

I recently listened to a podcast (it may have been @Todd Dexheimer's show, actually) where the guest was a syndicator who only gave out 5-6% pref returns.  But his track record pretty much made his deals look like bonds.  So if your track record is strong enough, lower pref returns might be possible.  

As an investor, I would want good pref returns (8%-10%) with enough meat on the bone to keep the general partners motivated throughout the process.  As a passive investor, I'd almost rather take less of a return (even in a very good deal) so the GPs can stay motivated to get their share (and therefore make me money too).  I see a deal going bad if the GPs don't leave enough meat on the bone to keep them motivated.  Hey, it's human nature....  I

I hope you do a follow up post that discusses structure on the "blue sky" assuming you've paid out your 8-10% pref returns.  I love the creativity I hear in this arena, but simple is better in my book.  

This is a good area that is close enough to the metro that it's going to be in decent demand and any time.   Blue collar but plenty nice.  In the past I've been concerned with 1 bedrooms as it feels like a limited renter's pool but I've been proven very wrong in this thinking.  At the end of the day, as long as it's not high-end Class A property, I'd think you'd be in for a good occupancy rates assuming rents are at market rents.  It's closer than Forest Lake and I'd say FL is still plenty close to the Cities to garner rental attention.  Assuming your numbers are solid and you plan for a bump up in interest rates in 5 years after your initial loan term expires, I'd say go for it.  

@Brian Eastman

Thank you so much for your opinions.  This has been invaluable.  This is a deal in CO.  Do you by chance know of any banks that like to finance mountain real estate?  Thank you again for your help.  I feel like I understand how this should work but I can't quite connect the dots.