All Forum Posts by: Kyle Bryant

My family owns about 3 acres in a semi-rural part of Montgomery County, Texas. We recently found out that the new "Aggie Super Highway" from Houston to College Station will have frontage on our property. So we have been considering building a self storage facility on the lot in anticipation of the future growth. Aside from market considerations, I have a few questions:

-How many rentable square feet can I reasonably fit onto 3 acres? About how many units?

-What is the estimated cost to build a decent facility in that part of Texas (cost per s.f. or similar)?

-What is a reasonable profit margin per unit per month (or something similar) to expect for self storage units? 

Keep in mind we already own the land, but there's nothing on it. We'd be starting from scratch, and we would want to use a management company. This would be for stable cashflow. I know self storage is all the rage right now, but I haven't seen much on new construction of storage. Thanks in advance for any guidance!

Investment Info:

Large multi-family (5+ units) commercial investment investment in Houston.

Contributors:
Sam Webb

40-unit apartment complex in Houston, TX. This is a value-add Class C deal with significant rent upside for renovated units, as well as upside potential in decreased management costs.

I would honestly be surprised if you're seeing rent at $1/sq ft. in the Montrose area, and it's a livable space. Most of the things I'm seeing are in the $1.75 - $2 range. But if you're seeing those numbers, I would wonder whether you could get closer to $1.75/ft with a little upgrading.

Another factor could be that this time of year there is a very high turnover of units across the board. Late spring and early summer tend to be high-volume moving times. 

Ultimately, though, I don't think the mid-rise market will crowd out the smaller 2-6 unit complexes. The fancier mid-rises appeal to a certain market demographic (yuppies), and there are plenty of other renters who fall outside that demographic. Many people just don't want to live in a complex with 50, 60, or 100 units. 

The demand may also be highly dependent on the sub-market. In the Heights, for example, duplexes, triplexes, and quads are renting almost as fast as they can be put online, at rates closer to $2/ft. A lot of that is the neighborhood "charm," but for as long as I've lived there (7 yrs), the market for small multi-family has been popping.

I just got into my first syndicated deal. I didn't have much money of my own, but I partnered up with a couple of friends who had money, and we invested in the syndication as an entity, on the KP side. That allows me to gain experience on the operations side, without having to have 100k of my own money. I highly suggest that route. 

I'm currently involved in my first syndicated deal, and my advice is to just talk to people about what you are doing and what you are looking for. I came across this particular deal because I started talking to people who were already involved in syndication. The more people you talk to, the greater chance you have of landing your own deal or investing in a syndication. 

Second, have something worthwhile to say. If you run around talking to people, but your talk lacks any substance, you're just wasting air. When you meet folks who are syndicating deals (or investors), you should at a minimum know what you are talking about. Know how to look at a deal and do "back of napkin" analysis. Know how to analyze someone else's underwriting, etc. 

Third, have something valuable to bring to the table. Whether you are looking to be a principal, a deal sponsor, or a passive investor, have something worthwhile to contribute. It may be knowledge, money, or hustle, but you need some combination of two of those things. 

The best thing you can do is partner up with someone who has done an extensive apartment rehab before. There are so many things that can go wrong, especially with historic buildings. If you bring a deal, some money, and some hustle to the table, you should have no problems getting people involved. The sweet spot would be to partner up with the owner of a construction company (or someone who knows the rehab business really well) and tackle it together. DOn't be afraid to bring others in for this one.

 I'm not aware of any such limits for LLCs (at least in Texas, where I practice). As long as your profits are not primarily the fruit of someone else's labor, you should be good to go. If every member is contributing to the ongoing management of the business in some way, you should be able to avoid the hassle of SEC regs.

If you're both participating in the management of the investment, you should be good to go with a simple business entity and operating agreement. 

I would go with the one by Memorial Hermann. You will probably get some freeway noise at night, but your street thru-traffic may be lower, even with the hospital across the street. Also, it's closer to the White Oak Bayou bike trail, which is a plus. Both of those houses are in basically the same area, but I would choose the 1800 block because it's closer to the Loop, and the interior roads in Shady Acres (that particular neighborhood) are terrible.   

I don't have an informed opinion about appreciation—just a gut feeling from living in the Heights for the past 7 years. But I would agree with that assessment; there seems to be a leveling off of appreciation, but the market is still relatively strong. If you're buying a townhome, there are just so dang many of them that they're having trouble appreciating once you buy them. 

A lot of it depends on how much money you are putting into the deal on the front end, what your investment horizon is, how many other investors there are, how much cash you need up front, etc. 

If you have just one partner putting up the down payment and closing costs, I would try and keep things very simple with a straight equity split. Figure out what percentage return he expects, and then base your equity split on that expectation combined with the actual financials when you buy. Then, when you rehab the property and it performs, you both win.