All Forum Posts by: Scott Krone

@Douglas Gratz glad you were able to find a lender

@Kaustubh Johri  @Taylor L. is correct there could be opportunity.  With what you have written, it is impossible to say is this a good deal.  Is it a good deal at $500,000 - perhaps.  Is it a good deal at $200,000 more than likely.  Is it a good deal at $1,000,000 - probably not.  There is still more that needs to be determined:

The saturation is a concern:

1.  Why is the econcomic 60% and physical 93%.  There could be many reasons for this.

2.  Expenses at $65,000 is quite high for that type of facility.  It is worth digging into the expenses

3.  93% is a good occupancy and if the saturation is 7 sf/capita than I would expect to see 93%.

4.  Are there opportunities for additional income (insurance, expansion, truck rental).

These are the areas where we would begin doing more due diligence.

I was working for a real estate developer and realized I had to make a change.  I contacted a broker (my mother), and told her I wanted to find a property to tear down and build a new home.  We found a home, went under contract, closed in 3 months.  We built the home in 9 months and sold it upon completion.  That is how I started my business back in 1998.  I had three investors.  They told me, "Do it again, and don't tell anyone."  That was when I knew I was onto something.

@Zach Hummel  - that is great you have found something you desire to pursue.  As you are in school, did you by chance mean Intern versus a Mentor.  An internship will offer you a great means to gain entry into real estate.  It will afford you the opportunity to learn the industry and work on real projects.  It is how I began my real estate career as I viewed the owner of the company as a mentor while I did my internship.

@William Thing and @Sergey A. Petrov there are many commercial brokers as well as wholesalers that focus entirely on self storage.  It is helpful to have a sense of what asset class you are looking to purchase, as that will give the brokers guideance.  

@Karen Johanson - Great question.  There are many factors to consider when evaluating a property for self storage.  As @Taylor L. and @Ronald Rohde have astutely pointed out, demand and zoning are both very important.  Demand is quantified as the square footage of lockers per capita (sf lockers/capita).   Typically, across the country 7 sf of lockers/capita is market saturation.  However, in certain markets the number has increased from 9 to 11 and even 13 sf/capita.  As a developer of self storage, our goal is always to be under 7 when our facility comes on line.

Zoning is also a critical component.  We have experienced many municipalities that have approved storage via their zoning for a site, and yet still do not want it!  If the site is zoned for storage - great, if not, then talk with the city planner to guage the receptivity of the municipalities board.

Construction type and access.  These are also important factors to assess.  Access will impact your unit density and ultimately your gross potential revenue.  The construction type can also play a factor in the feasibility of the product - column layouts, ceiling heights, structure capacity, etc.  They will impact your costs as well as your revenue stream.  These are the main components that we assess when determining if the building is right for storage.

@David Friedman - It may surprise you to know this happens quite frequently.  I have see it done on many Catholic properties.  If a Catholic property is sold the proceeds go to Rome.  If the parcel is leased, it remains with the local Church.  As such, there is a land lease for the property which is then developed.  The assets in this market have ranged from Condos, Townhomes, Single Family homes, retail, commercial and office.  It provides income for the local church and the properties are developed.

If the local religious entity wants to develop and lease their own space, it would seem any involvement would need to be a fee based agreement.  An attorney with a strong background in 501(c)3 would seem best to consult on the best structure.

@Joshua Steven Ferrell - ultimately the answer to your question is, "What each of you think is fair".  Some have suggested 50/50 split, and having management as an expense.  Valid points - if you are both contributing the same amount of equity.  Which leads back to my first point, if the equity is 70/30 split, but the 30 is doing the management, then perhaps 50/50 works IF both parties agree.  As my mentor once told me - it has to be a win win situation.  Once you agree, then don't question the deal.  You were happy going into it, then be happy exiting it.  You can always evaluate the situation on the second property if you choose to move forward with a second one.  

An attorney will outline all the ways it can be divided.  How you do it will come back to you and your friend.

 I will send you a DM with information.

@Lucio Palanca - Perhaps I am missing something, but I do not see 2 acres that are vacant.  The location has newely developed industrial buildings on it.  While there are residential units in close proximity, I am not sure tearing down or redeveloping the existing buildings is the best play for the site.  Typically, leasing property for residential is not the most optimal.  The only time I have seen it is when the local Catholic church was wanting to liquidate some assets and keep the revenue local.  If they had a lease, then it was income and stayed local.  If it was sold, then the assets would revert to Rome.  So the local church created a 99 year lease with a big up front price and then a small annual lease amount.