All Forum Posts by: Scott Krone

@Leila Moussavi  I love the entreprenuer spirit.  Great place to start.  I agree on a significant point - out of state investing or out of a local area.  It is difficult if you don't have the ability to go and address a problem within a local drive.  There are many reasons this may come up:  non-payment, tenant damage, maintanence issue, meet a repair person, etc, etc.

The systems in place which are necessary for out of town is local management that can address all of those issues which will arise.  So the issue becomes finding someone to manage a one off rental.  That can be costly which inturn impacts your bottom line.   What makes MF "easier" is a manager can oversee 20 or 30 or 40 units compared to one, so the cost is spread out over more units.  Or, if you had 10 SF you could get some savings as well.  SF are harder to manage, because they are typically spread out which means it takes more time to manage.  If I can drive 20 minutes and check on 20 or 30 units, versus driving 20 minutes seeing one unit, then driving another 15 minutes to a second or third location.

So, I am not saying don't invest out of state or out of your local community.  What I am saying is it is important to recognized the increase in your cost and factor that into your underwriting.

@Morgan Painter To answer your question, the first step would be to review the income and expenses to determine the NOI, and compare the asking price to the market capitalization rate for the area.

@Anthony Bednarek - welcome to the market here in Chicago.  Have you considered expanding your search radius or criteria?  Perhaps research off market absentee owners or probate and reach out to them directly before they are on the market.

@Hayden Wright  This may not be the answer you are looking for or expect, but I have found it to be an incredible tool.  When asked this, I suggest reading "The Road Back to You" by Ian Morgan Krohn.  It is a book which helps people understand themselves better through the use of a tool called the ennegram.  The type known as a Investigator (also known as a 5) commonly experiences "analysis paralysis".  The trait is to be driven by data to insure a full understanding of all the facts before proceeding.  The under current driver is fear of being wrong.  An example of this:  my father in law was a 5.  Incredibly thorough and prepared man.  He studied stock options for over 30 years.  He attended many seminars, weekend conferences, read many books, knew all the strategies, and could explain the market.  Yet, during those 30 years, he never made one trade.  I even attended a conference with him, and joint opened an account with him, yet there was always something prohibiting him from moving past learning and into the world of doing.

Analysis by paralysis is an unhealthy 5.  The book helps each of us to better understand when we are healthy or unhealthy in our type.  By recognizing and addressing the cause we can move away from the fear and into a better place.  From my perspective, all the tools and resources will never address the block.  It first begins with addressing the fear.

@Omar Torres That is a very large and extensive question. The first step we do is review the local municipal codes regarding a PUD (Planned Urban Development) or Re-zoning a property or Zoning a Sub-division, as well as the Comprehensive Plan. Each municipality describes it differently, and has their own process. Once we are familiar with the process we meet with the City Planner or Zoning Administor to ascertain their thoughts on the receptivity of the municipality's governing board. If the planners don't support it or think the city won't support it, you have a challenging task - which is why we rely upon the Comprehensive Plan if there is one.

Assuming we have a tenative green light, the code should outline what is required for the process, and the planner should be able to clarify the requirements.  A site that large will most likely need an architect, civil engineer, traffic consultant, impact engineer, attorney, and perhaps a wetland engineer if there is a creek.  It all begins with a survey!  Obtaining that is the first step.

@Andy Tang  - interestingly, we have properties in both Milwaukee and SW Ohio (not Cincy, but Dayton not too far away).  We are pleased with both markets.  We picked them because we were able to find properties that met our buying criteria.  Good luck with your searches.

@Fisher Hudak  I applaud you and your friends desire to get into real estate.  @Nicole Heasley Beitenman makes some great points as soon college could be or should be over soon, and you all may move in different directions.  I am assuming $18k will not be enough to buy what you are intending, which means a loan will be required.  Most if not all lenders will be looking at both the asset's income as well as yours to determine the level of risk associated with providing you a loan.  I would suggest talking with local realitors and mortgage brokers to help you determine what an appropriate budget will be for the acquisition, operations, as well as potential income.

@Michael Williams .  Most of the time when people speak about getting a job in self storage it typically means a store manager.  Having been in real estate for over 30 years, self storage is by far the least job intensive area of real estate that I have seen.  Typically, those that have a staff are:  developers or REITs (either mid-major or major REITS).  90% of the owners we know, do not have staffs.  The ones that do typically own more than 5 facilities, and have the intent of growing a portfolio.  @Paul Moore book is a great resource for understanding the self storage industry.  @Scott Meyers offers a very thorough training program.

From your bio, it states Real Estate Agent.  I have seen many types of people enter the self storage space and do well:  developer, armed forces, real estate agents, sales agents, landscapers, corporate CEO's, manufacturing managers, wholesalers, flippers, property manager, and even insurance sales agents - (I have nothing against insurance sales agents, just attempting to be humorous).  Bottom line, none of them had a job in self storage.  Nevertheless, they took the time and resources to educate themselves in the industry prior to commencing.  They also relied upon guidence from a community of like minded investors.

@Samuel Gates - A number of years ago, our family went through this as well.  The back story.  I had purchased the property adjacent to my grandparents property.  We tore it down, built new and sold it.  When it came time to sell my grandparent's property, I suggested we tear it down, build new, and sell it.  Based upon the market the property was worth "X", our construction costs would be "Y", and we could net an additional "X" in profit.  To be clearer, if we sold "As Is", we would net "X".  If we developed, we would yield "2X".  In my mind, a home run, and it would benefit everyone in the family - grandparents, parents, and grandchildren.

Two problems:  1.  all parents were not on board (felt it was too much risk), and 2.  grandparents were offended that their property would be considered a tear down.  In fact, my grandmother scolded me and punched my shoulder when I suggested we tear down the property.  Fortunately, she was 90 so it didn't hurt : )

What really happened:  After the discussion, the property was put on the market, and sold in one day - cash for "X".  A developer bought it, tore it down, built new and sold it for the same value as I projected.  What we discussed occured exactly as predicted except the family lost out on an additional "X" in value.

The real kicker is 5 years later, when we were talking about the market, and what had transpired with the property, my grandmother chimed in, "Why didn't we build and do it ourselves?"  It took all that was in me, not to fall off my chair.

So the moral of the story.  @Account Closed , and others make good points about zoning, experience, and working with a developer.  Nevertheless, unless everyone in the family is on board, it will be hard to move forward.  In our case, we were talking about an immediate sale.  Managing a MF asset for a duration of time adds another level of complexity.  Is it a good idea:  sure.  One that merits exploring.  In our scenario, I didn't see the same risk as the others, because in my mind we had "X" value of margin to break even.  If the property is held longer, risk and who the asset benefits can become more complex.  For instance, who holds the note, is there a guarantee, who manages, is there a fee for managing, when do you pull out cash, or do you just cash flow the asset.  These are the questions most family offices work through because as you get to different generations, the goals and objectives for the various family members begin to diverge.

Hope this story helps and if not a bit humorous for you!