All Forum Posts by: Tom Scott

Hey guys, thanks for the input. Great information. My next question, is how does one go about funding something like this? So far I've been funding my residential real estate purchases with a mix of HELOC's and personal cash. Obviously this commercial space is much more expensive then $100k homes so how does one make the leap?

Being more of a traditional business venture I would guess a small business loan might come into play here but I could see even a small self storage business pushing into the $500k to $1,000,000+ range quite easily. Will the SBA touch such a venture and if so how much cash is the borrower expected to foot on his or her own? 

Tom

Hi all, I'm investigating the possibility of converting a former big box store to self storage and I'm wondering if there are any basic rules of thumb to determine how much of a buildings space can be converted to storage vs the space used for reception areas utilities, hallways, etc. I'm also hoping to get a rough idea of how much on can expect to make per square foot of storage. 

Obviously these will all be very dependent on too many factors to mention but I'm just wanting to find a way to filter through some of the spaces so I can focus on those that will be the most profitable. 

Thanks in advance,

Tom

Hi all, I'm a new investor looking to break into the small multifamily market in North Florida. Willing to look at properties anywhere from Orlando north but focusing my search on the larger city centers near me like Gainesville, Jacksonville, St. Augustine, Lake City, Ocala etc. 

Aiming for a B or C property with the ability to add value anywhere from a duplex on up as long as the numbers make sense.

Tom 

I live in a pretty rural area, large acreage and lots of mobile homes. Being there are so many of them, I'm running some numbers on those on the market and they look they should cash flow really well, around $400-$500 per property. Is anyone out there buying and renting mobile homes in rural areas? I seem to recall discussion in the past of someone buying and doing a rent to own program with mobile homes on rural plots of land. 

I realize I am sacrificing appreciation for cash flow, but it would seem to balance out over time. Especially if I were doing a rent to own strategy which should limit my exposure to the increased cost of maintenance as the homes age. I'd appreciate any advice or experience anyone is willing to offer. 

Tom

Hi all, the wife and I live in the country and land prices are pretty low where we live. I'm curious if anybody has had success buying vacant land and placing a nice single or double wide mobile home on it and renting it out? The idea popped into my head yesterday and I have done zero research. Some back of the envelope calculation would indicate it would seem to make sense cash flow wise but I would need to verify the amounts as I am not sure how much it costs to buy and install a mobile home. Any thoughts or experience in this area would be appreciated. 

Tom

I've been in contact with the owner and he is pretty set on his price which does not figure in the expenses we've been discussing. He insists that you can have a retiree run it for a few hundred dollars a week as long as I give them a space to park their RV. He may be right, but I can't rely on that so I have to figure paying a full time manager. Additionally his price is based on the highest grossing year from the past 5 years which to me seems very optimistic. If you average the last 5 years of gross income, you come out with about half of last years income. So it seems he's built the business up to a peak and getting out at the top. Great idea for him, bad idea for me. I'm going to keep an eye on the price and see where he goes with it. I can't imagine it selling as it's currently listed. Tom

Originally posted by @Patrick H.:

Ok well that is big enough that I would want a manager close by.  His expenses sound lean, probably isn't figuring any management expense.  Defiantly sounds like the rents need raised if its that full (need to check comps)  Be sure to add in a vacancy factor, it won't always be this good of a self storage market in my opinion.  Also figure in a offsite management cost to pay your self for checking on it and overseeing operations.  

If he has a management software then great but if not id figure in some for something like Site Link Web based for around 150 a month.  It makes managing soo easy.

Just be very honest with your self on expenses.  

Best of luck!

Just got the P and L via email and you are correct that he is managing it himself so those costs aren't included. Based on what I got it appears he's running the whole operation off an excel spreadsheet. He seems to be organized and doing a good job, but definitely some room for improvement as far as automation is concerned. It also appears he's been building the business over the last 5 years and is selling at a peak. He also seems to have a very low delinquency rate as far as non payment is concerned. 

Tom

Originally posted by @Patrick H.:

I would figure in a manager salary in to your numbers for sure.  Then look at that number and ask your self do I want to spend the time driving and signing up tenants for that amount.  My guess is no.  Id find a retired person or some one to meet with the tenants.  3 hours is almost the same as 5 or 6 in my opinion.  

How big is the facility?  It it a gate code access?  Any storage buildings?

It's roughly 3 acres all paved with 107 parking spaces, 26 covered 81 open. There are also 17 storage units of various sizes a 750 sqft office and a 5000sqft workshop of some kind. It sounds like the workshop is fenced separately from the storage facility and is being used by the current owner as a personal space so if that were rented out it would provide additional income. There is a coded gate for access to the facility and it does appear to have security cameras though I have not visited it yet. I'm still waiting on a P and L from the owner as well as some other basic documents. The area is light industrial adjacent to a boat yard and if the owner is truthful operating at about 98% capacity.

I see some potential to drive up the income by adding additional covered storage (there is supposedly a waiting list for covered storage). The existing pole barns being used for storage look sound but will require some repairs I think based on the photos and don't appear to be in an ideal location for maximizing the space available. Eventually I think you could demo them and rebuild with better looking, more efficient space. The owner is claiming a net cash flow of $12,300 per month with a operating cost of $2,500 a month though I have no proof of those numbers yet. 

Tom

I'm taking a cursory look at a Boat and RV storage facility. So far all the numbers look fine and I'm wading through the due diligence process to get some hard data. The only thing I am concerned about is the distance from my home city. The facility is just under 3 hours from the house. Obviously this isn't a terrible drive but if I have to do it too often it's going to get to be a pain in the butt real fast. I'm willing to make a greater number of trips early on while getting the property swapped over but eventually I'd like to limit my visits to once a month or so. With that said, is it practical to manage a facility of this type from a distance? I am able to answer the phone and email documents during the day with no issues but the field visits would have to wait until the weekends. There is an office on site so I could staff it if I had to but obviously it would cost more to operate. I could try to get creative and rent the office out with the caveat that the office staff needs to handle some of the basic operations but I'm afraid it could be difficult to get the right tenant to accept that deal and do a good job with it. Any advice is greatly appreciated. 

Tom

I've been studying everything I can get my hands on about buying and owning multifamily properties. The one thing I keep seeing is that people will only buy if it's a "good deal". Now, I of course understand that that term is subjective and greatly depends on the buyers goals and criteria but for the purpose of this post I will describe it as I have most often seen/heard a "good deal" described. A "good deal" is one in which you can purchase a property below market for some reason, or purchase and then rehab or better manage it, which will in turn allow raising of rents and therefore increase the market value of the property and equity. For lack of a better term I would say that most of these properties would be distressed. 

Hearing this over and over, I started to question the validity of the practice of only buying a "good deal". It would seem to me that buying a cash flowing property, in good condition at market value, assuming 25% down and the rest financed in your preferred way, while obviously not profitable as the deeply discounted property, would still be a good choice as long as the cash flow was adequate to your needs/criteria (maybe $100-$200 a door). The reason I say this is even though you cannot gain equity immediately through rehab and raising rents, you can still gain it slowly due to the fact that your renters are paying your mortgage for you. 

Just to be clear, I am not saying that buying distressed is bad. In fact just the opposite, it's great. I am however saying that turning away deals because they aren't distressed may be a mistake, or at least that's my line of reasoning at this time.

Also, it would seem to reason that, in the case of poor condition and mismanagement, a lot of work needs to be put in on the front end to get the property up to snuff and cash flowing to its potential. This might be a pretty tall order for investors like myself whom currently hold down a day job and invest on the side. Less headaches may just be a welcome thing for those of us struggling to manage a job and a portfolio. 

Tell me what you think, am I right? Am I wrong? Am I somewhere in between? I'd love to hear some feed back.