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  • 10 days to Close on Land

    Helping a friend out purchasing some property and then building storage units on it. Not closed yet, so I won't show you location and Market analysis first. Below is the Layout/Unit analysis, Cost analysis, and then PL and payback analysis. Have 10 days till close.

    Our survey has yet to be completed, although we have the dimensions from the prior survey. For a building permit you have to have a recent survey. When we get the survey done, they will be able to lay out the roads and buildings so we can be precise. We are also a little behind in the analysis because we got "stuck" when we went to manually measure the property. The West line which should be 289 feet, kept coming up 200 feet, even though we measured it 4 times with a Roller Wheel and a 300 foot tape. The wood fence was built in the wrong place on the West side, correct on the East side. Survey showed a perfect rectangle, but the fence was at an angle. Always Survey.

    Got past that, now we still need to resolve the highway set back. This is in a "Housing Authority" district, not a Subdivision. Their setback says 15 foot all around for Electrical, which is what the county requires, but along the frontage road they require 50 foot, because they thought that is what the county requires. Checked with County and they have no setback rules, other than electrical 15 foot. We have a request in to move the Highway setback from 50 foot to 25 foot so we get more space to build on. Thus we are doing two sets of layouts and financial analysis just on the "Fewest" unit layout.

    Dimensions: West 289 feet/North 465 feet/ East 188feet, then curve at entrance of 141 feet/ South 373 feet. The North and South sides are both 465feet except for the "Housing Subdivision)" entrance has a curve on our East and South side. We are at the entrance to a large Housing area. No Zoning in the county. You can build Storage anywhere. Which makes for a dangerous investment.


    This property has an existing Steel building, which we will rent out, but we have to build around. Normally we would build in phases, but the site layout, quantity of units and our market analysis, we decided to build the whole location at once.

    ************************************************** ****************************************

    50 foot setback on Highway side. Spreadsheet did not copy the columns to proper spacing. Distances across will be 50/40/25/30/25/30/25/40/24. The 40/30/30/40 are the building widths. With this layout, we did not get our Office as a standalone building. Will have to figure out. This results in 196 units. 196 units will the units we use for the financial analysis.


    New Location Layout
    50 foot setback on Highway side
    West
    Highway side 15 electrical
    Short Short 289
    50 40 25 30 25 30 25 40 0 0 24 289
    50 50
    bldg bldg bldg bldg no bldg
    2 sides 2 sides 2 sides 2 sides
    200 200
    Units Possible:
    270 310 0 54 62 40 40 0
    50 196
    No Office Units
    Existing building Possible
    Entrance
    50 ft in
    370 50
    373 East
    100 188
    100
    464

    ************************************************** *****************************

    25 foot setback on Highway side. Spreadsheet did not copy the columns to proper spacing. Distances across will be 25/30/25/30/25/30/25/30/15. The 30/30/30/30/30 are the building widths. With this layout, we do get our Office as a standalone building. This results in 260 units. Did not do the Financial analysis since the previous model turned out satisfactory. More units will only make it better.

    New Locaiton Layout
    25 Foot setback allowed on South
    West
    Highway side
    Short 289
    25 30 25 30 25 30 25 30 25 30 15 290
    50 50
    bldg bldg bldg bldg bldg
    2 sides 2 sides 2 sides 2 sides 2 sides
    200 200
    Units possible:
    270 310 320 54 62 40 40 64
    50 260
    Office Units
    Existing building 30 by 30 Possible
    40 40 is office and 10 ft space
    between storage bldg and office
    Entrance
    50 ft in
    370 50
    373 East
    100 188
    460
    464

    ************************************************** ************************************************** *******

    Cost Analysis on 196 Units with 50 foot set back along Highway.
    Rough cost comes in at $1,200,000. This includes the pre-existing building, which is about $100,000 3,200 sq ft. Soft numbers are the Office cost. To make into a living space. Fence we don't have a quote on yet. Not included is a lot of sweat equity taking out about 30 oak trees. Luckily sandy soil.



    This is an example, for discussion only.
    A. Project Cost estimate from ground up.
    B. P/L revenue stream
    C. Valuation Buy/Sell
    Adjust all of the above to your local market and situation.
    A. Self Storage Project Worksheet
    Drive up Storage
    Notes:
    Land $310,000 3 acres, plus building (approx $100,000)
    Survey $3,000 Site, elevation and building layout
    Fence $20,000 Black rectangle
    Gate system $30,000 Automated rolling 20ft
    Engineer $ if needed; $30,000 to $60,000
    Dirt work $10,000 Slight roll, no dirt brought on site
    Building demo $ if needed, $15,000 to $60,000
    Electrical- site $20,000 building lighting and office if needed, LED.
    Electric poles $ if needed; $2,000 per pole. First is free if nearby.
    Security $20,000
    Storm drains $ if needed; $50,000 to $150,000
    Water $5,000 if needed; $5,000 just plumbing
    Water line $ ?? if an extension could be $10,000 up to $150,000
    Fire Hydrant $ if needed, $3,000
    Sewer $1,000 if needed: $5,000 plumbing
    Sewer Line $ if needed; $10,000 up to ????
    Buildings $627,200 Phase 1 196 3200 cost per unit
    Office $50,000 if needed, plain storage unit 20x30; $25,000 insulated.
    Office setup $5,000 if needed, $5,000- computers, printers, HVAC, frig, cabinets, etc
    Footings $ if needed. ??????
    Roads
    Gravel $ if needed, ?????
    Asphalt $80,000 rolled chip seal
    Concrete $3,000 6 inch Cubic yards, framed, poured, sawn,
    Retention Pond $ if needed, part of dirt work cost, less land for buildings
    Landscaping $ I like trees and bushes. Less sterile
    Road Sign $15,000 For highway 55mph billboard sign
    Total $1,199,200
    ************************************************** ********************************************

    P/L and Payback Analysis:

    This is based on the 196 units and a 50 foot setback on the Highway side. If we get the approval to just do a 25 foot setback, the units will increase to 260 units and we get the live in Office building.


    This is an example, for discussion only.
    Adjust to local estimates
    Green change or fill in.
    Combination PL/Cash flow
    Intentionally leaving out Depreciation and Taxes
    Annual Notes:
    Revenue:
    Gross $148,176 196 @ 90%, after rent up period
    Contractor $21,600 Bldg rental at 90%; $2,000 per month
    Late fees $0 as needed
    $169,776
    Electricity $2,400
    Water $1,000
    Sewer $1,000
    Grass $0
    snow removal $0 as needed
    manager $0 as needed, I do self service by phone; do you pay yourself.
    maintenance $3,000
    Insurance $4,000 Property/Liability
    Property Tax $40,000 use local
    Loan P/I $75,000 Bank do 20 year amort, adjust based LTV 10%/15/25/40/etc. $1,069,200 Use $130,000 downpayment
    Depreciation left blank for Cash analysis 20 loan amort period
    53460 Principal/yr
    Cash pymts $126,400 0.03 Int rate
    $32,076 Annual interest
    Pre tax $43,376 $85,536
    Tax $13,013 as needed, adjust Loan P/I for Depreciation expense 75000 Use for Amort figure
    Net cash $30,363 Less P/I and income taxes
    Payback:
    Total Cost: $1,199,200
    Less Equity infusion: $119,920 10/15/25/40%
    Net loan position $1,079,280
    Annual cash flow $105,363
    Payback years: 10.2
    Financial Objectives:
    Change calc/terminology etc to your objectives. Example: cap rate, COC, etc.
    I normally shoot for an 8 to 12 year payback, with a 20 year loan amortization.
    This is based on the location/deal on hand. Any improvements in performance on top of that will be gravy.
    Phase 2 is where you make your real money. I always have phase 1 pay off
    the land, fence, Electrical, sewer, grading, etc.; here we are building out the entire project.
    How many phases or units should you build to start?
    You can always build more buildings. I always shoot for 65% occupancy covers all initial costs for Phase1.
    In this example, we are building the full location out. Due to financing and market assessment.
    ************************************************** ************

    LAST things to check on:

    A. Survey and then layout of buildings/roads.
    B. Approval on 25 or 50 foot highway setback.
    C. Since the North Fence was in the wrong location, we have to check with the North neighbors and explain. Then make sure there is nothing in our property line from their house such as Septic tanks or drain fields.

    ************************************************** ****
    Summary:

    Again, since this is not closed, not walking you through the property search, marketing analysis or Deal structure until closed.

    Our target level is a Payback of 8 to 12 years. This hits 10.2 years with the fewer units. We are achieving some other targets, making this a sweeter deal, but won't go into them until later.

    Other metrics. $30,000 additional cash flow above P/I. This comes from seeking an 8 to 12 year payback, but a loan on 20 year amortization. This extra cash can be used to pay off earlier, cover any marketing short falls, Cost over runs, or Competitor pricing issues.

    Cash on Cash:
    We will put down $130,000.
    Cost basis of project will be a $1,200,000 project. Pays for itself, plus additional $30,000 cash stream.
    Cash stream NPV of $105,000 including Principal/Interest, for 30 years, using 5% IRR= $1,614,000 as of start.
    Thus $414,000/$130,000= 318% before tax impact. If sold.

    Sounds great, logic is good. But we haven't rented a unit yet. That's why I am always happiest when we hit our 65% occupancy breakeven.


    Start small and Make Your Big Mistakes Early.






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