Here is a basic rundown of the process for developing a self-storage property:
Step 0.) Make sure the price of the property, rough price of the buildings, site grading, paving, etc. are included in your costs. Can this thing make money???? Can you float the payment while it rents up???? Did you remember management and lawn cutting (snow removal)???? If yes to all 3, proceed to next step....
Step 0a.) How are you going to fund this thing? Is it such a good deal people will fall over themselves to get a piece of the action? Will a bank loan you the money for this thing? Be REALLY honest with yourself on this. Otherwise you'll spend approximately $50K on engineering and leg work, plus the cost of the property only to give it back to the bank.
Okay, enough soul searching, let's get on with it.
1.) Select a property that is zoned appropriately.
2.) Acquire property.
2A.) If property isn't zoned properly, get property rezoned. You will need steps number 3 - 5 done to have the property rezoned. I suggest you buy the property contingent to the rezoning or risk total failure.
3.) Have site civil engineer do a preliminary planset (30%) for the site including:
a.) Buildings
b.) Office
c.) Stormwater ponds
d.) Pavement/Driveways
e.) Offsets of buildings from property lines
f.) Landscaping (if required by zoning ordinances)
4.) Have building engineer/designer put together a conceptual drawing for a building or two and the office (if you have one). Some zoning ordinances have aesthetic guidelines. Make sure you pass that info along to your building designer so they are incorporated.
5.) Get your costs dialed in for your construction. Grading will be tough to estimate. You'll probably want to discuss this with your civil engineers to get rough quantities (or figure them out yourself - Length x Width x Depth = Volume) to bounce off a grading contractor. Or your civil engineer can assist you. Most Department of Transportations publish a unit pricing schedule that tells you how much it costs to place and finish construction materials. For example: gravel, pavement, concrete culverts, catch basins, common excavation, select granular, etc. This would eliminate the need to pester a grading contractor prior to sending the plans out for bid.
6.) Have building engineer take plans to 100% and go before the City/County boards to get approval.
7.) Building designer will have to submit their plans to the State (unless the SF is under the State's threshold) for commercial buildings.
8.) Get approvals from local agencies and State (hopefully).
9.) Have civil engineer submit plans to State for State approvals and DNR approvals.
10.) Have building designer dial in their design to submit to building contractors for bid and to the City for building permits.
11.) Get hard costs on the building from contractors.
12.) Get hard costs on the grading from grading contractors.
13.) Get hard costs on the paving from paving contractors.
14.) You will also need plumbing, well, septic, and electrical permits for their respective trade. You will also need to send the building design out to each of these guys if you're building contractor doesn't handle all of these items for you. Remember, you'll probably pay a markup of 10% on each trade if your building contractor handles it. It may or may not be worth the expense.
15.) Pull permits, schedule contractors and get started!
Like I said, be prepared to spend approximately $50,000 plus the property to get you to this point. You may be able to wrap everything up into a construction loan, but it's likely you'll have to float the project for a while until you get full approvals. Plus, the bank still wants interest payments on what you've borrowed while you are developing the property and/or getting approvals. Be ready for this. Don't go down this road with $50K and a dream. You'll probably need $50k for the costs and another $50k to be comfortable.
Thursday, April 26, 2018
Tuesday, April 24, 2018
How to Develop a Self Storage Facility - Second Step
I know I said step one was finding the property and making sure its zoning is appropriate but it's probably step 1A. Step 1B (pretty much simultaneous with the property selection) is determining what kind of storage you're going to choose. You can go with one story, multi-story, temperature controlled, lean-to, outdoor storage, large units, small units, etc.
We chose to go with large units that businesses could store their stuff in. I had a construction company of my own and couldn't find anything on the cheaper side of the spectrum to keep my stuff covered. I literally looked for 3.5 years and found nothing under $3500/month. Most businesses in their infant stage don't need office space and fancy stuff, they just want somewhere to put their junk and make a small repair from time to time.
Side note: Originally we wanted to build individual garages on the property and sell them as part of an association. We waited for 8 months to get a response from the County that this isn't possible due to a technicality in the ordinance. The ordinance read something to the effect: Buildings must be broken up by partitions or walls. In my mind I could then build a 4'x4' partition around the service door of the garage and then sell both units to the same buyer, it would be considered self-storage. I think this could be a fight I could win but decided not to pursue this. I liked the idea of building 1 building at a time and getting paid for it as soon as it was done, but in the end, you only make your money once. So I wasn't too upset (other than wasting 8 months) that I had to build self-storage rentals. I figure I'll eventually get the equity I built into the property when/if I sell. So it's always still there and I basically get a return on that money each month. Moral of the story, know your zoning prior to jumping in. I always knew that my backup plan was an acceptable option so I was okay pushing forward.
So we built larger units, 25'x50' an 50'x50' with 16' ceilings and 12'x14' overhead doors. Each unit has a service door for access too. Each unit has electrical and 2 buildings will have heaters for temperature sensitive items. Painters particularly like these, by the way.
The zoning stipulated that businesses can't transact at our location. Actually, it's more building code than it is zoning, but they go hand in hand. So as long as they store things (they are allowed to make small repairs), they are okay. Bathrooms must be on site however. We've always wanted our tenants as well as our employees/grounds keepers to have a bathroom onsite so that was in the plan. Let me tell you, that was a lot more expensive that it needed to be. That's a topic for another blog post, however.
Anyhow, I think you need to consider what your uses are primarily going to be before/during your site selection process. You have to think who your units are going to be for. If you're in downtown metropolis, then small units will probably be fine. If you're in a mid-sized city, you'll probably want more 10x25 units, for larger toys and larger houses getting moved. If you're planning on having businesses store their things, you'll need large doors and large units. Maybe you're in a boating town so 10' wide units are a waste. You get the picture.
To summarize, construction, use, and location should all be considered together. We chose large units, large doors, power, and large driving lanes (60' between buildings) to provide a convenient home for business storage. We knew that some renters would want heated but we also knew that few would pay the premium for that. We completed our heated units in the month of May. If I were to do it over again (I am), I would build more unheated to be done in May and then build the heated building to be done closer to October when heated units (we are in Minnesota after all) are in more demand. We sat on a pretty empty building most of the year and then October came and the heated units were in huge demand. So if you are offering a mix of heated and unheated, learn from me, have you unheated finished in spring and your heated units finished in fall.
We chose to go with large units that businesses could store their stuff in. I had a construction company of my own and couldn't find anything on the cheaper side of the spectrum to keep my stuff covered. I literally looked for 3.5 years and found nothing under $3500/month. Most businesses in their infant stage don't need office space and fancy stuff, they just want somewhere to put their junk and make a small repair from time to time.
Side note: Originally we wanted to build individual garages on the property and sell them as part of an association. We waited for 8 months to get a response from the County that this isn't possible due to a technicality in the ordinance. The ordinance read something to the effect: Buildings must be broken up by partitions or walls. In my mind I could then build a 4'x4' partition around the service door of the garage and then sell both units to the same buyer, it would be considered self-storage. I think this could be a fight I could win but decided not to pursue this. I liked the idea of building 1 building at a time and getting paid for it as soon as it was done, but in the end, you only make your money once. So I wasn't too upset (other than wasting 8 months) that I had to build self-storage rentals. I figure I'll eventually get the equity I built into the property when/if I sell. So it's always still there and I basically get a return on that money each month. Moral of the story, know your zoning prior to jumping in. I always knew that my backup plan was an acceptable option so I was okay pushing forward.
So we built larger units, 25'x50' an 50'x50' with 16' ceilings and 12'x14' overhead doors. Each unit has a service door for access too. Each unit has electrical and 2 buildings will have heaters for temperature sensitive items. Painters particularly like these, by the way.
The zoning stipulated that businesses can't transact at our location. Actually, it's more building code than it is zoning, but they go hand in hand. So as long as they store things (they are allowed to make small repairs), they are okay. Bathrooms must be on site however. We've always wanted our tenants as well as our employees/grounds keepers to have a bathroom onsite so that was in the plan. Let me tell you, that was a lot more expensive that it needed to be. That's a topic for another blog post, however.
Anyhow, I think you need to consider what your uses are primarily going to be before/during your site selection process. You have to think who your units are going to be for. If you're in downtown metropolis, then small units will probably be fine. If you're in a mid-sized city, you'll probably want more 10x25 units, for larger toys and larger houses getting moved. If you're planning on having businesses store their things, you'll need large doors and large units. Maybe you're in a boating town so 10' wide units are a waste. You get the picture.
To summarize, construction, use, and location should all be considered together. We chose large units, large doors, power, and large driving lanes (60' between buildings) to provide a convenient home for business storage. We knew that some renters would want heated but we also knew that few would pay the premium for that. We completed our heated units in the month of May. If I were to do it over again (I am), I would build more unheated to be done in May and then build the heated building to be done closer to October when heated units (we are in Minnesota after all) are in more demand. We sat on a pretty empty building most of the year and then October came and the heated units were in huge demand. So if you are offering a mix of heated and unheated, learn from me, have you unheated finished in spring and your heated units finished in fall.
Friday, April 20, 2018
How to develop a self-storage facility - First Step
Here is my round-about story on how I developed my property.
I put in an offer for a mini-storage facility in what I determined was an up and coming area (new bridge crossing into a largely undeveloped area other than a few small towns). I lost out on the mini-storage but came across property that was for sale next door. I know what you're thinking, direct competition. Nope, I'm building larger sized self-storage units for businesses to store equipment and materials (and people with a lot of crap). And you might ask, isn't that place directly across the street with large storage units direct competition too? Nope, my units are bigger, my driving area is wider (for trailers and large vehicles) and I'm putting electric in all units and heating some units. I'm really creating something new.
Getting back to zoning. Our property was unique. The front half was zoned commercial and the back half was zoned residential. The residential zoning es no bueno. We had to get that changed in order to build self-storage on the back half. Time to pull up my britches.
We did some digging and found that the comprehensive plan had the property guided to be zoned commercial. This was HUGE. Without that, we probably wouldn't be able to build storage on the back half. We'd still be able to do something, but certainly not the original plans. So we went through the process to get the back half rezoned. We had some opposition from neighbors but the fact that the comp plan guided this property (the entire property) for commercial was a huge factor. Also, we found out old documentation when the property was originally subdivided that said the property we owned was supposed to be commercial. It was signed by one of the neighbors who was opposed to our rezoning. The other guy was a fella who was friends with the neighbors and used our property to ride his tractor back to see his friends. As an aside, he also thought he had unlimited future access on an old easement on our property to visit his friend.
So while at the meetings to get our property rezoned, we were asked a million questions. We also had to have a rough plan for our project up front. Keep that in mind. I didn't really have a great plan but I was able to figure things out. For things like this, it's good to know what other requirements you'll need to do, like a berm or visual buffer, etc., to properly our property. That helped answer questions. I guess I could have just said I'll follow all the ordinances, but I felt like it helped to be able to talk the talk.
While at the meetings I realized that a couple engineering firms were repeatedly there presenting plans and certified survey maps. I read between the lines and realized I needed to hire these guys to put my plans together and negotiate the town board. This was a very important revolution. If I did it again, I would probably just call the township and ask them if anyone is at town board meetings a lot. If you don't feel comfortable doing that, look at past meeting minutes. It shouldn't take long for you to figure this out. I wish I got them involved earlier. I would have paid them a little more money than doing it myself, but I would have had a coach and I had to have someone draw up the plans anyhow.
So, to summarize, make sure the property can be used for your intended use in the first place.
- Happy developing.
I put in an offer for a mini-storage facility in what I determined was an up and coming area (new bridge crossing into a largely undeveloped area other than a few small towns). I lost out on the mini-storage but came across property that was for sale next door. I know what you're thinking, direct competition. Nope, I'm building larger sized self-storage units for businesses to store equipment and materials (and people with a lot of crap). And you might ask, isn't that place directly across the street with large storage units direct competition too? Nope, my units are bigger, my driving area is wider (for trailers and large vehicles) and I'm putting electric in all units and heating some units. I'm really creating something new.
Getting back to zoning. Our property was unique. The front half was zoned commercial and the back half was zoned residential. The residential zoning es no bueno. We had to get that changed in order to build self-storage on the back half. Time to pull up my britches.
We did some digging and found that the comprehensive plan had the property guided to be zoned commercial. This was HUGE. Without that, we probably wouldn't be able to build storage on the back half. We'd still be able to do something, but certainly not the original plans. So we went through the process to get the back half rezoned. We had some opposition from neighbors but the fact that the comp plan guided this property (the entire property) for commercial was a huge factor. Also, we found out old documentation when the property was originally subdivided that said the property we owned was supposed to be commercial. It was signed by one of the neighbors who was opposed to our rezoning. The other guy was a fella who was friends with the neighbors and used our property to ride his tractor back to see his friends. As an aside, he also thought he had unlimited future access on an old easement on our property to visit his friend.
So while at the meetings to get our property rezoned, we were asked a million questions. We also had to have a rough plan for our project up front. Keep that in mind. I didn't really have a great plan but I was able to figure things out. For things like this, it's good to know what other requirements you'll need to do, like a berm or visual buffer, etc., to properly our property. That helped answer questions. I guess I could have just said I'll follow all the ordinances, but I felt like it helped to be able to talk the talk.
While at the meetings I realized that a couple engineering firms were repeatedly there presenting plans and certified survey maps. I read between the lines and realized I needed to hire these guys to put my plans together and negotiate the town board. This was a very important revolution. If I did it again, I would probably just call the township and ask them if anyone is at town board meetings a lot. If you don't feel comfortable doing that, look at past meeting minutes. It shouldn't take long for you to figure this out. I wish I got them involved earlier. I would have paid them a little more money than doing it myself, but I would have had a coach and I had to have someone draw up the plans anyhow.
So, to summarize, make sure the property can be used for your intended use in the first place.
- Happy developing.
Monday, April 16, 2018
Never a good time?
Yes, it's true, there is never a good time to start a business (or have a kid). But you have to push through. You have to be persistent. Actually, I feel persistence is the most important trait you can have while starting out on your own. Hell, it might be the ONLY trait you need to get started. You can pick up the rest as you go.
Anyway, getting back to it's never a good time to get started, here is how it went down for me:
I worked 80 hrs per week (40 hrs at my day job and 40 hrs on the business) to write my business plan and get the new business figured out for about 8-9 months prior to going out on my own. This was while we had a toddler who was just starting to toddle. Then, about 1.5 months before I was to quit my job and start off on my own, my brother passed away in a motorcycle accident. That was another life-altering experience. When I got home from the funeral, my wife gave me the news that she was pregnant with #2. My head was spinning and self-doubt was definitely creeping in. But after talking with my wife some more, we decided that this was truly what we had to do for our family. No matter how hard life currently was.
It seemed like bad timing on all fronts but what were we going to do, wait until the kids were out of the house? Nope, we just knew we had to work harder to make it work. We had to continue to trust we were doing the right thing. Trust your plan.
Anyway, getting back to it's never a good time to get started, here is how it went down for me:
I worked 80 hrs per week (40 hrs at my day job and 40 hrs on the business) to write my business plan and get the new business figured out for about 8-9 months prior to going out on my own. This was while we had a toddler who was just starting to toddle. Then, about 1.5 months before I was to quit my job and start off on my own, my brother passed away in a motorcycle accident. That was another life-altering experience. When I got home from the funeral, my wife gave me the news that she was pregnant with #2. My head was spinning and self-doubt was definitely creeping in. But after talking with my wife some more, we decided that this was truly what we had to do for our family. No matter how hard life currently was.
It seemed like bad timing on all fronts but what were we going to do, wait until the kids were out of the house? Nope, we just knew we had to work harder to make it work. We had to continue to trust we were doing the right thing. Trust your plan.
Who's on your side?
As 'they' say, there is never a "good time" to have kids. Same goes for starting a business. I have to say, it was life altering. Work was no longer a place to collect a paycheck or try to keep busy, it was now for survival. I know, overly dramatic. But there is something a bit more exhilarating about having to get the next job to put food on the table.
I quit a well-paying job at TKDA to start off on my own. We pared down all of our expenses to the bare minimum. No cable, no health club memberships, no jelly of the month clubs. We were planning on having to live off of $50,000 (the projected proceeds from our first project) for 1 year if necessary. Luckily it went much better than that and we were able to string work together for the rest of the first year.
What I found interesting was that people were very eager to help someone just starting out. Yes,
'help out' and 'buy something from', are very different animals but it sure helps when you realize society is on your side rather than against you. I can't even begin to tell you about all of the stories of people coming out of the woodwork to do a favor for me. These were strangers willing to stay late at their job or come in on a weekend to help me get my machinery running. Incredible. I owe the universe and I'm hoping, to a certain degree, that this blog helps others thinking about trying something outside their comfort zone.
So, don't be scared. The world isn't against you. To the contrary, actually. The world is with you. They love underdog stories. Love them...
I quit a well-paying job at TKDA to start off on my own. We pared down all of our expenses to the bare minimum. No cable, no health club memberships, no jelly of the month clubs. We were planning on having to live off of $50,000 (the projected proceeds from our first project) for 1 year if necessary. Luckily it went much better than that and we were able to string work together for the rest of the first year.
What I found interesting was that people were very eager to help someone just starting out. Yes,
'help out' and 'buy something from', are very different animals but it sure helps when you realize society is on your side rather than against you. I can't even begin to tell you about all of the stories of people coming out of the woodwork to do a favor for me. These were strangers willing to stay late at their job or come in on a weekend to help me get my machinery running. Incredible. I owe the universe and I'm hoping, to a certain degree, that this blog helps others thinking about trying something outside their comfort zone.
So, don't be scared. The world isn't against you. To the contrary, actually. The world is with you. They love underdog stories. Love them...
How did I get to this point? - a little background
I'm going to make this quick...
Out of college, I got a job with the Minnesota DOT in their railroad group. After enjoying my time there and loving my coworkers, I decided it was time to see what else was out there. I had job offers from the County or the civil engineering consulting firm, TKDA. I chose to work for TKDA despite a lower starting salary. I felt it was the right decision due to the opportunity to work in private industry where you had to find or develop your next opportunity. There I got a taste for how to market and how to develop relationships with clients. While working for them, a few clients asked me to run railroad construction projects for them. This was not in TKDA's bag of tricks at the time. While this wasn't the first time in history this was done, it was the first time this was done at TKDA. This experience led me to start my own construction company in the railroad industry. I had a ton of trials and tribulations which I won't get into now, but know it was fun, tiring, hard, and life-changing. After 3 years (2011-2014), I was approached to have my business acquired to act as a satellite office for another railroad construction company out of Duluth, North Shore Track. I sold the company and worked for them full-time over the next 4 years (2014-2018). With the proceeds of the sale we started investing in real estate as a way to NOT fritter away the fruits of our labor over the prior 3 years. In April, 2018, I decided to quit my job to be able to spend 8 hours per day (in addition to the rest of the time I spend on this stuff) to concentrate on real estate investing, development, and other business opportunities.
This isn't necessarily a business blog, a real estate blog, a motivational blog, or a personal finance blog. It's what we're doing and hopefully others can learn something (good or bad) from our experiences.
Out of college, I got a job with the Minnesota DOT in their railroad group. After enjoying my time there and loving my coworkers, I decided it was time to see what else was out there. I had job offers from the County or the civil engineering consulting firm, TKDA. I chose to work for TKDA despite a lower starting salary. I felt it was the right decision due to the opportunity to work in private industry where you had to find or develop your next opportunity. There I got a taste for how to market and how to develop relationships with clients. While working for them, a few clients asked me to run railroad construction projects for them. This was not in TKDA's bag of tricks at the time. While this wasn't the first time in history this was done, it was the first time this was done at TKDA. This experience led me to start my own construction company in the railroad industry. I had a ton of trials and tribulations which I won't get into now, but know it was fun, tiring, hard, and life-changing. After 3 years (2011-2014), I was approached to have my business acquired to act as a satellite office for another railroad construction company out of Duluth, North Shore Track. I sold the company and worked for them full-time over the next 4 years (2014-2018). With the proceeds of the sale we started investing in real estate as a way to NOT fritter away the fruits of our labor over the prior 3 years. In April, 2018, I decided to quit my job to be able to spend 8 hours per day (in addition to the rest of the time I spend on this stuff) to concentrate on real estate investing, development, and other business opportunities.
This isn't necessarily a business blog, a real estate blog, a motivational blog, or a personal finance blog. It's what we're doing and hopefully others can learn something (good or bad) from our experiences.
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