Developing a property takes work. Paperwork.

If you stumbled upon this blog looking for a magic bullet to get past all the paperwork involved with property development or real estate investing, you are in luck, you came to the right place.  I would be happy to do your paperwork for you for one small payment of $1 Billion.  Unfortunately, I am non-negotiable on the price.

All joking aside, there will be a lot of paperwork.  You NEED to expect this from the start.  There literally are no short-cuts.  What has worked for me is just keep your head down and do one item at a time and pass it along.  That is literally the best I could do.  Yes, the bank, or city, or county, or engineer, etc., will make you redo documents.  They will need more information.  It's part of the gig.  Don't let it get you down.  If you feel like you are overwhelmed, do one item at a time.  Typically, that one item isn't insurmountable. 

Here are a few documents you can expect to fill out for a property development (in no particular order):

Zoning application (if rezoning)
Site plan submittal
Variance application
State plan review authorization form
DNR delegation of authority form
DNR stormwater management maintenance agreement
Bank loan apps
SBA loan apps
Personal financial statement
Sworn Construction Statement
Insurance paperwork
Life insurance paperwork
Lien Releases
Construction contracts
Updates to your tenants
Pro-forma to Bank
Pro-forma to SBA
Draw funding requests
Draw funding log
Draw funding request signature page
Various other SBA forms
Tenant leases
Attorney contracts
Bank account docs
Checking account docs
Corporate Docs
Past tax returns (2-3 years)
Interim balance sheets for your other properties/companies
Rent rolls for your current properties
Future rent rolls for your current properties
Projected rent rolls for the new property
Meter requests
Meter agreements

I'm sure I'm missing a few.  Yes, that's a lot of paperwork.  But the most you typically see at any given time is 5-6 of these items.  If you take one item at a time, it's totally doable.  Don't worry, the pain is over pretty quickly.  Just know that this is the part that separates the haves from the have-nots.  This is one of your biggest hurdles if not THE biggest hurdle.

Week 9 as a Real Estate Investor - June 11 - 17, 2018

Week 9 update: We wrapped up Building 4 in Houlton and it sold out the same day. That is a great feeling. The excitement isn't over, however, we still have one unit left from a tenant swapping units. I'm guessing it's just a matter of time now until that unit goes too. It's always a relief to have that kind of interest. I certainly want to be right about building the facility but more importantly, I need it to work our financially, of course. I'd be perfectly content being dead wrong if there was a pot of gold at the end of that rainbow.

I spent a lot of time chasing contractors around as we wrapped up B4. We finished up electrical which was a relief seeing that we had a number of new tenants that wanted to move it. Asphalt pavers were the unpredictable ones this week. They grading the parking lot and took out the gravel ramps (for tenants to get into their units) and left for the weekend. We had one tenant that was planning on moving in on Saturday. He showed up and couldn't get into his unit. The bummer is that he had set up all these rides to get his things moved and he had to cancel. Such a bummer. I'm going to take full responsibility for this though. I should have told the pavers that they couldn't start unless they could finish. Now with the rains we got over night, I'm not sure if they will get paving in today or not. So our tenants may have to deal with this bummer situation for another day or two. The tenants are crabby and rightfully so. This was supposed to be done on Tuesday and they were left without access to their unit all weekend.

I called in a final inspection for B4 and they didn't like that we already let tenants into the building. We've done this before and no one had any issues with it. I guess we'll find out how big of a deal this is. My thought is that it's just stuff, not lives are at risk. I hope they see it my way. We will proceed with more caution in the future.

The rest of the week was spent filling out paperwork and chasing bank requests for Building 5 in Houlton and loan submittals for our Hudson project. Oh, and our neighbor in Hudson doesn't like our name. Seems to think our name is too similar to his. I'm working through this issue. The State of WI did approve our name so I'm not sure what recourse he could have. But, we would like to play nice, too. Angie says go with it. I'm still thinking. I sure would like to keep our naming convention consistent. I'll let you know what we decide.

Week 8 of Self Employment - 2 months in and we're not broke yet!

2 months in (Week 8 update). Finally got some renters into Building 4. Including the one renter we signed on today, we only have 3 units left in our facility. 2 in the new building. Plus, we have about 4 or 5 people interested in renting so I'm guessing it'll only take another week or so to fill up. This process is so weird. I worry, worry, worry that we won't be able to put people in the units and then as soon as the building gets finished, people beat our doors down. I have to admit, it is a bit of a thrill getting the buildings rented up.

Week 8 was a great success for our Hudson project too. We got site plan approval from the Township and therefore we are good to keep rocking and rolling. We should be ready to submit our stormwater calculations and grading permits to the DNR in a week or so once the engineering is done. It was exciting to put the call into our building designer saying he needs to get rocking and rolling! State review was taking a long time earlier this spring so I'm hoping it will be quicker this time of year. We are hoping to break ground mid-July. Let's hope we can keep that timeline.

Struggles included motivating the electrician to get his stuff done. This has been a constant struggle. If anyone has suggestions on other, reasonable electricians in Western WI, I'd be open to interviewing them. I feel like each of our 4 buildings has gone increasingly more poorly and therefore it might be time for a change. I don't like getting told Tuesday and then Tuesday comes and goes without my project getting prioritized to a certain degree. Poor communication is another big issue. I can never ask more than 3 questions on a phone conversation otherwise he gets overwhelmed. If you are having these same problems, I'd say it's time to cut bait. I need to take my own advise this time.

Week 7 of Self Employment - May 28 - June 4, 2018

Midweek update: Definitely sweating it a little on Building 4. We have 4 tenants that want to be in on Friday and it's always a challenge to get them in without electrical being done. It's a pain to get the lights in and a pain getting around their stuff to make any edits. So we try really hard to get everything finished prior to move in.

Our building guys showed up in Memorial Day to pop up a few walls and get a garage door or two installed. With that nice effort they should be able to stay ahead of the electricians.

Electricians showed up today, got the meter bank up and started to work on the units. I like to think we will make our Friday deadline by a hair. Next we need to fill up the other 3 units!

Week 7 Update: 

Hurray! Week 7 concluded with the completion of Building 4 and some tenants moving in. Our contractor and electrician cranked out the 4 units that are going to be immediately occupied. We have 3 more units to finish up electrical on but we've bought ourselves a little bit of time at this point. The last step is asphalt in about 2 weeks. We should have some pretty pics of everything polished up at that point and then we will quit beating this drum. At least until Building 5 gets constructed.

Week 7 was big for the Hudson Storage Garages project too. We selected our bank/credit union and it will now be full speed ahead on that project. I can't wait!

I'm also getting to do a little consulting for a railroading friend of mine. This will be a fun way to pass the time as we continue our progress on our real estate empire!

Week 6 - Real Estate Investing - May 21 - 27, 2018

Awesome week #6 of self-employment. Took the boys to the driving range, went golfing, went to a car show (actually, I'm not sure if it's a car show or a garage show; either works for me), played baseball, went mountain biking, and got approval on our construction loan for Hudson. 
I'm still working through the options for the loans but that's better than not having any options at all. Our construction crews are back at it on Building 4. Got an interior wall or two up do our electricians can get going next week. We will have our first renters move in by Friday next week. Hurray!
With that, we also got all of our estimates for Building 5 together (finally) so we can get the funding for that building going, and therefore construction. B5 will be heated so we want to make sure we can get that up prior to winter. That is our "busy season" for the heated units, naturally. We are building mostly 25x50 units because they seem to be the most requested. I guess we could always pull out a wall if someone wanted a 50x50 but we'll have one of those at least.
On Hudson, we got our site plan approved by the planning commission for the township so that's a great first step. We.are hoping that we can get too g on the grading work by Aug 1. That would be ideal. Maybe even sooner but that seems to be wishful thinking!
Lots of stuff happening. Can't wait for next week to finally get renters in B4. I think they would say the same thing....

Week 5 - Real Estate Investing - May 14 - 20, 2018

Week 5: we finally got concrete in Building 4. It was a long time coming. The finish looks awesome. Probably the best yet. This will allow us to get interior walls and doors in next week. Then electrical the following week so we can get our tenants a place to call home. We have 4 tenants (out of 7 total units) for the new building already. This is by far our best start to a building. We will be starting Building 5 sooner than thought.

The rest of week 5 was rounded out with chasing down last minute items, paperwork, rent checks, etc for the sale of our Mini Storage in Prescott. It was a good little property but we decided to sell to roll the proceeds into bigger projects (namely the new Hudson property).

Free time was spent tracking down a truck for day to day use for the business. The funny thing is that we haven't been able to cut the lawn because the lawnmower was at the warehouse and we didn't have a way to get it to the house. The Camaro's towing capacity isnt ul to the task. Anyhow, problem solved! Yay!

More fun stuff coming soon!

Week 4 of Real Estate Investing full time - May 7 - 14th, 2018

Week 4 is in the books. I'm officially sticking with the plan. I wasn't worried but I was worried that eventually I'd have an issue with deal flow (i.e. new projects coming across my desk) seeing that we will have little capital to invest in order to give ourselves a buffer. That's when 6 new properties landed on the front porch.

I had a meeting with some lending folks and another random call to a realtor friend of mine and it turns out there are people with land looking for help to monetize or develop them. I think I'm their man. The next question I have is, can I do it all myself? Good question and good problem to have at this point. Now, with this said, they aren't all going to pan out, but if I can get one to pan out, it's a very productive week.

The rest of the week was filled with meetings and conversations and paperwork for banks. A bit less fun but I do like playing with spreadsheets so I enjoyed it nonetheless.

Week 3 - Self Employment - April 30 - May 6, 2018

Week 3:

Week 3 of self-employment: it was a short week due to a previously planned vacation. The thought of the week was sell everything hiding in the closet. It was actually kind of fun. I sold a porsche mirror I got thrown in on a other deal for $160. Not bad. That and auctioning off some mini-storage units about a month ago gave us some spending cash for the vacation.
I did attend a real estate meetup on Monday night. I found this group on Meetup.com. These groups are really cool. I've met potential investing partners, swapped investing info and helped newbies along on their journey. Very rewarding all around. I'd recommend it for anyone looking to find a group that likes the same stuff you do. It gives me energy each time I attend these events.

I also updated out ad for Houlton before leaving on vacation. I got scolded for that but I didn't want to let a week go by without getting the ad to the top of the listings. I was punished with lots of calls but rewarded with a new tenant and possibly 2 more on the way.

We had a break in at our mini in Prescott. Got a 3 am call from the police (no, I didn't answer). It turned out they found the meth-head and got our renter's things back. I'm glad for that but our poor tenant has to move units and we have to replace a latch. Annoying.

With that we are continuing to have plans drawn up for the Hudson property and working on progress in Houlton. I also got a good call while hanging out on vacation from the bank. It looks like we are going to be able to get going on building 5 in Houlton sooner than expected. Our original plan was to finish up B4 and close out the loan before getting started on B5. Now we'll be able to extend our current loan one more time to include B5. That means they start of that building is about 2 months out rather than 4 months. Yippee. That means Angie will be cranking away getting the necessary paperwork out the door. Slow and steady....

Bye for now.

Week 2 of Self Employment - Real Estate Investing

Week 2:

Week #2 of self-employment is in the books. Another exciting week. We closed on our property in Hudson, WI. We will be developing this into large storage units 18' x 40' for boats, and RVs and other big stuff. We will have big driving areas for backing trailers into the units and big doors to aim at. Engineering survey next week and then rock and roll. Hope to break ground Aug 1st. I'm cautiously optimistic on that timeline.

We also got better news that banks are suddenly excited to lend us money for the construction. Project. Not sure why such a change of heart since last week but I'm not complaining.

I evaluated a couple other properties and businesses but nothing checked all the boxes. I do have a property I'm interested in but will definitely need partners for that one. I'll report back soon.

We still have our health and our house so things are still going according to plans. Next month we will be selling our mini storage so we'll be able to pad our emergency fund. Until I find another property, according to Angie.

Week 1 of self employment - April 16 - 22nd, 2018

I thought might experiences with self-employment might help others so I'm going to be posting my weekly business updates here too.  It might get you thinking of other questions.  Feel free to message me with questions if something is either not clear or fully elaborated.  I'd be happy to tell you what has or hasn't worked for me.  It might also be worthy of a future blog post. 

Week 1:

Week one being self-employed is in the books. Ironically, it felt very similar to the week prior. Lots of action. We found out our closing date for the Hudson property (April 26th) which is exciting. I'll finally get an office to work out of. Equally exciting (not in a good way) is the bank is balking at loaning us the money for the construction due to not having a job. Imagine that. I may be looking for investors with a day job. They consider that more important than track record - which I understand.

Next, my truck isn't running we'll so we are going to need another vehicle. We knew this was coming, just not this quickly. I sense Angie is secretly happy about this. I'll get that stinky, noisy Diesel out if the garage. We decided we are going to wait to sell our property in Prescott before we pull the trigger. Not to mention with how busy things were, we didn't want to settle. So in the meantime I am renting a truck until Weds next week so I can clean out the mini storage in Prescott for the sale. Then I'll be getting the camaro out of hibernation until I can get a permanent daily driver. It does feel somewhat ironic that we have 3 vehicles and I'm renting something to drive. Judge me if you must....

Otherwise Houlton Building #4 is at a standstill with road restrictions, frost, and melting snow keeping things on the shelf. Our grading guys should be back there on Tuesday to doll things up and get it ready to pour the concrete floors and center beam footings for the structural walls.

The survey and engineering is pushing along for the Hudson property while we wait on financing. It'll go no matter what (I may be knocking on your door looking for handouts) so i want to be ready day 1 when that big loan is in place. We are also working with our contractors and suppliers to dial in our numbers for grading, concrete, and building construction.

See ya next week. I'll get to post some pics of the new building and rest of the property once we take possession.

Pick a loan, any loan.

Sometimes you don't know there is a better deal out there.  That is the beauty of choices.  

I recently was looking to get a loan for a self-storage development.  Here were the two options I had:

Option 1:  

10% down

SBA portion of the loan: 5.4% fixed interest rate for 25 years on 40% of the project costs.  Prepayment penalty of decreasing rate from 10% to 1% over the first 10 years of the loan.  Loan is assumable, however.  

Credit Union portion of the loan: 5.5% fixed interest rate of prime rate plus 0.75% once construction is done and loan can be locked in.  25 year amortization with a balloon after 5 years.  Prime + 0.7% after that if another 5 year term can't be negotiated. 6.0% interest only during construction.  No prepayment penalty.  $7800 in closing costs, plus 20 included draws for the title company to pay construction costs - this is probably a $3000 value as they typically cost about $150 each.  

Option 2:

10% down

SBA portion of the loan: 5.4% fixed interest rate for 25 years on 40% of the project costs.  Prepayment penalty of decreasing rate from 10% to 1% over the first 10 years of the loan.  Loan is assumable, however.  

Bank portion of the loan: 5.45% fixed interest rate of prime rate plus 0.7% once construction is done and loan can be locked in.  25 year amortization with a balloon after 5 years.  No additional guarantee of rate or terms after the initial 5 years.   5.45% interest only during construction.  Prepayment penalty for the 5 years decreasing from 5% year one to 1% in year 5.  If an additional 5 year term is negotiated after the initial 5 year term, another prepayment penalty from 5% - 1% will be in effect.  Bank had 0.25% closing cost plus title fees (probably around $8,000) but weren't able to give me any free draws for the construction period.     

Initially, I loved Option 1.  And then I initially loved Option 2 more due to lower interest rate for the construction period and rent-up.  What I didn't like about Option 2 was the lack of perceived flexibility it gave me.  It seemed very restricting with the prepayment penalties without the assumable loan.  I also didn't like the uncertainty of having nothing to fall back on after year 5 when the balloon came due.  No adjustable rate mortgage, no additional 5 year term, nothing.  I felt a little bit naked, so to speak.  In the end Option 2 changed their term to allow for a 5/1 ARM with a prime plus 0.7% rate but wouldn't remove the prepayment penalty after the initial 5 years.  They allowed me to sell the property without penalty, but not refinance.  I struggled with that option although if it were my only option, it probably wouldn't be terrible.  

My philosophy on the overall market and interest rate conditions are this:  I think interest rates are going to go up a little but I think the treasury is going to do a lot of monetary tightening.  What this means to me is that I don't think interest rates will get too inflated but I think free cash will tighten a lot.  That may make it tough for me to get a new loan once mine expires.  Therefore I want some sort of safety net of an ARM for as long as I need to get a new 5 year fixed rate.  If I can't get another 5 year fixed rate due to fiscal tightening by the government and federal reserve, I want to make sure I have a mechanism for keeping the loan going as a safety net.  I could be wrong, but this is my main concern.  BTW, I think this will slightly impede our current economic tailwind (similar to raising interest rates) to keep the economy from getting too inflated too fast.  It might actually stifle growth a bit.  If things are stifled more than a "bit", I want to have protection.  I think I'll be making plenty of rent, but I know interest rates are going to pinch me a little and I don't need the added headache of a big balloon payment I can't get a loan on.  Anyhow, maybe I'm too worried about the downside, but I want to be super conservative in the down direction. 

I asked Option 1 to match the interest rate and reduce the interest-only rate for the construction and rent-up period.  They were able to do that so I was able to go with them.  I really felt confident I'd be able to renegotiate a new 5 year deal that was favorable after the initial 5 year term and if I couldn't, I had the 1 year adjustable rate to fall back on (which the Bank also was willing to do).  The biggest selling point for me was the lack of a prepayment penalty.  If I had to refi for some reason, I would only have to pay the SBA prepayment penalty.  We are talking about having the potential to save $50,000 when I'd probably need the money the most.  Anyway, like I mentioned before, I was thinking of worst-case scenario stuff here and I just felt way more comfortable going this route.  

In the end, both offers were really pretty great but I was able to take a loan that I thought gave me the most flexibility going forward.  Not to mention, very low closing costs once the 5 year initial term wrapped up.  

Deal flow - How I come across opportunities.

So far I've had enough deal flow (new opportunities for investment) to keep me busy so I haven't resorted to alternative methods at this time.  With that said, that doesn't mean I've stopped looking even when we have a project that either taps us out financially or will take up most of our time.  It's basically a form of marketing.  When a typical business stops marketing, sales usually lag at some point.  When I was working for the construction company, we would get super busy in the summer and it would be almost impossible to market.  Then fall would come around and we would run low on work and then it was too late to start marketing again.  This is bad.  I think I learned my lesson. 

The key is to always be looking (or marketing).  You never know when the next great opportunity will strike.  And let me tell you, if the deal is that good, you won't have to worry about finding funding.  Just go on BiggerPockets.com forums and post about it.  If you do a little homework, you'll be able to find partners.  Or better yet, go to some meetups and build your network of people looking for deals BEFORE you find the next deal.  But again, the search is on for good deals.  If you find one, you'll find the funding. 

But back to deal flow and how I have found my properties.  In general, I'm looking for a little more bottom-end property.  I'm looking for industrial properties or land that can be used for self-storage.  So far I've found two deals on Craigslist and another by looking at a deal I found on Craigslist (it was across the street from the one on Craigslist).  I've found another deal by bidding and losing on a mini-storage facility and missing out on it but buying the property next door which I developed into maxi-storage.  I've found another property by knocking on the door and asking if it was for sale (it was).  Door knocking doesn't always work - sometimes you get told to buzz off - but you have to be able to deal with failure in this business anyhow.  I see it as practice! 

A couple other deals I've found out about (but not closed on) are from knocking on doors, networking with past realtors or just asking people who are in the real estate industry if they know of anything that might be available.  ALWAYS ask if they have something else available.  I've never encountered someone who was mad because I asked.  The answer is always 'No' if you don't ask.  If you ask, it might be 'Yes'.  So basically this is networking.  Tell everyone you know about what you're looking for and go out and try to meet others who may be able to help you find what you are looking for.  If you like a property in an industrial park, go in and ask if it's for sale.  If they say 'No', ask if they know of any properties in the park that are for sale.  A lot of times they know of someone who is interested in selling. 

One final word on this subject...Always be marketing.  If a property isn't for sale but the owners appear to be on the elderly side, keep in touch with them.  People typically want to sell the property at some point.  Sometimes they pass it down to kids.  Sometimes the kids don't want anything to do with the real estate.  If you keep checking in, you'll likely be the first person they inquire with to sell the property.  This isn't foolproof by any means, but it gives you a better chance than if you sat around waiting for things to pop up on Loopnet or the MLS. 

How we got our site plan approved.

These back-to-back blog posts are probably kind of annoying but I feel like this information goes hand-in-hand with my last post. 

I saw some other developers at the council meeting last night and they had a great project, but they were trying to feel it out rather than have a plan moving forward.  A lot of this hinged around them not knowing the local zoning laws.  I think they could have been better educated in local zoning laws by their advisors.  In the end, the council really liked that the developer brought their project before the board to discuss what they wanted to do to get feedback.  That was a positive outcome.  I know I've done the same in the past with another town board and they were annoyed.  So your outcome may vary. 

So while they went in and had lots of questions as did the council, I was able to go in with a plan for a project.  I researched the local zoning laws and knew exactly what would fly and what wouldn't.  The council had a few minor comments and questions but otherwise it was a slam dunk. 

The difference is that I spent approximately 2 hours researching the zoning laws and getting familiar with them while the other developer didn't.  I'd suggest that it's worth your time.  You still may have a lot of questions but at least you'll have a really good feeling about what can and can't be done on the piece of property you have invested time and possibly money into. 

Site plan approval

Two nights ago we received approval for our site plans for our Hudson Storage Garages LLC project.  It will be a large-scale self-storage facility catering to boat and RV storage.  To my knowledge, there is nothing like it in the area.  Most boat and RV storage is shared space within a large pole shed.  Sure there are places around that have larger storage units but they usually don't have a ton of room between buildings to actually pull large trailers in and out.  This should hopefully fulfill the needs out there.  Sure it'll be a bit more expensive than a mini-storage unit but it should still be quite a bit cheaper than other options out there for large-scale storage.  The other options are typically industrial or warehouse space which is typically reserved for business needs (and therefore business budgets). 

The units will be 18' wide by 40' deep or 720 SF.  This space will cost $325/month or $0.45/SF.  Pretty reasonable for a space with 16' ceilings and 12'x14' overhead doors.  This is basically the going rate for mini-storage per square foot so I like to think we'll be competitive. 

I think that mini-storage and storage condos are going a bit too main-stream for me lately.  I'm trying to stick within the storage space but change it up a little.  I'm spending more money to build these units and renting them out for the same price compared to mini-storage but I feel like the long-term needs and future ability to raise rents neutralize these initial negatives.  Not to mention, it's good to have a product that isn't a commodity.  I'm hoping my bet pays off.  Mini-storage is probably a safe bet as new construction is filling up nearly as quickly as it's being built, but I like the idea of having a little different product to offer people.