Analysis of land for self storage

[Yveskleinsky]

Ok, so I've found 2 pieces of land.

Parcel #1 is 4 acres, with Hwy frontage, about 5 miles from an Air Force base. Asking price is $285k with owner financing of 6% amortized over 15; seller wants 20% down. Land is flat, and has a chain link fence around it (not terribly secure, but most storage places in town aren't secure at all.)

Parcel #2 is 3 acres, with Hwy frontage, about 4 miles from AFB. Asking price is $180k, with no seller terms (currently on the table.) Land is flat, and unfenced.

Since parcel #2 is virtually identical, I would think that I could take their price to seller #1 and get them to come down on price to a max of $60k an acre.

I like the price of the land and the location. ...I remember Sonya saying that the next step is to get price per square foot for construction. ...What type of construction should I consider?

[AroundTheWorld]

I'll defer to someone else on the construction question... not my department!

I know from speaking with you (offline) that have been paying attention to supply / demand in your area. Initially, it sounds like you are in a great area!

Would you want to be the general contractor on your project, or hire that out? My suggestion would be to:

Run some basic proforma financial statements.

Income = What are self storage properties in your area getting per square foot in rent?
Expense = Insurance, Property tax, utilities, maintenance, advertising, etc.

Potential profit?

The next step is to talk to a few general contractors in your area. They would want to see some "plans" to give you a hard bid, but some of them may be willing to give you a "ballpark" number.

[Doug]

As far as type of construction goes you basically have 3 options....straw, sticks or bricks...no I guess that's a different story.

Most people are choosing either steel frame construcion or wood frame construction. Some builders are choosing to go with cinder block construction when wood and steel prices are high.

When going the steel frame construction route most people choose to go with the prebuild kits. There are many manufacturers to go with and any design is possible. You can search these manufacturers online and often get some good quotes instantly using their design modules. Make sure you hire a competent crew that has experience in assembling the building. You don't want to be paying someone to learn on your site.

Wood frame is what we have choosen to go with because they are more economical than the steel kits. Any framing crew can build them with simple plans and they look just as good when they are complete. I know that in our area there are a lot of framing crews out of work and willing to do a job for next to nothing. It's a great time to be building.

Everything is covered in metal with both steel and wood construction so from the exterior you cannot tell the difference. We get just as much rent as the steel frame guys and our break even point comes a lot sooner.

[Bilgefisher]

Did you run into any permit problems when choosing steel over wood. Ie: fire code issues?

Btw thanks for the quote tip.

[Doug]

There really is no advantage of steel over wood framing when considering permits. Depending on if you are building in the city or county you will have to abide by their building codes which include fire codes. Wood framing meets all of these codes.

The only issue I have had was that when constructing one building I accidentally did not meet one of the property setback requirements. Basically building so far away from the property line so that a potential fire would not jump to adjacent properties. The problem was that the old fence on the property was not on the property line. By the time we found this out the building was complete. Remember there is always remidies to problems. I asked the building inspector on his recommendation on how to fix it (always ask for help instead of demanding something) He recomended I add fire rated sheet rock to the back wall and we would be fine.

I have had questions about insurance as well but when I have gotten quotes; all the insurance companies stated there would be no price difference for wood or steel framing. Some companies may be different but I haven't encountered it.

[Doug]

Originally Posted by Yveskleinsky

Ok, so I've found 2 pieces of land.

Parcel #1 is 4 acres, with Hwy frontage, about 5 miles from an Air Force base. Asking price is $285k with owner financing of 6% amortized over 15; seller wants 20% down. Land is flat, and has a chain link fence around it (not terribly secure, but most storage places in town aren't secure at all.)

Parcel #2 is 3 acres, with Hwy frontage, about 4 miles from AFB. Asking price is $180k, with no seller terms (currently on the table.) Land is flat, and unfenced.

A few things to consider:

The fencing on Parcel #1 is probably worth about $20k and you do eventually want to be fenced . You could always add a few strands of barb wire on top for more "precieved security" but some people feel it give facilities too much of a prison look.

When just starting out you will be negative cashflow and the larger more expensive piece of land you get the more negative cashflow you will be. You need a minimum of 2 acres and probably a maximum of 6 +/- . With 2 acres you are able to make a great profit but not over extend yourself in the begining. I would strongly consider the 3 acre parcel...get the owner to reduce their price and ask for terms. Remember you are going to be adding immediate value to the property. If the owner has to take it back then they are getting a storage facility not just a vacant piece of land.

If they do not want to finance the majority then get them to finance enough so you can go to the bank and finance the difference.

I can give you examples of some creative financing where you can walk into a project with little to no money out of pocket. Just let me know.

[Bilgefisher]

Curious what costs you ran into on fencing. I used some online fence calculators to get a rough idea. Fence plus gate on 6 acres ran 45k. 3 Acres was about 35k. This was a for a chain link fence 8 feet tall with barb wire on top. I am wondering if the calculators are high. This also does not include construction costs.

[AroundTheWorld]

That sounds close.... perhaps slightly high, but I'm sure it varies from area to area.

Are you saying those quotes don't include the labor to install the fence? If so, that does seem high, at least for our area.

[Yveskleinsky]

What is a ballpark cost for fencing? Is this cost figured on a per foot or per yard basis? ...And what about the automated gate?

[Bilgefisher]

Dana,
there are several fence estimators online that include gates and other customizations. Those calculators will give about 45k plus gate to do a 6 acre lot with gate. (Just for materials)

Recently my company got bids to replace 900 feet of wood fence with 6ft tall chain link with barb wire. For removal of the old fence, materials, and installation of the new fence was 15k. The bids ranged from 15k to 45k on the project. Get lots of bids. You may be able to get a better deal then you think.


Just for reference an acre is 208ft x 208ft or 200x200 for simplification.

1 acre = 800ft
2 acres = 1200ft
3 acres = 1600ft
etc etc.


Not sure if that info helps at all.