Archive for June, 2009
Property Spotlight: Investing in Self-Storage, Storage Units, Or Storage Space
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Is this storage unit big enough?
Thinking about investing in storage units?…I mean storage space….what I meant to say was self-storage?
Greetings from the metropolis of Cedar Crest, NM!
Actually….from Corley’s Automotive…where my car is in the shop…again.
Anyway…
This is the second post in a series that will highlight the different types of properties available to investors. The posts are an overview of general information. As with all investments, you should properly research the opportunities to determine whether they fit your portfolio.
What are storage spaces?
Storage spaces are properties that lease units designed to store personal property but are not designated as living spaces. 
Storage spaces may offer a variety of unit sizes, with some large enough to hold automobiles. Many storage spaces offer an on-site manager that processes paperwork during office hours and lives on-site to provide security. Many managers receive their living arrangements in addition to a nominal salary in exchange for their services.
What Do I Need to Know About Investing In Storage Space Properties?
Storage spaces can be a very efficient way to build your wealth, but you need to do your research to find the right opportunity for you.
1. One of the easiest ways to invest in a storage space is to invest in a Self Storage Real Estate Investment Trust “REIT”. According to investorwords.com, a REIT is a corporation or trust that uses pooled capital of many investors to purchase and manage income properties. REITs require no minimum investment, and pay yields in the form of dividends, which are not based on share performance. Investing in a REIT will yield regular income without the hassle of active management.
2. A significant number of storage space tenants are clients. This means that you secure long-term, low-risk tenants. The bottom line is that you receive steady income with low risk.
3. Economic data has shown that this sector has not been hit as hard as others by the recession.
4. Barriers to entry are significantly lower because construction costs are less than that of other types of property.
5. Maintenance costs are low. Storage spaces are generally constructed from steel or other high-grade industrial materials that are designed to last longer than standard residential materials.
6. Eviction costs generally do not exist. Most states require that unit contents be auctioned.
7. Taxes and insurance costs are typically lower than other types of properties.
What Are the Cons To Owning Storage Space Properties?
Storage space properties can be quick income generators; there are drawbacks to owning this type of property. The market you want to invest in may be too well penetrated. This means the supply of storage spaces may outweigh the demand. Additionally, your region may not have the demographics to support the need for storage spaces. Do many of the residences in your market offer full basements that could feasibly store large amounts of personal property? Is your area full of late teens that may not have acquired enough property to fill an apartment, let alone a storage space?
In Conclusion
Storage space properties are a common addition to many investment portfolios. If you are considering investing in a storage space property, take the time to tour other properties in the market and look at each building’s performance. And, as always, if you have questions, contact the experts at The Real Wealth Company.
Until next time…..rob
Seizing Unique Opportunities—Do the Risks Outweigh the Value?
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Hey...check me out! I am stylin' and I am going for it!
Greetings from the metropolis of Cedar Crest, NM!
Today I celebrated my 39th birthday…on my journey to 40…..yikes! I remember trying to burn my parents house with a magnifying glass at the ripe age of ten….now…wondering if my ten year old is trying to do the same.
I was talking to my childhood friend, Efrem, this morning and he told me he was getting ready to attend his twenty year reunion. The word “twenty” rang in my ears long and hard. What happened to the ten year reunion? I feel like I just graduated from college….grad school….did I just sleep through it all? Possibly….but more importantly, A quick reminder that “the time you have is all the time you got.”
Anyway….
Today’s topic is taking the plunge into doing your own thing. Specifically, investing in real estate. I remember not to long ago taking a leap of faith and trying to do my own thing vs. “working for the man.” It was a scary time. Leaving behind the security of a job and seeing if I could make a go at real estate investing. There were a lot of scary times where I felt failure was eminent….but somehow….it has all worked out so far. That was eight years ago. First investments were residential homes…then small commercial deal…then it grew from there.
The one thing I learned is that starting your own business is like having kids. It is never the right time, it is never going to be the right time, so the time is NOW.
So….what is your next step?
There’s an old saying that you can’t win if you don’t play the game. And, it’s true for real estate. If you don’t take the plunge, you
can’t collect the money. But, at what point do you decide the risk is worth it?
Understanding What’s A Good Fit
Being proactive is generally a safer risk strategy. This means that if you take the time for self-assessment and research, you will better understand your risk mitigation comfort level. If you are a first time investor, you don’t want to sink your capital into something that requires sleepless nights, tenant hassles and more money than what you are bringing in from the investment. On the other hand, if you are a seasoned investor, you have a good idea what types of property will work for your investment personality and will automatically steer yourself away from risk that is beyond your tolerance.
Looking With a New Perspective
Once you know what your risk tolerance is, do not limit yourself to a certain investing mindset that fits properties into your portfolio. You may “know” you want to invest in an office building that is an “A” level property with a certain dollar amount. However, you may realize even greater earning potential by looking at unique opportunities. Choose to focus on the risk level of a property and determine if that will fit your portfolio.
Risk Mitigation—Bringing Balance To Generate Cash
According to businessdictionary.com, risk mitigation is the systematic reduction in the extent of exposure to a risk and/or the 
likelihood of that risk occurring. By looking at investments through a risk mitigation perspective, you can begin to analyze your investments as big risk/high potential rate of return, big risk/low rate of return, medium risk/medium return, low risk/high rate of return and low risk/low rate of return.
Smart beginning investors will grow their portfolios with both high potential rate of returns and low risk properties. This allows smaller and more steady cash flow from less risky investments to cover gaps from more risky investments.
Making It Work
Investing in commercial real estate should focus on generating cash flow, not generating unbearable risk. But, how do you make this work?
Let’s look at an example:
A property in your desired market area that you have classified as high risk/high potential carries a high investment cost. However, extending your desired market area by 50 miles opens the opportunity to invest in a low risk/high potential with a substantially lower investment cost and brings tax incentives because it is considered a lesser-desired area. If you first invest in the low risk/high potential, you can build the wealth from the investment to then also invest in the more risky and costly investment while covering any gaps that may result from the risky investment.
But What If I Really Like Risk?
As with any investment strategy, there is no one right answer for every investor. If you want to take the plunge and throw it all 
into a risky investment, you may have a substantial payout. You may also lose everything. Decide what you can handle and then grow your wealth!
Well…until next time…..rob
Property Spotlight: Multifamily And Pinon Nuts
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Apartment Buildings? Pinon Nuts? Dude...who cares?
Greetings from the pinon nut capital of the world…Cedar Crest, NM. Not really the pinon nut capital for the world…but…I wonder if there is such a thing.
During the first phase of my home remodel, the construction workers would collect pinon nuts during their lunch break. Funny to watch a handful of guys crawling around the ground picking up nuts. I never even paid attention before. Now…when I am walking around outside talking on the phone, I will take a seat…and start cracking shells and eating nuts….they are everywhere.
APARTMENT BUILDINGS
Anyway….Let’s talk apartment buildings (Mutifamily a.k.a. Residential Commercial Real Estate). I remember my very first 
multifamily asset was a triplex in Albuquerque, NM. I still have it! Like any commercial property or even residential, with the right property management and the right asset management in place, owning multifamily is a wonderful thing. Without the right management, it can be…and probably will be a NIGHTMARE!
This is the first post in a series that will highlight the different types of properties available to investors. The posts are an overview of general information. As with all investments, you should properly research the opportunities to determine whether they fit your portfolio.
What is “multifamily”?
Simply put, a multifamily building is one meant to house more than one family in individual units. This can include a wide variety of configurations from individual rooms with communal facilities to multiple large apartment complex buildings housing hundreds of people.
What Do I Need to Know About Investing In Multifamily Properties?
Multifamily properties can be a very efficient way to build your wealth, but you need to do your research to find the right opportunity for you. Here are some basics to consider when determining whether to invest in a multifamily property:
• Are you going to manage the property yourself, hire a property manager or hire a management company?
• What occupancy rate will you need to secure and maintain your financing?
• What plan will you implement to prevent low occupancy rates?
• If it is an existing building, when do the existing leases expire?
• What changes will you need to make when implementing your leases once the existing leases expire?
• How much notice must you give according to your state laws about changes to lease terms?
• How do the units compare to other units in the market place? (i.e. will you need to make substantial repairs or upgrades?)
• How do you plan to retain existing tenants?
• How do you plan to attract new tenants?
• What expenses can you pass on to tenants to generate greater cash flow?
• What upgrades can you implement on a cost effective basis to attract higher caliber tenants and generate greater cash flow?
What Are the Cons To Owning Multifamily Properties?
While multifamily properties can be quick income generators, there are drawbacks to owning this type of property. With multiple tenants, you need an efficient way to track payments, late fees, application fees, maintenance calls, and all other aspects of property management. Also, not all multifamily tenants renew their leases, which means the paperwork associated with bringing in new tenants and vacating units can be continuous. Hiring a management company or your own property manager is an expense that deducts from the income you take home. Additionally, multifamily spaces are those where people live. This means that the usual “wear and tear” of a space is greater than that of an office building where the main activities are “low repair” like people working behind desks. This means that you will need to repair and replace fixtures and appliances more quickly.
In Conclusion
Multifamily properties are a common addition to many investment portfolios. If you are considering investing in a multifamily property, take the time to tour other properties in the market and look at each building’s performance. And, as always, if you have questions, contact the experts at The Real Wealth Company.
Until next time…..rob