Self Storage Review

Before we look at the facilities for self storage in London, let us be clear about the nature and advantages of self storage.

With more and more things to store, and ever-increasing cost of accommodation, both people and businesses are looking for independent storage solutions. They have two main options - entrusting the things to store with a storage company or hiring self-storage facility.

Both solutions make available specialist storage facilities and safe storage. They also offer the convenience of keeping clutter out of your living or business space. The storage can be for a short period or for long periods. What are the differences between these two solutions?

Storage Company Control

When you entrust our goods with a storage company, it would be the company that would decide where to store these and how to control access. They might move it around to suit their own convenience. Access to the stored goods will be restricted by requiring prior appointments, and might even be charged for.

Traditionally, storage companies also required longer-term contracts, and charged high. You also could not move things in or out of storage as you needed and had to ask the company to arrange for these.

The Self Storage Solution

Under the self-storage solution, you would have complete control over storage and access (subject to the facility opening and closing times). You can move things in and out and store them in your own way (by storing the frequently accessed articles in a more accessible manner, for example). In effect, you are hiring storage space, not just storage convenience. This storage space can be a small closet to store some valuables and papers, or large space to store the entire contents of your house, say, when the house is being remodeled.

Storage periods are also more flexible. You can hire self-storage for a very short period or for years. You might be able to get a full refund for unused periods if you terminate the storage arrangement.

Self storage, however, puts the responsibility for packing, moving, loading and unloading the goods on you. Some companies might offer these services, but at extra charges. Many self-storage businesses offer trucking services, for example.

Self storage arrangements have an additional layer of security over and above the normal security provided by facility owners for the facility as a whole. The space you hire will be an enclosed place to which only you will have access. Typically, you can use your own lock and key to this area.

Self Storage in London

There are many self-storage facilities in London. We look at one particular facility Bullman’s Self Storage to get an idea of the facilities typically available.

They offer private storage units of 10′x8′, 20′x8′ and 40′x8′ in a facility with 24 hour manned security and CCTV. The units are located at ground level and you can just roll up your trolley with your goods into the unit you hire.

You can use the facility for domestic or commercial purposes. The company offers removal, collection and distribution services, and even shipping services. They can also fit your unit with shelving or lights if required.

The location of the facility is excellent from a logistical point of view. Special rates are available for long-term storage.

This self storage facility in London is indeed a highly secure and convenient one offering you full control.

Mobile Home Park Money Trees

Mobile home park investors across the nation are raking in the dough while countless single family home real estate investors are struggling to turn a monthly profit. Okay, so it’s not exactly like investing on Madison Ave. However, if you have the knowledge you can do just as well as the Donald Trump in real estate. Just ask Jim Clayton of Clayton homes who sold his company and portfolio of mobile home parks to Warren Buffett for a cool $1.7 Billion dollars!

Why are mobile home parks the “red-headed stepchildren” of the commercial real estate investment world? Perhaps one of the reasons why most investors ignore this lucrative asset class, other than for obvious eye sore reasons and the negative connotation associated with mobile home parks (we like to call it the Jerry Springer effect), is because they believe it requires too much up front cash and a personal income statement well above their means. This might be true if you were trying to finance your property through a large bank, however many mobile home parks are purchased with much less than 20% down and with little financial reserves in the bank. In fact, many of these mobile home parks are purchased with seller financing.

Small to medium sized parks are typically owned by “mom and pop owners” that have been running or overseeing the managers of their respective parks for a long time. Many of these owners have mobile home parks that have a large vacancy due to the glut of repossessed mobile homes caused by the mobile home industry overheating in the late 1990’s. It is difficult for these owners to refinance or sell the mobile home parks conventionally due to the significant vacancies in their park.

Furthermore, some of these same owners prefer doing business the old fashioned way (without bankers / real estate brokers). In other words, a large percentage of mobile home park owners would rather take some initial financial consideration, make a nice profit each month off the interest on their note and not worry about the day-to-day issues of running the park. Additionally, many do not want to deal with a large tax problem if they sell the park outright. Sure they could 1031 exchange it into something bigger; but then they would be in the same situation all-over again.

Investing in mobile home parks is an absolutely beautiful thing! Not only is it a long term land play, but you have NUMEROUS ways to make money through multiple “profit centers” in a park. Single family homes and apartments are a “one trick pony” with only one source of revenue… the rent payment. It is much easier to achieve your financial goals with mobile home parks due to the following reasons:

1. The parks are usually in a less than favorable part of town. Therefore the land is cheap and you will be spreading that cost over numerous mobile homes.

2. Provided you purchased the right mobile home park, there will be vacancies for you to bring in extra mobile homes. (Yes, that’s right….you want at least 20% of the park vacant so that you have a huge upside!) You’re healthy, sharp and full of energy so you’ll improve the quality of the park, raise rents and maximize your rent roll. By the way, this will immediately increase the value of your mobile home park through the cap rate valuation.

Example

30 Space Park, $300 a month Rent Roll (50% Vacant) = $45,000 yearly rent

$45,000 - 15,000 (33% of rent goes towards Operating Expenses) = $30,000

$30,000 (N.O.I.) / 9.0 % (cap rate) = $333,333 (Your Purchase Price)

The Upside:

30 Space Park, 100% Occupancy, $320 a month rent roll = $115,200 yearly rent

$115,200 - $34,560 (30% park operating expenses) = $80,640

$80,640 (N.O.I.) / 9.0% (cap rate) = $896,000 (at 100% occupancy)

Over $500,000 profit!

3. If the cash flow of a park is low, you can add additional revenue by putting in a coin operated laundry mats, vending machines, lawn service, day care service, self storage, etc.

4. You can purchase mobile homes at a 40%-50% discount and resell them on terms (either with a lease option or note). Home ownership is the American dream so when you advertise “Own your own home, $2000 down, low monthly payments - Bad credit OK, call Boca Vista Mobile Home Park” your phone will ring off the hook, trust me. From there you take their down payment and have them sign your lease option paperwork that details the term of their loan with you. So why sell them one of your mobile homes….isn’t that an asset to the park you ask? Yes, but:

A. You now collect the lot rent. Pure profit with no additional expense.

B. Now you have someone in your park that has pride of ownership and will most likely take better care of the mobile home than a renter.

C. No costly maintenance. The buyer is responsible for all maintenance.

D. You can purchase the mobile home at wholesale cost and sell to your customer for retail. In many cases, you can double your money on each home. In addition, you charge an interest rate of 10-15%.

E. Some of your buyers will not finish out the loan term and will give you back the home in good condition. At that point, the property is 100% yours again, you’ve pocketed the $2000 option payment and you start the process all over.

As you can see, mobile home parks are an amazing real estate investment. Where else can you find an income property with so many profit centers (with the exception of self storage). Mobile home parks are huge cash cows and ultimately will become a land play. Take advantage of the untapped opportunity that exists today in the mobile home park industry before it is discovered by the masses!

Few would deny that real estate is a solid investment. Nationally, there hasn’t been a decline in home values since the end of World War II, according to the National Association of Realtors in a report the one-million-member trade organization released in March of last year. These widespread equity gains in residential real estate, as well as monies from other sources, have led many to invest beyond their primary residence and into income-producing properties such as rental housing, apartment buildings, or small office or retail centers. Over the years, many of these investment properties have built up substantial equity.

However, many seniors now find themselves in a quandary. They have become equity rich, but are cash poor– with increases in the value of their property far outpacing income growth. Plus, they have grown tired of the day-to-day property management headaches such as toilets, tenants and trash, and want to simplify their lifestyle and enjoy golf, grandkids and gardening.

Of course they could always sell the property and unleash that accumulated equity, but this can have disastrous tax consequences. Moreover, even if they decided to sell and take the tax hit, where do they re-invest? After all, the Dow Jones is still 1,000 points below its high water mark reached in January 2000, the NASDAQ is less than half of its March 2000 peak, money market funds are barely ahead of inflation, and saving accounts can’t keep pace with inflation.

INVESTMENT PRACTICES THAT DATE BACK GENERATIONS, EVEN CENTURIES

For years, investors have been using an investment option that allows them to sell a property and defer all taxes on capital gains by using the profits to acquire another “like-kind” property. In use since the 1920s, a 1031 exchange, so named for its designation in the IRS tax code, allows you to sell your income-producing property and “exchange” it for another while deferring capital gains taxes. Of course there are rules by which investors need to abide. Among them: the exchanged property must be of the same or greater value; the seller has 45 days after closing escrow on the old property to identify a new property; the seller has 180 days from the sale of the old property to close escrow on the new property.

Meanwhile, another real estate investment opportunity, Tenant-In-Common (TIC) ownership, has been around for centuries, dating back to British Common Law. TIC ownership allows for multiple parties to own an investment property, with each fractional owner holding separate title to his portion of the property. Additionally, like any property held in sole ownership, fractional ownership in a TIC can be purchased, sold, gifted, bequeathed by will or inherited. Naturally, it is also subject to property taxes, gift tax, and estate and inheritance taxes in the same manner as a solely owned property.

TIC ownership has been gaining momentum over the last 10 years, due largely to the increasing costs of acquiring real estate. By combining their resources, multiple investors can think beyond what they could purchase on their own, including gaining access to institutional-grade properties, such as grocery and drug store anchored shopping centers, large office buildings, malls, and multifamily apartment communities.

With the increasing popularity of TIC ownership, in March 2002 the IRS issued Revenue Procedure 2002-22, which set forth formal guidelines regarding the structure of TIC investments, including the maximum number of co-owners allowed in a property (35).

COMBINING OPENS OPPORTUNITIES TO SENIORS AND BABY BOOMERS

Many seniors and Baby Boomers are now finding that investing in a Tenant-In-Common property through a 1031 exchange is an attractive– and increasingly mainstream– investment. Now, instead of merely exchanging a “like-kind” property as part of a 1031 exchange, an investor can sell the property and pool his proceeds with other investors. This allows the investor to swap, for example, that sole ownership in a three-unit apartment building into a fractional ownership of a class-A office building in downtown Chicago, as well as an additional fractional ownership of a 220-unit, professionally managed apartment complex in the suburbs of Los Angeles. Or the investor could swap the proceeds from the sale of a strip retail center into a regional shopping center anchored by national tenants.

Aside from freeing the investor from the obligation of property management, the investor has “traded up” into institutional-grade properties that are professionally managed and have received professional scrutiny for their continued financial performance through a comprehensive due diligence process. Also, the investor can potentially reduce investment risk through geographic diversification and investing in a spectrum of property types. The TIC investors get the same oversight that’s provided for a large institutional investor, including monthly reports, while potentially increasing monthly cash flow.

RAPID GROWTH IN 1031 AS TIC INVESTMENT

Since the IRS provided guidelines for TIC investments, total equity invested in this sector has more than doubled every year, according to Barron’s magazine. It went from $350 million in 2002, to $750 million in 2003, and to $1.8 billion in 2004. The total is expected to reach $4.2 billion for 2005.

But beyond the numbers, there are other factors contributing to the accelerated momentum of such TIC investments for seniors:

Demographics
Today’s class of seniors is the best educated and wealthiest ever. Investment and saving have long been a part of their financial discipline. Now, they are increasingly focused on wealth preservation, which involves minimizing the amount of taxes owed. TICs can accomplish just that– allowing a taxpayer to enjoy cash flow, potentially increase equity, while continuing to defer taxes.

Meanwhile, there are 76 million Baby Boomers (those born between 1946 and 1964) who are just beginning to retire, or preparing to do so. Perhaps no other generation has been so enriched by real estate. Consequently, they tend to be comfortable– and eager– to reinvest their gains right back in.

Lifestyle
Being at the beck and call of your tenants to repair an overflowing toilet, or an electrical malfunction is never fun. For a senior, the physical demands of hands-on property management can become that much harder. For busy Boomers it’s hard to find the time. Investment-grade properties– office buildings, shopping malls, apartment complexes and industrial properties, valued anywhere from $10 million to $300-plus million– employ professional asset and property managers. They relieve investors of day-to-day maintenance and leasing headaches. That can mean more days of uninterrupted golf, travel, time with grandkids and other pursuits.

Diversification
For those worried about a local real estate “bubble,” TIC investments give investors the opportunity to diversify into different real estate asset classes, upgrade their investment, and get into different markets. For example, by pooling the equity earned on a three-unit apartment building into a self-storage complex in the suburbs, a class-A office building across the country, or a 220-unit high-rise condominium tower, the investor softens potential revenue fluctuation from vacancies. He is also less beholden to the performance of a particular local market or asset class.

Estate Planning
For estate planning purposes, a TIC structured investment in inherently like any other real estate investment. Upon passing, your surviving heirs inherit the investments. They can either sell the real estate, 1031 exchange their investment into something else, or can continue the TIC process. Like it did for you, this allows your heirs to enjoy tax-deferred capital gains, cash flow, and the ease of having professional property managers deal with leases, tenants and maintenance.

AN INVESTMENT THAT’S RIGHT FOR YOU?

The benefits of investing in a property through Tenant-In-Common ownership are many:
o Ability to keep real estate in your investment portfolio
o Opportunity to diversify property holdings geographically and across property types
o Mitigation of vacancy risk with larger properties that have more tenants
o Elimination of day-to-day property management headaches inherent in sole ownership properties
o Deferral of capital gains taxes when acquired using the proceeds from a 1031 exchange

Of course, investors must remember that, TIC investments have the same material risks of their previous (indeed of all) real estate investments, including potential for property value decrease, illiquidity, change of tax status, and the possible impact of fees/expenses which may outweigh a property’s tax benefits.

Lastly, it is also important that the TIC real estate investment offered to you is structured as a security. When structured as a security the bar is set much higher for due diligence, confirmation of investor suitability, broker/dealer record keeping, and licensing and training of registered representatives.

This is neither an offer to sell nor an offer to buy real estate or securities. There are material risks associated with the ownership of real estate. Securities offered through Sigma Financial Corporation, Member NASD/SIPC.