Storage sheds ??????

[devo76]

Hi all. I have been pondering this thought for some time now but today a made a few phone calls and found that all the local storage areas with 6 by 3 storage sheds were booked solid with a substantial waiting list for some. I crunched some rough numbers and it seems like a worthwhile excersise.

Land $200,000 ( A actual suitable block currently available)
Purchase costs $12,000 ( 6% of purchase price)
Storage sheds $120,000 (25 sheds at $4,500 as quoted )
Security install $10,000 ( Got quote today)
Fence $10,000 ( Worked out from per meter quote)
Odd stuff $15,000 ( Stuff i cant think of)

TOTAL $ 367,000

Interest $367,000 at 7.7 % $28,259
Managment cost at 5% of rent $1,800 ( as stated by PM seems low to me)
Back to base security per year $400
Council Rates $2000
Advertising $4,000 ( Total guess)
Insurance $3,000 (total guess)

TOTAL HOLDING COSTS $39,459

Rent at $1800 per year per shed $36,000( Allows for 20% vacancy rate)
Rent for parking $4,800 (10 spots at $480 per year)

TOTAL INCOME $40,800

Cash flow $1,341 Tax deductions not included.

Very neutral i know but better than residential. What are your thoughts. What have i missed
The block im thinking of would have room for 50 sheds and up to 30 parking spots allowing for future growth which would increase yeild since land is already purchased
The shed rental prices are a bit below whats on offer locally to ensure they stay filled.I have no expieriance in this at all so please tell me what i am missing. Thanks.

 

[APerry]

You need to adjust your interest cost upward, you're not going to get anywhere near residential rates on a loan that size, around 8.5% would be ballpark.

Regards
Alistair

 

[devo76]

OK that makes it cashflow neg by $1,595. Thanks for your input.
It still has potential with rental growth and add on of more sheds in the future.
If i add a further 25 in a few years
Total cost $155,000 ( sheds,concrete)

$155,000 at 8.5% $13,175
Plus holding costs $3000 ( Realestate, insurance extra etc)
Total $16,175

Rent $36,000 (allows for 20% vacancy rate)
Parking $4,800 ( 10 spots at $480 per year)
TOTAL $40,800

Total cashflow $24,625

Actually when you look at it that way you would try to build the total 50 sheds if the bank lends the money becouse the last 25 sheds make it a good earner.


Im sure im missing heaps so please throw your thoughts at me.

 

[pulse]

Storage sheds are a business not an investment property.... There is a definite trend to large businesses with hundreds of sheds with a free truck and onsite management.

The local realestate agent managing 10 sheds on the block nearby offers an inferior service and will lose business as the market matures

Pulse

 

[devo76]

Yes you are right but on site managers,truckes,hire gear, 24 hour security all come at a price. The area i am talking about has a high demand in the affordable bracket. The price range i would charge is a bit lower than similar storage places and a lot cheaper than the ones that offer more.I guess its like houses. You buy something thats in demand. I cant compete with the big boys so i will look at the cheaper market.
I would offer safe secure affordable storage. at a cheaper price than many similar storage centers.

 

[pulse]

Or you could try something different like wine storage, document storage, etc

Pulse

 

[yo yo ma]

Or you could try something different like wine storage, document storage, etc

Don't do document storage... My brother works for a company that scans documents onto discs... saves heaps of space & make document storage redundant.
Steve

 

[Belu]

this is in effect a business. show me a SWOT analysis of the situation.

Neutral may be great when compared to residential property - but its crap when compared to a business.

 

[alexlee]

As a business, it would be more management intensive than a normal residential IP. So you would have to make enough to justify the extra work.

A few questions:
Would you get a PM to manage this? Would they know how? Would you have to do your own marketing? How would you find customers? How would you get insurance against fire, etc?

For residential property we expect capital gains. Would you expect capital gains from this? If not the cashflow has to be enough to justify the return, and breaking really isn't enough.
Alex

 

[Dazz]

Interest $367,000 at 7.7 % $28,259
Managment cost at 5% of rent $1,800 ( as stated by PM seems low to me)
Back to base security per year $400
Council Rates $2000
Advertising $4,000 ( Total guess)
Insurance $3,000 (total guess)

TOTAL HOLDING COSTS $39,459

Hiya devo ;

I reckon you may have underestimated your costs a tad ;

1. Alistair is right, your interest rate is going to be ~ 9%.
2. I think PM fees will be higher than that, especially with people coming and going at all times.
3. I've had back to base security. With the dedicated phone line, calling itself on average 8 times a day, plus all of the callout fees / false alarms - attendances by patrols / plus the base cost, it was more like $ 500 / month.
4. Council rates looks a bit low for that bit of dirt - remember it goes off the rental generated.
5. Water rates - another 1K
6. Land Tax - could be up to 3 or 4K
7. Insurance - depends totally on what is stored. If the tenants lie to you and store hazardous or chemical or flammable materials and she goes up, then the ins. co. will drop you like a hot potato, and it'll be a civil action between you and the tenant - good luck with that, could drag out for 5 years if they dig their heels in.
8. You don't have anything for maintenance, there will be ongoing costs to hold.


Most things like this I've seen some bored housewife / student / retired gent there manning the small fort at the front. Wages and all of the other labour costs will add up, unless it runs on auto-pilot, which should send the insurance bill through the roof.


Chatting to a few investors who hold these types of things.....both the cake and the cream is in the land appreciation, realisable many years down the track. The venture may be nuetral at best, but like most property things, the big bikkies is in the land growing in value. Therefore, try and pick a spot which isn't surrounded by open paddocks.


I have no clue how you can erect sheds for 4K each. Most I've seen of late are concrete tilt up panels. Great for security and privacy. The tin sheds you are talking about can be broken into a piece of case. People would be reluctant to leave their valuables in those I would have thought.


Anyway, good luck....who knows - you could be onto something there.

 

[kathryn d]

We have a storage facility here in our town. Originally it was owner occupied with an apartment right onsite.Under the apartment was a tool rental shop.All the lockers are strung along with steel door entry to each locker.

Now the storage lockers have a security fence and tenants each have a key.Owner must be doing alright as he just built more this year.The tool rental shop was replaced by another shop years ago.The place always seems to be full.

 

[handyandy]

If you do a search for Jakk he was involved in smaller self storage sheds in country areas.

He hasn't been around a while but at the time was extremely busy doing exactly what you are thinking about.

I have looked into the bigger end of town as a business proposition but basically arrived to late on the scene and %'s were dropping due to site appreciation. In my case there is the business and there is the facility (RE) the RE needs to get the normal return for that type of property and then the business needs to be able to afford to rent the RE and run the business and still make sufficient ROI to make it a viable business.

A few of these business's I looked at were really land banking exercises one in particular was right at a rail station where you would normally expect to find shops. Very strange!!

Cheers

 

[devo76]

OK so the numbers dont seem to add up like i hoped. Thanks for the honest imput everyone. Ill take the info you have given me and look a bit deeper.

 

[evand]

You can good info from the storage shed association:

http://www.selfstorage.com.au/

Also theres a guy in the States called Fred Gleeck who is an authority on storage sheds and their marketing. I have bought a few of his products and theyre great.

http://www.selfstoragesuccess.com/

Good Luck.

ps: First thing you should do is a business/marketing plan. Including a swot analysis as someone posted previously.

 

[Sunfish]

I'm living in an older house on a 1012sm block, very centrally located in a large satellite commercial area. I like living here so I'd rather develop the block myself than sell to someone else and have been thinking I would get more return on storage sheds than a residence in the back. (I'd fix up the house and it would stay)

I am surprised at the $36/wk return quoted. Is that all you would get or would that vary quite a bit? How big are they for that return?

 

[devo76]

I'm living in an older house on a 1012sm block, very centrally located in a large satellite commercial area. I like living here so I'd rather develop the block myself than sell to someone else and have been thinking I would get more return on storage sheds than a residence in the back. (I'd fix up the house and it would stay)

I am surprised at the $36/wk return quoted. Is that all you would get or would that vary quite a bit? How big are they for that return?

Thats for a 3 by 6 car size shed. It seems low but when you consider how many you can pack into a relatively small space. The returns look better.

 

[Buzz]

I looked into sheds 3 years ago and having done the costs on developing - at that stage in new industrial parks near the Central Coast NSW I started flying the country looking at sales of existing facilities. Looked at Mt Isa, Orange and a few others in NSW and Qld growth areas.

My SWOT analysis didnot work for me and after studying the industry - I think I even bought a report from IBIS World - the costs started adding up.

From memory some points
- Mt Isa, all looks good from a cash point of view but you need someone who will turn up with a key and help out when keys and automatic gates do not work at all hours
- automatic gate gets knocked around a lot, and maintenace costs were high and call out high for person to let in leasee whenever they wanted
- with 2 real estate agents in Mt Isa and 3 storage facilities, they both looked after one each they were not prepared to take on a 3rd in competition so had to source someone who would
- there is a purpose built software package for running these and to do it right it added $$$ to the cost of setup, especially when owning remotely and trusting a PM or local to run operation - there is alot of cash and in mining areas apparently alot who do not want direct debits..
- high person involvement ie cost
- check local river high tide points, on in NSW we looked at one which was within flood zone

All in all with the big boys were buying up the little guys it seemed to be where the action was but the high hold costs and management costs and unknowns for me were too much, so we did another renovation. Maybe one day I will get into commercial - still looking.

I hope this helps, I know everytime you come up with an idea there is someone to knock it down - don't let this stop you - just be better at working around the hurdles then they ( including me) are.

Good Luck
Jane

 

[Don and Liz]

on a facility that size insurance would have to be more than the assumption made here. Public liability would have to be expensive if you are giving access to people unsupervised on the site. Then covering the contents itself would be a major expensive.

 

[devo76]

Thanks for the response guys. Maybe ill look at somthing a bit smaller as far as comercial goes. Thanks for the imput

 

[Player]

** Bump **

Some interesting info above.

Some seven years on, is anyone playing in this space either as a freehold landlord, leasehold operator or freehold/leasehold owner operator?

What type of returns are common in the various scenarios?