SELF STORAGE FACILITY W/ SHIPPING CONTAINERS ?

[Christian Podedworny]

     How can an investor leverage his/her time in creating a high cash flow passive Investment that can potentailly yield 30% + returns ?

.   After investing in several real estate courses, seminars  & books (airbnb rental, wholesaling, multi family and self storage) I have analyzed several strategies and found self storage has the preferred asset class with the least liabilities. 

I have been looking at several self storage properties and found large facilities 70,000 sq. ft. + trading In the 6- 6.5 % cap rate which shows how sought after this asset class has become in the last 5 years, therefore I see the opportunity has diminished  in getting a "deal". Even though it is a sellers market there are ways to capture strong cash flow through storage thinking outside the box. I have been researching self storage shipping container investors who had  created successful businesses and high returns on investment which has brought me to conclude the following potential project:

Shipping container self storage

1.Acquire a vacant industrial property for $110/sq ft. with 5,000 sq. ($550,000) which sits on a 4 acre paved site.The subject property has to have a full parking lot covering the entire lot which allows for shipping containers to be placed on site without any added site work.

2. The vacant industrial building will serve as the main self storage building with an onsite employee selling packaging materials , locks etc. This building will be converted to climate control and will yield a higher ROI compared to the shipping containers.'

3. Purchase 200 used shipping 40 ft.containers from a local port for $1,850 plus $400 delivery ($1,800 + 400 = $2,200)

.  (2,200 X 200 = $440,000)

4. Convert each 40ft shipping container into  x2. 8x20 spaces divided with a wall In the middle and  2 rolls up steel doors opposite sides. The doors can be purchased from Janus at $395. The total cost of the delivered container and the costs to convert each container into 2 rentable spaces is $3,900 (hire laborers to paint containers, install doors and install dividing wall)

.   200 x $3,900 =$780,000

5.  Allocate budget for security system, fencing ,signage and costs to convert existing industrial building to a climate controlled self storage building ($45 psf @ 5,000 sq ft. = $225,000) 

The 5,000 sq ft warehouse would yield 3,500 sq ft net rentable square feet (-30% of gross square footage for hallways and exits)

6. total costs :

.    Property purchase $550,000

.    Converting warehouse + miscellaneous costs. $225,000

.    Adding shipping Containers and converting to rentable units $780,000

.  total $1,555,000

Average rental rates :  $16 psf climate controlled units 

                                   $10 psf shipping container units  (8 x 20 ) ,($133.33 per unit)

 Pro forma:

  $ 16 x 3,500 sq. ft. x .90 % occupancy = $50,400 (yearly revenue minus vacancy)

  $10. x 64,000 sq ft.. x.90 % occupancy =$576,000 (".     ")

total revenue $626,400

       - all expenses (tax, marketing, property management etc)  (25%)

.       note ***.  Property taxes are not applied to the shipping containers because they are mobile

=$469,800 ROI

Cap rate=. 469,800/ 1,555,000   = 30.2 %

This is a quick project calculation which may not take into account a few small hidden costs however  the returns are attainable in the 30 % range. 

There are several aspects that have to be addresses which include : zoning , location , population , traffic count and household income. When I factored the rental amounts I allocated a low price per square foot on the shipping container units ($ 10 psf ) and I did not add  any additional revenue which can be attained through vehicle/RV/ boat storage. Please let me know your thoughts.

[Jay Hinrichs]

Originally posted by @Michael Wagner:

As someone who has played in the storage arena for a while now, I'd say there is a lot of merit to what you present.  It is very well thought out.  I've looked into storage container use a couple of times but have never been able to get "over the hump".  To me, the slight cost savings that a container MIGHT pose over a traditional storage building is not justified given the "feel" that these containers have relative to traditional buildings.  Just my take though and this model can definitely work...i just see the costs (lower appeal to customers) outweighing the benefits (slight cost savings).  My only other advise would be to be sure your rents reflect the market you are looking at.  While $10 per square foot might be a "slight discount to the national average of $12 per square foot, you'll want to remember that there are MANY markets where the rents for traditional storage will be $6-8 per square foot and containers would need to be discounted from there.

I think the other main issue will be city or county approvals of stacking all those containers out in the open like that. I would think they would want some control over appearances in places I guess were zoning did not matter  and folks did not care.. then rents might not be there either.  I know on the west coast this would have zero chance without major modifications and landscaping etc. 

PS this is what my aviation partner is doing with containers

https://www.relevantbuildings.com 

this is what you have to do to get them approved at the state level and what the public will actually buy.. these are not cheap either.. 

but I could see buying a building and stacking them inside the building ???