SELF STORAGE FACILITY W/ SHIPPING CONTAINERS ?

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SELF STORAGE FACILITY W/ SHIPPING CONTAINERS ?

Christian Podedworny
Maspeth, NY · Member since 2013 · 58 posts · 16 votes

     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.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
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 ???

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  • Justin Ellis
    Property Manager · Scottsdale, AZ · Member since 2015 · 113 posts · 77 votes
    7y

    @Christian Podedworny WOW! I don't know anything about self storage except what I've read here on BP. But I'm curious to see what the gurus in this space have to say about this concept. From what I've read people are willing to build these things it just sounds like there's a shortage of good places to build in order to have enough market share potential. Intersting concept though!

    0Reply
  • Matt Berklacy
    Rental Property Investor | Realtor · Jacksonville FL | Savannah Ga |Raleigh NC · Member since 2017 · 467 posts · 161 votes
    7y

    Im in, lets do it...N Florida is perfect..

    0Reply
  • Michael Wagner
    Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
    7y

    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.  

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    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 ???

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
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    4Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    7y

    Not sure why all the money modding the containers. Containers come in 53', 40', 20', 10'. Just buy the sizes you need and leave them as is. The doors are as secure as the locks used. This would cut your investment costs further. Also, you could start out with less containers and add them as needed. Wouldn't just commercial zoning work (vs industrial?)

    1Reply
  • Ronald Starusnak
    Property Manager · Syracuse, NY · Member since 2016 · 601 posts · 384 votes
    7y

    Christian, pole barn / metal buildings are competitive at $28-$35 / sqft fully built with concrete slab and rough wiring. At 65,000 sq/ft. At that volume I bet you can get the price to $20 per sq/ft or under. Have you quoted having a building made custom w/ site development? I think your perceived savings will be less in the end than just building a new building custom. 

    3Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y
    Originally posted by @Ronald Starusnak:

    Christian, pole barn / metal buildings are competitive at $28-$35 / sqft fully built with concrete slab and rough wiring. At 65,000 sq/ft. At that volume I bet you can get the price to $20 per sq/ft or under. Have you quoted having a building made custom w/ site development? I think your perceived savings will be less in the end than just building a new building custom. 

    Ronald,

    .  I believe you are correct however the structures would be taxable and this would be a fixed cause therefore holding the property for the long term would save a significant amount of money.

    .    I do prefer the the look and feel of an actual structure compare to mobile containers.

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y
    Originally posted by @John Teachout:

    Not sure why all the money modding the containers. Containers come in 53', 40', 20', 10'. Just buy the sizes you need and leave them as is. The doors are as secure as the locks used. This would cut your investment costs further. Also, you could start out with less containers and add them as needed. Wouldn't just commercial zoning work (vs industrial?)

    John,

    you make a valid point and this method would allow for quicker turn around time to market however this would not be perceived as industry standard. Customers who currently drive up storage units are use to the aesthetics and easy use of rollup doors compared to heavy metal swings out doors. I believe the type of storage units you mentioned would work well for contractors, businesses and people using the space for light equipment storage. Why not do both and see which units rent quicker and stay rented longer?

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y
    Originally posted by @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 ???

     Jay,

      I had spoken to several zoning officials and planning mangers in waterbury Ct about creating a self storage facility and there was tremendous push back. They said self storage cannot be built in commercial zones but only in industrial zones . Then when I posed the question of renting "modular storage containers" they said that is not allowed and that a permanent structure can only be used for rental. Now the question to ask is ,"how do I rent a mobile storage unit by finding a loophole in the system?" After driving to several self storage facilities throughout New Haven and Waterbury Connecticut I saw mom and pop facilities renting storage containers to the public.

    .  I believe stacking these containers inside warehouses is an option however the county might not allow that because it does not count as a permanent structure. 

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y
    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.  

     Michael,

    .   There are facilities which recreated shipping containers to mirror traditional self storage buildings and they appear the same to the untrained eye. I see a large benefit through property tax savings and the ease of creating the facility without using a construction company or expensive architects. Do you think the cost savings would be significant if most of the work can be done in house?

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y

    Self storage facility in London

    https://londonselfstorage.com/...

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    7y

    This is another facility in England which uses blue shipping containers in all of its facilities

    http://www.dainton.com/self-st...

    1Reply
  • Ronald Starusnak
    Property Manager · Syracuse, NY · Member since 2016 · 601 posts · 384 votes
    7y
    Originally posted by @Christian Podedworny:
    Originally posted by @Ronald Starusnak:

    Christian, pole barn / metal buildings are competitive at $28-$35 / sqft fully built with concrete slab and rough wiring. At 65,000 sq/ft. At that volume I bet you can get the price to $20 per sq/ft or under. Have you quoted having a building made custom w/ site development? I think your perceived savings will be less in the end than just building a new building custom. 

    Ronald,

    .  I believe you are correct however the structures would be taxable and this would be a fixed cause therefore holding the property for the long term would save a significant amount of money.

    .    I do prefer the the look and feel of an actual structure compare to mobile containers.

    If you put these structures on the land, they're still going to be taxable whether it's a building or a "shipping container". The powers that be are not dumb, they will consider it an improvement on the land and you will still be taxed. There are homes built out of shipping containers that are taxed. If they think it is a permanent structure then they're going to tax it. You will be required by code to build permanent foundations for these and you will be required to meet every other safety standard because you will be having the general public have access to the facility.

    You can't just stack a bunch of shipping containers and call it a self storage. There are building codes you must meet, you must meet snow loads, wind loads, egress, potential fire suppression, site drainage, parking, there are minimum and maximum height allowances, anything above 3 stories must have fire suppression, anything over 12,000 sq/ft must have fire suppression, if the units touch each other they must be fire blocked, you need 3hr firewalls between each x amount of sq/ft. By trying to modify these shipping containers, you're going to spend more money on labor than you anticipate. 

    Experienced builders know how to follow local codes with the building materials that are common place. To request a large custom project like this to be built while also meeting all local codes, not just the ones above, you're going to be paying a premium. There is no specific code on how to safely stack these containers, you're going to spend more money and more time dealing with bureaucracy than it is worth in my opinion. 




    1Reply
  • Ronald Starusnak
    Property Manager · Syracuse, NY · Member since 2016 · 601 posts · 384 votes
    7y
    Originally posted by @Christian Podedworny:
    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.  

     Michael,

    .   There are facilities which recreated shipping containers to mirror traditional self storage buildings and they appear the same to the untrained eye. I see a large benefit through property tax savings and the ease of creating the facility without using a construction company or expensive architects. Do you think the cost savings would be significant if most of the work can be done in house?

    If you're in the US you will have an entirely different experience. You will not be tax exempt and you're going to spend MORE in architect fees while they try to conform these shipping containers to local code. You're going to pay extra for constant revisions as you run it by your code officer and they deny you.  

    3Reply
  • Michael King
    Rental Property Investor · Navarre, FL · Member since 2019 · 913 posts · 640 votes
    6y

    I would airbnb them.

    1Reply
  • Parker Eberhard
    Contractor · Seattle, WA · Member since 2019 · 339 posts · 325 votes
    6y

    @Ronald Starusnak there are places in Seattle that have thousands of containers stacked 10 high without any of the fire suppression, etc that you mention.

    0Reply
  • Justin Ellis
    Property Manager · Scottsdale, AZ · Member since 2015 · 113 posts · 77 votes
    6y

    @Jay Hinrichs I used to think those storage container houses were awesome until I checked out that link and saw the price points! $205/sq AND that doesn't include the slab? And for that reason....... I'm out. :p

    2Reply
  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    6y

    I may just be unusual but I just have a difficult time thinking that cosmetics matters a great deal to people looking to store something. I think price point and security are the key metrics. Containers are designed to be wind/water tight and are inherently very secure. The doors are like a vault vs the tinny roll up doors on most units. They're all steel except for the wooden plywood floors so I'm not thinking anyone would have a fire hazard issue with them. Sometimes public officials will spew out "rules and regulations" where none exist so if you're in a particular place that you would like to explore this option, I'd press a bit to determine if there actually are codes/regulations that would/should be applied or if someone is just giving their personal opinion on the subject matter. ie, "I'd like to read those regs for myself, where are they published?"

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Justin Ellis:

    @Jay Hinrichs I used to think those storage container houses were awesome until I checked out that link and saw the price points! $205/sq AND that doesn't include the slab? And for that reason....... I'm out. :p

    yup its not cheap housing that's for sure.. its unclear to me were the market for those is.

    But Carl my partner who owns the business owns enough land he could just put them all on his own lots and rent them.. he is doing an 8 plex out of them up river in St. Helens..  I think one of the good uses is a rural cabin.. you can lock them tight and leave.. 

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    2Reply
  • Michael Wagner
    Specialist · Victor, NY · Member since 2013 · 823 posts · 844 votes
    6y
    Originally posted by @Christian Podedworny:
    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.  

     Michael,

    .   There are facilities which recreated shipping containers to mirror traditional self storage buildings and they appear the same to the untrained eye. I see a large benefit through property tax savings and the ease of creating the facility without using a construction company or expensive architects. Do you think the cost savings would be significant if most of the work can be done in house?

    Personally I do not see sufficient cost savings regardless of if you are in house or not.  To re-purpose the storage containers good enough to make them look like traditional storage to the untrained eye costs as much as just building normal storage.  The only time I see storage containers as the best option is when they allow you to take advantage of easements or setbacks where building is not permitted. And even then, I would be tempted to use "micro units" like Trachte offers over storage containers as the cost is comparable and they look EVEN more like traditional storage.  Its just my own preference but to me the "storage container" just "feels" less professional.  

    1Reply
  • Minh Dong
    Seattle, WA · Member since 2017 · 29 posts · 15 votes
    6y

    Very thought our Christian, I remember came across the same concept in Oregon before https://www.willowcreekselfstorage.com/

    We would stop by there when you are in town as well

    1Reply
  • Chris BlackburnPro Member
    Developer · Salem, OR · Member since 2014 · 193 posts · 110 votes
    6y

    @Christian Podedworny. One way to get around the issues of the zoning is have a rental contract that breaks out the rental agreement into 2 parts. Renting the ground space and have a separate company rent the storage unit. The property is just renting the ground space. The other company is just renting the storage unit. The container is not a building- it is a piece of equipment. You could argue that there are NO building code issues since it would be just like storing a car, RV or boat plus the property technically does not own it. I think there would be some great short term tax benefits and less long term. I have looked hard at this model but the aesthetics of the units put this in a lower price per foot/tenant type. On the other hand- with the lowest price in town, you are typically full- especially with a reasonable web presence and the use of “Sparefoot”

    1Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    6y
    Originally posted by @Minh Dong:

    Very thought our Christian, I remember came across the same concept in Oregon before https://www.willowcreekselfstorage.com/

    We would stop by there when you are in town as well

    Minh,

     Thank you for adding this to the post. This is exactly what I am talking about and this can be done since Willowcreek is a fully functioning facility. Eventhough they charge $6.75 psf they do not have to worry about the costs that a traditional build would have. 

    0Reply
  • Christian Podedworny
    OP
    Maspeth, NY · Member since 2013 · 58 posts · 16 votes
    6y
    Originally posted by @Chris Blackburn:

    @Christian Podedworny. One way to get around the issues of the zoning is have a rental contract that breaks out the rental agreement into 2 parts. Renting the ground space and have a separate company rent the storage unit. The property is just renting the ground space. The other company is just renting the storage unit. The container is not a building- it is a piece of equipment. You could argue that there are NO building code issues since it would be just like storing a car, RV or boat plus the property technically does not own it. I think there would be some great short term tax benefits and less long term. I have looked hard at this model but the aesthetics of the units put this in a lower price per foot/tenant type. On the other hand- with the lowest price in town, you are typically full- especially with a reasonable web presence and the use of “Sparefoot”

    Chris ,

      I like your thinking and I see you are creative. I asked the zoning and development staff in Waterbury about renting spaces for boats & RV’s and they said it would not be possible in a commercial zone however It would be allowed in an Industrial zone. I argued  and said that commercial businesses have shipping containers on their lots and they are storing items in them. They came out with a rebuttal says “a storage container can be used in a commercial zone because it classified as an accessory use for that given commercial business. They are not renting the container for their business therefore it is allowed since the business needs to use it for its own purpose.” 

    Now I’m thinking of how to circumvent this issue.

    Possibly creating a business that sells “shipping containers which are technically placed on the lot and then rent them out without specifying I am in the storage business “.
     

    0Reply
  • Account Closed
    Member since 2019 · 1k+ posts · 1k+ votes
    6y

    Lots of CO’s doing this locally where I am. However it’s in smaller towns where the local admin is much more apt to be accepting of ugly crap. Half mile from me there are ~50. And basically every single boat / rv storage facility has added these in my area. Local guy I know ran a contract worker “hotel” with ~60 units (30 cans/2) for a couple years during a $4B power plant project. I’ve thought of adding it to the back of my lot at one place but just a single 40’ can divided into 4 (10x10) units with the roll up doors facing the alley along the fence line. I’m positive I would get shut down but I suspect it would’ve more than paid for itself before I did.

    In some cases it may be a quick way to build out a mini storage property that has yet to be optimized.

    0Reply
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