Is A Shipping Container Storage Facility The Best Investment In Real Estate?
Most investment advisors agree that investing in real estate is one the best long-term investments you can make. Some of that enthusiasm however was tarnished after the bursting of an 8 trillion dollar housing bubble in America that lead to the Great Recession. Many rental property owners lost their investments or ended up with trashed properties. On the other hand, some savvy investors snapped up properties during that period for pennies on the dollar and have made small fortunes fixing up, flipping or holding properties for long-term gains.
Today, we’re going to talk about a different type of real estate investment that you might not be familiar with. This method of real estate investing has a lower startup cost and a higher potential return on investment compared with rental homes. I’m referring to a storage facility utilizing shipping containers!
Single family homes vs a storage container facility
The median single family home price today is $189,000 in the USA with an average rent just shy of $1,000. If you owned 5 of them they would provide a 6% CAP rate ($60,000/$945,000). Compare that to a shipping container storage facility with 50 units: land $250,000 + containers $150,000. At a conservative rental price of $100 per month * 50 units = $5,000 per month. This translates to a 2 1/2 times larger CAP rate of 15% ($60,000/$400,000)!
Even higher investment returns can be achieved by increasing the number of containers for rent and/or financing the facility. Here’s a table to illustrate these points:
Shipping Container Storage Facility vs Rental Property
|Storage Facility 50 Units||Storage Facility 200 Units||5 Rental Homes||20 Rental Homes|
($250k Land + $150k Containers)
($600k Land + $600k Containers)
($189k * 5)
($189k * 5)
|Monthly Revenue||$5,000/mo (50 * $100)||$20,000/mo (200 * $100)||$5,000/mo (5*$1000)||$20,000 (20*$1000)|
|Typical Financing Available||50-75% on the land and 100% on the containers!||50-75% on the land and 100% on the containers!||80%||80%|
|Out of pocket money to start (down payment)||$100k to $200k|
(75%*250k / 50%*$250k)
|$150k to $300k|
(75%*$500k / 50%*500k)
|Typical Interest Rate for Financing||9-18%||9-18%||9-18%||9-18%|
|Annual CAP rate without financing||15%|
|Annual CAP rate with financing||30% to 60%!|
($60k/$200k / $60k/$100k)
|80% to 160%!|
($240k/$300k / $240k/150k)
Why shipping containers vs a traditional storage facility built from concrete and steel?
Shipping containers are particularly good for storage facilities for a number of reasons:
- The cost to build a traditional storage facility are much higher than containers.
- Containers are strong, secure and waterproof.
- They have strong, thick steel walls and easily accept bulky, heavy goods.
- Unlike traditional facilities, containers are dustproof with tight seals around the doors to prevent rodents from entering.
- Containers are secure, with both a lock on the door handle and a special lock box for additional security.
- Container doors fully open ensuring very larger items can easily be stored.
- Even full size cars and trailers can be stored inside the container!
- Overall, containers are a much cheaper, better and arguably more beautiful way to start your storage facility business.
Additional requirements for your facility
A storage facility needs to have at least one employee, power and internet access. It would be prudent to install security camera(s) that can live stream a video feed onto your website as well key-card access for your security gate. The employee hurdle can be overcome partially by the use of technology. If you choose to utilize keycards for entry/exit and a Redbox style automated kiosk for renting and/or your website has your renting options on it you can eliminate most of the employees time and work.
Marketing for customers
Depending on your location, it’s possible a giant sign built from a shipping container placed next to a busy freeway could be all that’s needed to attract customers. If your location isn’t highly trafficked or a sign just isn’t enough, rental websites such as sparefoot.com come into play. They take a % of the initial rent and deliver customers to your front door. Other options include Yellow Page ads, Google ads, social media and your own website. Whichever combination of options your choose it shouldn’t be that difficult to get to 100% occupancy with a proper plan and a good location.
Chose your location carefully
Location is paramount. So is ZONING. If you buy or rent a property and don’t do your homework beforehand, you could later find out that the local city/county government won’t allow you to operate as a storage facility! Problems like these can be avoided by simply visiting the county assessor’s website where you’ll find the zoning on any parcel, and it’s permitted use(s). Once you know the zoning designation of your subject parcel it’s a good idea to phone the zoning board/assessor’s office or schedule a brief meeting. Confirm with them that your desired self storage facility built from shipping containers aligns with the current zoning and that you’ll have no issues operating it as such. Don’t let a simple piece of public information stop you from moving forward, this should be step #1 on any parcel of land you’re considering opening your business at!
Use NEW (one trip) shipping containers vs USED shipping containers
NEW shipping containers cost more but they last longer, look better and can be customized for your storage facility at the time they are built. USED containers cost less but they will likely need to be painted, maintenance will be more frequent, modifications will cost more and your facility will end up looking less professional.
We highly recommend using NEW (one trip) shipping containers made from Corten steel. This ensures your facility will utilize a product that will last for decades with minimal maintenance. Using new containers also ensures your facility will have a professional and clean appearance with matching containers and the right factory additions you need. Most importantly, new containers are eligible for Shipped.com financing up to 100%!
Financing your shipping container storage facility
If you own your land, you’re one step ahead. For everyone else, traditional bank financing for land is readily available with interest rates ranging from 9-18%. Most lenders can loan up to 75% of the lesser of the properties purchase price or appraised value. The alternative is to lease your land and completely avoid a costly downpayment. With leased land you may be able to negotiate a lease-purchase option and/or options to extend the land if adjacent plots are available. Whatever decision you make on purchasing your land outright vs financing vs leasing, the good news is that if you outgrow your land you can move your containers to a different property at a minimal cost.
That leaves the containers to finance. Only a tiny handful of storage facility leasing companies exist in the world today for containers. Fortunately, Shipped.com is one and has special DIRECT financing for shipping container storage facilities up to 100% financing! As of today, we are the only shipping container leasing company to offer such terms for storage facility businesses. We offer an attractive 8-12% interest rate for your new containers and can include the container modifications you need as well. In addition, you can choose the color of your containers, add your storage facility logo and customize all of your container’s features. And unlike traditional real estate loans, we will only loan on facilities where the numbers work in your favor to ensure that your facility will be a positive cash flow business. This special financing enables you to get your storage facility operating right away and avoid a massive out of pocket startup expense.
Have we inspired you to start a self storage facility using shipping containers? We hope so. Choosing excellent land along with assessing the competition from nearby storage facilities are the two most important components of the deal. Getting the shipping containers from Shipped.com with or without world-class financing will be the easy part! We’ll help make your facility look as nice and professional as it can, along with financing that will get your business up and running in the shortest amount of time possible.
Feel free to get in contact with your sales manager, Karl Brimmer to talk about containers or to discuss financing contact Jason Fox on our about us page. Thank you and good luck with your shipping container self storage business!