Planning to buy/rent a space for storage.

Hi,

We have plans to buy a space for a storage unit on the outskirts of the city. Our current inventory is congested and we plan on buying or renting a warehouse to store the big equipment.

I was thinking about buying a unit because it will be an asset in the future. I read about the industrial mortgage available for storage units and warehouses. It doesn't seem like a difficult task for me to get one. But, it confuses me whether to rent a space first before buying a property.

What do you think? Need advice.

Might be possible 'institutional lender' may frown on the obligation for the building when it comes to financing additional iron. Wonder if: company signs lease while the owner buys the building - would this make the obligations align in a more desirable manner?

I vote if you can buy, do it. Rental always seems to be a trap, once you get started you can never quite make the move out of it.

If it's a good value, not a burden to pay for then I'd consider buying it. Real estate is almost always a better investment than iron. It may very well help your balance sheet look better to the bank. In the 15 or so years I had the trucking company the only smart purchase I made was my property and it was the only one the bank didn't give me ten kinds of $hit over. Is it large enough it will produce revenue and pay for itself? Possibly turn a profit? Make sure you follow through with due diligence, which I'm sure the bank will do if you're borrowing to buy it. Zoning, easements blah blah it can be a pain in the rear.

Junkyard

At one point I was renting a lot of space for a service firm I worked for as our work load increased. The owner always preferred to rent as then he wouldn't have an empty building if work was slow. Problem was the work never dropped and we kept renting more. I heard that he is now fianlly looking to buy new or expand the presently owned building. He must have paid 500k rent in the last 12 years. Could have bought or built a lot for that and had fewer problems.

The big thing with commercial rent - is it single, double or triple net. This can greatly affect the monthly cost. Also who pays repairs, expansions and who do improvements figure in when you leave. Often at lease end you may need to remove any walls, offices, plumbing and electrical you added to return to bare walls. Clearly access with tractor trailers will be important for you - are you able to leave a trailer at the dock or in the lot? What sort of modifications can you make to the building without approval? Most important is how responsive the landlord is to problems like roof leaks, broken windows etc. Seperate utilities are a must.

Also - very important - do not rent an end space if you are in a multi tenant building. In your climate it will be cold and cost more to heat. Let your neighbors pay to heat the outside walls and heat your walls all on their side

I like multi tenant buildings for storage as it is other people around to keep an out as security. Speaking of that get a security system that works on a cell line. You can even get one with cameras so you can look in remotely.

Buy if you can. But not too old. Most have flat metal/rubber roofs that may last 20 years and are expensive to replace. Look for 3 phase power, gas heat, and insulated. Avoid ground level windows for security. Try to find a space that can be divided off to rent parts of it if you don't need the space. Dimising walls are cheap and easy to put up. Rent half/use half and you pay your mortgage.

Good luck.