How to buy a warehouse
Ignoramus8246
same time, valuations of stocks are up 70% and I would like to
diversify my investments a little bit, as I am mostly invested in
stocks.
I would like to try to buy a small warehouse and just rent it out
forever. This would not be a purchase for a quick flip.
I was trying to find out some basic things, like rents per square
foot, prices per square foot, see listings of what is available, etc.
When I just do web searches on this stuff, I come up with so little,
as if information on this was classified.
I am in Chicagoland and would be interested if someone can help me
get started with some useful pointers or experiences.
Too_Many_Tools
wrote:
I always like the "driveabout" approach,
You know your area better than anyone...get in the car and drive
around looking for "For Sale" signs in the industrial sections near
you. The logic being that you want it close for convenience and so you
can keep an eye on your investment.
Then follow up on the signs.
You can also stop by your local bank/realtor...and ask them about the
local commercial real estate.
Did you buy your house through a realtor....yet another network
source.
Are you sure you want to be a landlord..it comes with its share of
headaches.
TMT
John R. Carroll
Like any other business, this one requires training and experience.
Spend a year talking to people Ig.
I'm also a little surprised, given the following:
With the Fed Funds rate at zero bonds have only one future and it ain't
pretty.
With the tremendous distress and ongoing deleveraging in the bond market it
still isn't certain what any financial services business ir really worth
these days.
With the upcoming need to refinance a HUGE notional value in corporate high
yield bonds begining in 2011, there might just be a shortage ( and therefore
interest rate run up ) of funding for debt.
That you are thinking about an investment that isn't remotely liquid.
The secondary and even primary, credit markets, aren't so far from trouble
that a little frost might set in and then freeze solid in a big hurry. There
is also a good chance that equities in anything that looks like KKR or what
that bunch has been leveraging might go right to hell without much notice.
What can they do besides have a fire sale if they can't roll over their
bridges?
You are truly a brave fellow!
--
John R. Carroll
Larry Jaques
<ignora...@NOSPAM.8246.invalid> scrawled the following:
Go talk with a REA, Ig. They can tell you what's out there and who's
ready to sell cheap right now. Something close to you so you can
check on it frequently, right? Warehouses near airports are always
full...in good times. You might find a really nice place in these
economic times. You might also find a small place for your own stuff,
so you don't have to fill up your garage and driveway, eh?
Let us know what you find.
--
Everything I did in my life that was worthwhile I caught hell for.
-- Earl Warren
Ignoramus8246
I will start earnestly looking. I did look a bit on loopnet and it
seems that there are some affordable deals. With a bit of looking I
may be able to find some kind of a buyout deal, where I buy a
warehouse with machinery and sell it off in two months, or something
like that, to help pay my costs.
i
John
available and check the prices of rents on commercial real estate. Also
see what is selling and prices. Also find a commercial real estate
salesperson and pick his brain. I would be very cautious in getting
into a large commercial building. If it stands empty for any time the
taxes are likely to eat you up.
John
Ignoramus8246
> Ignoramus8246 wrote:
>> I keep hearing that commercial real estate is in bad shape. At the
>> same time, valuations of stocks are up 70%
>> I would like to try to buy a small warehouse and just rent it out
>> forever. This would not be a purchase for a quick flip.
>
> Spend a year talking to people Ig.
Good idea. I do not expect to find a super great deal, given my level
of expertise, just something where I would not be screwed and where I
do not overpay too much.
> I'm also a little surprised, given the following:
>
> With the Fed Funds rate at zero bonds have only one future and it ain't
> pretty.
>
> With the tremendous distress and ongoing deleveraging in the bond market it
> still isn't certain what any financial services business ir really worth
> these days.
>
> With the upcoming need to refinance a HUGE notional value in corporate high
> yield bonds begining in 2011, there might just be a shortage ( and therefore
> interest rate run up ) of funding for debt.
>
> That you are thinking about an investment that isn't remotely liquid.
Um, I do not see the contradiction. I did not post a message here
saying "I would like to invest in a 30 year bond". I want to buy a
warehouse, not a long bond. I was planning to put up 50-60% in cash
and if I can find a loan at affordable fixed rates (I never take out
other kinds of loans), finance 40-50% of the purchase. If I cannot
find such a loan, I wuold just buy something smaller.
This is all assuming that normalized rents would give sufficient
return on caiptal to make this worthwhile.
If, say, I buy a warehouse, and rates go up, that may indirectly help
me in the longer run, as higher rates would force higher returns on
assets and thus higher rental rates. (though I would also anticipate a
minor reduction of economic activity).
The best time to invest, generally, has been when fear was the mani
public emotion. Investing when everyone feels optimistic and giddy, as
we know by now, does not lead to great results. I had close to 100% of
my money in stocks by March of 90 for that same reason. I was a little
bit early to the party, having started puttnig cash to work in
November, but in the end it worked out.
Same here. If rates rise, our government has trouble paying its bills,
etc, that does not directly result in people not needing warehouse
space.
> The secondary and even primary, credit markets, aren't so far from trouble
> that a little frost might set in and then freeze solid in a big hurry. There
> is also a good chance that equities in anything that looks like KKR or what
> that bunch has been leveraging might go right to hell without much notice.
> What can they do besides have a fire sale if they can't roll over their
> bridges?
>
> You are truly a brave fellow!
>
There are many ways to lose money. One way is by becoming financially
overextended and then hitting a "snag". Another way is to have money
in cash and lose due to inflation. Yet another is pay too much for
assets due to public optimism, compared to their true income producing
ability.
What I am getting at, is that even not investing has its own risks, as
does investing where such troublesome things as you outlined, are not
anticipated.
Consider current Greek troubles. I hear that Greeksw stocks are
down. Imagine a Greek company that sells chewing gum to Greeks and
enjoys substantial market power. Question: how much does the default
of Greek government, impact the earning power of that company? The
answer is, of course, not by much.
I am not really concerned about the possibilities that you mentioned,
if I can buy warehouse space at a price that allows good return from
good renters.
i
Ignoramus8246
> The first thing to do is to watch the classified and see what is
> available and check the prices of rents on commercial real estate. Also
> see what is selling and prices. Also find a commercial real estate
> salesperson and pick his brain. I would be very cautious in getting
> into a large commercial building. If it stands empty for any time the
> taxes are likely to eat you up.
I was thinking about something like 4k square feet, two bay doors or
something like that. Not a big building 90% financed via leverage.
i
Ignoramus8246
I mean March 09
i
Steve B
"Ignoramus8246" <ignora...@NOSPAM.8246.invalid> wrote in message
news:78ydnaX0Hdxhui3W...@giganews.com...
It's a soft market, ig. Who are you going to sell the machinery to if
places are going out of business, and there is a glut for equipment? You
could get into a storage situation with a lot of inventory, but not a lot
going out the shipping dock. I know that you are moving stuff right now,
but you don't have the big nut you would have in a building, where the first
$XXXXX a month that comes in is already promised.
Why don't you do this? Start on a small scale, and see how it works. If it
doesn't, you don't have a large warehouse and a lot of equipment, sitting
there like a horse that just eats.
Steve
John R. Carroll
> On 2010-03-29, John R. Carroll <nu...@bidness.dev.nul> wrote:
>> Ignoramus8246 wrote:
>>> I keep hearing that commercial real estate is in bad shape. At the
>>> same time, valuations of stocks are up 70%
> ...
>
> overextended and then hitting a "snag". Another way is to have money
> in cash and lose due to inflation. Yet another is pay too much for
> assets due to public optimism, compared to their true income producing
> ability.
>
> What I am getting at, is that even not investing has its own risks, as
> does investing where such troublesome things as you outlined, are not
> anticipated.
>
> Consider current Greek troubles. I hear that Greeksw stocks are
> down. Imagine a Greek company that sells chewing gum to Greeks and
> enjoys substantial market power. Question: how much does the default
> of Greek government, impact the earning power of that company? The
> answer is, of course, not by much.
>
> I am not really concerned about the possibilities that you mentioned,
> if I can buy warehouse space at a price that allows good return from
> good renters.
You make good points but I guess what I was trying to say goes to your last
comment.
It's straightforward to adjust rents when you aren't leveraged.
Otherwise, you are dependent on renters and rents. Those two might be
adversly impacted.
I'm becoming increasingly convinced that this is the case and just went back
and reread a short volume about these markets that Ed Gramlich wrote shortly
before his death to refresh my understanding.
One example is that there is considerable supply side support in the US for
rental properties.
Everyone knows about the big demand side programs like Section 8 but not the
supply side stuff.
Yes Ig, the feds, states, and local communties actually pay landlords to
create rentals and not just single family or multi unit residential
properties.
You might also be able to discern rents and the extent to which your market
is both subsidized on the supply side and also leveraged from CRA, HMDA and
AHS databases. The CRA data might be the first place to begin. Talking with
a loan officer at a local regional bank would also be productive. He or she
will know all of this stuff and they have to disclose it to you.
As I originally stated, what you are considering is just like any start up
and that means you have to know both the business you are entering and the
lay of the land where you intend to operate.
--
John R. Carroll
John R. Carroll
I didn't think you were investing in American equities from Moscov <G>
--
John R. Carroll
Ignoramus8246
Steve, most machinery sells very easily, if one does not demand
pre-2008 prices. I was not considering buying anything that I could
not afford without big pain.
i
Too_Many_Tools
wrote:
Two suggestions.
One...why not rent for awhile and get the feel of the neighborhood. If
then you want to buy, there is always someone who will take your
money. Real estate is not a very liquid investment and if you need to
move, your investment will not follow you.
Two..be damn sure that you are not buying a Superfund site. With
commercial estate there are many sites that come with a hidden
cost...cleanup costs. Make sure that you are not the one holding the
bag when something like this comes due.
TMT
Steve B
"Ignoramus8246" <ignora...@NOSPAM.8246.invalid> wrote in message
It's all business, ig. Buy low sell high. If you're right, you make out.
If you're not, you don't. My experiences with businesses was that a lot of
people know their crafts very well, but once they go commercial in a big
way, they create an overhead monster, and that monster must eat every month
before the owner does. You have the drive and intelligence to do this.
However, you are moving from a position of do it when you want to having to
be there every day to open the doors, search for the stuff, clean it and
prepare it for sale, deliver, etc. You may be doubling your work week, and
only increasing the profits by 20%.
And then there's employees. When I started a welding business, a friend of
mine had a friend of his coming into town from Florida, where he owned a
very successful business. We talked, and he mentored me. I remember him
saying, "Do everything you can by yourself. Employees are the kiss of
death."
I wish you well on your venture. The only way you are going to find out is
test the waters. But it's like piling a bunch of money and your stuff in
the middle of the street and sitting a gas can beside it. If all goes well,
it all goes well. If not, it's like adding gas and lighting it all off. It
just goes away.
Steve
Too_Many_Tools
wrote:
Another thought Ig...ever consider buying your next house with a LARGE
outbuilding on the lot?
You live next to your warehouse.
TMT
Bob La Londe
> Are you sure you want to be a landlord..it comes with its share of
> headaches.
I have done that, and it certainly can come with a lot of headaches, but it
paid for itself and the property appreciated very well for me. Except for
one office building which I still own and rent I sold my rentals a few
months before the real estate bubble burst and did very well.
I'm actually actively looking again. I'm just afraid that so may a lot of
other people.
Ignoramus9410
The way I think about it, is that a lot of real estate people lost a
lot of money, so not as many people may be looking. The key is not to
buy into hype and avoid leverage.
i
Ignoramus9410
> It's all business, ig. Buy low sell high. If you're right, you make out.
> If you're not, you don't. My experiences with businesses was that a lot of
> people know their crafts very well, but once they go commercial in a big
> way, they create an overhead monster, and that monster must eat every month
> before the owner does. You have the drive and intelligence to do this.
> However, you are moving from a position of do it when you want to having to
> be there every day to open the doors, search for the stuff, clean it and
> prepare it for sale, deliver, etc. You may be doubling your work week, and
> only increasing the profits by 20%.
Steve, I was thinking of buying a warehouse to rent out, not to open a
full time business. If I was planning on that, I think that your
comments about running a business would be spot on.
i
co_f...@yahoo.com
wrote:
You can't hide the real reason from the long-time readers of this
group. The real reason is you have run out of room in your garage and
you need a place to store your new stuff.
Paul
Buerste
"Ignoramus8246" <ignora...@NOSPAM.8246.invalid> wrote in message
Keep checking the classifieds to understand the market for space. What is
the demand and cost for space in various locales? Talk to other landlords,
commercial real estate agents and appraisers to see what the issues are.
Check what taxes are applicable. Factor in continuing maintenance costs of
buildings and grounds. Don't forget insurance costs and legal costs. Your
bank can tell you the average worth of warehouse space per square foot and
how much is available. It could be a good investment.
Jon Elson
> I keep hearing that commercial real estate is in bad shape. At the
> same time, valuations of stocks are up 70% and I would like to
> diversify my investments a little bit, as I am mostly invested in
> stocks.
in our area, who unfortunately died of cancer last year, bought an
incredibly cool clerestory factory building in downtown St. Louis about
5 years ago. The rear part with the clerestory windows was in pretty
good shape, but there was a 2-story office space in the front that was
pretty badly rotted out. He re-roofed it, rebuilt the office space into
a home, and it was apparently pretty cool, but I didn't get a tour of
that part.
Under the front office was a shop space with street-level access and a
big roll-up door. He had machine tools, an incredible foundry setup and
all sorts of other stuff there. He rented out most of the clerestory
back part to a couple of tenants. This was in one of those "loft
districts" where all sorts of artsy folk were setting up all sorts of
studios. But, one of the guys had a horrible little cement blockhouse
of a shop a block away where he repaired Indy racecars, and he needed a
place to store the cars he was working on. A very interesting place!
Jon
Jon Elson
> If, say, I buy a warehouse
Oh, one other point. Be SURE to factor in security, whatever mods you
will need to make to make the building secure, etc. Also, depending on
what you are going to do in it, check into insurance. Business
insurance, even just casualty coverage on business property, is just
insanely out of sight.
Jon
Stuart Wheaton
Iggy, the local Real Estate Investors Association is:
CHICAGOLAND
Chicago Area REIA
PO Box 2597
Glen Ellyn , IL 60138
contact: Laura Baker, President
phone: 630-375-7342
email: pres...@careia.org
website: www.careia.org
guest policy: $15
Go to a meeting and let the people know what you are interested in, they
can point you at people who can teach you how to do it right and people
who have real estate to sell.
Stuart
Jon Elson
> You can't hide the real reason from the long-time readers of this
> group. The real reason is you have run out of room in your garage and
> you need a place to store your new stuff.
Yeah, that's what I was thinking, too. If it doesn't start out that
way, anybody who has been buying stuff at auction will just expand into
that kind of space. Maybe be DRAGGED kicking and screaming into it by
all the "neat stuff".
It's a disease we are all familiar with.
Jon
Jon Elson
> I was thinking about something like 4k square feet, two bay doors or
> something like that. Not a big building 90% financed via leverage.
4K sq ft is not enough space to let it out, except to one tenant,
probably. But, maybe that is what you had in mind. In some areas, much
larger properties are available for a song, and if you can buy it for a
song, then the taxes will be based on that sale price, at least for the
first couple years. There are a lot of properties, like the clerestory
factory building I mentioned in an earlier message, that VERY few
established businesses want. But, to possibly split up and have a
couple startups use, it could be just perfect.
Jon
co_f...@yahoo.com
is set up for 3,000 ft increments. We rent 6,000 ft. All the spaces
can have walls knocked out to expand to another 3,000 ft. or rebuilt
to reset the footage. The building is metal with concrete floor. The
land lord usually has the units all set up for 3.000 ft.
Ig, Each unit you rent must be set up for a rest room that is ADA
compliant. Must have some off-street parking, Obviously must have
water/sewer, etc. If each unit had an office space, that is a plus.
Should have individual phone lines already installed which can be used
as part of a security system for each space.
Expect to have conflicts between renters if you have more than one.
Even the best renters can irritate the other. Yes, your insurance will
be a lot of money, but will go down for a rented unit as the renter
will have to have insurance to make you whole in case of a claim.
If you are going to mange the unit yourself, you will spend a lot of
seemingly wasted time showing the unit to potential renters. We have
looked at lots of other buildings and each visit takes about an hour,
plus driving time. Even more time if the potential renter sees
something of interest. The worst impression you can make is to say you
don't know something about your very own building.
Paul
Stuart Wheaton
A big factor here will be how much managing you want to do. One tenant,
you can write the lease so they pay pretty much all expenses, and most
of the maintenance and repairs. Look up triple net lease... More
tenants, you will need to spend more time and energy running the place.
Flip side, if one tenant quits, you pay everything until you find a new
one, or you hardly notice it because it is only 10% of your income.
Stuart
Steve B
"Ignoramus9410" <ignora...@NOSPAM.9410.invalid> wrote in message
news:iMadnWaE3IeGeC3W...@giganews.com...
My experience from common rentals have not been good. We do have three
vacation rentals, but in that case, one week's occupancy pays for more than
a month's mortgage, so it is good. You just have to balance the numbers and
see if it is right for you. I'd advise consulting a professional who can
tell you the advantages and disadvantages, and plug in YOUR numbers. It's
not right for everyone, but it's not wrong for everyone, either. If you can
make more than your payment, and have the payments cover the mortgage and
upkeep, it is a positive situation. It can go anywhere on the map from
there.
Steve
Steve B
"pdr...@coinet.com" <co_f...@yahoo.com> wrote in message
news:2db5e782-af60-45cb...@g1g2000pre.googlegroups.com...
Paul
Thank you for putting it so delicately, Paul. <g>
Steve
Steve B
"Jon Elson" <jme...@wustl.edu> wrote in message
news:Q6qdnenUs8s1sCzW...@giganews.com...
Just like work expands to fill the time allotted, "stuff" expands to fill
available room, and then there's always the driveway.
Steve
Ignoramus9410
Stuart, this is very much on the mark. Thanks. Tomorrow me and my
whole family are going on an Amtrak trip to California, once we come
back I will start researching deeply.
Re: needing space for stuff. I actually manage with the garage and
backyard. For personal messing around, I would much rather have space
next to my house rather than a warehouse somewhere. The warehouse is
really meant to be a way to get monthly rent checks. Maybe later in
life I will use one for my own purposes, but not now.
i
Gunner Asch
<ignora...@NOSPAM.9410.invalid> wrote:
>> Go to a meeting and let the people know what you are interested in, they
>> can point you at people who can teach you how to do it right and people
>> who have real estate to sell.
>>
>> Stuart
>
>Stuart, this is very much on the mark. Thanks. Tomorrow me and my
>whole family are going on an Amtrak trip to California,
How long you going to be here and where are you going? Im sure a bunch
of us would love to meet you.
Gunner
"First Law of Leftist Debate
The more you present a leftist with factual evidence
that is counter to his preconceived world view and the
more difficult it becomes for him to refute it without
losing face the chance of him calling you a racist, bigot,
homophobe approaches infinity.
This is despite the thread you are in having not mentioned
race or sexual preference in any way that is relevant to
the subject." Grey Ghost
Steve B
I knew a guy who bought a piece of property he thought was a steal. Come to
find out, it was previously a gas station. It cost him a lot to remediate
the property, and with all the remediation, he broke even. After about five
years. Research the property in question. If you buy a EPA cleanup site,
the government won't want to hear any whiny stories on how you didn't know.
Steve
Ignoramus28422
> On Mon, 29 Mar 2010 22:50:08 -0500, Ignoramus9410
><ignora...@NOSPAM.9410.invalid> wrote:
>
>>> Go to a meeting and let the people know what you are interested in, they
>>> can point you at people who can teach you how to do it right and people
>>> who have real estate to sell.
>>>
>>> Stuart
>>
>>Stuart, this is very much on the mark. Thanks. Tomorrow me and my
>>whole family are going on an Amtrak trip to California,
>
> How long you going to be here and where are you going? Im sure a bunch
> of us would love to meet you.
I am going to San Jose, CA.
i
Gunner Asch
Bill Noble
>>>Stuart, this is very much on the mark. Thanks. Tomorrow me and my
>>>whole family are going on an Amtrak trip to California,
>>
>> How long you going to be here and where are you going? Im sure a bunch
>> of us would love to meet you.
>
> I am going to San Jose, CA.
>
When in San Jose, visit Weird Stuff Warehouse.
Jon Elson
places in the south bay area. I think Halted
Specialties is still around at 3500 Ryder St. in
Santa Clara.
Mike Quinn is at 401 Mccormick St in San Leandro.
They used to be on the Oakland Airport, then
moved a couple blocks away.
Triangle Machine has apparently closed. It was a
totally awesome place, with tables of ballscrews,
servo motors, etc. just filling the place!
Those are the only ones I knew of in recent
history. Some years ago I used to make almost
yearly trips to Berkeley, and would rent a car and
take a whole day to tour all the cool places. If
you are interested in old computers, the Computer
History Museum is a total blast. They have all
the computers I learned on, including some quite
unusual machines from the 60's.
Jon