$30k/Month from A Parking Lot?? | Story of The Deal

industrial outdoor storage is one of the hottest topics right now so I flew down to Dallas Fort Worth to tour one of these assets with the investor behind it to get the story behind the deal so you know exactly how you can do one of these projects yourself this used to be some office it was like very dilapidated 70s lenium I think they had three offices a conference room this is Ron roie a buddy of mine that I met at Bigger Pockets last year he's a real estate attorney turned real estate investor and over the last couple of years he's been focused on IND industrial outdoor storage which is essentially a covered land play where you buy industrially zoned land put a fence around it put some lighting up make it secure and rent it out to trucks on a month-to-month basis the cash flows from this type of asset can be pretty strong but the appreciation and the potential for future Redevelopment are even stronger that's why I'm so excited to be walking through the property with him today and getting an inside look behind the curtain as to how these deals actually work this is very productive use of space because they can store some tools they can have high value materials uh and then they can have office in addition to their yard storage and that's really what people are looking for as a single tenant user they want some office space a little bit of storage and then yard storage is is the key driver so yeah it's it's pretty well laid out for a wide variety of industrial uses the future of real estate is flexible it doesn't matter if it's office retail multi family tenants want flexibility in their space use so by doing a project like this you'll have the flexibility to accommodate a wide variety of tenants which means that you're diversifying your risk on the site and also increasing your chances of finding somebody to lease from you so here this is one of the later additions and this is again super valuable this is a service Bay um we call it maintenance Fleet but the main thing about this is these massive 16 ft rollups you can drive a tractor Trail trailer with lights with antennas and it's not going to clip the ceiling but having a Tractor Yard Service and then you'll be able to pull the tractors the you know the truck part we call it the engine and service your own Vehicles here incredibly valuable you know if you're a business that's in trucking Transportation this is what you need to be able to do oil changes and these guys are doing oil changes every week you know every 50,000 miles they're running a lot of mileage on these trucks oil changes transmission brake pads air filters belts all the consumables you know you need this and so this is a fully you know modern construction to your point you pointed out the the overhead service it's got 240 volt power uh you can run your air compressors you know I was talking to Chad griffi our buddy um and he said the number one Beyond location like physical feature he just said clear height yep because it opens up so many possibilities and that's the number one filter for so many tenants is clear height clear height clear height they can make do with 8,000 10,000 ft 14 two buildings whatever but it's clear height that if you don't have the clear height to fit what they need like they have a piece of equipment or they need three rows of racking it's a deal killer that two extra feet makes a huge difference I mean most most of these rollup doors that you see on older industrial product are are 8 to 14 ft and you know 14 ft is obviously far more desirable but that 16 ft really is a game changer that's what helps differentiate your product in the mark so how many different users do you I mean the property is about 5 and2 Acres mhm you've got the flex building and you've got all these vehicles parked out here how many different tenants or users do you have on this site so we have a range of Fleet tenants that I will say like this guy Flores is a fleet and they've got 10 to 20 to 30 trucks uh in their in their Fleet and they all Park them here um so we have a couple of those I want to say three quote big guys we have smaller operators that maybe have four or five and then we'll have onesie twozies and those are just your owner operators putting around they they own their own truck exactly so we got to get on them for this all the vehicles stored here must be operational must be on four inflated tires non-flight it doesn't necessarily have to be like registered and all that stuff I'm not testing whether it can drive on its own power but has to be stored on all four tires and inflated that's probably something that you as a landlord want right cuz it it helps keep your property from getting junked up but often times a lot of municipalities will actually require that based on the zoning so we are a truck parking of you know operational Vehicles as opposed to a junkyard junkyard is where you have non-operational vehicles but that just really opens up all sorts of environmental issues you've got leaking coolant you've got leaking oil because when a car is in an accident that's that's the concern yeah you don't want to be dealing with that so let's break this down real quick quick in a subsequent conversation that I have with Ron you can fit a little less than one 18wheeler truck per 1,000 square ft of soil so if you've got a full acre of land which is 43,560 ft you could probably park close to 30 or 40 trucks on that site depending on how it is laid out so that will help you run numbers as we're going through this process when you have multi-tenant it immediately escalates the number of conflicts oh yeah this is a container yeah management that you have to put into it and so so you as a landlord are responsible for resolving tenant to tenant issues you have to play mediator and so it gave me a good appreciation for running multi-tenant was was you know cuz these guys are probably the the rudest of the bunch you know they're they're white crass what's uh what's the story behind these that is awesome dude I would 100% drive one of those around that'd be the office truck dude yeah you probably get at least 2 m per gallon you know so yeah so so our property actually extends further along here um down towards the creek um but I but I what I kind of show you is this new construction development um it's an LGE project leased by Holt lumford 230,000 s ft of Class A and they just leased it one thing I want you to take away as we're walking around this site is that there is nothing fancy going on here it is a gravel cupboard lot there is chain link fencing you've got some LED lighting throughout and the biggest Takeaway on that is that industrial outdoor storage is relatively inexpensive to get open and operating as long as you have the right zoning in place you don't have to worry about going through a rezoning process it can be fairly easy to get these projects up and going if you're looking at truck parking and and trying to figure demand these types of paved facilities do not compete with my product first of all these are only for uh deliveries to this location so they're not going just let people off the street park there would be charging about 175% more so so we're at call it 200 225 these would be 350 or 450 it's a big difference on a monthly basis for for our truckers so I consider if this was a public truck parking lot this would be the class A we're believe it or not we're Class B uh because we do have the fence we do have the lighting we are uh improved surface with gravel and then Class C of truck parking is actually dirt I mean if anything it actually probably helps your business because if somebody comes over here and gets quoted 350 to park their trucks they can just come right next door and ask you oh yeah you're half the price okay cool except we're full but other than that part um that's a good problem to have that's the thing about these projects there are so many value add opportunities they're just very different from a value ad retail or value ad office you can do anything you want just specialize and and don't do everything for me it's like I'm only industrial I'm only iOS I'm only only in DFW but this is what gives me Comfort and and confidence to you know when I see a site that's really good I can jump on it yeah I mean whenever you're getting started you got to you got to find something to specialize in whether that's a geographic area a product type A you know your your investment strategy whatever it is but I talked to a lot of new investors and they say like well I'm looking at industrial Flex product in in Dallas or Houston or San Antonio and I'm like that's way too big you know you Houston is a massive Market by itself we've seen all of the the trucks so you've also got some dumpsters as well yeah you know whatever whatever we can rent on this is a great use of the last little Corners otherwise it would be dead space you know you can't fit any semi- trucks in there but you can fix fit these little boxes other value ads is you know starting to bundle more types of like amenities for them um mechanic Services oil changes truck washing these are all things that they currently pay for and it's more convenient if they can come on site that's a great point of advice for you no matter what kind of asset class you're at is what amenity would better serve whatever tenants I have what are they already using what are they already paying for that I could find a way to provide for them maybe at a better quality for a slightly less cost or maybe even a higher cost but better quality we started seeing this years ago in multif family when apartment started offering Wi-Fi as a part of your rental package and it helped increase their bottom lines significantly but we do like the truck the tire removal there so they know they can just kind of drop their tires and um oh so you handle that for them yeah we charge them we charge them so we pay like $7 a tire and we charge them $20 so walk us through some of the value ad components that you did I mean obviously you can do the the minimal things right like just putting gravel into existing holes and one of the big improvements that we did was install an automatic gate that is a 30 foot Canal lever gate is it's not cheap uh is it on a timer like does it stay open all day or how does that up kind of work great question so on our other properties yes I have found that that is the most effic effective use of the gate is as it has a little module that's that's extra on this particular property I even went through the hassle I paid for the guy he came out to install it and they don't like it they prefer the enhanced security that the gate closes every time they go through how did you find this site off Market cold calling texting email you know there's a lot of ways I mean social media like we like looked up these people's Facebooks and maybe didn't message them through Facebook but we at least looked it up to try to figure out is this a Family Guy is he old is he young reaching out to sellers directly through Direct Mail is actually an incredible way for you to find off-market Opportunities check out this video here where I dive into my direct man were they just tired of owning it or what was the reason they wanted to they applied for like a variance um to to do a different type of Tire business here and the city said no I was convinced of the value so it's like you pay two 2 and A5 million for it feel good uh we get a little bit of financing but it's like 55 60% LTV the rest we came up with cash so we put about a million dollars cash over a million cash and it's just Partners Equity so we don't raise money but I'll just send it email say hey I got this deal got it under contract I got the debt I'm personally guaranteeing the debt I'm going to run it I'm going to do the management I've got staff I I have the software kind of I know what I'm doing I'm I'm Ron I'm Ron Burgundy and then people will just respond like yeah put me down for two put me down for 400 put me down for 300 so you bought it for 25 million what was your value ad budget and what was your plan coming into it that's the thing so I I really didn't have a budget we did not raise we did not plan for additional expend is like right at closing our sole plan was to raise the rents right when we took over um cuz they knew that was coming uh raise the rents sit on a month get another month of cash flow pay the debt put some in reserve and then use whatever was left to reinvest back into the property this is a great investment strategy if you don't want to bring more Capital to the table on the front end or maybe you can't or you just don't want to use a loan to pay for any improvements on the property just utilize the existing cash flow instead of Distributing it to yourself and your Partners say for the first 6 12 24 months we're just going to reinvest 100% of that cash flow back into the property so we can continue raising rents it's not a good answer in terms of we didn't have a budget but I knew I had a list I knew a list I had bids I knew guys everything was ready and so I either could have done it all for 100k up front or I could have done it over a year time out of the cash flow exactly talk us through the the cash on cash return that you would have if you were Distributing what it would look like today and then let's dive further into the reasoning behind why you decided not to do that because a lot of people are so heavy on we have to have cash flow cash flow cash flow and it's not always the best thing to to increase the value of your property as a stabilized as is we're at about 8 or 9% um again we kind of Target like 2% 3% above our debt and so we're we're right at there if we just did nothing with the property the way that we look at our projects you know for every dollar you put into it you should be getting $2 to3 back and so you have to think if you were pulling out that 8 or 9% cash on cash you're losing 16 to 24% increases overall because you're you're really pulling that out and not putting it back into the property to make improvements to be able to raise your rents or find that next tenant and significantly increase the value on a cap rate so what's what's your exit strategy so another great plug for iOS and why I love love industrial outdoor storage is multiple exit opportunities so when you have these kind of low coverage sites um small buildings or just yard storage even you can sell to an owner user so a company can come along there's a lot of industrial companies they buy their own dirt and so you can sell to an owner user you can lease to a single tenant on a triple net and then development that's kind of the final one is is vertical construction you still have this great piece of land we've talked about the building in the back that's tenanted we talked about 300,000 s ft going up there there's another half a million squ foot project up on 820 so this whole area is booming and we would love to sell to a developer at you know Peak Market land prices so that he can go vertical Ron this is a this is a really interesting covered land PL you've got here thanks for touring us around awesome well thanks for coming so there you have it for the story of the deal behind industrial outdoor storage if you are looking to do one of these projects yourself you want to aim to spend somewhere between 300,000 and 500,000 and speaker and you'll probably want to aim for somewhere around $175 to $225 per space in rent of course you'll want to check your Market comps to make sure that it supports that but if you're able to find a site that checks those boxes You' got yourself a pretty good deal and if you want to dive more into industrial outdoor storage check out this video here on the laziest way to invest in commercial real estate

Channel: Tyler Cauble

Views: 271,355

Keywords: commercial real estate, commercial real estate investing, real estate investing, buying commercial real estate, passive income, passive investments, Industrial outdoor storage, Industrial real estate, IOS, Outdoor storage, Outdoor storage investment, Investing in outdoor storage, Story of the deal, Industrial real estate investing, Industrial outdoor storage investment, Storage investing, Self storage for beginners

Id: IRDT0HnPpUc

Length: 15min 21sec (921 seconds)

Published: Sun Nov 19 2023