Storage units -are they commercial?

[OllyN]

Dean is advertising these:

http://www.massiveaction.co.nz/display.php?item=328

In my view storage units are more akin to boarding houses when calculating value and return. This is because the leases for storage units are casual and quite unlike the formal leases used for regular commercial premises, such as shops, factories and offices.

You may find that it will be difficult to obtain finance for these as lenders treat them as casual tenancies, the theory being that they could be vacant for long periods of time with no personal guarantees to fall back on, and no leases to enforce. They also need intensive management to ensure they remain full.

[Tucker]

May be right there Olly although the storage units I have used or friends have used in the past in Auckland are all full with waiting lists for units especially larger ones. I ended up getting a 1.5m x 2m unit for storing some household gear which was the biggest and only one left.

[OllyN]

In reply

Whether they are full or not isn't the question.
They may be full all year round.
Equally they could be empty all year round.
The question is whether you can enforce a contract if the tenant vacates in breach of their lease - as can be done with a formal lease.
The answer is usually "no".

[SuperDad]

The advertisement does mention an "owner occupied" option.

So maybe they are residential? The new shoebox apartment?

Paul.

[orbital]

The rent is cheap, they are secure, no windows to people to peer into, are a conveniant size, are in commercial areas where smells are'nt such a concern, with all these factors the question must be asked, why are'nt more of them used as P Labs?

[SuperDad]

The rent is cheap, they are secure, no windows to people to peer into, are a conveniant size, are in commercial areas where smells are'nt such a concern, with all these factors the question must be asked, why are'nt more of them used as P Labs?

Lack of running water?

[Mark_B]

Are you suggesting that they are falsely advertised?

If so, then then the correct channel to do that is to raise the matter with the commerce commission, rather than on this forum.

M

[Tucker]

Who said anything about having a commercial contract with a tenant like normal commercial leases, they are just a storage unit rented on a monthly basis with month to month leases I guess (other than the owner occupied ones) and offered for sale to investors as another form of investment. They probably already have finance organised, not sure. The difference with these as I see it is they are reasonably cheap to get into as a form of commercial investment. If you don't think it is a good investment or it's not for you then don't buy into it.

I looked at a storage unit site in Silverdale a few years back and it was classed as a form of commercial/business by all the valuers I spoke to about it, also a few lenders at the time were happy to fund it.

Come to think about it, it was valued as commercial/business and residential because it had a residential managers unit on site.

[brettc]

I agree, they are like a boarding house lease. You are actually buying into a business rather than a property investment. Your return will be largely based on how well the business is run.

Thats good or bad dependign on your view point.. but it begs the question... how much control will you be able to excercise over your investment? Will you be able to advertise or drop your rates to get tenants? Will you be able to improve you maintentance systems? I don't think so.

[orbital]

I agree, they are like a boarding house lease. You are actually buying into a business rather than a property investment. Your return will be largely based on how well the business is run.

Thats good or bad dependign on your view point.. but it begs the question... how much control will you be able to excercise over your investment? Will you be able to advertise or drop your rates to get tenants? Will you be able to improve you maintentance systems? I don't think so.

I assume that the land and storage unit is purchased then leased to the storage unit company who takes care of all rates tenants and income from the unit.

[Jumpin]

My This could be a good investment, but then again...
My worry is 'low barrier to entry', meaning, if these things really are a good investment, and have a nice yield, and investors are buying them up like hotcakes, then all those developers who are sitting on their hands waiting for their next opportunity can shove up a load of storage units cheap as chips in the meantime, on all that land that no one else wants at the moment.
Overnight occupancy falls and you are left with no income.
On the other hand, it could be a cheap entry level for a new investor, and a step up to new opportunities.. Who know, I am sometimes too conservative. :-)

[Dean@Massiveaction]

These are already pre approved with National Bank. They are fully managed and if you read the valuation you will see that the average occupancy for storage units in the area is around 95%.

In addition this particular development has all income pooled so everybody receives the average occupancy rental, significantly reducing income risk.

So to answer Olly's post, yes they are commercial, no there are no funding issues, and they are fully professionally managed. Interest from owner occupiers is quite high so this further enhances occupancy and returns and growth.

I've bought 4 based on the likely returns, cheaper than 1 house gives you potentially 4, 6 or 8 income streams and you get income even if your units are vacant. I like it :-)

[OllyN]

GST issues

What about GST issues?
If they are being marketed as vacant commercial properties then won't the purchasers have to pay this charge as well?
Or are they being marketed with guaranteed rents ?

[Dean@Massiveaction]

They have an option of guaranteed rent for 12 months and are all being sold as plus GST if any. Rents and yields are all quoted as plus GST.

You can download the full valuation and paperwork by clicking on the link Olly if you are actually interested in knowing anything. Or ring the developer or his lawyer Tony Steindle. They'll happily answer any questions of a technical nature.

[OllyN]

In reply

You hold yourself out as the promoter of these units and as an expert property investor. You answer the technical questions.