Today’s REI Classroom Lesson
Warehouse investing can be huge profit makers, if you buy right and realize there are multiple uses for the space. Joe Calloway mentions a few ways his warehouse properties are being used, including private residences, offices, and studios.
REI Classroom Summary
These days, there’s a decent number of people who want the unconventional living space, and warehouses can be the perfect fit. Buildings can usually be purchased at a steep discount because they’re no longer being used for their original intent.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Joe: Hi, I’m Joe Calloway with RE Investor Professor and RE360 Real Estate and I’m your host of REI Classroom. Today, I’m going to be talking about something that we’ve recently come into, and that’s warehouse investing and the beauty of this asset class.
Mike: This show was sponsored by passiverental.com.
Joe: We are in the inner city of Pittsburgh and there are a lot of old warehouses and old buildings that have been left behind. They’re a little quirky, different sizes, different shapes, different sizes of doors, different clearance heights, but there’s an abundance of them, and there are some cool market shifts happening right now in commercial real estate that make these assets very, very valuable, but a lot of investors are not identifying them as that.
So we started buying warehouses that were vacant, extremely cheap because the owners, they don’t want to deal with them anymore because they thought no one would invest in them, and what we found was there was an abundance of people looking for different space. And that doesn’t just mean someone who wants to build big widgets or manufacture things and what else. A lot of people love the office or the cool industrial feel of these warehouses.
So you have a beautiful thing here where you can rent it to someone forth. You can buy it cheap and rent it to them for $3 a square foot, which is extremely cheap, and have someone building, storing their junk in there, or building things. Or you can throw a few dollars into this cool space that’s in the city where someone wants to be and turn it into a really cool, hip office or flex space.
For instance, we have people in one of our warehouses that, they do movie production so they need office space and they need a big space to shoot stuff on a green screen. We have another person in that same exact warehouse who builds stuff out of wood, a very traditional warehouse space. The person who needs the green screen pays a lot more for the better lit space than the guy in the basement building things out of wood.
But it gives you that flexibility and it’s extremely profitable when someone doesn’t understand the asset is worth much more than what they used to use it for, a pickle warehouse, and now it’s a movie production warehouse. So it’s a phenomenal way to kind of get an advantage when most people are looking at it as something they need to bulldoze. So, there’s a lot of flexibility in that.
One of the cool other strategies with warehouse investing is a sale-leaseback, where you buy the property off an existing owner who’s already performing their business out of the warehouse. That owner cares more about making whatever they’re making and selling that product than owning real estate, a lot of times. They oftentimes need cash in order to expand their actual business that’s feeding their family. They’re very willing to sell you their property and then pay you monthly payments as the tenant in order to free up that lump sum of cash.
This is perfect for a real estate investor because this continues to provide you with income stream. You walk into something that has an income stream. You don’t have to worry about leasing it, finding a tenant, and it’s the best of both worlds. You have a great tenant who’s dedicated to making whatever they’re doing happen, and you have a great asset that’s going to continue to appreciate in value and keep paying you month after month, year after year.
So don’t overlook these places. They’re really, really, really great investments, and I would highly advise people to check them out and don’t just drive by that dilapidated, boarded-up brick structure.
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