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Industry standards for conversion/development: utilities, ins., taxes, mrktg, etc.

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  • Industry standards for conversion/development: utilities, ins., taxes, mrktg, etc.

    - I informally linked up with two experienced commercial guys at our local RE Investors association. They see a real opportunity with an empty big box conversion to SSF but don't know much about our industry, so they are asking me about industry standard costs for utilities, insurance, construction/retrofitting/renovation, taxes, marketing, payroll, maintenance/repairs, etc. but also income too: unit rent, truck rental, supplies, late fees, etc.
    - With an existing facility it is "easy" to project past income/expenses into the future, but with new development/conversion... where do we look? THANK YOU!
    "But store up for yourselves treasures in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal." -Matthew 6:20

  • #2
    Projecting income: Look at a few comparable sites in your market or a nearby similar market. Figure out the typical income per sq ft based on a 10x10 and 10x15 unit rental rate. My advice is to ignore other income such as late fees and supplies sales. It's inconsequential, and you are also probably ignoring bad debt, discounts etc. So just look at rental income and call the rest gravy if you are lucky enough to have a significant amount. For a rough estimate, figure that 80% of the property can be rentable, the remainder will be non-revenue producing space such as halls, bathrooms, office. Think in terms of revenue per sq ft in absence of a plan. The unit mix is important, but you can think about it later assuming the project pencils out.

    Truck rental: IF you add truck rental you probably need an extra employee. I don't offer truck rental myself, but the operators that I have talked to that do it probably see more benefit in the increased clients it brings vs actual income. I see many operators discontinue dealing with trucks due to hassle. So again, i suggest you stay conservative and don't bank on truck income.

    Expenses: Aside from the mortgage, property taxes and employees are the major expenses. Utilities will be middle of your list, and in my experience insurance is pretty reasonable (i spend more on credit card processing fees that I do insurance). Until you do some research and have some solid numbers, you might use 25% to 30% of revenue as an estimate of expenses. Marketing does not need to be a significant expense in this business unless you are in a highly competitive market.

    When you look at the renovation expenses be sure to evaluate if the building is zoned correctly for storage, if it will need changes to sprinklers and/or firewalls, and if major changes are needed for ADA compliance. These are commonly overlooked and potentially expensive.

    Steve Hajewski
    Trachte Building Systems
    Marketing Manager
    608 327-3208
    shajewski@trachte.com


    Last edited by Steve_hajewski; 21st October 2017, 10:48 PM.

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