Financially, the before tax return on investment is very good at 13.79%. The maximum allowable construction costs are at $397,798.61, which I believe to be an overestimate for the necessary type of structures to be built on the site. The actual construction costs are projected to be $277,940. If the developer wished to utilize the maximum construction costs allowed, it is assumed they could construct more of the enclosed storage spaces and thereby increase rental income and NOI. The site chosen is relatively small in comparison to the market competition, and if the developer chose to look at a larger site, they could max out the allowable construction costs by building more covered storage spaces and so increase the NOI. Or the project could be completed in phases with a larger site.
There seemed to be quite a few competing businesses in the Mansfield area, but after further research and after speaking with a few of the businesses, there seemed to be a demand for this kind of storage facility, especially considering that many of the existing storage facilities were nearly 100% occupied and remain so for a majority of the year. And the city does have an ordinance prohibiting the parking of recreational vehicles and boats on residential yards or driveways. Mansfield also appears to be a growing area with the median income far exceeding the state median income level. This, along with the city's close proximity to Joe Pool Lake and much-traveled highways/interstates, makes Mansfield a desirable location for an RV and boat storage facility.
In conclusion, an RV and boat storage facility would produce desirable returns at the chosen site.
Very strong presentation. It was easy to follow for someone with no knowledge of the boat/rv storage industry. I also suggest that a RE development such as this is attractive because it would be fairly easy to change use in the future if needed (unlike my movie theater).
ReplyDeleteWell I must say that you have wonderful taste when it comes to both blog design and project selection! I too chose storage, but I must say that your project is a great idea in that it fills a very targeted niche and obviously commands a much higher overall average price/PSF. Great job!
ReplyDeleteVery interesting topic. I am not familiar with the boat/rv storage industry. But, with your analysis, I could understand which factor is important to make an investment decision. Thank you.
ReplyDeleteThis is a well thought out and well presented presentation. Great financials and great photos for back-up.
ReplyDeleteRichard