Gravel and a fence on 2.8 acres now cover the taxes and then some

I bought this parcel in 2016 because it was cheap and sat on a highway just past the edge of town. Held it, paid the taxes, mowed it twice a year, did nothing with it. Nine years of that.

What changed is I counted RVs and boats parked in driveways on my way to work. Lots of them. So I looked into outdoor storage, which is the simplest version of self-storage there is. No buildings. You rent a numbered gravel space and the tenant parks a thing on it.

A few terms first, because I didn't know them either:

Conditional use permit. Your land has a zoning district, and each district lists uses allowed outright and uses allowed only if the planning body approves them for your specific site. Outdoor storage was the second kind here. That meant an application, a fee, a public hearing, and about three months. Zoning language and process differ by city and county, so the only real answer is to read your own ordinance and call the planner.
Gross versus net. Gross is what tenants pay you. Net is what's left after taxes, insurance, mowing, electricity, and the software. People quote gross because it's bigger.

Costs, all in, 62k:

Gravel base and grading, 31k. This was most of it and I underspent at first and regretted it. See below.
Fence and two gates, 18k
Cameras, lighting, gate keypad, electric run, 9k
Permit, survey, sign, 4k

41 spaces. Mix of 12 by 30 and 12 by 40. Pricing runs 75 for the small ones to 115 for the big pull-throughs. Filled 34 of 41 in the first seven months, mostly from a sign on the highway and a Facebook post in a local group. Gross is running about 36k a year. Taxes, insurance, mowing, power, and the software software come to roughly 7k, so net is high 20s on 62k spent, on land I already owned and was doing nothing with.

The part that nearly broke it: I cheaped out on the base in the back third. First wet spring, a fifth wheel sank a wheel and I had a tenant standing in my driveway at 7am. Cost me 8k to fix properly, and that 8k is inside the 31k above. Grade for water first. Everything else is decoration.

Second near miss was a neighbor at the hearing objecting to lighting spilling onto her property. She was right. I changed to downward-shielded fixtures on the plan before the vote and she withdrew. Cheaper than fighting.

What I'd keep: pick the boring use the land already wants. This parcel was never going to be a subdivision. It was always going to be a place to park things.

6 replies

1tonyv88SO4CPRO6

Whether this stays easy comes down to your lease and your enforcement. Vehicle storage has a wrinkle that unit storage doesn't. When someone stops paying, you have a titled vehicle sitting on your dirt, and getting rid of a titled vehicle is a different legal process from auctioning the contents of a locker. It usually runs through your state's abandoned or unclaimed vehicle statute, and it varies by state, sometimes a lot.

How many nonpayers have you had in seven months, and did you have to move on any of them?

1renee_dubois Get yours

36k gross on 62k spent is better than anything I own. My small multifamily doesn't come close on cost basis.

Question though, @parcel, do you have any labor in there? You listed mowing but not your own time. How many hours a month does this actually take you between calls, gate codes, and someone wanting to swap spaces?

-1chriswalton8CC1CPRO8

What interests me is that this is a use conversion, not a purchase. You already owned the basis. Somebody buying 2.8 acres on a highway at today's asking prices and then spending 62k has a completely different return on the same 36k of revenue.

Do you have a sense of what that land would trade for now? Not to sell it, just so people reading can tell whether they're looking at your deal or a different one.

1diane_kowalskiPassivePRO9

The grading point is the one I'm writing down. I've been looking at holding patterns for parcels that aren't ready for anything and this is the cheapest one I've seen that isn't just paying taxes and waiting.

Did the conditional use permit attach to the land or to you? I've read that some are personal to the applicant and lapse on transfer, which would matter a lot if you ever sold with the income in place.

1tylerbrooks9PassivePRO5

This is the kind of thing I keep hoping exists. No tenants living anywhere, no toilets, no turnover paint.

One worry. Your demand is boats and RVs, which are things people buy when they feel good about money. If the local economy softens, do those come off the lot before or after people cut other spending? Unit storage supposedly holds up because people move and get divorced regardless. Parking a boat feels more optional to me.

2paulgrant17PassivePRO5

@parcel on screening, do you check anything at all, or is it just a name, a plate, and a card on file? Coming from the rental side I'm used to a whole process and I can't tell if that's overkill for a gravel space.

Gravel and a fence on 2.8 acres now cover the taxes and then some

6 replies