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Buying a house to use as a Lego warehouse


landphieran
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14 hours ago, landphieran said:

I have been trying to find warehouse space near me for a couple years now. Most locations are a 30 minute drive on a good day. Rent runs 1500$ for 1200-2000 sq ft. I live in a medium size metropolitan city which doesn't have very much commercial space. Without going too much into the details I haven't been impressed with the warehouse options available to me.

I am now considering purchasing a home near me in a lower cost area of town and using it as a Lego warehouse/shipment location. With current interest rates I could snag a 1300-1600$ mortgage and have a 2000sq ft place to run my business. I could always rent it out if I found a better option. My financial situation is pretty good so I'm not worried about being stuck with 2 mortgages.

Does this sound insane? Am I missing anything? Are there any tricks for securing a second mortgage with the intention of using it for business?

 

For US, a home owner can have a primary residence and a secondary residence...this is key because the attractive mortgage rates apply to primary or secondary homes ONLY...rates typically jump up 0.5 to  1 % for a business or rental home.  I believe if you don't already have 2 residences, you can claim a home as a primary or secondary; secure the loan, and then rent it out later (banks never check, AFAIK).

it's a crazy idea based on the high housing costs in my area...I couldn't find a broken down shack for less than $700K within a 30 minute drive...heck 1 hour drive.

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1 hour ago, $20 on joe vs dan said:

For US, a home owner can have a primary residence and a secondary residence...this is key because the attractive mortgage rates apply to primary or secondary homes ONLY...rates typically jump up 0.5 to  1 % for a business or rental home.  I believe if you don't already have 2 residences, you can claim a home as a primary or secondary; secure the loan, and then rent it out later (banks never check, AFAIK).

it's a crazy idea based on the high housing costs in my area...I couldn't find a broken down shack for less than $700K within a 30 minute drive...heck 1 hour drive.

Just looked on Zillow in my area out of idle curiosity......700k will buy a 5 to 6 bedroom 3300 sq ft+ house here.......Jeez that is insane the difference area and location makes......

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9 hours ago, Mathew said:

Have you looked into storefronts?  I bet you could find something cheap to lease. 

To add to this:  Check monthly leases at a local ”dead mall” that is on life support. Heck they might even give you the space for a small percentage of sales.  They probably wouldn’t even care if you left the gate down and never opened as long as you pay them something a month. 

Edited by Mathew
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1 hour ago, $20 on joe vs dan said:

it's a crazy idea based on the high housing costs in my area...I couldn't find a broken down shack for less than $700K within a 30 minute drive...heck 1 hour drive.

Are you in California?  Thats insane. 

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Zoning won't allow it and neighbors will report it.  No one wants a vacant house in their neighborhood.  It isn't safe and brings down property values.

Insurance, landscaping maintenance, exterior maintenance, termites, plumbing repairs, roofing repairs.  Local crime gangs will know its vacant and it will become a target.

I went through the scenario only looking at just getting a bigger house/property and it still didn't make sense that way.  In my state my property taxes would reset at today's market based on a higher priced home.  Then take all your normal household expenses and double them.

I got out of the game for 3 years and just got back into it this past November.  Leased out 1600 sq ft for $2000.  If I ramp things back up again I imagine I will need more space but right now by using high vertical shelving I should be ok for a bit.  Insurance is $2000 (although I really need better coverage) and utilities are negligible.  So that's about $2266/mo.  100% write-off and no equity money sitting on the sidelines.  No repairs or upkeep running a warehouse.  I'm sure most can do a lot better for rent as I'm in one of the highest markets in the country.

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1 hour ago, Mathew said:

Are you in California?  Thats insane. 

yup.

 

1 hour ago, Mathew said:

To add to this:  Check monthly leases at a local ”dead mall” that is on life support. Heck they might even give you the space for a small percentage of sales.  They probably wouldn’t even care if you left the gate down and never opened as long as you pay them something a month. 

I think renting retail space, especially in this climate, makes sense. I'm sure there are some regions where it must be dirt cheap...ofcourse there is crime concerns...but as long as the outside looks dilapidated then the urban decay camo should serve well. 

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4 minutes ago, $20 on joe vs dan said:

yup.

 

I think renting retail space, especially in this climate, makes sense. I'm sure there are some regions where it must be dirt cheap...ofcourse there is crime concerns...but as long as the outside looks dilapidated then the urban decay camo should serve well. 

Retail landlords typically do not want warehouse tenants in their center.  They want businesses that will generate traffic making the property more valuable and lease rates higher.

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1 hour ago, gmpirate said:

Retail landlords typically do not want warehouse tenants in their center.  They want businesses that will generate traffic making the property more valuable and lease rates higher.

yeah well...the point is some regions the landlords just want paying tenants. period

Edited by $20 on joe vs dan
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I thought a lot about this in the past and wouldn't do this if I were you. Houses are typically not set up well for this type of storage with stairs and rooms and what not. If you're at the point where you need that much additional storage, you'd be better off renting self-storage space for the short-term while looking for/working towards a longer term solution.

Finding a pre-existing warehouse close to your house for a decent price is pretty difficult in most areas, but not impossible. Have you talked with commercial landlords and looked at Craigslist? I constantly look at the commercial stuff available around me and it's all wildly expensive, but have found some very affordable places off the beaten path.

The idea of renting retail space for storage is not a smart one IMHO. Retail space is typically more expensive and comes with all sorts of lease covenants that pretty much require you to be, you know, a retail store. Sure, you might be able to find some desperate landlord willing to forego some of that, but then you're probably renting storage space with some amount of breakable glass on its front right next door to the internet gambling parlor, a car audio store with a "z" in its name instead of an "s," and a vape shop.

The option that is a bigger pain, but makes sense if you're in this for the long haul is to find commercial land and develop it with storage that suits your needs. Trust me if you're starting to operate on a larger scale, you are going to want/need the ability to move things around on pallets using a forklift/pallet jack before long. Unless you have some very weird houses in your area, you aren't going to find that in a house. Your back will thank you.

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20 hours ago, joch29 said:

The question is would home insurance really cover a sizeable lego inventory?

Home insurance would cover if you added specific rider (which you would want to do anyways with a current inventory list.)  Honestly, the best option unless you need to move pallets, a nice climate controlled storage room and most newer facilities have cameras already.  

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57 minutes ago, Banjoman said:

Home insurance would cover if you added specific rider (which you would want to do anyways with a current inventory list.)  Honestly, the best option unless you need to move pallets, a nice climate controlled storage room and most newer facilities have cameras already.  

If you're running a business, your home owners insurance won't necessarily cover your inventory even if you have a specific rider for it.  You need to make sure that your policy doesn't contain any type of business exclusion clause.  And this would apply even if you say that you're not running a business...the insurance company will make its own determination in the event of a loss.

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15 hours ago, Mathew said:

Rent is high too. Thinking about moving?  

pro and con...real estate prices are high and difficult to "get in", but once in, the appreciation builds fast and you can upgrade more easily...until you hit a relatively sweet spot...then when kids go to college and its time to down-grade...you can use the equity and flip it into a 2nd mortgage and buy-into pretty much anywhere you want to retire...collect rent at the last house to pay for your new mortgage and have a few bucks left over to subsidize retirement income.  for the folks that try this in relatively affordable house markets...they are looking at equity near retirement maybe $100K-$500K...I am looking at $1m-$5M...so that's the trade off...if you can afford it..the pay-off after makes it more than worth it....I prefer relying on real estate rather than a 401K...both has risks 4shure...but I feel better funneling savings dollars into property.

Edited by $20 on joe vs dan
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21 hours ago, gmpirate said:

Zoning won't allow it and neighbors will report it.  No one wants a vacant house in their neighborhood.  It isn't safe and brings down property values.

Insurance, landscaping maintenance, exterior maintenance, termites, plumbing repairs, roofing repairs.  Local crime gangs will know its vacant and it will become a target.

I went through the scenario only looking at just getting a bigger house/property and it still didn't make sense that way.  In my state my property taxes would reset at today's market based on a higher priced home.  Then take all your normal household expenses and double them.

I got out of the game for 3 years and just got back into it this past November.  Leased out 1600 sq ft for $2000.  If I ramp things back up again I imagine I will need more space but right now by using high vertical shelving I should be ok for a bit.  Insurance is $2000 (although I really need better coverage) and utilities are negligible.  So that's about $2266/mo.  100% write-off and no equity money sitting on the sidelines.  No repairs or upkeep running a warehouse.  I'm sure most can do a lot better for rent as I'm in one of the highest markets in the country.

Please excuse my curiosity... I took from your submission that you pay monthly cca 2200 USD for storage with 1600 sq ft (internet translates that as cca 145 EU sq meters). So you are basically "minus 12x 2200 USD at the beginning of each annual financial year" that you need to make up for by getting some profit on sold LEGO sets. Thats 26.400 USD.. Wouldnt it make sense for you on such a large scale to think of different storage solutions? even DIY built-up "something" on your property would pay off in 5 yrs x-folds. I guess.. 

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49 minutes ago, crayxlp said:

Please excuse my curiosity... I took from your submission that you pay monthly cca 2200 USD for storage with 1600 sq ft (internet translates that as cca 145 EU sq meters). So you are basically "minus 12x 2200 USD at the beginning of each annual financial year" that you need to make up for by getting some profit on sold LEGO sets. Thats 26.400 USD.. Wouldnt it make sense for you on such a large scale to think of different storage solutions? even DIY built-up "something" on your property would pay off in 5 yrs x-folds. I guess.. 

If I had an acre of land I would consider building a storage unit on my property because it certainly would pay for itself.  As it happens, I don't 😝

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6 minutes ago, $20 on joe vs dan said:

is that an offer?

this brings us to a new branching point for this thread...are there BPers out there with space to spare?  I know I'd be very interested in sharing some extra storage space... 

I considered that but my stash would be open to a lot of prying eyes with no control over it really.  All it would take is one guy talking about all the Lego he saw at some party and someone listening in.  

Here in California one person can legally steal up to $950.  You get a a ring of guys running around breaking into warehouses and retail stores with each grabbing a small share to stay under the limit.  Quite the state we live in.

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6 minutes ago, gmpirate said:

I considered that but my stash would be open to a lot of prying eyes with no control over it really.  

not understanding this...the presumption is that BPers have their own storage solution for LEGO and may have some extra space they would be willing to rent out to a fellow BPer. Lots of trust involved, but it's still a face to face agreement at the end.

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1 minute ago, $20 on joe vs dan said:

not understanding this...the presumption is that BPers have their own storage solution for LEGO and may have some extra space they would be willing to rent out to a fellow BPer. Lots of trust involved, but it's still a face to face agreement at the end.

I have friends that I trust with warehouses that I talked to that were open to the idea.  The more I thought about it, however, I just wasn't comfortable with the idea for many reasons.

What happens if someone doesn't lock up?  turn on the alarm?  turn on the cameras?

Your inventory is open to all they let in.  Employees, friends, family members, etc.

I would want all my inventory sealed off from access and visibility.  Do they want you building walls?  And if you do, you're making leasehold improvements for someone else's property which you will probably have to pay to take down at some point too.  And even if this all makes sense, you are still loading and unloading in front of the whole staff.

It's their facility, so at least for me there's some level of discomfort.  I wouldn't want to get in their way or inconvenience them regardless of financial arrangement.  

What if they increase their business/inventory and need the space back?  or want to get out?  You're subject to their whims.

Hey, maybe you find a situation where someone has some extra space to sub-lease with its own entrance and a good term contract that makes sense.  Fantastic!  Nothing wrong with asking.  It's not like I'd be 100% against the idea.

In the end however, business is stressful enough as it is without having to add complexities to your operations.  It doesn't mean you can't find an ideal situation, but its probably not very realistic to expect to find one.  Sorry if I'm coming across as too negative, I've just gone through so many scenarios over the years . . .

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At the end of the day, if you need space, just pay for the space and maintain control over your inventory.  Using a self-storage facility is the best way to go when you grow out of your house/apartment.  The rent is super cheap compared to any other option and it's super flexible...need more space, rent another unit...don't need all that space, move out of a unit.  I worked this way for many years before getting fed up with having multiple units and wanting everything in one spot.

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1 hour ago, redcell said:

At the end of the day, if you need space, just pay for the space and maintain control over your inventory.  Using a self-storage facility is the best way to go when you grow out of your house/apartment.  The rent is super cheap compared to any other option and it's super flexible...need more space, rent another unit...don't need all that space, move out of a unit.  I worked this way for many years before getting fed up with having multiple units and wanting everything in one spot.

Is there any recommended insurance? What kinds of precaution have you taken? I have a friend who's storage unit was targeted and more than 100k worth of stuff were stolen. TWICE!

 

 

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10 minutes ago, joesnow2005 said:

Is there any recommended insurance? What kinds of precaution have you taken? I have a friend who's storage unit was targeted and more than 100k worth of stuff were stolen. TWICE!

 

 

I've had a business insurance policy for years that covers replacement cost for inventory in the event of a loss.  It costs me a few grand a year, but is well worth it.

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On 7/24/2020 at 12:53 AM, gmpirate said:

I considered that but my stash would be open to a lot of prying eyes with no control over it really.  All it would take is one guy talking about all the Lego he saw at some party and someone listening in.  

Here in California one person can legally steal up to $950.  You get a a ring of guys running around breaking into warehouses and retail stores with each grabbing a small share to stay under the limit.  Quite the state we live in.

you are not that bad.. here just passed the legal discussions to make it cca 450 USD. Stealing goods in that amount is characterized as an offense and not criminal act of theft

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2 hours ago, crayxlp said:

you are not that bad.. here just passed the legal discussions to make it cca 450 USD. Stealing goods in that amount is characterized as an offense and not criminal act of theft

 

 

But hey, on the positive side our government can now tell us how crime is down.  It's amazing.

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