Time to buy a warehouse!

I listed a small individual 1500 sq ft warehouse space in 2006 for $275,000. It was a prime space in this park. I researched every other unit in the same industrial park to discover what everyone paid and when. Looking at the history tells you a lot. My seller had not bought at the bottom of the market. There were several units purchased after them that were considerably lower. This was the only way you could know when the market bottomed out and started back up. My seller didn't buy it at the bottom, but they bought it for a reasonable price, and they made income while holding it. If they had let me sell it for the amount of the offers we received, then they would have made a profit even though they didn't buy at the right time, or right price. What else is important?

But I wanted to crunch some numbers for you so you could see where we are today in 2010. My owner paid $163,000 in 2004. They purchased from someone who bought brand new in 1998 for $79,900. This is American capitalism at its finest. The first buyer purchased in 1998 and sold in 1974, six years and made 104% on their investment. I had offers of $199,000 when we were listed at $275,000 which were turned down. My owner dropped the listing after one year and sold in late 2007 for $129,900. Greed got the best of them while listed, and panic forced them to sell at a giveaway price. Instead of making 22% and being pleased with the investment, they lost 20%.

There are two listed in the same park now, both 1500 sq ft, Here's how they stack up:

Property                            1                                  2
Purchased new                  1998                           2000
Purchase new price          $77,500                       $117,900
Sold                                  2005                            2003
Sold/ Purchased Price     $120,000                      $137,500
Listed                               2010                            2010
Listed Price                    $169,000                      $199,999

You can easily see what timing, history and markets have to do with this pricing.

Property 1 bought early, and held for seven years and made 55% on their investment. the new owner has held for 5 years and is trying to get a 40% return. I would have you offer $150,000 or less. They get 25% or less return for their five years. Very fair.

Property 2 bought late, held for three years and sold three years later and made almost 17% on their investment for their three year investment. The new owner is trying to get 45% on their investment after 7 years. I would have you offer $170,000 or less. They get 24% or less return for their seven years. Very fair.

This analysis is of two units in the same park. It does not account for build out amenities or park location. We would need to look at your needs and then the units. But you can see, crunching the numbers helps alot.