Investing In Warehouse Rental

Building or purchasing a warehouse for rent is a lucrative investment in the real estate market, especially, if it is well situated either close to the market, air or sea ports among others.

One advantage of investing in the building of a warehouse is that it can be converted into an office, restaurant, furniture or vehicle retail shops and so on by the tenants.

Purchasing a warehouse as an investment property is potentially a lucrative strategy for long-term passive income. 

Warehouses are also considered a more profitable type of commercial real estate investment than others as it comes with several benefits. 

Some of those benefits are; 

Increased Potential Income with Lower Volatility

Because of the sheer size of a typical warehouse, the income potential in rent from a warehouse is significantly higher than for most types of residential real estate. 

Warehouse rental also produces higher income than other income streams found in a typical investment portfolio such as money market accounts, savings accounts and so on.

Additionally, rental income from warehouse is extremely stable.

Triple Net Leases

This makes the tenant responsible for rent in addition to maintenance costs, insurance premiums, and taxes associated with the property. Triple net leases are usually 10 years or longer, but they can also be anywhere from five years up to 20 years.

Rent Payment

The rent can stay the same during the entire lease, or it can go up in increments every year or few years, often based on inflation. This type of lease is extremely attractive to the landlord because it is so hands-off. 

Passive Income

Money collected from a rental warehouse truly is a passive income where you are doing very little. After the initial investment and preparation for a tenant, a warehouse becomes mostly hands-off, especially with a triple net lease.

Property Appreciation

The value of the property will increase by doing nothing at all. When a lease agreement expires for a warehouse, the value of that warehouse will be significantly higher than when the lease was written. 

Tax Deductions

Several tax deductions can be taken related to owning a warehouse as a commercial real estate property. Owners of a warehouse can deduct for depreciation and mortgage interest and other tax deductions, including expenses of maintenance, repair and management. 

Initial Capital

This involves the initial cost of building or purchasing the warehouse.

This, however, varies depending on the location but my findings show that an investor needs a minimum of N5million or N50 million to venture into this investment opportunity.

Profitability

With most warehouse rent always on long lease, my investigations revealed that, a 10 year lease could go for N8million to N30million, which, when divided annually, will translates to between N800,000 and N3million profit. This could even be more, depending on the earlier mentioned factors.