I’ll Admit: Warehouses are Easier

By Amanda Cruise

 

If you follow my LinkedIn, you may have seen I recently purchased a warehouse in NC. I got a great deal on the building in part, because the landlord/tenant situation was complicated and I worked through those issues. The inspection process itself was SUPER EASY compared to a manufactured home community. So am I doing a switch to just buy warehouses? You already know the answer – no way. Here’s my thought process:

Warehouses are Easier

I’ll be the first to admit this warehouse was much easier than a manufactured home community during the due diligence process. One building. Zero septic systems. One lease that was an actual real lease  (we rarely see straight forward leases in a manufactured home community acquisition).

The stabilization period will be easier. We hired a leasing broker to find a good tenant and he’s working hard for his commission. There’s just no comparison to the hands-on effort to stabilize a value-add manufactured home community!

And the ongoing effort will be much less for the warehouse. Once we get a tenant in place, they will handle all of the maintenance. Even lawn care. One rent deposited each month. Very few ongoing expense transactions each month. It does sound nice compared to the many, many moving pieces of a manufactured home community!

Long-Term Demand

If warehouses are so much easier, why do I still want to purchase manufactured home communities? The main reason we’ll keep acquiring manufactured home communities is the long-term outlook for the asset. You’ve heard it before – there is a big shortage of housing in the U.S. and an even bigger shortage of affordable housing.  Meanwhile, manufactured home communities, a big affordable housing option, are reducing in number.

It’s a big challenge to find good communities, a big pain to perform due diligence on them, and these communities are management-intensive. Despite all of those things, I strongly believe in the future of this asset class, the continued and increasing demand for the product, and opportunities to both improve lives and make great returns while doing it.

Investors

I bought this warehouse as a joint venture with a friend who is also a commercial real estate investor. I didn’t open this as a passive investing opportunity. Why not? I believe this project will be a great win. However, there’s inherently more risk in a vacant warehouse than a cash-flowing manufactured home community. With this being my first non-residential acquisition and a vacant property, there were several unknowns (lease rate, length of vacancy, etc). I chose to partner with another hands-on investor for this acquisition.

 

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