How to Use a Lease to Expand or Add Canopy Boat and RV Storage to Your Facility
(image credit: Absolute Steel)
One day in the course of my research writing a boat and RV storage feasibility study, I came upon an offer on the Absolute Steel website that sounded too good to be true. “Add covered parking to your facility with little or no money down with our Pro-Lease. Immediately profit from increased cash flow,” it said.
Intrigued, I set up an interview with the president of Absolute Steel, Dean Thomas. The first question I posed to him was, under what circumstances is it better for a boat and RV storage developer to lease rather than buy their buildings?
“Preservation of capital is the number one advantage to using a lease to add covered parking to your facility as opposed to purchasing or financing its construction,” Dean explains. “Facility owners can use their money for other things.” He adds, cheekily, “And leasing instead of buying is the American way.”
OK, We’ll Bite, Tell Us More
As far as Dean knows, Absolute Steel is the only boat and RV storage manufacturer offering a leasing option. The program is called “Pro-Lease” and is available only to established facilities that are expanding their boat and RV storage. It is not available for ground-up construction or new facilities that are still in lease-up.
The Pro-Lease program is specifically for Absolute Steel’s Tubular Steel Frame Systems. The advantages of leasing rather than buying are realized immediately through increased net operating income and in the long run through tax savings.
The reason the program is available only for the Tubular Steel Frame Systems is because, for the canopies to be considered business equipment—and should the lender need to repossess it—the canopies must be able to be easily disassembled. The anchor bolts of the system are easy to unbolt and disassemble.
Terms and Conditions (Tax, Title and License May Vary, Not Valid in Hawaii, Alaska, Guam and Puerto Rico, Oops, Wrong Article)
The Pro-Lease program is offered through a private institutional lender who is able to adjust to meet the needs of each facility. Based on strength of borrower, the typical lease payment for a 12’ x 40’ canopy unit is $60 to $70 per month.
“The acid test for whether this is a good option for a facility is whether or not it improves net operating income,” says Dean. “If your lease payment is $60 per unit and you can charge $100 per unit, you are making $40 on each unit above the lease. Thereby the lease allows you to increase revenue without increasing expenses.”
The canopy units may also be 100% financed depending on strength of borrower. Lease terms are for five or seven years, and there is a $1 buyout at end of term, after which the facility owns all of canopies and equipment.
I’m not a tax professional but…
Because the tubular steel canopy structures may be classified as business equipment, accelerated depreciation schedules may apply. And although they qualify as equipment, the structures are fully engineered to meet local building codes.
Facility owners should also be able to save on real estate property taxes. According to Dean, “The way the city keeps track of improvements is through building permits. When you get a building permit you state the value of the improvements you are doing and then the city sends you a higher tax bill.”
“In this particular case, what you’ve added is equipment. Therefore, should it be added to your property value?” he asks. “It is questionable in my mind. The only thing that gives the property tax treasurer the ability to tie into property value is that they wanted to see what was being done so you brought in an engineered plan and treated it like an improvement to a property. It is a little bit of a conundrum, a little bit of a catch-22. Consult your tax professional.”
Like most boat and RV manufacturers, Absolute Steel can do the facility site plan (they charge $500) and provide CAD drawings to a civil engineer. Facility owners will likely need to work with a civil engineer because canopy boat and RV units will probably need a drainage plan.
So anyway, give leasing a look.
Absolute Steel is giving established self-storage and boat and RV storage facility owners an opportunity to expand their canopy parking or to offer this option for the first time. The tubular steel structures are not any different than other canopy storage options, and solar can be added to them.
As a self-storage feasibility consultant, I’d like to remind you, gentle reader, to apply the same smart due diligence you always do when exploring the leasing option. Make sure your market will support the higher rates you need to command to achieve your desired return on investment, and that this is the highest and best use of your land. That said, the Pro-Lease is a creative way to add value and profits to your facility by growing your covered boat and RV storage customer base.
For more information, visit Absolute Steel’s Pro-Lease information or email Dean, Dean@absolutesteel.net.