Uhaul rental income in Mini Storage complex

[leasedfee]

Do you count vending machine income in a hotel appraisal?

Yes, I would count it, but as part of the personal property or business income. I'd separate the real property from the personal property from the business income to get total assets value. Hotels are pretty clearly past the line as a going concern.

I wouldn't count vending income in an office building. Self-storage facilities seem in my opinion to be sufficiently inside of the real property category. Sure mini-storage sell and rent stuff. But so do retail, retail-warehouses, and some office users and that income goes to the business. Question back: If the none of the Uhaul trucks are onsite that day/week/month/year as they're on the road and thus generating good income (as well as lots of boxes and tape), or if most of the Uhauls are taken-away because it is a weak economy and thus generating little income, would you impute a different surplus/excess land values? Follow-up question: maintenance and repairs and cost of goods sold, and amortization, how should that be handled to determine land value?

Another argument is that what happens on top of the land (like a paid parking lot) or inside of a building goes to a business operator or tenant or serf. The lord of the land in a feudal sense collects a passive income stream of rents of their estates. Hence, we subtract management fees so the landlord can remain passive. "Passive" is a under-discussed concept -- European aristocracy thought talking about and grubbing-for money to be quite crass and very middle-class or peasant class for the aristocracy simply collected their rents. I can't imagine the Downtown Abbey's Dowager Lady Grantham with a clipboard or barcode reader tracking tape, box, and soda inventory and the Uhaul fleet.

 

[leasedfee]

Do you count vending machine income in a hotel appraisal?

Yes, I would count it, but as part of the personal property or business income. I'd separate the real property from the personal property from the business income to get total assets value. Hotels are pretty clearly past the line as a going concern.

I wouldn't count vending income in an office building. Self-storage facilities seem in my opinion to be sufficiently inside of the real property category. Sure mini-storage sell and rent stuff. But so do retail, retail-warehouses, and some office users and that income goes to the business. Question back: If the none of the Uhaul trucks are onsite that day/week/month/year as they're on the road and thus generating good income (as well as lots of boxes and tape), or if most of the Uhauls are taken-away because it is a weak economy and thus generating little income, would you impute a different surplus/excess land values? Follow-up question: maintenance and repairs and cost of goods sold, and amortization, how should that be handled to determine land value?

Another argument is that what happens on top of the land (like a paid parking lot) or inside of a building goes to a business operator or tenant or serf. The lord of the land in a feudal sense collects a passive income stream of rents of their estates. Hence, we subtract management fees so the landlord can remain passive. "Passive" is a under-discussed concept -- European aristocracy thought talking about and grubbing-for money to be quite crass and very middle-class or peasant class for the aristocracy simply collected their rents. I can't imagine the Downtown Abbey's Dowager Lady Grantham with a clipboard or barcode reader tracking tape, boxes, soda inventory and the Uhaul fleet.

 

[Rlong]

Many of these are now fairly small, auxillary oerations. A small uhaul rental operation can be done out of any building, even a Properly zoned house; unless there are features about the subject that makes it a uhaul property in particular it would seem to be almost all business enterprise value.

Bob in CO

 

[CANative]

"Passive" is a under-discussed concept

I think of this and discuss with small motel owners several times a week. These properties cannot generate enough income to make them suitable for a "Passive" landlord. They only work because of the managerial expertise of of the owners (usually the Indian subcontinent.) They are operated by the owner and his family.

 

[CANative]

unless there are features about the subject that makes it a uhaul property in particular

A sales office, a sign, and asphalt.

What about intangible p/p that goes to HBU such as the franchise, the web presence, the trained staff, etc.?

 

[NachoPerito]

An article in the Appraisal Journal suggests including the income from truck rentals. In rare cases where the income is out of wack with the real estate you can allocate the value from truck rental income as business value.

 

[CANative]

Perhaps it's the difference between a little extra pin money and part of the highest and best use. The little gas station around the corner (unbranded) also sells propane. Just recently (a day or two ago) I noted they set up a small a-frame type sign that had Uhaul's logo and some truck rental rates. I also noticed a small Uhaul enclosed truck (the $19.95 type) parked next to the propane station.

Pin money that I wouldn't include if I was to value the gas station. But a self storage with a Uhaul center. That's different. Those are very complimentary businesses and I might conclude that the Uhaul is part of the HBU.

 

[GregoryK]

Couple of thoughts. Is the franchise transferable? For it to have value, it must be able to be transferable to a potential buyer. Next, does the local or state government require a license to operate a truck rental business?

You could go either way with this in my opinion. But explaining what is included and excluded is essential to the appraisal problem. If you include the U-Haul business, you are most likely looking at a much higher cap rate for the income attributable to the truck rental.

 

[leasedfee]

I'd like to see someone tackle the questions that I posed above in the prior post about the problems of using truck rental income. Are you taking out the amortization and repairs/maintenance and vehicle insurance and management and oil/fuel from the truck rental income? Didn't think so.

And the Uhaul company is counting their truck income as revenue on their corporate P&L statement and booking the land as an asset on the same corporate balance sheet. You guys are double counting. Value the real property surplus/excess as real property using land comp comps. And as necessary back-of-the parcel comps (see past debates on the 40-30-20-10 rule). Sorry TAJ is wrong -- actually after being on the blind peer review panel and reading what felt like an infinite number of articles, I've concluded that it's not 100% reliable; they published stuff that I begged to be not published and didn't publish stuff I begged to be published. Heck, I'd like to change some errors in my own article in the journal.

 

[NachoPerito]

I'd like to see someone tackle the questions that I posed above in the prior post about the problems of using truck rental income. Are you taking out the amortization and repairs/maintenance and vehicle insurance and management and oil/fuel from the truck rental income? Didn't think so.
.

The deal with Uhaul is:
Uhaul handles taking payments and all expenses on the trucks and of course they own the trucks. They give the mini storage owner 20% of the revenue on the deal.