Boring business, exciting income
Boring businesses such as self storage generate profits unlike startups
Entrepreneurship
Boring businesses such as self storage generate profits unlike startups
Entrepreneurs are setting up boring businesses. It helps them in minting money out of the thin air. The global waste management market size was $2,080.0 billion in 2019.
A self storage business generated a revenue of $2mn (INR 16cr) in 18 months. An old factory from 1890 housed 50,000 square feet of storage space. It had a revenue of $25000 and expenses of $10,000. The space required repair and professional management. A businessman bought the property for $1.2mn. Sellers were to repair the roof and offer a loan of $300k. The business man raised the rest of the money from the bank. After refurbishing the building he re-launched the business at the market rate.
The first year projections were:
Our projections for yr 1:
$360k revenue
$108k expenses
$252k NOI (~20 cap)
$57k interest
$37k principle
$158k in cashflow
The businessman Nick Huber wrote, “As long as our monthly operating income covers the debt by 1.5x or more, we’ll lever up, taking $3.375MM in new loans on the building.
After $1.25MM goes to clear seller financing and original loan, we’ll have $2.125MM in cash go into our checking accounts”.
The businessman retains the building, with a positive cash flow, and no taxes. Nick shared his story how he got started in real estate. My favourite is ‘How to build a self storage empire’.