Thread by @Levijameshere

Thinking about investing in real estate and don’t know what kind of property to buy? Take a look at industrial assets in growing cities. Here is a 🧵about one deal I own that is like an ATM machine. 👇

Many industrial properties are trading for far below replacement cost and yet offer functionally the same value to tenants as a new building would which means you can earn great returns if you buy smart.

Industrial vacancies are shrinking in most markets with population growth and yet most investors ignore the space which means opportunities still exist for great buys.

Harbor Capital buys much larger assets than this, but I’ll use an example of a building I purchased personally as it’s a great type of deal for a first time investor. (Would work even if I had borrowed the down payment)

The building was listed on both Crexi and LoopNet so it was available to anyone.

It is a 5400 square foot, 2018 build, with 24 ft ceilings, a 1400 square foot office and is located in an industrial park in The Woodands TX.

The market is growing quickly there and there isn’t much new industrial stock in the pipeline so I felt comfortable with the lease income.

Purchase price was $540,000. It was already fully leased, to a sports facility on a NNN lease with 4 yrs term remaining.

I put $125,000 down and got a loan for $423,000 at 4% interest.

The lease generates $4800 per month and NNN leases mean the tenant covers property taxes and all OPEX.

The lease income is both paying down roughly $1000 per month on debt and throwing off $2500 in free cash flow.

If you were following along, that is $125k in cash to buy, $30k per year in cash flow plus $12k per year in mortgage reduction, not to mention the usual tax treatments available to property owners.

As an added bonus, a similar building in the same compound recently sold for $700,000 so there has been some fantastic appreciation as well. (I bought it well because the seller was desperate to close quickly so some of that appreciation was immediate)

Industrial buildings aren’t considered a hot corner of the market just yet so you typically aren’t trying to outbid multiple other investors to get a deal. In fact this one had sat on the market for nearly a month before I found it.

As long as you are buying a well maintained, flexible use asset in a good location with low vacancies in the area, I don’t think you can go wrong in industrial right now.

That said, there are risks. Be sure you get all the necessary inspections and do your homework on the market. Watch out for older buildings that need a bunch of work and never never buy a building based off a cap rate that is leased over market rate.

Buy the asset not the tenant.