Turning Dirt Into Dollars: The $1.15M Truck Depot With $550K Uplift

Hi, I'm Andrew Wright, principal of Professional Southport, and this is the Andrew Wright Property Podcast. I've built a multimillion dollar property portfolio delivering a seven figure annual rental income, and led my real estate team through thousands of sale and lease transactions in each episode. I share real deals and strategies that will help you find, fund and operate profitable property deals.

The aim of this show is to provide education and build a community of like-minded investors who can collaborate, share insights, and help each other in each other's journeys. You can make excuses or you can make money, but you can't do both. So come and join us.

Adam:: Hello and welcome back to the Andrew Wright Property podcast. Today we are going to be talking about turning dirt into dollars with industrial outdoor storage. Think truck depots, container yards, and equipment lay down. We'll cover why IOS can cash flow with the tenants paying the outgoings, how to choose the right site, what returns to expect, where investors get stuck, and a few real deals Andrew's done lately, including one that he bought 550,000 below UCV. Andrew, welcome back to the podcast.

Andrew:: Hang on Adam, do you like my tie?

Adam:: I do. For anyone watching on YouTube, we've got a very bright tie in here in the studio today. What was that character's name? It's a golfing guy and he's smashing his golf club because he is not happy.

Andrew:: Is that the Tazzy devil? I used to be into my Warner Brothers stuff. That's what happens when you've hit a nice drive down the middle, you chip it on and your four putt. Yeah, you smash your clubs like this guy at the top.

Adam:: Yeah, well I've done that plenty of times. Alright, so industrial outdoor storage or as we're going to refer it to as IOS. What is it mate?

Andrew:: IOS is basically land that is zoned industrial, that can be used to park trucks, buses, building equipment, excavators, might be tiny homes, shipping containers, the like. Anything that doesn't need to be inside a warehouse out of the sun. And the reason it exists is because the rental rates per square meter might be 10 or 20% that a tenant would pay if it had to be under a big warehouse right out of the sun and out of the rain. You know, if you can store it outside, you're gonna save a lot of money on the rent.

Adam:: Sure. Okay. So this is very interesting, something probably a lot of people haven't thought about or considered. How did you come across this as a potential investment area of interest?

Andrew:: Look, every morning I'm in the gym. I listen to podcasts and there's a couple in the United States talking about industrial outdoor storage. And the more and more I learn about it, it just fascinated me. And the same opportunity exists here in Australia.

Adam:: Right. Okay. So what sort of returns are you looking at? Obviously they would vary, but talk me through returns on IOS.

Andrew:: Okay, so the first thing to note is that it would depend on whether there's actually a warehouse on the site. So typically most of these truck depots would only have maybe 10 to 20% site coverage of a site with actual shed on it. It's mainly just hard stand. Might be compacted gravel or concrete. So the amount of return you have will first of all depend on whether you have a shed on it or whether it's all outside storage.

Adam:: But does it matter whether there's concrete or gravel or what the actual surface is?

Andrew:: It does, depending on the weight of what's being stored there. I might explain the different types of facilities. So the way I see it is you've pretty much got three categories. C grade sort of site might be an old rural property like a farm where the council's just changed the zoning to industrial and it's not properly fenced. There's no improvements to the ground, no hard stand there. If you wanted to leave a truck there, you might come back in a week and have smashed windows or it might be gone. There's no security or anything.

Class B is, you know, you'd expect that to be fully fenced and it would probably have some compacted gravel on it.

And then you go up to the A Grade. Usually found in a custom built logistics industrial park facility where you've got really wide bitumen roads for these double and triple road trains to turn around. They need big turning circles. Really solid concrete overpasses leading to the site, fully fenced for security, probably security cameras, security lighting. And those facilities would either be very, very thick compacted gravel, or even asphalt bitumen or concrete, which is the most premium one that lasts the longest. Some of them might even have toilets and places for them to wash the trucks down and things like that.

And the returns you get are different for each of those three different asset classes, as is the quality of the tenant. So when you're dealing with B grade stuff, which I've recently purchased, they're mom and dad tenants, usually signing shorter term leases, more likely not to pay the rent, more problems. Whereas when you go into the more expensive A grade facilities, the rental yields might be a lot lower, maybe three to 5% net instead of up to 10% on the B and C class facilities, but lower risk, easier to manage. And the banks like lending on them because they're safer, better quality tenants.

Adam:: Okay. So yeah, talk me through the types of tenants you do have and the leases that they take on. Tell me a bit more about that.

Andrew:: Well, typically on an A grade facility, I've only got one A grade facility. I'm building a second one. But that one there, there was a long-term tenant in there that paid rent and they paid a hundred percent of the outgoings, including insurance, rates, land tax, the whole box and dice.

Adam:: Hang on. What tenant was that? What was their business? What were they using it for?

Andrew:: Look, I've only just purchased that site last week. The company, the tenant there is RGM maintenance. I think they maintain trucks, right? They have eight truck depots round Australia, and they're actually moving out of this facility at the end of the year 'cause they're building another one up in Townsville that they're gonna move into.

A lot of these big trucking companies like to buy their own sites because they don't wanna pay the rent. But that's a good exit strategy if you can get hold of some. One of the exit strategies is you can build it or buy it and down the track if you do need to sell, one of the exit strategies is to sell to the end users, the truckers themselves.

Adam:: That saves them money and you make a good return on your investment.

Andrew:: Yeah. And the other exit strategies like you can sell to another investor like myself, someone who's just wanting the income and capital growth from the site. The third type of exit might be a developer who actually wants to build warehouses and take the property to its highest and best use.

What I'm particularly excited about is option four — perhaps packaging multiple sites together and selling it off to a big fund manager, a property trust or something that usually they won't look at anything under 10 or $20 million worth of land. But I'm at the moment, I have a game plan to build a portfolio, package a portfolio now, and maybe sell it for a premium.

Adam:: Interesting. 'Cause I'm sure Andrew, most people think when you know, lay people think building a property portfolio, it's about residential houses and buying the next one. They don't think of it in terms of what you are talking about here — a portfolio of IOS properties and the value that would stack onto have multiple and then be available to a much bigger buyer.

Andrew:: I just had something come into my subconscious when you said that building a big portfolio of houses — if you've got a hundred houses, you've got a hundred roofs to leak, hundreds of air conditioners that break down, hundreds of toilets that stop flushing.

I could have a hundred truck depots. I don't pay insurance on any building 'cause there is no building most of the time. There's no air conditioning problems, there's no leaking roofs, there's nothing. So the management of this type of asset is so much easier, particularly when you have a single tenant facility.

And that's another discussion too. So you could go down this track of industrial outdoor storage. There's two different paths you could go down. One is the choice that I've made and that is long-term tenant, single tenant leases. Or you could run it as overnight truck parking. Treat it more like a business, like a parking lot, but you've got more intensive labor. You've gotta employ someone, boots on the ground. More technology, you will make a lot more money that way, but it chews up a lot more of your time.

Adam:: How easy is it to find tenants? A lot of people out there thinking, well, I've never looked at this. I know roughly what the rental market looks like for a home, the vacancy rates, et cetera. Talk to me about the ease of finding tenants, vacancy rates and that sort of thing when it comes to an asset class like this.

Andrew:: Yeah, so I'm only just learning and feeling my way around this. I've started one year ago. Like January this year. I bought my first one, so I'm certainly not an expert, but I think it depends on the region. Every region is different, but what I can say is that on recent research that I've done, even Googling, there are over 1 million heavy vehicles in Australia, over four and a half tons that have gotta be somewhere, and there is a lot less than 1 million legal heavy truck parks available. So there is always going to be a shortage.

Adam:: So when you look at that supply demand figure right there...

Andrew:: And it's gonna get worse because councils around Australia are under a lot of pressure to release more land for residential purposes, and they don't like releasing it for industrial use. And every single time someone who owns industrial land builds a shed on it, it takes away from the supply of legal places for a truck to park.

Adam:: Wow. Okay. So I'm massively excited and you're very excited about this asset class.

Andrew:: It's my favorite asset class.

Adam:: I can tell. We've talked about it a bit in the past, and I'm loving this episode already 'cause this just blows my mind. Alright, talk about site criteria. What do you look for? How do you find these places? Is there a checklist?

Andrew:: I'm sure there would be a checklist, but step number one, off the top of my cuff — has to be zoned industrial land. If it's not an existing use, you may have to apply for a material change of use with the local council to use it as a truck parking depot or industrial outdoor storage facility.

It's certainly helpful if the industrial land is in close proximity to a highway because trucks are going up and down the highway and they don't want to drive for 20 minutes just to park the car every night when they go for a nap. They want to be close to a highway and close to a port might be an additional bonus because that's quite often the route that they're traveling.

As far as the sites themselves, they usually would need to be at least one acre in size up to 10 acres of land. And as I mentioned before, it's probably best if they're fully fenced, a solid concrete overpass wide for a double semi-trailer to actually have that big turning circle to get in safely. And preferably some security lighting and security cameras.

But the main thing is it's well located, close to a highway, fully fenced and secure. And preferably if you could afford to concrete everyone, you would do it. And you get the higher rate rent. Compacted gravel can move around and asphalt — when those big trucks turn around, they can actually damage the asphalt as well. A grade would be concrete, but it's so expensive that most sites are compacted gravel.

Adam:: Now you talked about whether there's a building or not on these. Do you need an onsite manager at these places? Do you have to have a building? How do you manage incoming, outgoing trucks? How does all that fit together?

Andrew:: Well, I'm still learning, but a couple of the sites I bought this year don't have any dwelling on it at all. There's nothing there. A lot of these people, with the local council, wherever they are will allow a relocatable home. So it could be like a caravan on wheels or some relocatable little office that people work out of when they're there. That's certainly quite common.

There are other more when you get to the A grade sort of facilities, most of them, not all of them, but most of them would have some sort of dwelling on site covering 10 to 20% of the site.

Adam:: And depending on your tenants and the model you're going for, as you have explained, that would determine whether you actually needed an on site management team or not.

Andrew:: Yeah. Well I certainly don't have any intention at all to have overnight parking. You can get a lot more, you know, charging for overnight or weekly parking rates, but then you've gotta have someone on the ground or some magic app on your phone. I don't want to go down that track. Down the track I may do that, but at this point in time, I'd rather just have single tenant properties that you just don't hear from 'em. There's nothing to do.

Adam:: And in your experience, finding those one tenant, single tenancy for your sites hasn't been a big issue so far?

Andrew:: It hasn't. As I said, I've bought six blocks of land this year on four different contracts of sale and three of them already had tenants, well, fully tenanted. The other one, I'm actually going through a development approval for a change of use, which we'll talk about shortly to actually build a site. That one's obviously empty with no income, so I'm sure there'll be vacancy risks there, but I'm hoping that it's only gonna be minimal vacancy.

Adam:: Sure. Alright, well talk me through, you've got four deals to tell me about, don't you?

Andrew:: So I don't forget them. I think chronologically would be the way to go through these ones. So the first one was January this year. So we're only talking nine or 10 months ago, a newbie at this, but bit of experience already.

So this was in Emerald. Haven't flown up to have a look at it, it's too far out in the sticks for me. And it's cheap. You don't have to be a multimillionaire to get involved with this sort of stuff. It's cheaper than a house.

Adam:: I think that this is a point I really wanna make for our listeners. I think we've been so drilled here in Australia to think property investment needs to be residential property, and what we're talking about here can be done by your mom and dad who've got that cash that they'd be mostly putting into an investment property.

Andrew:: Yeah. And the average house in the CBDs of capital cities is a million bucks now. So this site, people might be surprised to learn, I paid $340,000 for 3,231 square meters of land, so nearly an acre. It already had a tenant in there, so they'd signed a — it's a mom and dad truck parking company, transport company up in Emerald.

And they just parked their semi trailers there. They had a two year lease with a two year option. It was fully fenced. The owner had already spent $30,000 putting a concrete overpass there. There was another $30,000 of compacted dirt and gravel on the site.

Because there was an existing lease on that property, that's the only one of the four I was able to get a bank loan from. Banks hate lending on vacant land, but if you have a long-term lease on it, they'll lend 50%. So the debt on that one is only just over 6%, which is fantastic.

Rental return — 25 grand a year plus all the outgoings, so it's about 7.5% net return. And on my 50% deposit, I get the 7.5%. And on the bank's money I'm making one and a half 'cause I'm only paying 6%.

But the future of that site is great. They've just exercised their option to extend for another two years. The previous owner who sold that one had also successfully got a development approved for a 900 square meter shed on the site, and he's already paid all the infrastructure charges. So at any point in time if that truck transport company doesn't wanna rent it, I've already got the approvals there, the council fees have already been paid. I can just whack up a shed and then increase the potential range of tenants that I can get.

Adam:: It comes back to if you haven't listened to a previous episode, highest and best use. What in your mind should that tenant ever move on and you do put a shed on it — what does that open you up to?

Andrew:: Well, first of all, I hope it doesn't come to that because with most commercial tenancy agreements, it'll be written in there that the tenant has to give you probably six months notice if they're gonna move out. So that allows me to go to realcommercial.com.au and advertise for six months to find another truck parking tenant.

Now with the shortage of supply around the place, I would hope that by the time they move out or shortly thereafter, I'll have someone ready to go in. I don't wanna build a shed. I'm not a builder. It's a pain in the ass. But if it came to that, if I had a vacancy like I've had in other asset classes for six or 12 months, I would be forced to build a shed and then the rent will be massively higher because you've got a much bigger property there to rent out.

Industrial sheds are the cheapest type of construction to do. It's just four walls and some LED lights and a few other little things here and there. They're a lot easier to build than residential or retail property and I don't mind going down that track if I need to.

Adam:: Perfect. Alright, deal number two.

Andrew:: The next one I bought, from selling that church. I had a bit of money left over when we did another episode before, and I went out to Toowoomba and I purchased just under four acres of industrial zoned land. It is just vacant land.

Adam:: You just found this on real commercial?

Andrew:: Yeah. It was just like the Emerald one. It was all online. Anyone else could have bought it. 15,800 square meters of land. It's all very, very flat, which is great, and it is literally a hundred meters from the highway, the Warrego Highway, and not far from that other new Toowoomba bypass road.

So really, really close to the highway. Four acres of land. I looked up the road at a place called Withcott. This place is in the suburb of Helidon. It's about 15 minutes from Toowoomba down the bottom of the Toowoomba range. Up the road in Withcott just 10 minutes away, they're selling this type of property for $400 a square meter. I bought this site for $27 a square meter.

Adam:: Wow.

Andrew:: So $420,000 for four acres of industrial land. Now, if you look on the Gold Coast at Yatala here, people are paying $1,500 a square meter. I've paid $27 a square meter for this land.

Adam:: What is it when you found it? Is it a paddock?

Andrew:: Yeah, it's an old rural property that the Lockyer Valley Council rezoned a section of rural land to industrial.

Adam:: So there's the key right there, isn't it? That's where your radar goes off. The approval's been changed. You're looking at it. Can this work? Ticking off things. Am I close to the highway? Yes. Is this an area where a lot of trucks come past? Yes, it is. And can I say holy shit, look at the price.

Andrew:: Yeah. And there's like 150 meters of frontage on this road, massive frontage, and it's only a hundred meters from the highway and it's flat. There's NBN and three phase power already connected to the site.

Adam:: Okay. So what did you have to do to it to convert it, to be ready?

Andrew:: Well, I'm still doing it now. I've got a town planner on the job. I've employed some engineers. I'm not educated in all of this sort of stuff. That's why you employ smart people to help you out. I've got engineers doing storm water reports and all this sort of stuff with the drainage to work out what I need to do. And very shortly in the next few weeks, we'll be lodging a development application for approval to make it a truck parking site.

So unfortunately what I didn't realize is that once I've had all the engineers look at it, after a couple of months they've come back to me and said, Andrew, we can't build on the whole four acres. We've got these new flood maps from the council that said if there was a one in a hundred year flood, there's about half of this site which would have water flowing over it, and if you want to build on that some sheds or something like that, you have to elevate them on poles or something like that.

I said, well, look, that's too expensive. You might have to have a very expensive water detention device which means that when it rains or floods, all the water is held in these tanks and it's slowly released out to the footpath so it doesn't flood the main road. Can cost hundreds of thousands of dollars. So I didn't wanna go down that track.

So at the moment we're looking like doing hard stand on seven and a half thousand square meters. About half of that site, which will be a lot easier to build and it won't cost me as much either. I'm doing it in two stages. So stage one is just the hard stand so people can use it for parking, industrial outdoor storage. And stage two, if my tenants demand it, is I can build a couple of sheds on there later.

And the reason I'm doing it over two stages is when you get a development application approved, you start building, you have to pay to the council infrastructure charges up front for the whole development. By doing it in two stages, I don't have to pay all the infrastructure charges for the two sheds until I decide to do it, if or when. So it could save me a hundred thousand dollars or more in infrastructure charges by doing it in two stages.

Adam:: So phase one, what's that costing you?

Andrew:: I dunno yet. I'm working through that. Once I get the approvals, I'll get some quotes from Earthworks, but my understanding is probably if I go with gravel, it might be $30 a square meter for gravel. So 8,000 square meters times 30. That's a quarter of a million dollars for the compacted gravel. The local council charges $12.50 per square meter in infrastructure charges, so there's another hundred grand. About $96,000 just in infrastructure charges to the council before we get started.

There's 350,000. Once it's all compacted, I'd have to put a fence around it, maybe some lights and some cameras. That's without a shed and I don't have the engineer's instructions yet as to what sort of drainage I might need to build. The concrete overpass will cost me 50 grand. I'll probably have a security gate with some fancy code where they can dial their phone and it'll automatically open. There could be another 50 grand.

So I'm, you know, it may well be seven or $800,000 I need to spend on it, which will bring it up to 1.2 million. It'll be worth 2 million all day long from the moment that you open it.

Adam:: And then that's without building sheds. That's just the hardstand. Your plan then would still be to keep it though? You don't sell unless there's a particularly good reason to?

Andrew:: No. So if it, look, it's all hypothetical at the moment, but if I go down that track in a year's time, it's all done and I get some tenants in there, there'll be an equity uplift there. I'll get it revalued.

Oh, the first thing I'll do — I'll come back to how I bought that one. Remember, banks don't lend on empty land. Same deal. So I used some of that church money and a mate of mine who lent me on the church, he's lent me the money, a private loan. He lent me 70% or 60% on that site because banks won't finance it.

So what happens is once I finish it, I can get it revalued, get some long leases there. I can then go to a bank and get the 50% loan at the cheapest 6% interest. Hopefully have a little bit more equity there that I can use to go and buy another site.

Adam:: Fantastic. And yeah, don't sell. And the other thing about this site is if I can't find a tenant to lease the whole two acres of hard stand, I can put a fence in the middle and break it up into two or three, and get two or three smaller tenants.

Adam:: Fantastic. One question I've got before we move on to deal three, you mentioned it was zoned industrial but you needed to get approval to turn it into a truck parking. Talk me through that.

Andrew:: Great question. It was only after I purchased the site that I had that exact same query because I didn't know it was — it's really crazy. But the council has zoned it industrial. And I rang them up to make sure I'm just gonna put some hard stand on here and rent it out for truck parking.

Oh no, it's not approved for that. And I said, well, it's zoned industrial, isn't it? What can I legally do on it without applying for a change of use? And they came back with some really weird response of out of that 15,800 square meters of land, you're allowed to use about 15 square meters of it for a battery storage facility.

I still don't get it. 15,800 square meters, the only legal use was about 15 square meters for a battery storage.

Adam:: Well what's the point of zoning it industrial?

Andrew:: It quite clearly is something that the council realizes. They need some more industrial land, but they want to make sure that it is constructed with the best needs of the community and they can put their hands out for fees. And that's what it's all about. I mean, I've come to that conclusion. I may be offending some people by saying that, but it's a money grab.

Adam:: Right. Okay. But you have got the approval now?

Andrew:: No. My town planner is working. I'm still waiting on the final engineering drawings. I've just had to go back to the building designers now — we were originally gonna put hard stand on about 12,000 out of that 15,800. Now we're cutting it back to seven and a half. We should be lodging in the next couple of weeks for the development approval.

Adam:: What happens if you don't get it?

Andrew:: I'll get it. It'll go through. I mean, there might be some changes, but it'll come through in some manner, shape, or form. I mean, they've zoned it industrial because they want it to be used as industrial and for the community.

Adam:: Alright, deal number three.

Andrew:: And the next one for hopefully every single viewer out there will get excited at the price range of this one. Again, exactly the same price as the Emerald one. $340,000. Again, one third of the price of a house in a capital city. This one was in Townsville.

Adam:: Very doable for your average property investor.

Andrew:: Absolutely. Almost identical size to the Emerald one, 3,237 square meters of land, fully fenced and already broken down into three separate yards. It had three separate tenants in there, just industrial outdoor storage with a fence around it.

And the rental return on that 340,000 is 42,500 or 12.5% rental return.

Adam:: Why is someone selling it? I don't know.

This again, there's gonna be certain things that come up in just about every episode of this podcast series, Andrew, and I'm gonna bring it up again. You look at every listing. Every listing to find these gems. They're there.

Andrew:: Well, a lot of people wouldn't have found that one because it was actually listed for sale with the site next door, 18 Ridge Street in Oonoonba in Townsville is what it was advertised at, but it was two separate lots for sale. And it said on the advertising, both combined or each separately.

Now I looked at the aerial photograph and the 18 Ridge Street was two separate tenancies and a lot of it was all grass still. And I had a look at the other half at 15 to 17 Nadzab on the other street. It was broken into three, so it had three tenants. I thought, well, maybe there's a lot more of that rent being apportioned to that second site. And it was fully hard stand. It was a lot better developed. Three tenants instead of two.

I thought, well, maybe I could just look at that half. And on the website it was marketed X amount of income for the whole two sites. But when I did my due diligence, it showed me that the majority — 42 and a half out of 60 something was for that half of it.

So I thought, well, why would I buy the whole lot if I just buy that half? I'm getting 12.5 percent rental return. It's fully fenced into three separate yards, three existing tenants. 12.5% return. There's no buildings to insure. I pay about $500 a year in public liability insurance is my only outgoing on that property, apart from some rates. What a deal. Why wouldn't you do that all day long?

Now, only month to month short term leases there because the guy running it had operated short term leases. So once again, I couldn't get a bank loan, so I approached a different friend and got a private loan on that one, a 70% LVR.

But because I'm getting 12.5% rent, there's nothing coming outta my pocket on the private money loan. And I will in the next month or so put those three tenants on two or three year leases so I can go back to a bank and say, look, now I've got two or three year leases on this site. Can you lend me 50% at 6% interest instead of paying the higher interest?

So I'm gonna be getting 12.5% rent, paying only 6% to the bank. I mean, you can't — and the other thing is, you know, people say, oh, you can get more capital growth from resi. Well that's in some cases may be true, but with the sites I'm buying, that's just baloney because that site, nearly an acre of industrial land, that's gonna go up in value.

I've paid a hundred dollars a square meter for that one. In Yatala it's 1500 or $1,600 a square meter. There's so much upside on the capital growth there. It's unbelievable.

Adam:: Another good point I think too then for our listeners is something you are more than comfortable doing and that is investing in places that are far-flung and not close to where you live or that you need to see necessarily. Be willing to do that. Be willing to look further afield. 'Cause I think a lot of people probably feel the security of wanting to invest close to where they physically are.

Andrew:: I think it's probably a little bit easier when it's just land. Like if it was a house, I would probably wanna fly there and have a look at that one. I bought sight unseen as well. I didn't — I flew there after I'd bought it to check it out. But if it's just land, you don't really need to go and tap all the walls and turn on the lights and all that sort of stuff. It's a little bit easier to take a punt on something site unseen and further away from home.

And the other thing about that site — what I like that site as opposed to the Emerald one, even though I couldn't get bank finance because there was no long-term lease, is there's actually three separate lots of income there. If one moves out, I've still got two thirds of the income. From a risk management point of view, you're covered.

Adam:: Alright, give us your final deal.

Andrew:: Last week I settled on 13 Kupfer Drive in Oonoonba up in Townsville again. It was advertised online for three or six months for one and a half million dollars.

Adam:: Okay, so a much bigger one.

Andrew:: This was an A grade facility. I checked on the Queensland State government website and the land valuation was $1.7 million. Obviously there was a relationship problem with the owner. Need to get rid of it. There is an A Grade tenant in there, as I mentioned before, RGM Maintenance. But they're moving out at the end of the year.

So again, no one can get finance for an empty block of land, which probably is what creates the opportunity for investors who can think outside the box.

I couldn't get a bank loan either. So once again, for the third time this year on a third different deal, I've had to get a private money loan from a mate of mine.

And I bought that site for 1,150,000 — 550,000 less than the unimproved capital value as valued by the government. And there's a couple of hundred thousand dollars of improvements there in addition to that — fencing, concrete overpass, hard stand, all that type of stuff.

Adam:: So good deal. Rental return?

Andrew:: Currently they're paying $15 a square meter plus outgoings. So 6,038 square meters, it's 90 something grand a year, plus all the outgoings. So the net return on that is 90 on 1.15, whatever that is. Seven point something percent net return.

Again, when you go to the more A grade stuff, your net yields are gonna be slightly lower because you've got a safer tenant and you're not gonna get 10% net with an A grade tenant like that.

Adam:: Are you in a hole if you can't find another tenant?

Andrew:: Yes. Yes I am. And that's why I'm advertising now. I've got two months to find another tenant and there's a massive risk. And in fact, there's a high likelihood that there'll be some vacancy there because the lease finishes 31 December. I can't imagine anyone first week of January moving their truck parking site there and I'll suffer some vacancy there.

The 550 grand discount on land value is a fairly good buffer to play with if it takes me a few months to find another tenant. Secondly, from a risk management point of view, they're paying $15 a square meter. Another fund manager in the area just told me a recent comparable transaction was leased at $25 a square meter, which would make market rent there 150 grand a year, not 90.

So there's plenty of upside there. And if I can rent the thing out at a higher rate than $15 a square meter plus outgoings, there'll be an immediate capital growth again.

Adam:: Fantastic. Four absolutely amazing deals.

Andrew:: I just wanna add one more thing. Reason why I'm so excited about that one, Adam. It's three blocks of land. I bought it on one contract, but it's lots 26, 27, 28. From risk management point of view, again, if I can't lease that thing out, I can put up two more fences. I can rent the three blocks individually.

Adam:: Effectively subdivide, just yeah.

Andrew:: To smaller 2,000 square meter tenancies. And when you have smaller tenancies, there's a lot more potential tenants in the pool that can afford to rent the place. Could be small blue collar workers, plumbers, people who fix pools or whatever, electricians, someone who sells caravans or boats, they might just wanna store stuff there.

There's plenty of smaller tenants that I can put in there. And if I have real trouble, well guess what? I can sell. If I sold each — there's three lots there and I sold a couple for 600 each, I got me 1.2 million back and I got a free block of land left. Third one's free.

Adam:: Unreal.

Andrew:: And I don't need to go to the council and pay them fees to subdivide. It's what you call in residential, a splitter block. It's already legally three different blocks of land. You just have to put up a fence, sell it. I sell two, got one free block of land.

Adam:: Unreal. Absolutely love it. Fantastic Andrew. Look, I've — you can tell I've absolutely loved this episode.

Andrew:: Can you tell I'm excited about this?

Adam:: I can. I can.

Andrew:: I'm gonna buy a hundred of these things. I love it.

Adam:: And look, that's what this podcast is all about. If you've enjoyed this episode, please — the contact details are down in the show notes. Jump in, send us an email, join Andrew's community, where you'll get newsletters and all sorts of things that'll be becoming free resources and everything else.

This whole podcast is about Andrew sharing his knowledge, and we'll be having other people on the show as we roll forward, who will share theirs. This is about a community and like-minded people who can help collaborate, possibly even do deals together. Who knows?

Andrew:: Look Adam, one of the things for sure is I don't have enough money to buy a lot of these things. I can find really good sites, and I'm hoping that through this podcast I'll meet people that get excited about what I'm talking about, and they may want to go and invest with me because I can't buy 'em or I can find them. That's my skillset. I need some help.

Adam:: Yep. Fantastic. So do join Andrew's email list there. Become part of the community. This is going to grow dramatically as this podcast grows. But do give us a like, give us a follow, subscribe to the podcast, share it with other people who are passionate about property.

And Andrew, I'm absolutely loving being a part of this with you, and can't wait to sit down with you on the next episode.

Andrew:: Thanks, Adam. See you next time.

Thanks for listening to the Andrew Wright Property podcast. This is all about building a community of like-minded investors who can share real life stories, experiences, and collaborate with a view to helping each other.

Join us. Get in touch through the link in the show notes. I look forward to you joining me on the next episode.