Top Adding - Real Estate

Self storage units have simplified management and potentially consistent cash flow. That makes them an attractive investment. You have to shop well, however, because the return on investment is probably low in most areas now, due to competition.

Inves

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

ting in self storage units was a great idea almost anywhere 30 years ago. Now that every little town has several of these facilities, you may have to do some serious research to determine if there is still room for one more. On the other hand, if there

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

is a need for more storage space, there are some real advantages to this kind of real estate investment.

Build a new self-storage complex and you likely won't have any real maintenance costs for many years to come. Other costs can be predictable as w

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ell. This means that if you did your research, and so can get those units rented out, you can have fairly consistent and predictable cash flow for years.

Investing In Self Storage Units - An Example

Suppose you decide that you may want to buil

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

d a self storage facility as an investment. First, you look at what is out there, and what the various sizes rent for. You call several places and ask if they have any units available. If they all had vacancies, you would likely drop the idea, but you

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

find that most are full, meaning there is probably some demand for more.

You call the county and find that there have been no permits issued for self storage buildings. You check the census statistics online and see that the population of the county i

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

s growing. Noting the income statistics, and the high prices on homes, you figure that most newcomers will be renting. These are the ideal customers for self storage business. The demand is there, you decide, or at least it will be soon.

You see a pl

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

an for a 102-unit building that you like, with three unit sizes. With 90% occupancy, the facility should bring in about $4,800 per month. You have projected the regular expenses (taxes, insurance, advertising, maintenance, legal costs, etc.) to be abou

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

t $12,000 per year, or $1,000 per month. You decide you don't want to manage the place yourself, and find a management company that will do it for $500 per month.

Subtracting that $1500 per month from the projected income of $4,800, you arrive at a ne

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

t income before debt service of $3,300. This is the amount you have to work with to cover your financing and provide a decent return on your investment.

There is a piece of land on the edge of town. You can buy it for $55,000. You talk to a company th

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

t specializes in building self-storage buildings, and get a quote for the 102-unit building you want. You call a paving company and get a quote for a driveway. You also find out what fencing will cost. You estimate closing costs, initial advertising co

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

sts, holding costs prior to getting the units rented, and every possible expense you can think of to get this project up and running.

You project the total cost to be $270,000. With your plan in place and in writing, you go to the bank. They will loan

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

you only 70% of the money - $189,000. At 9% annual interest, amortized over 30 years (but probably with a 10-year balloon), this will cost you $1520 per month. It also means that you'll need $81,000 additional for the deal.

You don't have the money,

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

so you put a second mortgage on your home to borrow $54,000. The bank is okay with this, because it leaves $27,000 of your own cash in the deal, which is 10% of the total. The second mortgage is at 7.75% for 30 years, costing just $387 per month. Your

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

total debt service will be around $1900 per month ($1907, to be exact). With your regular expenses of $1500, you'll have $3,400 going out.

This means that if all goes according to plan (90% occupancy - $4,800 per month), you will have cash flow of $1,

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

400 per month on your investment of $27,000. Not bad, but once you get that occupancy rate up to 95%, you will have cash flow of $1,665 per month - and without managing it yourself. That's a 74% annual return on your investment. You also feel relativel

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

y safe knowing that you can have as much as a third of the units vacant and still have cash flow.

You need forms signed that release you from liability from theft or damage, while still assuring the customers that you have decent security. You have to

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

think about locks (better to let the customer provide his own, perhaps). You need to know the law in regards to opening units and selling the contents when rent isn't paid. In other words, there is a lot to learn about the self storage business, but i

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

t can be a great real estate investment.

One last piece of advice. Don't try to do this on too small of a scale. The rent you collect for each self storage unit will not change, but the cost per unit will go down with bigger complexes, because of per-

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

unit cost for land goes down. For example, A $60,000 piece of land is $3,000 per unit for 20 units, but you might fit 120 on the same land, which makes it just $500 per unit. Good cash flow is easier to achieve with a decent-sized self storage building

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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