The economics of running a scrap yard have been less than ideal with the drops in demand driven by political and nonpolitical issues. What is ideal however, is the value of the licensed land to conduct metal recycling operations. Many of our clients are finding they can make just as much money leasing their properties out as operating them. If so, why work?
We came to this conclusion ourselves and leased the four yards we have and are currently enjoying roughly the same amount of money we were making by operating them. Of course, we gave up the up side in the business but the business had been good to us for a long time and it was time to move on. This was kind of like getting our cake and eating it to. We have to move on but keep the income.
Tiffany Klauer of Indeavor, a specialist in Industrial Real Estate transactions for the metals markets, says that “there are many areas in the country where the right tenant will pay rent that equals what most people can make from operating a traditional scrap yard.” If this strikes you as strange think about where we are:
- Historical real estate boom
- Eighteen years (1998-2016) of environmental tightening by federal authorities
- Trade wars killing raw metal demand from the export market
If you’re in a major market where 1M plus people exist in a 20 mile radius, have 12-15 acres or more, and it is licensed to dismantle and recycle, you are probably an ideal candidate. If your property falls into one of the new Opportunity Zones, it may even be more interesting.
These allow investors to be able to take advantage of new tax laws if they operate a new business on your land or buy the land from you (many rules apply).
How much can you make? There are two primary buyers/tenants for these properties and some of them are very hungry. The self-serve used auto part operators and the car/truck storage companies are the biggest players. “We have many companies we know actively searching right now” says Ms Klauer. In markets like California the rents can be from $15-$100k a month. Each market is different of course so you need someone who is focused on the metals markets and knows the players.
The point at the end of the day is at least investigate all your options before you work yourself to the bone when sleeping and making money may be an option after all.