The Decatur County, Ohio, show ring building at the fairgrounds is booked solid from November to the beginning of April. Is the 140- x 260-foot space busy with concerts and monster truck melees?
No, the facility rents berths for customers to store RVs, boats, campers and show cars, bringing about $12,000 in revenue annually. Renters are charged about $9 per running foot, according to Dan Wilson, Ohio State University Extension educator.
"This is one of the best kept secrets for making money," says Wilson, indicating there is a need for storage space, whether for RVs and sometimes for farm equipment. Which, of course, raises the question: Is there an opportunity for farmers with largely unused buildings to fill the demand?
NO EASY ANSWER. Unfortunately the answer is yes and no. There is little data on how much landowners lease existing shed or storage building space. Kelvin Leibold, an Iowa State University Extension farm-management specialist, says farms near urban areas have an opportunity for storage income, particularly if the buildings are in good condition with concrete floors. That's one segment of the market.
The other type of business consists of landowners renting machinery sheds for equipment or cars to other rural residents. Leibold says their most recent survey showed an average annual rate paid for storage space at 36 cents per square foot. Rates ranged from 10 cents to 70 cents per square foot. A combine might need 450 square feet, estimates Leibold. At 36 cents per square foot, that's a $162 rental for one year. If that doesn't seem like much, you're right, he says. "This is where what I call 'the nuisance factor' comes into play," he says. "Is it worth renting space for $162?"
CHECK LIABILITY. If you're considering leasing a shed or barn, look closely at your liability. If something happens to the equipment while in your facility what, if any, increased insurance costs are involved? Leibold says rental agreements need to determine who is responsible for what upkeep of the facility and who pays for the electricity.
In addition, many buildings that are mostly empty are that way for a reason, according to Larry Hill, an area vice president with the management firm Farmers National Co. in Eagle Grove, Iowa. "There is a functional obsolescence involved," he says. "Combines and planters have gotten so large that these buildings aren't usable for that."
Farmers National recommends to clients they rent a facility for about 7% of its value. So for a $10,000 building, the annual rent would be $700. General recommendations for renting a facility are 7 to 12% of the building's value.
Hill suggests property owners carry at least $1 million worth of liability insurance and make sure renting a facility doesn't run afoul of local zoning ordinances. Otherwise, renting a facility doesn't create much of a tax/income problem because rental income is not subject to self-employment taxes.