Business Entreprenuer startup

How To Invest In Shipping Containers

Entrepreneurs are constantly looking for new business opportunities, especially those that don’t involve franchising. Shipping containers are metal boxes that range in size from 20′ to 40′ long. If they are still being used to transport goods, they are CW (cargo worthy) and are WWT (wind and watertight). Profitable shipping container business opportunities do exist, some are extremely lucrative and secure, others are complete and utter scams.

Intermodal transportation has been important to our economy for some time. Shipping containers play a vital role in this method of transportation as containers can easily be loaded and unloaded from cargo ships, railcars, and tractor-trailers.

The logistics industry is constantly changing. Economic changes have an effect on how many containers are sitting empty in storage and how many are on ships or otherwise “in transit”.

In bear markets, fewer goods are sold and transported due to reduced demand. In bull markets, the opposite happens. As a result, more goods flow than many logistics companies are prepared for. Shipping companies are left with the difficult decision to either buy, lease, or rent additional containers to keep up with the demand.

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The business opportunity that most investors encounter in this space, involves buying shipping containers which are rented out to logistics companies at higher than bank rates. This is similar to other businesses where peaks in demand create short terms high rate opportunities, such as rail car tankers or heavy equipment like cranes.

There is a thriving business in renting to shipping containers to businesses and consumers who are looking for on-site storage similar to PODS (portable on-demand storage) but who are not looking to transport the filled container to another location.

The shipping container’s high level of portability challenges other modular, affordable solutions for business and consumers such as the pop-up shop, the food truck, and even the tiny-home.

Rental Scam

Many entrepreneurs and investors like owning tangible assets, and feel more in control of an investment when they own the underlying asset. This makes sense when purchasing appreciating assets like real estate but it makes less sense in other industries where there is significant depreciation.

The shipping container business opportunity that has the least amount of upside and the most amount of risk is the container rental scheme.

An investor purchases new containers from a third-party who agrees to broker containers to shipping companies who are looking to temporarily lease a container. The investment promises significant returns in the rage of 10-20% per year.

The sales pitch is that shipping containers are hard assets that retain value. After a set number of years of collecting rental fees, the investor can sell the container for close to, or exactly, what they initially paid.

These schemes are scattered throughout the internet. Most of them operate similarly and share commonalities (beyond the negative reviews).

International transactions are difficult to track and are almost impossible to challenge or call back. It’s not unreasonable to wire money to China to buy Chinese shipping containers, but it’s near impossible after the fact to identify the principles of a business, let alone attempt to recover funds.

The rental scam works like this: an investor buys a shipping container from a third-party broker and wires the money, the broker may stop returning phone calls at this point, or they may continue the scam by providing ownership documents (that they may have provided to others). Since the investor is not physically in control of the containers it’s impossible to verify if they actually exist, and that they are registered to the investor. As long as new investors continue to invest, no business activity of any kind is required. Monthly, quarterly, or yearly “rental fees” are paid out by using new investor money or the investor’s original investment. As long as investors get paid a return, nobody suspects any foul play, and new investors continue to join until the scheme becomes unsustainable and it collapses.

To label, every rental scheme as a scam may be over-reaching. There may very well be legitimate shipping container rental business opportunities that provide honest returns. If these investments do exist, they are the exception, not the norm. Do your due diligence, never invest more than you can afford to lose, and try to speak to as many investors in the product as you can before making a decision.

Be aware that the general consensus is: investing in shipping containers through a third party for the purpose of renting is a bad idea and almost always a scam.

Purchase Scam

The old adage of buying company stock, not “rolling” stock applies to shipping containers. Transport and logistics companies have thousands of containers already. The safest and easiest way to position yourself to gain from an increase in the global transport industry is to buy stock in intermodal transport companies, companies that produce containers, or companies that produce the raw materials needed to make containers.

Some companies allow investors to purchase shipping containers from “developing countries” at half the price they cost in developed countries. Once the containers are purchased, they are loaded onto cargo ships and delivered to major shipping centers such as London or Hong Kong.

This arbitrage opportunity presents many of the same risks as the rental scheme. The investment is typically made through a third party agent who claims to have relationships in both the developed and developing world. For a nominal fee, these third parties offer to use their expertise to purchase the containers, transport them and sell them at a significant profit in larger developed markets.

While on the surface it may look like a reasonable arbitrage opportunity, there is a reason why everyone isn’t buying shipping containers for less and selling them for more elsewhere. Even if there is a verifiable significant margin involved, it’s important to realize international tax law is complex. If this were a legitimate opportunity, companies would be buying boatloads of containers and selling them in other ports.

Arbitrage opportunities that are legal and scalable are rare. Many people earn money by buying luxury items in the western world at retail prices, then selling them to China because either the retail markup in China is significantly higher or it’s an item that isn’t sold in their jurisdiction.

Is it possible to sell “grey market” containers? It may be possible to get away with a few, perhaps this how a third party hooks a potential investor. As with rental containers, it’s very difficult to verify whether transactions are actually taking place, or if someone is “creating paper” with the intention of eventually “losing your containers” or simply shutting down. Very few people claim to have had success with such schemes. Unless claims of success can be verified, they should be taken with a grain of salt. Unfortunately, scammers are quite adept at writing their own positive reviews in order to recruit investors.

Buying And Renting Used Shipping Containers

Buying a shipping container in your home country, to be delivered to your own property is typically a safe and affordable transaction. Most used shipping containers are dented and dinged and require a painting and rust removal at the very least.

Some used containers are suitable for shipping, but a secondary rental market for using them as seafaring containers is limited. Typically used shipping containers are either procured for the purchaser’s own shipping needs or more commonly they are rented out to those requiring temporary storage or space.

Shipping containers are up to 40′ long which means heavy equipment is required to load and deliver the container. The business model for renting containers locally is simple: buy some old containers, advertise, deliver them to your customer, then pick them up when they are done.

There are limitations to this business. Heavy equipment is required to move containers around so in most situations containers are delivered and picked up completely empty. This is different than PODS, which are cheaper and lighter than a shipping container but allows the renter to slowly fill it with items before it is eventually picked up and moved to long term storage.

Buying and renting shipping containers as a business, requires investment in equipment to move them, insurance, and a yard to store them. A partnership with someone who is able to do all the heavy lifting makes the most sense to those attracted to this idea.

With competition from PODS that are lighter and can be moved whilst full, the need for a rental container is limited. This isn’t to say that there is no market for rentals, there are many companies compete in this space.

Investors who rent shipping containers locally are in the sales and marketing business not the shipping container business. Renting containers in your local market requires all of the efforts any business requires. It is not a get rich quick scheme or a passive investment. Unless you are passionate about the subject or have connections in the industry there are likely far better industries to invest in.

Building With Shipping Containers

The best shipping container business opportunity involves repurposing and building. With a building created out of a single container, a business can easily be transported to another location. For example, a business in the north can be moved south for the winter without having to own multiple buildings.

Shipping container buildings are popping up everywhere because they are strong and extremely easy to modify. Some choose limit size to one container for portability, others superficially connect multiple containers to make a larger structure. In permanent installations, services such as hydro and water can be connected. Another benefit to container buildings is they can be stacked, allowing for maximum square footage with a small footprint.

Investors interested in a shipping container business opportunity that has serious potential should look no further. Containers can be purchased for a few thousand dollars and modified to fit the needs of many. Some investors choose to outfit their containers for a single purpose such as hydroponic growing, dog grooming, food services, or office space. Others use their own land to create a series of container buildings, and rent out space to pop-up shops, work-from-home professionals, restaurants, or even weekend markets.

There are a lot of opportunities for the entrepreneur looking to invest in shipping containers. While there is a myriad of schemes and scams that exist, there is a very real market for shipping containers. As the saying goes “he who holds the gold makes the rules”, trusting a third party to purchase and lease this type of asset is not a good idea. No matter how authentic or credible a third party company may seem remember that “possession is 9/10ths of the law”.

The only business opportunity that truly makes sense for entrepreneurs looking to make money with shipping containers involves buying, physically possessing, and repurposing containers to create affordable workspaces for businesses or tiny homes for those in need of affordable housing. A container is a perfect size for many business applications, the only limit is the entrepreneur’s imagination. Whether you are building ice cream stands or solar-powered tanning salons, your chance at success increases substantially the second you physically possess the container.

Renting out shipping containers through a third party is an ultra high-risk investment (at best) and is not ideal for a passive investor or entrepreneur. Buying used containers and repurposing them presents the most lucrative option for creative entrepreneurs ready to take on a new challenge.

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