Large modular building and mobile office trailer suppliers do not want to sell their inventory and lose rental income. So, a “buyout” will likely be very expensive in today’s market. In this article, we will learn the reasons why it’s so expensive to buy out a modular building from an existing rental or lease agreement and what your best options are.
Lately, we have received calls from tenants of modular buildings who are shocked at the purchase prices they have been quoted to buy out the structures they are currently renting (leasing). The big modular building and mobile office trailer leasing companies like WillScot and Mobile Modular, typically want to sell their modular buildings only if the tenant is willing to pay the same price it would cost to replace the structure with a new model. This makes ownership very expensive for any company paying long-term rent for a structure that may be in poor shape, too small, or simply outdated.
If you are a facility manager, administrator, or business owner experiencing a similar scenario, please read on. I will explain some of the best options for solving this tricky financial and space planning issue.
Here’s what you need to consider first. If your business has one or multiple modular office buildings on rent and you are stuck between continuing to rent, buying out, or finding a larger or smaller modular building, you are not alone. The modular building industry thrives on providing various types and sizes of prefabricated offices for short-term and long-term rentals to a wide variety of business types. Some of the industry’s most successful companies own thousands of modular buildings and collect monthly rental income under thousands of contracts. This “landlord/tenant” relationship serves suppliers and customers very well until the time comes when paying rent is less attractive than ownership.
If your company has decided that it’s time to stop paying rent and start owning the modular building out in the parking lot, read on. As you can imagine, this isn’t as easy as “Legos,” and the costs can add up if you want to “swap out” that old structure for a newer or possibly brand-new version. Here are the most considered modular building buy-out and lease renewal options we’ve helped companies understand over the past twenty-four years at iModular.com:
1.) Replace the existing modular office with a newer or brand-new model
2.) Pay the buy-out price and own the modular building outright
3.) Continue renting under a re-negotiated lease/rental agreement
Let’s dive into your options:
1.) Replace your current modular building with a more affordable used model.
Yes, replacement is a viable option, and many customers choose this direction. If your current leasing company is quoting an extremely high price to buy the modular building, then why not replace it altogether and freshen up your business? Throughout the United States, you can find affordable deals on used modular buildings ranging from 24’x40’ and 24’x60’ up to larger 48’x60’ and 60’x60’ offices with custom floorplans, including bathrooms, meeting rooms, and storage areas.
Used modular buildings can be purchased outright for far less than a new model, and in many cases, this is the smartest option available. A modular building that has been properly maintained can be remodeled and made to look and feel nearly brand-new. Even if you decide to replace the HVAC systems, your purchase price can save your business tens of thousands of dollars in the long run, and your employees and customers can operate comfortably.
2.) Replace your old modular building with a brand-new model.
Replacing your older modular building with a brand-new model is also an option. This is more costly and time-consuming but may be the best fit for your long-term facility needs and financial strategy. New modular buildings can be designed and manufactured to your exact specifications. This option will also allow your business to upsize or downsize depending on the size and success of your operation.
The downside to replacing your existing modular building with a used or new model is business disruption. Yes, you will need to plan for displacing people and disrupting your operations when the old modular building is being removed and the newer version is being installed. In most cases, this process will take some smart planning and a capable Project Manager to handle the process. Utilities, space planning, furnishings, modular building removal, modular building installation, and normal day-to-day operations will all need to be well thought out and executed with precision.
If you purchase a new modular building, you will also benefit from starting over. You can design the interior to meet every one of your operational needs and have the building perform precisely as you and your staff see fit. Needless to say, you will also be able to take advantage of a wide variety of options for building automation, occupancy comfort, furnishings, and interior/exterior design. There are also some great options for financing a new modular building if an outright purchase doesn’t match your current budget.
3.) Continue renting under a re-negotiated lease/rental agreement
Maybe renewing your current agreement is the best option for everyone, even the modular building supplier. So, consider your finances and decide what monthly rental rate is best for your budget and for how long you are willing to sign a renewal agreement. The longer you are willing to pay rent, the better your chances are for a successful negotiation. Be sure to ask if your supplier will update the modular building, tune up the HVAC unit, repair any existing leaks, and possibly paint the exterior. Also, you may be able to have the original removal and return delivery costs removed if you agree to a long-term renewal. If you don’t ask, the answer is always no.
What’s next? If this article has you thinking about the next steps, great. In the modular building business, we say, “There is nothing more permanent than a temporary building.” I suggest you consider your options and at least compare prices between renewing an existing contract and replacing your current modular building with a newer or brand-new model. If you need an outside opinion, you can always ask me for help by emailing Matt@imodular.com. You may be surprised at the buying power you have in today’s market!
You may also like to read: What is Your Used Modular Office Trailer Worth?
Is it better to rent or buy a modular building for my business?
Buying a used or new modular building is always a good decision if you need the space long-term. Used and new modulars hold their value if they are maintained properly so re-selling in the future is another reason to strongly consider a purchase over renting or leasing. However, if your need is short-term the best option is an operating lease. This will be affordable, and fast and when you no longer need the modular building it can be removed by its owner quickly.
