Learn about why shipping containers are a phenomenal investment
Shipping containers are an investment asset unlike no other. Portable, durable, rugged and long lasting, they have an expansive array of uses and last seemingly forever. In a world where almost everything is constructed to have a 5-8 year lifespan, these massive steel boxes pay off for the long run and offer tax incentives like no other asset in the world.
Here are the top 5 reasons why shipping containers are among the best assets on the plant:
Tax Depreciation: We're writing this from Canada where shipping containers fall into the class 8 depreciable tax asset class. That means they offer a capital cost allowance of 20%. Here is a quick breakdown of the tax depreciation of 20' shipping container purchased for $5000 over 7 years.
- Half-year rule: $5,000 × 20% × 0.5 = $500
- Undepreciated Capital Cost (UCC) end of Year 1: $5,000 - $500 = $4,500
- Depreciation: $4,500 × 20% = $900
- UCC end of Year 2: $4,500 - $900 = $3,600
- Depreciation: $3,600 × 20% = $720
- UCC end of Year 3: $3,600 - $720 = $2,880
- Depreciation: $2,880 × 20% = $576
- UCC end of Year 4: $2,880 - $576 = $2,304
- Depreciation: $2,304 × 20% = $460.80
- UCC end of Year 5: $2,304 - $460.80 = $1,843.20
- Depreciation: $1,843.20 × 20% = $368.64
- UCC end of Year 6: $1,843.20 - $368.64 = $1,474.56
- Depreciation: $1,474.56 × 20% = $294.91
- UCC end of Year 7: $1,474.56 - $294.91 = $1,179.65
By the end of Year 7, the Undepreciated Capital Cost (UCC) for the shipping container is $1,179.65. This amount would be the value used to calculate the CCA for Year 8 and subsequent years, should you continue to hold onto the asset. So a $5000 shipping container purchased by a business actually only cost them $1,179.65 after year 7 of ownership. After reading the next section where we analyze the rate of depreciation, you'll begin to see why this is so amazing.
Rate of Depreciation: When a shipping container is repurposed as a self-storage device, its rate of depreciation is much lower than if it is used as an international transport device. This is because the wear and tear and stresses placed on the container are minimal when used as a self-storage device compared to the rigours of international transport.
Several factors will affect the rate of depreciation for a shipping container used as a self-storage device:
1. Location and Exposure: If the container is located outdoors and exposed to the elements, it might depreciate faster than one stored under a shelter or indoors.
2. Maintenance: Regular maintenance, like repainting or rust treatment, can extend the lifespan of the container.
3. Frequency of Use: If the doors are frequently opened and closed or if heavy items are often moved in and out, the container might wear faster.
4. Quality: The initial condition and quality of the container when it was transitioned to storage use will also factor into its depreciation.
For accounting, business planning or tax purposes:
- A shipping container repurposed for self-storage should last 25+ years, given that it's not exposed to the intense conditions of ocean transport. This means the annual depreciation rate could range from 20% down to between 2.5% to 4%. Considering they are a class 8 depreciable tax asset at 20%, this 16%+ swing is massive for savvy investors.
- Resale value: Shipping containers used as storage devices depreciate at a very low rate as even after being used for 7 years, they still look and feel nearly brand new. Considering the tax depreciation rate, it almost pays to own a shipping container. Here is the breakdown of the actual rate of depreciation vs tax depreciation of a class 8 asset.
Comparison with Class 8 Asset Depreciation in Canada:
Year Straight-line 4% Resale Value Class 8 Tax Depreciation Value (UCC) 1 $4,800 $4,500 2 $4,600 $3,600 3 $4,400 $2,880 4 $4,200 $2,304 5 $4,000 $1,843.20 6 $3,800 $1,474.56 7 $3,600 $1,179.65
- Considering the variance between the rate of depreciation and the Class 8 Tax Depreciation Value, after owning a container for 7 years, the cost of to purchase becomes $1,179.65 while the resale value will remain at around $3600 and the owner will have made $2400+ in profit just by holding onto this asset. If one were to rent this container out for $150 per month over the course of that 7 year span with a low occupancy rate of 70%, they would also make an additional $6300 in gross profit. This is why we think financing shipping containers is a great idea for small businesses.
Here are five of the most common alternative uses for shipping containers:
Housing and Living Spaces:
- Housing and Living Spaces:
- Container Homes: Many architects and builders have turned to containers as an affordable and environmentally-friendly alternative to traditional building materials. These homes can range from single-container tiny homes to sprawling multi-container mansions.
- Apartments and Hotels: Multi-story apartment complexes or boutique hotels made entirely of containers have been emerging in urban and rural areas alike.
Commercial and Retail Spaces:
- Pop-Up Shops: Entrepreneurs often use shipping containers as temporary or permanent retail spaces, given their mobility and modular nature.
- Restaurants and Bars: There's been a trend of establishing eateries, cafes, and bars in refurbished containers, providing a unique ambiance.
Office and Workspace:
- Mobile Offices: Many construction sites use shipping containers as temporary onsite offices.
- Permanent Offices: Companies looking for an eco-friendly or industrial aesthetic have turned to containers for office spaces, whether as stand-alone units or as part of larger complexes.
Agriculture and Farming:
- Greenhouses: Shipping containers can be modified to serve as compact greenhouses.
- Hydroponic Farms: The controlled environment of a container can be an ideal space for hydroponic farming, allowing for year-round growth of crops irrespective of external weather conditions.
Storage and Workshop Spaces:
- Secure Storage Units: Many businesses and individuals use containers for secure storage, either on a temporary basis (like during a home renovation) or as a more permanent solution.
- Workshops and Studios: Artists, craftsmen, and hobbyists alike use containers as dedicated spaces for their work, given their durability and modularity.
In addition to these, containers are also used for various other purposes like swimming pools, art installations, emergency and disaster relief housing, and more. Their robustness, modular nature, and relative affordability have made them a popular choice for various innovative applications.
At Stlbx Storage and Shipping Containers, we believe in the unparalleled potential of shipping containers. Not only do they serve as a testament to durability and versatility, but they also offer outstanding financial benefits that few assets can match. From the evident tax advantages in Canada's Class 8 depreciable asset structure to their sustainable depreciation rate when repurposed, shipping containers present a compelling case for investment. Beyond their financial appeal, their adaptability to a range of applications—from innovative living spaces to dynamic commercial hubs—underscores their value in today's fast-evolving world. Whether you're an entrepreneur eyeing a new business avenue, an investor seeking a resilient asset, or simply someone inspired by sustainable and modular design, shipping containers promise unmatched possibilities. Dive into the world of container opportunities with Stlbx, and let's redefine what these steel giants can achieve.