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What Does it Take to Profitably Rent and Trade Containers?

If you knew it is possible to rent a container for $27,375 dollars per year –or more- on a $2500-$3500 dollar investment would you be interested? Saavy investor Warren Buffett thinks so, he owns one of the largest container rental companies in the world to prove it.

According to the American Association of Railroads, Rail intermodal loadings posted year-over-year gains for 56 months in a row. Ocean containers have been fueling the boom. The National Retail Federation(NRF) predicated in August 2014 that import volumes at US ports covered by its Global Tracker report would reach the highest level ever recorded for one month since NRF launched this product in 2000. How many opportunities are there to rent a shipping Container? According to one source, there are over 200 million worldwide opportunities per year in a single Market Channel, and this number is growing.

If you are looking for an investment opportunity to strengthen your portfolio across diversely growing market channels, investing in equipment leasing and trading endeavors is certainly worth taking a look at. As an Equipment Lessor, or prospective lessor, you not only invest in equipment, but you are investing in markets that demand container service across a multitude of industry channels.  At the same time, this is a business that has a solid potential for long-term success.

For equipment brokers, traders and wholesalers, containers, at their core, can be considered commodities. They can be lower in value where there are surpluses, or at premium values in deficit markets-typically ports, where steamship lines discharge them. The secret is to locate these deficit markets and move containers into them. But how do you move them? How do you find them. How do you communicate with buyers before you move equipment to them? What is the cost? How do you find partners, delivery companies and find the types of equipment and service providers? The key is to find freight that needs to be moved, and offer the transporter a container at a discount while lining up your service providers along the way. This company may also need to rent the container for long or short-term storage after they ship their freight. Consider this example as a scenario of a One Way Rental: the most profitable transaction in the industry.  

  1. Railroads and steamship lines typically charge $50 to $100 per day for shippers (the ones renting the container) to move their freight from point A to point B.
  2. For example, it takes 10 days to move the freight from and East Coast Port to a West Coast port. Take an average of $75 per day x 10 days, this is $750 dollars. (Carriers will typically charge penalties if the equipment is not returned at the end of the agreed term and the price can start at $125 per day for 5 days and then increases to $175 per day after that).
  3. The container investment is $2500 to $3500 dollars.
  4. The bottom line is, if you invest in a container for $2500 - $3500 dollars, rent it for $75 per day for a year, this has potential income of $27,375.
  5. In the first part of this scenario, if you move the container from one port to another port, you can certainly sell the container and make a profit. But why sell it if you can generate this amount of income from a rental? The call is totally up to the equipment owner, but hopefully you get this gist of this.

Here are a few links to stories related to equipment being detained and shippers are required to pay demurrage.
Shipping Container Suppliers Announce Surcharges at Ports

Containers can be held, detained, for a number of reasons, even when government enforces laws. Jet Ski Champ Pays.

The key challenges include finding where to make your investments, promote your opportunities, and network with other equipment traders. There are systems available to large members of railroad, steamship and trucking operations, but these systems are very expensive and have strict requirements. These system owners are not interested in casual or smaller business clients, but we at sparecube are.

Sparecube.com provides a portal for equipment suppliers and consumers to post, promote and communicate their needs to each other; this is the huge trading gap that Sparecube fills. On top of this, sparecube.com can function on a global level, and promote the postings online.

Their shortages are our opportunities. One of the fundamental location features of the “big” systems is that they are limited to railroad ramps, storage depots, airports, and ports. These locations are characterized with standard 3 and 4 letters international codes.  Herein lies a major difference between sparecube and the big ones. Because sparecube is GPS based, this literally provides the ability for equipment to be posted and searched for anywhere on earth, thereby giving suppliers the power to promote equipment at ramps in addition to around ramps and anywhere in between.

Across global markets, the use of containers continues to dominate the transportation of non-bulk commodities, and this continues to ripple into many sub-industry segments. For example, in 1999 over 200 million container moves took place across the world maritime ports, and the forecast suggests strong growth in the future (from the Center for Transportation Research). In addition, 2004 marked the year that container freight passed coal as the number one source of railroad revenue in the United States (from the Intermodal Association of North America). The positive correlations of statistics like these are everywhere, and the room for expansion is very apparent.

It's a significant piece of your history, your heritage, and your future.

The truck rental business, a version of equipment leasing, traces its history to shortly after WWII, an age of vast industrial growth in the US.  During this time, Americas' love of the automobile was born, and the United States blossomed into a car-dependent society. People were no longer restricted by geography to realize their dreams of better jobs and retirement locations; they could just pick up and move. It was this time that L.S. Shoen fulfilled demand from families to rent trailers that made moving easier- with no labor cost involved. He believed there was an economic opportunity to build a nationwide company by providing the niche service, but like all small companies, he needed capital to invest in more trailers to respond to demand.  At this time, he turned to friends and neighbors for investment capital.  Shoen set up the agreements that allowed the investors to own the equipment while he managed and rented it. The investor received rental income and profited from the arrangement, and Shoen received a management fee on rentals.

Today, this business is known to as the UHAUL Corporation. UHAUL is one of the largest equipment rental businesses in the U.S., and they rent equipment to hundreds of thousands of customers every year from thousands of locations. They are also the largest propane tank refilling company and are ranked among the top self-storage owner/operators. But there are some consumer problems in the rental of trucks, namely safety, which proves to be an expensive endeavor.

Shoen wasn't the only one who thought the Equipment Leasing business had major potential. Warren Buffet also saw the equipment leasing business as a prudent investment.  Today, Buffet's company, XTRA Corporation, is one of the largest intermodal equipment-leasing providers. With an asset base of over $2 billion, a worldwide infrastructure of people and facilities, and a first-rate portfolio of service and operational support, time has certainly been friendly to Buffet’s investment.  Buffet, who makes his living by investing in fertile markets, invested in equipment leasing because he knew there was notable potential in it.

Another bit of history critical in understanding equipment leasing’s success is the story about someone who revolutionized transporting goods, Malcolm McLean. McLean started his trucking company with a pickup and a dream. His acute observations and creativity in the trucking business led him to an idea to place containers on ships to move freight up and down the Eastern Seaboard. The idea behind this was that as the ship reached destinations, his trucks could pick up and deliver the freight more efficiently by eliminating competitors’ trucks from the road.  The use of containers on ships decreased the amount of labor needed to handle freight piece meal, reduced theft and damage, and maximized operating efficiency. The idea of utilizing containers in this manner sparked another notable source of revenue. This money came from renting containers to customers that were not quite ready for their freight.  Upon physically deploying this idea, this company made $5.5 million dollars (In the 1950s) in its first year, simply due to fulfilling a demand and cutting the middleman.  It is also reported that he sold his company in the 1970's for an estimated $700 million dollars. Today, the business is known as Maersk SeaLand Shipping Lines, the largest container shipping operation in the world.

McLean's system has continued to evolve and grow to reach innumerable milestones. This system continues to move freight efficiently and safely while maintaining the integrity of the contents. It is precisely this system and its proven capabilities that our company seeks to emulate. Building on existing success is our competitive edge. This strategy fosters success, profitability, and long-term growth.

Turning Ideas Into Success for You!

Pursuing an Equipment Lease business opportunity begins with familiarizing yourself with the industry, making contacts, and promoting your equipment transactions. Sparecube is committed to extending and building upon the opportunities that continue to ripple from this base of ideas. We are passionate about the industry, and we would like to cooperate with interested parties at our site, sparecube.com.

What to Expect as an Equipment Leasing Player?

First, sparecube does not make any guarantees of success. As an equipment trader, you can invest in new, used, restored or one-trip containers as well as wooden storage/shipping vaults. At Sparecube, traders can invest in International Standard Organization (ISO) steel containers, wooden storage vaults, and other types of equipment. At our sister site, sparecube.com, there is a full spectrum of equipment trading options, including the ability to announce intent in buy or sale posts without making any commitments.

Why Invest in Equipment Leasing and Brokerage?

One of the paramount benefits of equipment trading is that you have total control over your investment. You will be an active hand in the equipment that you manage. You can be responsible for managing, leasing, buying, and selling equipment. Traders will access our information system to post availabilities and needs.  One of the most important aspects of our information management system is that it is built on an open platform, which requires no software installation or purchase. This approach allows you to login to a secure server where you can manage all aspects of your equipment.  This provides you with complete freedom to login anywhere at any time to manage your equipment. The sparecube.com system is designed to maximize your network opportunities so your equipment is being used to its full potential.  The system has a multitude of easy equipment management tools; one of the key features allows you to negotiate your equipment based on selected criteria (price, term, location) that you decide. Once your terms are met, the equipment will be reserved, booked, utilized and tracked. To find out more about the system, please visit our web site and stay posted for updates.