Centuries Old Technology Is New Again

I’d like to invite you to our upcoming Build To Scale Mastermind Nov 9-13 in Tulum Mexico. This exclusive four day event is for you to learn how to scale your business and your life. This is an opportunity for you to spend 4 high quality days with the leadership at Y Street Capital and take your investing business to the next level. To learn more, click HERE.

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On today’s show we are looking at the value of a piece of property that has a rail connection on it. 

When it comes to transportation and logistics, rail is significantly less expensive than trucking. Rail costs about $0.02 per ton mile versus about $0.10 per ton mile or more when transporting by truck. For bulk commodities, and for shipping containers rail can be much less expensive. 

That means that transporting a 20 foot long shipping a container by truck from Los Angeles to New York would cost about $7,500. By comparison, that same trip by rail would cost about $1,400. The savings are substantial. But once you get the rail car to the destination, you still need to switch from rail to road for the last mile, or perhaps the last few miles. This short haul trip is going to be disproportionately expensive. 

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Episode Transcript

(00:02):
Welcome to the Real Estate Disposal podcast, your morning
shot of what's new in the world of real estate investing.
I'm your host, Victor Minash. On today's show, we're looking
at the value of piece of property that has a real
connection on it. But first, I'd like to invite
you to our upcoming Built to Scale Mastermind November 9th
through 13th in Tulum, Mexico. This exclusive 4 day event is
for you to learn how to scale your business and your life.

(00:23):
It's an opportunity to spend 4 high quality days with the
leadership team at my company, YSt.
Capital and to take your investing business and your life
to the next level. To learn more, click on the link
in the show notes and we'll see you in Tulum, November 9th
through 13th. On today's show, we're talking
about the value of a piece of property that has a rail
connection on it. When you consider industrial

(00:44):
property, the methods for transporting material in and out
become important. The property should have good
access to major roads and freeways.
Proximity to a major seaport is definitely a consideration, but
sometimes that's not possible. But if there's no port nearby in
the main method of distributionsby truck, even a small rail
terminal could be extremely valuable.
When it comes to transportation and logistics, rail is

(01:04):
significantly less expensive than trucking.
Rail costs about two cents per ton per mile versus $0.10 per
ton per mile when transporting by truck.
For bulk commodities and for shipping containers, rail can be
much less expensive. That means transporting a 20
foot long shipping container by truck from Los Angeles to New
York could cost about $7500. By comparison, that same trip by

(01:27):
rail would cost about $1400. The savings are substantial, but
once you get the rail car to thedestination, you still need to
switch from rail to Rd. for thatlast mile, or perhaps the last
few miles. This short haul trip is going to
be disproportionately expensive.The rail yard would charge a
number of fees for handling. There's going to be an
intermodal fee for loading and unloading the container from the

(01:49):
rail car. There might be a storage fee if
you don't pick up the container right away.
The simple fact is, even shipping by rail can be complex,
even if there are real savings. Only those who have a regular
shipping schedule and upload material will be inclined to
ship by rail. But if you have a rail spur that
comes directly to your property,what would that be worth?
Our brand new rail spur is maybeexpensive to build.

(02:10):
Maybe it's inexpensive dependingon your point of view.
The rail in the associated infrastructure itself costs
about the same as a paved Rd. with all the infrastructure
we're talking about an average of $450 a linear foot.
So a 300 foot rail spur might cost $150,000.
The switching equipment to redirect the train onto the spur
can be expensive, and that mightcost a couple of 100,000.

(02:32):
Of course, the railway has to agree to the spur off their
branch line. In a denser urban setting, these
rail lines typically operate at very low speed.
The number one cargo on the railnetwork used to be coal, and
that's been replaced by intermodal, which includes
trucks, trailers, shipping containers.
Intermodal is the fastest growing segment of drill
transportation. Even though the railway seems
like an antiquated technology ofthe last century, it's still by

(02:55):
far the most energy efficient mode of transportation on the
planet from moving large cargoes.
The last mile for shipping container can be expensive.
Even if you ship a container across the country, you might
save $6000 on the long haul portion.
That last mile will often face aminimum charge called a drayage
charge of about $600.00. And then there's a whole bunch
of surcharges on top of that. There's going to be a chassis

(03:17):
rental fee on which the containers place that's anywhere
from 20 to $60.00 a day. There are terminal fees of 50 to
$100 at the rail yard, might be a fuel surcharge anywhere from
40 to $100. And then you Add all these up,
you could be facing an extra 800to $1000 for the last mile when
the 1st 3000 miles only cost you1400 bucks.

(03:39):
So the incentive is high to eliminate those costs every time
you take a shipment. Many industrial properties that
had a rail spur historically were associated with Heavy
Industries. Those properties can often be
redeveloped and used for a new purpose and transportation,
warehousing and logistics. But many of these properties
that have a history of heavy industry also bring the risk of
environmental contamination. Environmental standards are much

(04:00):
tighter than they used to be, and levels of contamination that
might have passed in years gone by would fail against today's
stricter thresholds. Environmental concerns can't be
a big liability. Obviously, they have to form
part of the due diligence in anyacquisition.
In some communities, there's a surplus of industrial land as
Heavy Industries have shut down.I'm thinking of Rust Belt
communities. The same time, there's
communities that have acute shortages of space for logistics

(04:22):
and warehousing. See, Amazon makes all the
headlines when it comes to commerce, but there's many
aspects of the economy that don't involve Amazon.
People in construction projects are continually looking for a
cost effective space to store materials without incurring huge
handling charges. Tapping global supply chains can
result in huge savings, but those savings can be eroded if
the logistics of the destinationare not managed efficiently.

(04:45):
As you think about that, have anawesome rest of your day.
Go make some great things happenand we'll talk to you again
tomorrow.