Buying a Storage Unit with Condo...?

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FRefugee
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Buying a Storage Unit with Condo...?

Post by FRefugee » Fri Mar 17, 2017 4:04 pm

Good Afternoon,

Entered into a Purchase Agreement for a new construction condominium about 3 miles south of downtown Austin. 925 sqft, 3rd floor, $235,000, so roughly $250 sq/ft which is really damn good for Austin these days (thanks, Californians). I will be putting 20% down.

I have the option of buying a 14'l x 6'w x 6.5'h storage unit that's located in the underground parking garage. They want $15,000 for it, which would just be added to the purchase price of the condo. I have a couple of kayaks and a lot of hunting/fishing/camping gear, and it'd be very nice to have a place to store it on-site.

The problem is, I do not have a framework with which to value this storage unit. Will it help my resale/rental value all that much? I don't want to ask my realtor because she'll obviously say that anything that adds to the purchase price is a good deal.

Does anybody have any experience with this aspect of condo living in the real estate value context? If I don't have a storage unit on-site, I'll likely be renting one somewhere near the complex.

Any thoughts or feedback is welcomed.
Geopolitical and demographic forces are so rooted in the unchangeable that political action often generates little but noise. -Zeihan

Hawk373
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Re: Buying a Storage Unit with Condo...?

Post by Hawk373 » Fri Mar 17, 2017 4:28 pm

I own a condo in a nice enclave town within Dallas. Incidentally each condo owner also is alotted a storage unit about the same size you mentioned as well as two parking spaces all in the single floor underground garage.

Everything itself is lumped in on the purchase price so I didn't have the option to not get it when buying. But these weren't new construction but dated to 1983.

One thing I would think about is what you want to store vs the elements that it may be exposed to. I know you mentioned kayaks and the such. Only reason I say this is due to the nature of the underground garage, there is usually moisture around and it stays warm in all months. At least in Dallas but I also assume in Austin this means "waterbugs" or huge roaches lurking in the storage unit since the units only close with a traditional door but they are not air tight or weather proofed. Just something to think about. We moved in a year ago and still have our old moving boxes in ours so I don't care about roaches in our storage unit but if you were storing anything like a nice piece or furniture or clothes etc you might think twice. Of course just because it happens in my complex doesn't mean it would with yours.

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CaliJim
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Re: Buying a Storage Unit with Condo...?

Post by CaliJim » Fri Mar 17, 2017 4:33 pm

How will you store this stuff if you don't buy the storage space?
Does it have a seperate title? Can you sell the storage unit back to the association or another individual if you decide you don't need it?
Can you rent it out and if so, what would the ROI be if you bought it and rented it to neighbors for $100???/mo?
Finally, compare the purchase price to the cost of renting a similarly sized unit from Public Storage for x years.
To me...seems worth it...I'd buy it. Extra storage is golden.
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White Coat Investor
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Re: Buying a Storage Unit with Condo...?

Post by White Coat Investor » Fri Mar 17, 2017 4:41 pm

FRefugee wrote:Good Afternoon,

Entered into a Purchase Agreement for a new construction condominium about 3 miles south of downtown Austin. 925 sqft, 3rd floor, $235,000, so roughly $250 sq/ft which is really damn good for Austin these days (thanks, Californians). I will be putting 20% down.

I have the option of buying a 14'l x 6'w x 6.5'h storage unit that's located in the underground parking garage. They want $15,000 for it, which would just be added to the purchase price of the condo. I have a couple of kayaks and a lot of hunting/fishing/camping gear, and it'd be very nice to have a place to store it on-site.

The problem is, I do not have a framework with which to value this storage unit. Will it help my resale/rental value all that much? I don't want to ask my realtor because she'll obviously say that anything that adds to the purchase price is a good deal.

Does anybody have any experience with this aspect of condo living in the real estate value context? If I don't have a storage unit on-site, I'll likely be renting one somewhere near the complex.

Any thoughts or feedback is welcomed.


Are you planning to flip the condo? If not, why not buy what you want/need? Sounds to me like you want/need the storage unit, so I'd buy it. We had a large closet in the hallway when we lived in a condo. It was critical to our storage needs, and that was 4 kids ago. I wouldn't have bought the condo without it.

Think of it this way. Let's say you dramatically overpay for the storage unit. You overpay by 33%. That's only $5K. If you lose $5K over the 10 years you live there, is that a big deal?

The best way to value it is to go down the street to the storage place, see what it costs to rent one and then use that value to extrapolate the value of owning your own.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

FRefugee
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Re: Buying a Storage Unit with Condo...?

Post by FRefugee » Fri Mar 17, 2017 5:08 pm

CaliJim wrote:How will you store this stuff if you don't buy the storage space?
Does it have a seperate title? Can you sell the storage unit back to the association or another individual if you decide you don't need it?
Can you rent it out and if so, what would the ROI be if you bought it and rented it to neighbors for $100???/mo?
Finally, compare the purchase price to the cost of renting a similarly sized unit from Public Storage for x years.
To me...seems worth it...I'd buy it. Extra storage is golden.


It does have a separate title, so even if I end up selling the condo in three years, I would likely hang onto the storage unit and rent it out... I have to think that people living in the complex--be they renters or owners--would pay a premium for storage on-site.

Hawk373 wrote:One thing I would think about is what you want to store vs the elements that it may be exposed to. I know you mentioned kayaks and the such. Only reason I say this is due to the nature of the underground garage, there is usually moisture around and it stays warm in all months. At least in Dallas but I also assume in Austin this means "waterbugs" or huge roaches lurking in the storage unit since the units only close with a traditional door but they are not air tight or weather proofed. Just something to think about. We moved in a year ago and still have our old moving boxes in ours so I don't care about roaches in our storage unit but if you were storing anything like a nice piece or furniture or clothes etc you might think twice. Of course just because it happens in my complex doesn't mean it would with yours.


Yeah, it would be outdoor equipment that I'm OK not having in a climate-controlled environment. Roaches are definitely a part of the Texas lifestyle, so no nice furniture in there.

White Coat Investor wrote:Are you planning to flip the condo? If not, why not buy what you want/need? Sounds to me like you want/need the storage unit, so I'd buy it. We had a large closet in the hallway when we lived in a condo. It was critical to our storage needs, and that was 4 kids ago. I wouldn't have bought the condo without it.

Think of it this way. Let's say you dramatically overpay for the storage unit. You overpay by 33%. That's only $5K. If you lose $5K over the 10 years you live there, is that a big deal?

The best way to value it is to go down the street to the storage place, see what it costs to rent one and then use that value to extrapolate the value of owning your own.


Really not sure what my plans are for the condo down the line. Will see where the market is in the next few years, but it's close to St. Edwards and is in what is becoming a desirable part of town, so I should come out nicely either selling or renting.


I tend to agree with y'all that buying it makes more sense than not, particularly given that it's a separate title. Storage space is getting harder and harder to come by as I get older, so I think from a practical standpoint it is a good purchase.
Geopolitical and demographic forces are so rooted in the unchangeable that political action often generates little but noise. -Zeihan

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Steelersfan
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Re: Buying a Storage Unit with Condo...?

Post by Steelersfan » Fri Mar 17, 2017 9:04 pm

You need it. It represents an additional 6% over your unit purchase price.

Buy it, especially with the flexibility you have to keep it, rent it, or sell to anyone it in the future. You may even make a profit on it

Alto Astral
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Re: Buying a Storage Unit with Condo...?

Post by Alto Astral » Sat Mar 18, 2017 12:20 am

You absolutely need it. I rented 2 condos in the past. One with and one without. I can tell you that I will always prefer one with it. Its the condo's equivalent of a basement. You can easily recover it in the resale value.

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Pajamas
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Re: Buying a Storage Unit with Condo...?

Post by Pajamas » Sat Mar 18, 2017 12:35 am

You probably would not be able to sell it to someone who does not own one of the condos. Same with parking spaces and guest/maid/accessory apartments.

Sounds like something you need, but the price seems high for unfinished storage with a 6 1/2 ft. ceiling at $178 psf compared to $250 psf for finished space.

You may also have to pay additional monthly maintenance fees/common charges/whatever-they-call-it-in-Texas-for-condos for the storage space, plus property taxes. If there are maintenance fees for the storage area and there is a special assessment at some point, you would be responsible for that, too. You might also ask your insurance agent if items in the storage area would be covered under your primary policy or if there will be extra cost.

I would at least check those financial factors out and try to get the price down some based on comparison to the finished space.

tim1999
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Re: Buying a Storage Unit with Condo...?

Post by tim1999 » Sat Mar 18, 2017 7:49 am

I'd be interested to know if there are any restrictions to leasing out the storage unit to a fellow resident of the condo complex. Some people need extra space for their "junk", and you may not need it at first. Then again, if both you and the renter keep your mouths shut, I don't know how anyone would know about it.

stan1
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Re: Buying a Storage Unit with Condo...?

Post by stan1 » Sat Mar 18, 2017 9:31 am

First, sounds like you need it and I'd think having the onsite storage would be much better than renting storage space elsewhere. You'll be more likely to use your equipment if it is easy to access and less likely if you have to drive a few miles to load it up.

When it comes time to sell there could be hundreds of similar condos on the market so it is good to have features that differentiate your condo from others for sale at the same time in the complex, in the neighborhood, and in the city. The storage will be a feature to put into the listing and may help the unit sell faster at a price you want because many other condo units won't have it. I would not make the assumption Austin will always be a strong seller's market.

I'd get the storage room.

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jimb_fromATL
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Re: Buying a Storage Unit with Condo...?

Post by jimb_fromATL » Sat Mar 18, 2017 9:53 am

FRefugee wrote:
CaliJim wrote:How will you store this stuff if you don't buy the storage space?
Does it have a seperate title? Can you sell the storage unit back to the association or another individual if you decide you don't need it?
Can you rent it out and if so, what would the ROI be if you bought it and rented it to neighbors for $100???/mo?
Finally, compare the purchase price to the cost of renting a similarly sized unit from Public Storage for x years.
To me...seems worth it...I'd buy it. Extra storage is golden.


It does have a separate title, so even if I end up selling the condo in three years, I would likely hang onto the storage unit and rent it out... I have to think that people living in the complex--be they renters or owners--would pay a premium for storage on-site.


Here's some more stuff think about.

You probably need to read the fine print of the contract very carefully. It seems very likely that in order to own the storage unit, you may also have to be a resident/owner of a condo in the complex, and thus must sell it if you sell the condo. Among other reasons, you would no longer be paying the condo fees that maintain the building, grounds, utilities, parking, etc.

Comparing the cost to a rental storage unit elsewhere:

You say it would be rolled into the mortgage, and that you'd pay 20% down. So after paying an extra $3000 down, adding to the mortgage:
    An extra $12,000 at perhaps 4.25% for 30 years would have a payment of about $59 per month.
    An extra $12,000 at perhaps 3.5% for 15 years would have a payment of about $86 per month.
Don't forget to factor in the $3000 you paid down, divided by the number of months you expect to live in the condo.

For example, if you expect to own it for 3 years, that's an extra 3000/36 = $83 per month to own the unit. With a 30 year mortgage and owning it 3 years, it will cost about $142 per month plus whatever extra it adds to your property taxes and insurance and condo fee.

Assuming you're the one out of every three or four taxpayers who exceeds the standard deduction and gets a tax savings by itemizing, you'd save a few bucks a month because of the tax deduction -- perhaps $10 in the early years.

In the unlikely event that you are allowed to keep the storage unit even if you sell the condo and are no longer a resident, don't forget that the storage unit is still not free to you.

For example, if you financed it for 30 years you'd still owe about $11,366 on it after 3 years. Even if you clear enough from the condo sale to pay off the mortgage, you'll still have $11,366 less equity. That will be that much more to finance on your next home. So you've effectively rolled the balance on the storage unit into your new home mortgage. Plus that amount will be financed for probably a longer time, and likely for a higher interest rate than today. And even if you can own it while you're no longer a resident, there will have to be some proportion of condo fees to pay for the maintenance of the property.

If you can keep it and rent it out you'll still effectively have monthly payments similar to what I showed above -- which are subtracted from the rent you may collect. The cost of the down payment per month will be diminished the longer you own it, but it's going probably going to have to have to rent for quite a bit more than public storage to make it worth the "carry over" mortgage payment, the original down payment, plus the taxes, insurance, and whatever the proportional condo fees are for maintenance of the infrastructure.

So ... I suspect you'd be better off deciding whether it is worth it to you for your own use only for the time you expect to live there and NOT plan to keep it when you move -- even if it's allowed.

jimb

Cash
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Re: Buying a Storage Unit with Condo...?

Post by Cash » Sun Mar 19, 2017 8:25 am

jimb_fromATL wrote:
You probably need to read the fine print of the contract very carefully. It seems very likely that in order to own the storage unit, you may also have to be a resident/owner of a condo in the complex, and thus must sell it if you sell the condo. Among other reasons, you would no longer be paying the condo fees that maintain the building, grounds, utilities, parking, etc.



We had a separately assigned storage unit (more like a storage bin within a large storage closet) with our condo and had to sell it prior to closing exactly for that reason (same for parking spaces). We sold it to a neighbor for a few thousand dollars. We found the extra storage to be quite useful.

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Re: Buying a Storage Unit with Condo...?

Post by cherijoh » Sun Mar 19, 2017 9:06 am

FRefugee wrote:Good Afternoon,

Entered into a Purchase Agreement for a new construction condominium about 3 miles south of downtown Austin. 925 sqft, 3rd floor, $235,000, so roughly $250 sq/ft which is really damn good for Austin these days (thanks, Californians). I will be putting 20% down.

I have the option of buying a 14'l x 6'w x 6.5'h storage unit that's located in the underground parking garage. They want $15,000 for it, which would just be added to the purchase price of the condo. I have a couple of kayaks and a lot of hunting/fishing/camping gear, and it'd be very nice to have a place to store it on-site.

The problem is, I do not have a framework with which to value this storage unit. Will it help my resale/rental value all that much? I don't want to ask my realtor because she'll obviously say that anything that adds to the purchase price is a good deal.

Does anybody have any experience with this aspect of condo living in the real estate value context? If I don't have a storage unit on-site, I'll likely be renting one somewhere near the complex.

Any thoughts or feedback is welcomed.


How much space have you got now and how are you currently storing your camping gear and kayaks? If you are downsizing, then I would definitely lean towards getting the storage unit. There are several good options for waterproof mildew-proof totes, so you could also store other seldomly-used items like luggage, holiday decorations, etc. Also car-related stuff like windshield washer fluid, coolant, oil etc. that I wouldn't want inside my living space. I once owned a 950 sq. ft. condo and it came with a small storage shed (~6' x 6') off the patio which was very useful.

How many of these storage units are there per building? If there are lots of them, you might have problems unloading if you decided later that you didn't need it. If there aren't that many, then your storage unit would be a good differentiator not only for other condo developments but for your unit vs. other units in your complex when it come time to sell. The flip side is that if you didn't have one and most other owners did, it could make it harder to sell your unit.

As someone else pointed out, are there any additional monthly fees involved with buying a storage unit?

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Re: Buying a Storage Unit with Condo...?

Post by jayhawkerbeef » Mon Mar 20, 2017 2:55 pm

As a prospective buyer of a condo I lean towards the ones that have some storage capability. As other posters have mentioned, go visit a public storage and that'll help make the decision much easier.

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Re: Buying a Storage Unit with Condo...?

Post by inbox788 » Mon Mar 20, 2017 3:22 pm

Pajamas wrote:You probably would not be able to sell it to someone who does not own one of the condos. Same with parking spaces and guest/maid/accessory apartments.

Sounds like something you need, but the price seems high for unfinished storage with a 6 1/2 ft. ceiling at $178 psf compared to $250 psf for finished space.

You may also have to pay additional monthly maintenance fees/common charges/whatever-they-call-it-in-Texas-for-condos for the storage space, plus property taxes. If there are maintenance fees for the storage area and there is a special assessment at some point, you would be responsible for that, too. You might also ask your insurance agent if items in the storage area would be covered under your primary policy or if there will be extra cost.

I would at least check those financial factors out and try to get the price down some based on comparison to the finished space.

What's the size and cost of the next size up or extra room? If 1000 sq ft condo went for $250,000, would you want the added space inside or out? Would the kayak fit in the closet, balcony, porch, etc? Or could you just sell it?

FRefugee
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Re: Buying a Storage Unit with Condo...?

Post by FRefugee » Tue Mar 21, 2017 3:49 pm

I asked a member of the sales team some questions that I gleaned from everyone's responses, and after reading the answers to those questions in conjunction with some of the key factors to consider that you guys had mentioned, I'm going to add the storage unit to my Purchase Agreement. I was also positively surprised to learn that the storage unit is 14' long x 6.5' wide by 9' tall, not 6 feet tall as I was originally informed. :sharebeer

"Good afternoon. I wanted to get my questions about the storage unit over to you in writing, that way you can either call me to respond or just write back (whichever is more convenient for you). Here we go:

1. Does the storage unit have a title that is separate from the condo? In other words, do I have to own the condo to own the storage unit?

The storage room does not have a separate title as it is considered a designation and assignment of a portion of the common elements of the condo regime. This gives you the ability to sell your storage space to another owner within the community at a later date, if desired

2. If I later wanted to sell it, would it have to be sold in conjunction with my condo, or could I sell it separately to another owner within the community?

It can be sold separately to someone within the community.

3. Would there be any additional HOA or maintenance fees associated with the storage unit's ownership?

No additional fee or HOA dues associated with the storage room. Technically it is part of the common element (just like the parking spaces) that is assigned to you.

4. Will the square footage of the storage unit be included in the calculation of my property tax bill?

Not to my knowledge as it will not have a separate survey and is part of the common element.

5. How many storage units are there going to be underneath the building?

There are a total of 20 storage rooms in the community, 4 are available."
Last edited by FRefugee on Tue Mar 21, 2017 5:07 pm, edited 2 times in total.
Geopolitical and demographic forces are so rooted in the unchangeable that political action often generates little but noise. -Zeihan

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Re: Buying a Storage Unit with Condo...?

Post by deanbrew » Tue Mar 21, 2017 4:00 pm

The price seems a little high, but you do have to factor in the convenience, as well as the ability to (hopefully) recover your money when you sell. You could find out what a storage unit rents for at a self-storage facility, but it's probably not worth the bother. Just buy the storage unit and enjoy it, and hope to sell it for a profit down the road.
"The course of history shows that as the government grows, liberty decreases." Thomas Jefferson

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Re: Buying a Storage Unit with Condo...?

Post by jayhawkerbeef » Tue Mar 21, 2017 4:06 pm

I like what some posters stated about buying what you need. Lean towards the side that this is not an investment, to be focused so much on resale there are several variables at play to determine what something is worth when you go to sell. Buy what you need or think you'll need while there and move on...

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Pajamas
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Re: Buying a Storage Unit with Condo...?

Post by Pajamas » Tue Mar 21, 2017 4:11 pm

It sounds more reasonably priced with the additional information about the 9 foot ceiling and no additional maintenance fees, assessments, or taxes. However, if it is part of the price you are paying for your condo, it seems that it could affect property taxes indirectly. All condo owners must be paying the property taxes for the common elements, including the storage spaces, which would argue in favor of buying one rather than not as it is effectively subsidized by the owners without storage spaces.

If it is part of the common element, then you are not actually buying and owning it as is the case with the condo. Must be some sort of long-term lease or other method of conveying right of use ("designation and assignment") without actual ownership. Be careful to review the exact wording used in the paperwork, preferably with a lawyer specializing in real estate, or at least do some research. You don't want any surprises down the road.

You might want to edit your post to remove the name of the condos and the building number.

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Re: Buying a Storage Unit with Condo...?

Post by celia » Tue Mar 21, 2017 4:16 pm

I would get 2 of them! Many people moving have more stuff than will fit in a condo, assuming they are downsizing. (Owning a ground floor unit is also important for someone who is about to retire or live there in retirement. As health declines, easy in/out access becomes more important.)

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Pajamas
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Re: Buying a Storage Unit with Condo...?

Post by Pajamas » Tue Mar 21, 2017 4:19 pm

celia wrote:I would get 2 of them! Many people moving have more stuff than will fit in a condo, assuming they are downsizing. (Owning a ground floor unit is also important for someone who is about to retire or live there in retirement. As health declines, easy in/out access becomes more important.)


Ground floor units are considered undesirable and are significantly less valuable in many places. In fact, in NYC, the higher the floor, the more the unit is worth, all other things being equal. Most new buildings over two or three floors have elevators, anyway, although if the power is out, it can still be a problem.

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Re: Buying a Storage Unit with Condo...?

Post by dm200 » Tue Mar 21, 2017 4:34 pm

I would lean towards buying it, since it is possible that your ability to sell the condo (and value received) may be related to the availaibilty of getting such a storage unit; they may not be available for purchase in the future.

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Re: Buying a Storage Unit with Condo...?

Post by dm200 » Tue Mar 21, 2017 4:35 pm

Ground floor units are considered undesirable and are significantly less valuable in many places. In fact, in NYC, the higher the floor, the more the unit is worth, all other things being equal. Most new buildings over two or three floors have elevators, anyway, although if the power is out, it can still be a problem.


Austin is NOT New York City :sharebeer

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celia
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Re: Buying a Storage Unit with Condo...?

Post by celia » Tue Mar 21, 2017 4:47 pm

^ True. I think the rationale is how many people walk by your unit each day and how close are they to your unit/window? In Manhattan, I wouldn't want to live on the ground floor, but in roomier residential areas (without constant shoppers walking by), I would want a ground floor unit.

The chance of crime (theft) and safety would also factor in to which floor is preferable.

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