MB 087: Self Storage - With Hunter Thompson

It’s important for each of us to find our niche in the real estate investing space. Maybe you’re confident that commercial real estate is where you want to be, but multi-family just doesn’t feel like the right fit. There are other asset classes to consider, and one of the most recession-resistant is that of self-storage. Hunter Thompson is the Managing Principal of Cash Flow Connections, a private equity group out of Los Angeles that connects passive real estate investors with opportunities in the commercial space, with a specific focus on mobile home parks and self-storage properties. Hunter has done 100-plus deals valued in excess of $350M. Hunter got his start investing in stocks, but the lack of predictability in the market led him to focus on simpler investments with mitigated risk. After connecting with a network of like-minded individuals, he began investing in mortgage notes before branching out into other real estate asset classes. Today he shares what inspired him to invest in self-storage, explaining what makes the opportunity truly recession-proof. Hunter discusses self-storage value-add strategies, the benefits of self-storage as an investment, and how to find the best markets in the space. Listen in to understand what Hunter looks for in a sponsor, his approach to management, and his advice around next steps for aspiring self-storage investors. Key Takeaways [1:45] Hunter’s shift to real estate investing Grandfather was successful businessman Initial interest in stocks, too much volatility European debt crisis inspired shift Real estate more predictable, simple [4:20] Hunter’s first real estate deal Attended 3-5 networking events/week Found small group of likeminded individuals Invested in mortgage note [5:43] How Hunter got into self-storage By 2013, good deals hard to find in traditional asset classes Data analysis inspired focus on recession-resistant assets Self-storage used during times of economic change [7:28] The benefits of investing in self-storage Many ways to add value to property without taking on additional risk Can add $1M of value with U-Haul, tenant insurance and merch Sticky tenant base allows for 6% rental increase annually [10:13] The best markets for self-storage investment Identify undersupplied markets (i.e.: southeast US) Utilize data from CoStar, LoopNet or Yelp [12:06] What Hunter looks for in terms of underwriting Expense ratio of 40% (or even below) Price per unit of $12-14K Price per ft2 of $65-110 Climate-control as upsell [13:26] Hunter’s approach to management Onsite management important component of A-class property Sponsor hires either entrepreneurial property manager or retired couple [15:28] What Hunter looks for in a sponsor Done $100M-worth of deals 10 years of experience Look at pro forma Background check, references [17:06] A case study of Hunter’s ideal investment A-class property in Woodstock, GA No value-add strategies in place Previous owner just expanded by 222 climate-controlled units Market 90% occupied, property 60% occupied Adding ancillary income items = additional $4K/month [19:44] Hunter’s take on trends in self-storage On-demand services Automation Increase in demand as affluent baby boomers downsize [21:36]...