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
[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] Hunter’s advice around next steps for aspiring investors
- Leverage experience of someone in game for 10+ years
- Passive investing affords freedom to do what you love
[23:03] What Hunter is excited about
- Construction boom
- Unique opportunities to buy from sophisticated groups
Connect with Hunter Thompson
Cash Flow Connections Real Estate Podcast
Free eBook: Little Boxes, Big Profits
Resources
Free eBook: The Secret to Raising Money to Buy Your First Apartment Building
