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] Hunter’s