There are plenty of opportunities in self-storage, but the most profitable strategies involve replacing poor management, according to Hunter Thompson, CEO of Cash Flow Connections. He is executing a value-add strategy based on buying properties with inefficient management and implementing revenue-generating amenities. In 2018, value-add self-storage is where he is finding the best opportunities for yield.
“I think that buying properties, particularly in this asset class, with significant in-place income and a lack of an effective implementation of management strategies on a risk adjusted basis is by far the most favorable,” Thompson tells GlobeSt.com.
One example of these revenue-generating amenities is providing U-Haul truck rentals to tenants. This is a service that he is successful brought into many properties. “I have invested in properties where the management didn't rent out trucks to the tenants when they are moving in or out,” says Thompson. “We can buy that property based on in-place income and leverage our relationship with U-Haul. Within 30 days, there are a dozen or more U-Haul trucks on the facility. We don't own or maintain the trucks. We just allow those trucks to be parked on our property, and we rent out the trucks to tenants as they are moving.”
This service can prove to be very profitable at a zero cost to the owner. “I have personally invested in properties where the line item of U-Haul rentals has gone from zero dollars to $3,500 to $3,800 per month within six to 12 months,” explains Thompson. “If you are looking at that on a cap rate basis, that is $600,000 that you are adding in value—and because there is no capital expenditure, so on a risk adjusted basis, it is favorable.”
One of the biggest trends coming to self-storage is automation; however, Thompson isn't sold. Automation focuses on driving value by reducing the onsite staff and doing away with onsite management, but Thompson thinks that managers play an important roll in driving value at a property. “There is so much value in being able to upsell clients on particular unit types or amenities like drive-up access or climate-controlled units by having a manager onsite rather than a kiosk,” he says. In 2018, his strategy will continue to be focused on value-add opportunities, but he is remaining nimble for possible changes to the market in 2019.
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Kelsi Maree Borland
