Ep #311 – Hunter Thompson – Special Edition – Self Storage Asset Class

Here is some of what you will learn:

Mitigating your investment risks
Understanding Non-correlated assets
Growth rate of Self Storage asset class
Self Storage Cap Rates
Understanding storage area per person in a demographic
Financing options available

Book Recommendations:
Miracle Morning for Entrepreneurs – Hal Elrod and Cameron Herold
Deep Work – Cal Newport

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Full Transcript Below:

Hunter Thompson  Self Storage Asset Class (Ep311) 

  

Intro:Hi! I’m Rod Khleif. Each and every week I record an interview with a thought leader that I know you’re gonna get a ton of value from. Now here on YouTube are the video versions of my podcast, Lifetime Cash Flow through Real Estate Investing. Now to make sure you get the latest information please subscribe and hit the notification bell. Let’s get started. 

 

Rod:   Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I’m thrilled you’re here. And I know you’re gonna get great value from the gentleman we’re interviewing today but I want to caveat this. This is gonna be one of those episodes where it’s not strictly multifamily driven. And I’m gonna do these from time to time and maybe I’ve already done one by the time this one comes out where if I feel you’re gonna get value from it, we’re gonna talk about it. And so it’ll be kind of an anomaly episode these this series were you know we do different asset classes different opportunities that I think are going to add value to you. So my guest today is Hunter Thompson and Hunter actively raises investment capital for multiple asset classes including multifamily. But today we’re gonna focus on self storage.Hunter, welcome to the show buddy! 

 

Hunter: Hey thanks again for having me on! I really appreciate it 

 

Rod:Absolutely my pleasure. So let’s talk about your background initially you know how you got into this real estate game and why you love self storage and maybe even some of the other asset classes that you’re familiar with 

 

Hunter: Sure so I studied economics, an undergrad, was really interested in economics as a whole now not that I really learned any real-life things in undergrad with economics but I was just really interested in the topic. So when the real estate collapse happened I was instantly drawn to all financial assets. I knew there was gonna be some kind of opportunity there. I didn’t know exactly where. My first inclination was towards stocks just because that’s where most of the marketing is that’s what most people are more familiar with. So I study the stock market not on a day trading basis but basically looking for long term holds and that was successful obviously in those early years because the prices have been so deflated but I really started to be skeptical with stocks as I started to realize the lack of predictability and the lack of being able to plan for your future because most people’s goal when they really get down to it is being able to have their passive cash flow, pay off all their expenses. But stocks is not a great vehicle in which to accomplish that goal it’s a very indirect way to accomplish that goal you have to have extremely high net worth to do so. So I was kind of teetering with that idea and then the European debt crisis happened. For most people 2008 was a big wake-up moment for them for me it was the European debt crisis and the reason for this is that, mostly the same thing happened in the United States but it happened in Europe where a lot of banks froze up. There was a lot of challenges with liquidity 

 

Rod:What year was that? 

 

Hunter: About 2009-2010  

 

Rod:Okay right after ours all right 

 

Hunter: Exactly. Kind of the global financial crisis it melded into Europe. But they had some really problems with solvency and liquidity. And so it was causing great variance in the market and volatility and I remember watching CNBC just being obsessed with this trying to wake up at market timing in Europe etc and they were talking about how the Greece bond yields and they’re saying if the Greece bond yields went above 7%, that the S&P 500 was going to collapse ever below this state below 7%, S&P 500 was gonna be fine I remember thinking 6:00 in the morning watching this how is it the case that the Greece bond yields are playing a role in my financial well-being? Let alone a significant role or people are even talking about it and that was really my last ramen with the stock market and when that happened, I thought ok there has to be a way to invest or you can provide predictable cash flow where you can actually conduct due diligence. The simplicity of the investment must be so that a small office or an individual person and actually mitigate those risks as opposed to something like the Greece bond yields which not even a huge group of people, the billionaires of the world, they can’t predict that or mitigate that risk. So later that led me down the path to real estate and you know ended up where I am today 

 

Rod:Wow! Well that’s quite a that’s quite a path into real estate and I completely agree with you. By the way but I just meant about the whole utilizing Greece as an example. I mean I remember I was at Iceland that went bankrupt back then and you know there was all kinds of economic turmoil happening. So what was your first let’s go back to you, you decided to get into real estate so this was after the 2008 crash. What was your first asset class that you got interested in and invested in or brought investors into? 

 

Hunter: So when I first got started you know I was really drawn to single-family I think for a lot of reasons most people are they see the low entry point price most people have lived in a single-family home at some point. They’re relatively familiar with it so I didn’t want to be hands-on in terms of actually rehabbing and flipping. My goal is to look at things on a risk-adjusted basis and at least have one person or company in between me and the asset. So the first investments I made were essentially hard money loans for people that were experts at flipping properties. So obviously a lot of your listeners are familiar you know if you buy a property, buy a home and if your own home and you get a loan from Bank of America. If the toilet breaks you don’t call Bank of America right, you fix the toilet or you call a property management company and that was kind of my thinking going in. So at the time there was properties in Memphis, Tennessee , St. Louis, in the hundred thousand dollar range, we would loan up to sixty thousand dollars on those properties based on after repair value. So sixty percent loan to value we were able to achieve let’s say thirteen or so percent 12 percent somewhere in that range and I was basically thinking you know sixty percent loan to value, these have a very low risk profile and you’re still able to achieve double-digit returns somewhere in that range. Now of course a lot of those opportunities are dried up. Those returns aren’t exactly achievable anymore as the margins have kind of collapsed as the markets recovered but you know at the time you know some of the best investments I ever made in a risk-adjusted basis because you have really strong collateral there but you know kind of to segway into some of the other assets, the challenge with single family in my opinion is that the simplicity of the investment while it does make it straight forward in terms of conducting due diligence, it also doesn’t allow a significant difference between a best-in-class operator and a mom-and-pop operator. So the difference between let’s say having two or three single-family houses and having a hundred, doesn’t allow you that scalability that true economies of scale the commercial real estate and multi-family and cell storage can provide and so I was then drawn later down the road to etc you know the multi-family sector and the commercial estates as a whole 

 

Rod:That’s funny I got that memo as well after 2000 houses and a buy-and-hold including two hundred in Memphis and got that memo in 2008 when the market crashed if I’d have just been in multifamily, I would have been just fine. My multifamily did just find so yeah you were smart enough to get that memo before you went down the path as far as I did. That’s actually the reason I started the podcast is to convince people to do multifamily instead of single-family. So let’s talk about self storage. Let’s get into why you’re on the show today so talk about why you love self storage as an asset class 

 

Hunter: Yeah sure so I’d say you know I actually I just want to touch on something regarding themselves single-family to multi-family. This is something I’ve repeated a lot but I think your listeners will probably think it’s interesting you’ll find it really telling that you almost never hear someone say, well you know I got started in multifamily but it just wasn’t for me and now I’m gonna try to buy three hundred houses. And that should be clear right but therefore they make the mistake 

 

Rod:That’s a clue  

 

Hunter: Exactly 

 

Rod:The progression is never that direction it’s always the other direction you know and in my case I was just you know I just love single-family was easy for me and frankly I got lazy you know I had apartment complexes as well but the houses were just so easy for me. And I don’t know it really is they actually are much harder but in in my view of the world my model of the world they were easier but anyway self storage, why do you love self storage?  

 

Hunter: Sure so what I’m looking at investment goal you know the godly cash flow is there, gaining value through appreciation etc, to be completely honest that why-factor really comes down to being able to sleep at night. And that was why that Greece situation was so profound because it was the opposite of what I was actually trying to accomplish financially. So when I looked at all of the investment vehicles that are out there, I was trying to find most importantly was non-correlated assets. Assets that perform well in all stages of the cycle and 2 really kind of came to mind one being mobile home parks I think a lot of we us can understand that the worse the economy does the more demand there is for affordable housing. With self storage it’s not as clear on this face but it’s just as compelling in my opinion which is that people are more likely to go through some kind of transitional period during recessions and those transitional periods very frequently result in people having demand for the product of self storage. So you think about people downsizing, kids moving home from college unexpectedly, layoffs, job changes, etc all of those things are more common during recessions then on the other side when things are really good when things are expansion we’re experiencing a stationary period in the economy people are more likely to buy toys they’re more likely to buy jet skis or RVs and those things need to be stored as well. So self storage caches both sides of the spectrum. I’m not as worried about the good side all assets do well when the economy’s booming in the capital markets in particular are loose but if I can protect myself to the downside even if it’s just a piece of my portfolio, it’s gonna help me achieve my main goal which is just being able to sleep at night. 

 

Rod:Yeah it’s asset preservation and so let me ask you this historically, and I don’t know the answer this question, historically how did Self Storage do through the 2008 debacle? 

 

Hunter: Yes so there’s a lot of data out there on this topic I have an e-book on it which we can link to in the show notes page but basically both in 2001 and in 2008, rents were relatively stable. Now part of the data there that’s important to consider is that the asset class is relatively new. In the sense that you know 1985 or so the first self storage building was develop in United States 

 

Rod:Okay 

 

Hunter: And so when you look at 1995 to 2010 or so, the asset class generally basically doubled in size, went from about 25,000 facilities to about 55,000 facilities. So the key there is that during that doubling with those two recessions, you still saw real stability and rinse while the square footage per person was essentially doubling 

 

Rod:So what happened you know we talked about that the rents remained stable but what happened with vacancies in 2008 in the self storage industry because I know in multifamily certainly there was there were higher vacancies and you know slow pays and bad debt and you know all that stuff increased because you know particularly and maybe more in sub markets than globally or I mean than in the entire country based on the types of jobs that people had but what what happened in the self storage space? 

 

Hunter: Yeah so overall we saw a couple different things happening we saw rents basically staying stable during in recession years. The occupancy’s very stable. Now generally like I said the expansionary period was such that the business was basically doubling in size but during that period, you’re seeing occupancy is going from about 83 percent to about 79 percent over the duration of let’s say 1995-2010 and the data that I’m talking about if you google “Cushman Self Storage recession resistant” it is a brief article written by a third party where this is a chart which has just all this data that’s really compelling and the charts pulled from REITs. So okay the obviously there’s a lot of business owners a lot of self storage owners the vast majority are non REITs but that’s the only way in my opinion to get accurate data as trust those public companies they have to disclose that. So that’s right about that is from 

 

Rod:Okay all right super that was Cushman what was that what was that domain again? 

 

Hunter: If you just google “Cushman Self Storage recession resistant” it’s an article trying to basically they’re trying to say, is this asset class actually cell stored? Essentially does the thesis line up with the data and I found it to be very compelling 

 

Rod:Okay awesome awesome so talk about, so that’s that’s a very recession resistant talk about you know why self-storage generates real really respectable returns as opposed to other asset classes? 

 

Hunter: So the thing with self storage is that I think a lot of people even investors in the asset class and owners think of the business as a relatively hands-off business in the sense that they say ok look you’re building a structure it’s not very complicated. You’re not really offering a lot of amenities. So it’s a great deal because you can just buy it and you can rent it out 

 

Rod:Right you just hose it out right 

 

Hunter: Right it can be possible you can be profitable doing that buying in a reasonable cap rate etc but there’s a combination of two things. Number one there’s incredible fragmentation in the business in the sense that a lot of the private equity groups are not terribly interested in the asset class because the purchase prices usually are not high enough to attract them, but also you have really unsophisticated managers generally but you also have so many ways to add value to the property so that there’s a ton of complexities. So like earlier when I was talking about single-family, is the property rented? is it not? are you getting defrauded by your property manager? that’s really what’s those are the moving parts. With self storage you can number one SEO and internet sales are can be a huge part of the business so you have to be sophisticated to do that  

 

Rod:It is though. Let’s be clear about that 

 

Hunter: Exactly  

 

Rod:It’s not something you buy and leave that. I mean you’re there employees involved there’s you know other things that I mean certainly multi families a business as well but ok I’m sorry I interrupted you please continue 

 

Hunter: No that’s actually, that’s exactly the whole point. So the complexities of the business allow for there be a significant difference between a fragmented non-major player and a best-in-class operator. So the things are like building relationships with U-haul or nearby universities or military bases actually knowing how to conduct marketing like that. I mean the relationship with you holds one that is very favorable and risk-adjusted basis. So essentially we will buy properties based on in place income that aren’t implementing the strategy within 60 days buying the properties. We call our contact at U-haul we have them parked there 15 to 50 trucks depending on the size of the facility on our facility then we rent out the trucks to tenants and get a commission for facilitating the transaction. I have personally invested in properties where that one line item has added $3,500 a month to the bottom line and that is not uncommon right and the critical thing about that is that, that is not a capital expenditure. You’re not incurring that type of risk you’re not expanding the property you’re not developing you’re not relying on the city to give you the credit owning you’re just leveraging that relationship  

 

Rod:You’re just creating additional income, bottom line 

 

Hunter: Exactly 

 

Rod:Straight to the bottom line. So let’s drill down a little bit let’s get a little bit micro. So if someone were to look for self storage, they’re interested in this asset class you know get some high-level high level tips for you know the sorts of facilities they may want to look for you know how they might do a little market research? what sorts of things might someone do? 

 

Hunter: So everyone’s strategy is gonna be different I have kind of a niche strategy for a variety of reasons again when it comes to investing diversification is one of my main goals. So the first thing I want to make sure is that we have at least 50,000 square feet in the sense that that’ll allow for about 400 units. That’s going to allow you to be in a quality property and there’s gonna be significant amount of tenant diversification but you’re also going to get economies of scale in the sense that you have to have a property manager at least the strategy that we do we don’t do all the automation but that property manager is gonna cost the same if it’s half that size or double that size. So you want to take advantage of that  

 

Rod:That’s a fixed expense you can’t you can’t eliminate. Now let me ask you this, do you typically flag your properties? like a hotel, like do you subscribe to public storage or some of these other national flags? is that is that how this business works? I don’t know if it does  

 

Hunter: I’m not sure when you say flag what is 

 

Rod:Like in the hotel business you know you build a hotel and it becomes a Hilton or a high end or a whatever and you you basically for its it’s effectively a quasi franchise in that you’re utilizing their marketing infrastructure their you know their policies and procedures you have to hold you held to a higher standard you know all of those things is that does that exist in the self storage space? 

 

Hunter: Yes good question. So what we do is we partner with the top tier managers in the US and leverage their infrastructure and not only in terms of their relationships with brokers and their regional managers etc but also their branding. So when we invest in a self storage facility, we are leveraging that pre-existing infrastructure and their time energy expertise and access to capital with our investment capital. So that’s how we position the marketplace and I think it gets critical  

 

Rod:No I agree that that wasn’t my question though my question is, in this space, let’s say you were to build a facility you were able to, and obviously you’d probably need the experience to arrange the financing but do operators build facilities and align with a national brand 

 

Hunter: Understood I see. So typically sponsors will have their own brand. 

 

Rod:I see okay 

 

Hunter: They may not necessarily operate under the same name as their management company, but that’s typically in the industry system 

 

Rod:Okay so the answer is no okay it’s not like hotels where you’d build and operate in the name of that got it I just want them  

 

Hunter: Not the strategy we do 

 

Rod:Right right right I just I didn’t even know if that was possible. So let me ask you this um so fifty thousand square foots the sweet spot so that you can hire a manager and have the economies of scale and you know how many, how big of a piece of land do you need for that? I mean obviously you can go up if you want to does that impact that the desirability? 

 

Hunter: Yes so I like to have single story because in most of the markets that I’m looking for just to give you an idea we’re usually looking for you know the southeast is a great market for self storage we can get into why. So you know thirty minutes outside of some Florida market. I like to be in kind of a quasi tertiary market with a little bit of growth but that’s the way my be able to achieve that cash flow 

 

Rod:Okay 

 

Hunter: I like to be single story because it allows for drive up and drive up you can create a premium for. So when you get into the double, it’s not a problem, it’s something that we definitely look at but it’s more like because that tertiary market you’re able to do that single story asset  

 

Rod:You can get the land you can get the land big enough okay and so tell me give me an idea of how many acres you’d need for fifty thousand square feet just curious 

 

Hunter: I’m not sure I don’t know the exact number of acres I can’t give you that but it’s relatively like based on the numbers that I’ve seen a significant portion of the acreage is dedicated to the asset so we don’t have a big lay over in terms of unused land 

 

Rod:I see I see I see okay. Well here in Florida you’d have to have some water retention and that stuff but you know but okay fair enough I just kind of get an idea all right what is the zoning requirement for self storage is just a basic commercial designation or  

 

Hunter: So yeah I mean industrial and sorry exactly  

 

Rod:Okay do you know, is it advisable, I suppose it’d be more advisable to try to find an existing facility and take that down what sort of cap rates do you see for self storage? and is it Geographic? I’m am certain its market driven but what are you seeing? 

 

Hunter: Yeah so that’s actually a good question. I wanted to address the risk profile, the strategy of in terms of developing or value add and then talk about the market as well and cap rates 

 

Rod:Great 

 

Hunter: The reason is that from my perspective, there’s so much mismanagement out there that you can quantifiably decrease your risk by buying properties that are mismanaged that have in place income. To me proven demand is very very different than having a eighteen month let’s say development process after which you say, trust me we’re going to be able to rent this thing up at five percent per month. That’s certain people’s strategy that’s just not mine especially when it comes to investor capital basically because of the mismanagement. You can just implement those strategies you’re well on your way to not only put achieving a lucrative return but more importantly protecting your equity because let U-haul strategy for example. I think some people see that and think wow this is going to produce a great return. Well I think what’s much more important is that if there is a capital market correction it really is just a good way a low-risk way a relatively low-risk way to protect your equity which is really critical. Now with that in mind because the business operates on monthly leases, you can implement those strategies very quickly. So if you have admin fees or late fees or you want to implement rental raises you can do within 30 days which is also great for some things like inflation stuff like that 

 

Rod:So what you’re saying is when you, I’m sorry I’m sorry when you purchase a property 

 

Hunter: yeah absolutely 

 

Rod:You can you can do this repositioning almost overnight because it’s month to month tenancy effectively is that, if I’m hearing you correctly? 

 

Hunter: That’s correct and so because of that, and this is just my opinion, but because of that the in-place cap rates can be somewhat misleading in the sense that the value add can be created quite quickly. So in a market, yeah exactly, so in a market that let’s say is trading at a six cap we may buy a four cap and underwrite that to a six and a half cap within the next let’s say 18 months or something like that. That may sound somewhat aggressive but historically speaking you know I think that’s a relatively reasonable thing to achieve given the strategies we’re kind of talking about  

 

Rod:So how do you identify mismanagement? tell me the sorts of things you look for 

 

Hunter: So you know number one we want to look in markets that we think makes sense. We only want to look in markets where there’s a supply-demand equilibrium. So it doesn’t matter if the property’s really mismanaged in it’s the middle of a place we don’t want to look at right. So once we kind of identify this the circumference we familiarize ourself for the property, you can see very quickly, is this facility an extremely safe and you know intriguing and branded property that’s operating in A class of self storage. And I think people here a class Self Storage they come in like what possibly does that mean like you guys have a pool or something like that? It’s really a combination of the amenities that are offered, the accessibility, 24-hour surveillance security, things like that, majority the tenants are women, so you want to cater to an audience that feels safe that they recognize the branded merchandise, they recognize the colors when they see them things like that I’m not sure what your question is 

 

Rod: Interesting. Let me circle back to something that you brushed over and that is your area demographical research – what sorts of things do you look at in an area? 

 

Hunter: So obviously the challenge with self storage is over building. The reason for this it’s a straightforward structural thing so you can frequently build the property cheaper than you can buy it. So the real key with the asset class and when it comes to due diligence is identifying radiuses where there’s a negative supply-demand or a favorable supply to me 

 

Rod: And how do you do that? 

 

Hunter: So what we want to find, the national average is about 7.7 square foot of self storage per person okay that’s on a national basis. So what we want to do a good first piece of due diligence is finding a market let’s say for the 5 mile radius or 3 mile radius where there is less than that okay. So if you have a market where there’s a certain number of population and let’s say it’s only 4 square foot per person you can actually do the math and say ok, this radius here is 1/4 million square feet under supplied in the sense that there could be 2 or 3 reasonably sized facilities developed in the next 18 months and you would still be able to raise rents aggressively and push rental income so again that’s a very large generalization  

 

Rod:Yeah I get it I get it  

 

Hunter: But it gives you a good idea  

 

Rod:Okay all right and then do you assume, you you take a look at the you know you look at the competition? do you do you gauge their vacancy? do you do those sorts of things as well like you would in the multifamily space? 

 

Hunter: Absolutely and secret shoppers are a big part of the business again because of that complexity in the sense that you can see that they’re advertising a certain rate but you don’t know what is going on behind that rate. Are they mandating that all of their tenants have tenant insurance? are they charging aggressive late fees? are they charging move-in fees? these things add up significantly. So when you go in and you secret shop those competitors, you can get a much more good understanding of that. And very many times they will be transparent unbeknownst to them they’re trained not to but many of them will disclose things like occupancy rates etc so you can get a relatively good understanding prior to the purchase which is critical  

 

Rod:Right right right. What sorts of debt is available on this asset class? 

 

Hunter: So the lenders currently like this asset class. It’s not as liquid as multifamily for example of course obviously that’s kind of the gold standard when it comes to liquidity but there are available financing options out there however 

 

Rod:Is it mostly regional banks? or on national banks? or is there agency debt? or just just sorry 

 

Hunter: I haven’t seen any agency debt but there is a lot of regional banks. There’s also national lenders which specifically focus on the self storage asset class which is interesting because they might not be the least expensive way to go but they understand the business so that if things go sideways you have a friend that understands the business. And that can be really important in these tertiary asset classes I mentioned earlier 

 

Rod:How could things go sideways? I can’t let that go by without an explanation tell me tell me how it goes sideways  

 

Hunter: Well this is one of the areas that I think you know multifamily presents itself quite strongly. When you’re talking about investing in tertiary asset classes I really like mobile home parks and self storage. One of the challenges with them is that towards the end of the cycle, all the sudden all the lenders start to love the asset classes they think there are geniuses they want to invest in mobile home parks etc and then the second things turn around. Wow all those lending possibilities are gone and it doesn’t matter if you’ve been paying your debt service coverage ratio for the last ten years and you’ve got a fifty percent loan to value if there’s no one that’s gonna lend you the money, it’s a matter of can you call your friends and give them ten million dollar loan in the heart of some kind of crisis. And like I said you know multifamily people say, look we’re gonna figure it out there’s so many available options out there you don’t really run into these liquidity crisis. In the most recent correction you know people struggled to get liquidity even if they had a strong performing asset  

 

Rod:So what you’re saying I’m sorry so you’re saying if debt came due it was a struggle to refinance and find that financing like it wasn’t always 

 

Hunter: Yes 

 

Rod:Okay  

 

Hunter: Yes in all fairness obviously I think you know both agree 2008 was an aberration. It’s relatively recent in our memories but still when it comes to downside protection that’s kind of a you know I wouldn’t say gold standard that’s like the opposite of the gold standard. It’s horrifying but we want to protect ourself from that. And I think that the case that I’m you know trying to make here with those two asset classes demand is stable. I don’t see a lot of data suggesting that’s going anywhere the challenge what you want to be careful about is getting appropriate loans to , appropriate debt service coverage ratio, you know a reason to 

 

Rod: Speak to what each one of those is  

 

Hunter: Sure. This is something that I think doesn’t get talked enough about an investor’s, particularly passive investors need to think really clearly about the lending arm lending portion of the capital stock. So I would say that 99% of all the challenges related to real estate particularly related to loss of principal have something to do with the loan. And so when you look at the loan you’re the that’s the majority of the purchase. And so you want to take a note of  those details. So the first thing we want to look at is the loan-to-value right that’s the loan to the value based on an appraisal or something like that. You also want to look at the loan to cost. Let’s say for example you’re buying a property for fifteen million dollars and you have a ten million dollar loan. Well that’s a relatively reasonable conservative loan but if you’re actually putting additional two million dollars into capital expenditure, you’re revamping the property turning from a B Class to an A-class, that is actually a significantly conservative loan so it’s important to take those into consideration. Some of the other metrics that I think are important are the interest only period which is the time at which the loan, the first two years usually first year so they may not be paying itself down. Now you will find sometimes sponsors will have extended interest only periods and if you were not paying attention to the fact that this portion of the loan is not paying itself down, therefore the payment isn’t as high comparing apples to apples without counting for that, you may think that one deal is much better than the other without thinking about the financing side 

 

Rod:And let me let me put an exclamation mark on that. Guys, I really want to hammer this piece home okay. In this hot market right now and I’ve talked about this, I did a Facebook live piece on this you know even if you’re just a passive investor, don’t dabble. You’ve got to have enough of an understanding of whatever it is you’re going to invest in. I don’t care if it’s the stock market I don’t care if it’s the bond market I don’t care if it’s multifamily, self-storage, mobile home parks, whatever it is you need to understand that asset class, you need to understand that investment vehicle because I’m telling you there are a lot of sponsors out there that have not gone through a crash in 2008, they’ve never experienced a big pull back, there’s a lot of irrational exuberance right now about deals and I will tell you, I sometimes get floored when I see what some of these assets are trading for selling for that we turn down and I see that they’ve sold with debt and I’m thinking, good God I wouldn’t want to be a passive investor in that deal because you know if there’s a hiccup, it’s gonna be a train wreck. And so guys you know if you’re interested in you know mobile home parks, get an education or self-storage, get an education, if its multifamily, come see me at one of my live events but or the very least read my book but get educated because listen, it’s very easy like Hunter just said to make the numbers look like they make sense. And if you don’t know what you’re reading you know anybody can make a pro forma look great it’s very easy to minimize the expenses and or you know play with the numbers so you’ve got to understand what it is you’re looking at would you agree? 

 

Hunter: Yeah I actually really appreciate that everything you said. I think that another side of that same coin is also that this has been one of the most remarkable and longest expansionary periods in the history of the United States and also by far the most incredible commercial real estate comeback we’ve ever seen. And so there are companies out there and investors that are not only looking for to place capital because other asset classes are challenging but also incredible returns have been produced that on a risk-adjusted basis are not repeatable. And so as an investor it’s an incredibly important time to do the one thing that almost no one is doing, look in the mirror, analyze the deal, and say is this repeatable without that cap rate compression? And that’s the thing a lot of people aren’t talking about. It’s not great for marketing but it’s really really critical to do because everyone’s gonna be having that conversation in five years all of a sudden that’s all they want to talk 

 

Rod:Trust me it could be next year. I’m gonna tell you that nobody knows and and everybody knows real estate goes in cycles I’ve been through a couple of downturns and one bloodier than the other but I’ve been through a couple and I will tell you it’s sobering and you know and it’s gonna happen again and you know if and there’s nothing worse than like you described. Having an asset that’s cash flowing and you can’t you can’t refinance and your debt is due and losing that asset because you can’t place you know you can’t refinance the property and so you know that’s a that’s a bad day when you’ve got an asset that’s cashflow and you lose it because it’s too tight and so you know you can and interest rates are going to go up anybody that thinks otherwise is kidding themselves and maybe not as aggressively as they as they market and that hasn’t happened but and when interest rates go up cap rates go up. And so you know it’s just this the way it works guys, so get an education bottom line bottom line get an education so that you’re not especially if you’re passive so that you’re not and so you know those of you thinking about multifamily for example. You don’t have to just be an active investor to get educated okay even if you’re just going to invest your hard-earned money and somebody else’s deal, come see me and get educated. and that goes for any asset class you agree Hunter?  

 

Hunter: Yeah absolutely. I think all right dude that’s the thing when people say what’s your suggestion for people that are just getting started look it’s a really exciting time to invest in real estate. There are opportunities that’s all I see is opportunity everywhere everywhere I look but for if you’re just getting started what you need to do all in like the poker analogy go all-in on education because that’s something that’s gonna always work and then once you do feel comfortable start making moves and be focused. Be focus and take action on a daily basis and you’re gonna be in a really good position and in a reasonable amount of time 

 

Rod:Love it okay we’re we gotta wrap it up here but let me ask you what books do you gift the most to other people? 

 

Hunter: Man you know there’s three books that I think done concurrently are really powerful. Grant Cardone 10x which I’m sure a lot of people are familiar with. I also so the first one is that one then immediately followed by Miracle Mornings for entrepreneurs which is a great kind of anecdote to that and then followed by Deep Work which is about basically blocking out significance amounts of time to accomplish things that are actually going to grow your business. The reason in that order is because they’re almost like antidotes to each other in the sense that Grant Cardone you guys know him he’s a man 

 

Rod:He’s been on the show twice he’s a hoot yeah I love that  

 

Hunter: He just he is the king of go as fast as you can in as many directions as you can. Cameron Herald is really good at systematizing that approach  

 

Rod:I thought you said I thought its Hal Elrod isn’t the 

 

Hunter: Correct. Correct but the one Miracle Mornings for entrepreneurs was co-authored by Cameron Herald okay so I think most people are interested in you know the morning routines etc which is an important piece of the book the second half of the book is written by the COO of Got Junk and he took the business from very small to extremely large. He’s a brilliant person when it comes to systems and putting the stuff in practice like from an operational side of things being the COO obviously and then Deep Work is actually written by someone I believe someone who’s in the world of academia where they need to write you know extensive really cognitively demanding tasks but it’s important to do that in long drawn-out increments. Sometimes we chat a time certain people like to do different things. I like to do at least I work from 7:30 to ten without answering emails every day that’s when the stuff that actually grow your business happens. So don’t mean to go on a tangent  

 

Rod:No listen buddy that was great because you know I teach my coaching students to block time for what’s most important. I block, I cut-out hold days for that creative time that Deep think that Deep Work time. I loved it I had not heard about that book absolutely and I didn’t realize that Hal Elrod co-authored that book about entrepreneurs and that Got Junk guy played a role in that and of course you know systemization is critical you know Michael Gerber and e-myth you know there’s a great book for that so I’m gonna pick up both those second two books that I don’t have. Well listen my friend it’s been a lot of. I appreciate you being on the show and adding value to my listeners and let’s stay in touch  

 

Hunter: Yeah I really appreciate I will say I really like the structure of the program. I love the educational content. You’re really setting yourself out there so I really appreciate you having me on 

 

Rod: No that’s kind of you to say that all right brother take care! 

 

Closer:Hey thanks for watching. Please subscribe to my channel and if you listen to podcasts join me on iTunes, Stitcher or wherever you listen to those podcasts. Just search for Lifetime Cashflow through Real Estate Investing. 

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