121: How to Passively Invest in Self Storage Units with Hunter Thompson

On this episode of the InvestFourMore Real Estate Podcast, I interview Hunter Thompson,who has been a passive real estate investor for many years. Hunter started investing in mortgage notes and then moved into syndication. Hunter chose not to be the person who put all the deals together but rather the person who invests in those deals and lets other people do all the work. Hunter feels his best use of time is finding the right investors to invest in. One of Hunter’s favorite investment niches is self storage buildings. I talk to Hunter about how to find the best self storage investments and why they are so attractive to him.

How did Hunter get started investing in real estate?

Hunter has had a very interesting life! He was a professional poker player for many years but got tired of the grind that comes with a poker life. He was also an entrepreneur, having started a number of companies including an event business. In 2008, Hunter started looking for the best way to invest his money. He naturally started with the stock market, as many of us are told that is the best place to invest your money. Hunter realized investing in the stock market was really hard because the markets are so intertwined. You can invest in a really good company, but if the markets in Southeast Asia drop, the stock price for your company may drop. He was also competing with millions of other investors who had much more time to figure out the markets.

Hunter decided real estate would be the best way to invest his money. There was less competition, higher rewards, and in many cases, less risks because you are buying a real asset.

How did Hunter start investing in real estate?

Hunter started buying mortgage notes and lending money to house flippers after the housing crash. He was getting interest rates of 13% or higher on the money he was lending and had very low risk because he was only lending on 60% of the value of the house. Hunter did very well with these loans until more lenders came on the scene, creating more competition and lower rates. Hunter began to invest in syndication deals where another investor would find a multifamily apartment building and bring in investors to fund the deal. Hunter would invest $50,000 into a deal, get a great return, and have no work to do on the project. This strategy worked great for a few years until competition for multifamily proprieties increased prices to where it was really hard to find good syndication deals.

How does Hunter invest in self storage projects now?

Hunter moved into more syndication niches to increase his returns, and one of his favorites is the self storage business. There are many reasons why he likes self storage:

  • The purchase prices can be much lower than large apartment complexes
  • There is tremendous opportunity to add value
  • There is not as much competition
  • There is always demand for self storage

When I heard Hunter invested in self storage projects, I immediately thought that sounds risky. There are many new projects being built in my area, and I feel like there may not be enough demand for self storage units. After talking to Hunter, I see he is very smart about how he invests. There are a number of things he looks at in a project:

  • He likes to buy existing properties, not build new ones
  • He looks for mismanaged properties
  • He looks for ways to increase rents, like partnering with U haul
  • He looks at the number of storage units built compared to the population in that area

Make sure you listen to the podcast to hear Hunter explain, in detail, the projects he invests in.

Why is self storage less risky than other businesses?

Hunter explains that self storage units are much less risky that other investments. For one thing, people always need to store their stuff. During the last housing crash, storage units were almost unaffected. Rents stayed the same because people downsized and needed a place to store their things. Even though incomes decreased, demand went up. It is also very easy to evict someone from a storage unit compared to a residential unit. Hunter does warn that it can be very tough to finance commercial properties in a downturn.

How can you contact Hunter to learn more about self storage investing?

Hunter does not manage or run these project. He finds the best operators to invest with. Once he finds a good operator, he invests his money, and most of the work is done. He has invested in 30 different syndications to this point and is always looking for more! If you are looking for help investing in a syndication, you can find Hunter on cashflowconnections.com, where he offers a free eBook on the subject.