October 15, 2023

138. Uncovering Value-Add Opportunities in Self-Storage: Insights from Jeremiah Boucher on Maximizing Investments and Expanding Storage Units

50 minutes

There’s a fascinating world out there for self-storage in a changing market. In this episode, Jeremiah Boucher, the founder and CEO of Patriot Holdings, shares his insights on why self-storage will continue to be in demand, despite potential economic downturns. He emphasizes the importance of operational excellence, adapting to market conditions, and careful property management. He also offers a comprehensive guide for LPs (Limited Partners) to understand investments and assess opportunities in the real estate market.

About Jeremiah Boucher

Jeremiah Boucher is the founder and CEO of Patriot Holdings and manages a $350 million portfolio of alternative commercial real estate assets with a focus on self-storage, manufactured housing, and industrial. He is also the author of Finding Your Edge: How to Win at the Game of Commercial Real Estate Investing.

Here are some power takeaways from today’s conversation:

[03:24] Jeremiah’s real estate journey

[09:13] His transition from mobile home parks to self-storage

[11:29] Self-storage investment in a changing market

[18:01] A comprehensive guide for LPs

[20:31] What value add means in self-storage

[26:39] Jeremiah’s criteria for choosing where to invest

[34:57] Evaluating industrial real estate investments

[38:30] Tips for vetting sponsors

Episode Highlights:

[11:29] Self-Storage Investment in a Changing Market

Jeremiah believes self-storage will continue to be in demand due to demographic trends and the need for space, despite potential economic downturns. However, investors need to be cautious about overpaying for self-storage assets. Jeremiah emphasizes the importance of operational excellence and adapting to changing market conditions. He also warns of market saturation and the need for careful property management. Additionally, while occupancy may grow, revenue might not as customers become more selective when choosing storage units.

[18:44] Key Considerations for LPs: Understanding Investments and Assessing Opportunities

By considering these factors, LPs can gain a deeper understanding of their investments and make informed decisions that align with their goals.

Communication and Quarterly Reports: LPs should prioritize open communication, including regular feedback and comprehensive quarterly reports that highlight key metrics.

Operational Performance and Addressing Issues: LPs need to analyze how assets are performing and whether the company is actively addressing any challenges. Lack of distribution, for example, requires understanding the reasons behind it and the steps being taken to rectify the situation.

Importance of Communication: Effective communication is critical for LPs to assess a team's ability to navigate difficult times. A history of transparent communication demonstrates the team's experience in overcoming challenges and ensures alignment with investors.

Team Evaluation: LPs should not rely solely on one person's presentation skills but also seek to engage with other team members. A single-person operation increases vulnerability to personal circumstances that can impact investments.

Value-Add Opportunities: LPs interested in value-add investments should focus on mismanaged assets. Typically, these assets require different capex. Additionally, prioritizing quality locations with good visibility and markets that have sufficient demand but limited supply is crucial.

Barriers to Entry: Evaluating barriers to entry in the storage market helps determine the long-term viability of an investment. A market with limited supply per capita and obstacles for new entrants provides greater potential for success.

[20:31] What Value Add Means in Self-Storage

Value add refers to existing, mismanaged self-storage assets that typically have deferred capital expenditures. For a value add opportunity, the asset needs to have good quality "bones" like a decent existing storage business already in place that is conducive to tenants getting in and out easily. The highest value-add for his company is if an acquisition can get additional land on top of the existing storage, as this allows for expansion of the number of units once occupancy is high. Value-add involves making property improvements like lighting, fencing, paving, cameras, and signage to create a better product and command higher rents. But marketing is also important to fill the new units.

This show is for entertainment purposes only. Nothing said on the show should be considered financial advice. Before making any decisions, consult a professional. This show is copyrighted by Passive Investing from Left Field and Left Field Investors. Written permissions must be granted before syndication or rebroadcasting.

Resources Mentioned:

www.patriotholdings.com

Jeremy’s book: Finding Your Edge: How to Win at the Game of Commercial Real Estate Investing

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