I am one of them tired landlord wanting out of SF and into commercial. However, I have a bad case of aversion for any investment that has much contact with tenants/toilets so Iâm shying away from multi-family.
Therefore I have been looking at either Self Storage and/or MHP. I have Frankâs MHP course - which I highly recomend - he tells you the good with the bad unlike most.
I know Frank has a self storage course as well (unfortunately no SS forum) hence my posting to this forum.
Does anyone here have any experience with self storage? Iâd love to hear your thoughts about this.
I considered self storage, but decided to invest in MHPs because:
The pricing power with customers is better with MHPs (the switching costs are higher)
MHPs are a government-enforced oligopoly. It is not legal to build them anymore (not in any place youâd want to build one anyway). Once in this business, you can be virtually assured of never having any additional competition. Self-storage is not regulated, and if your property is âtooâ successful it is more likely that a competitor will open up close by.
To a large degree, everyone who owns a self storage facility is a sophisticated professional investor not likely to give you a great deal on selling their property to you. This is not the case with (all) MHPs. While many are indeed owned by professional corporations who will drive hard bargains, there are still a significant number (a third?) owned by âmom n popsâ who may sell you their property at a discount to what the property might bring in a competitive auction. Mom n pops may not know what their property is really worth, and/or may âbondâ with you because you remind them of their son, or a friend, etc. and give you a good deal.
Self-storage is the closest relative to MH. Both sectors have around 50,000 properties. They both began only around a decade apart. They both are focused on renting property without having to maintain it (other than common areas). They have similar expense ratios. They both were considered âweirdâ by the real estate investing status quo at their inception.
However, self-storage has done a much better job of being accepted by the real estate community at large, and trades at much lower cap rates than MH. It is also three times more consolidated. Public Storage has been a terrific steward of that industry.
Jeffersonâs three bullet points are completely true. Those are key reasons that we invest in MH over Storage. But there are some that prefer Storage, and we respect that right. Those Storage fans are drawn to the fact that it has zero negative âstigmaâ compared to MH, which has a ton. The biggest challenge for MH is to knock down this âstigma wallâ so that it can also share lower cap rates.
I have also noticed that most Storage folks come from a different place than most MH investors: many Storage people are looking for development options for raw land they own, and MH is simply not an option due to zoning.
So, in answer to your questions, I believe that:
MH is superior to Storage on existing properties, for the reasons that Jefferson expressed.
Storage is superior to most other uses for raw land â if you own raw land or approaching real estate from a development angle â as the zoning is available for those who want it.
So if youâre a developer, then Storage is better (since MH is not an option) and if you are buying existing income properties, then MH is superior. But again, I would never put down those that buy Storage, as smart ones have done very well with it.
If you have half the revenues from self store and the other half from tenant owned homes, how do you evaluate this deal? Do you give the same cap rate to both?
Great discussion here! Iâve been looking into self storage options in Tulsa recently and itâs interesting how much difference there can be between facilities when it comes to pricing, security, and accessibility. I checked out a few locations like SecurCare and Keyport Self Storage in Tulsa, OK and they both seemed well maintained with good access hours. It would be great to see more comparisons between climate-controlled units and standard units since that seems to be a common question for renters. https://www.bestlocalselfstorage.com/
so Iâm shying away from multi-family.