All Forum Posts by: Mohamed Youssef

General comments. We have also been concerned about the economy and have taken actions.

1.  Self storage is our main investment.  You need to stratify the discussion into ABC markets.  Our investments in C markets say 10,000 population.   Our occupancy has been at 99% forever.  We have increased our rental rates by 25%.   Too small a market for both Large or small investors to attack.  “A” markets draw the large locations and large REITS and oversupply and unit price have deteriorated.  Our “B” market investments are Performing well.  Self storage is great in both good and bad economies due to housing movements up and down.  Having looked at many markets in the U.S. there are still many markets that are under supplied.

2.  MHP maintenance.  It’s been 50 years but sewer line, water line and road repairs aren’t that big of a deal for established parks.  
 MHP needs to be stratified between lot rental only or Park owned units.  
      
  MHP are  housing of the last resort or a low cost entry point.  Both are great for a recession.   

3.  Senior homes.  Ride the Silver Tsunami.  Demand is guaranteed.  Baby boomers with all their wealth.  Problem this is an intense customer, regulatory, secondary customer- children, dietary, therapy, medical industry, employee based industry.  The real estate part of it is large but the easiest part of the equation.  

More than investment type concerns for a poor economy we have looked at the following.      
 A.  Reduce debt.    
B.  Increase cash reserves.   
C. Diversification of asset types.       
 D.  Pruning investments.      
E.  Both hold off or Start new investments.  We have held off starting our next Self Storage location even though the market analysis is concrete.  We are bringing to market a Country Subdivision.  We don’t build houses and this is the worst time to start a subdivision.  Luckily recessions don’t last that long and subdivisions usually take a while to fill.  We are doing this with cash and not a loan. 
F.  I personally would not start a new asset type going into a recession. Unless it was small and I did it for experience so I could ramp up quickly coming out of a recession.  

@Mohamed Youssef

Having the right engineering team really is key! 

Here's an article with things to consider when selecting a cost segregation company. Feel free to reach out if you have any questions! https://www.biggerpockets.com/forums/51-tax-legal-issues-con...

The company we always uses lets us know the payback ratio based on the expected bonus depreciation from their estimates right upfront. It makes our decision very easy and cuts right to the point.

I would add necessity-based retail.  Typically, this is your grocery anchored shopping centers in middle markets.  Think Publix/Kroger anchored, dollar store as junior anchor, a great clips/super cuts, maybe an inexpensive mexican restaurant, and budget clothing store, like a Rainbow or TJ Maxx.  

While clothing and restaurants are generally in the discretionary spending, when you are at the budget end of things, even in a recession, eventually you need some new pants or don't want to eat at home, but also don't want to break the bank with a nice restaurant.

 I remember hearing about self storage a bit after the great recession (probably around 2010 or 2011) and didn't put 2 and 2 together (or forgot I had). It definitely makes sense what you said and in hindsight it's definitely true. Still not convinced on mobile homes. Let me know if you come across anything on it. Thanks

Well I came in here expecting to add something but you hit the nail on the head. These are pretty much all assets that I like to look at for the very reasons you suggested.

I've never done a medical office, but can speak from first hand experience that collections from mobile home parks and self storage is solid in an up or down market. I think a lot of it has to do with the price point honestly. Even in tough times, people can usually afford to live in a MHP. And self storage tends to not be very expensive either so people keep paying because they don't want to get rid of their stuff...usually.

I've seen mixed results from these asset classes over the last several market cycles.

MHPs do seem to have some resistance to recessions and some stability, in part due to the reasons you gave.  They do have some risks, however--such as big-ticket capital improvements like water/sewer systems and roadways.  This can be mitigated to some extent by thorough due diligence, but for long-term ownership you'll probably get hit with these eventually.  This can be especially painful when the cost of labor and materials is high--as is the case now.

Self Storage has seen rent declines in the last couple of years.  I'm not sure that this is recession-related because we haven't been in an recession (officially?).  I think it has more to do with over-building, which can be just as bad as a recession.

I agree with your thesis on medical office, however I've noticed a lot of doctor consolidation in my area with doctors either leaving the area due to high costs or partnering up with other doctors and/or larger medical groups.  Our class A medical office seems to be doing quite well but I see a lot of vacant B&C class medical office that wasn't vacant a few years ago.

My addition to this list is senior housing, specifically assisted living, memory care, and skilled nursing facilities.  I believe in it enough that I'm about to launch a fund for acquiring just that, and have ten assets in contract already.  This is a needs-based use, so it has recession resiliency, but many states also have development restrictions so you don't see the over-building problem like we've recently seen in self storage and multifamily.  The downside here is you need specific industry knowledge and relationships to make this strategy successful, so it's out of reach for a lot of sponsors.

That's interesting about self storage, without having thought about it much I'd almost think it would be more vulnerable in a recession. But your logic makes sense.

I would be a bit nervous about mobile home parks just because they tend to be of a poorer demographic, who tend to be the ones most likely to be unable to pay when the recession takes a turn for the worse. But that is true about moving costs. Do you have any data on that by chance?