All Forum Posts by: Petro B.

@Michael Wagner @Steve Cheslock @Scott Krone appreciate your inputs. Agree that staying smaller and hyperfocusing on the micro market where the asset is located could be a good strategy in this environment.

@Michael Wagner yes, that’s what I hear from syndicators - “we stay in secondary and tertiary markets and our target area is 3-5 mi radius”. I agree that it’s a good strategy in the current environment, but what gives me pause:

1. Most of the small to medium guys are looking for opportunities in those markets.

2. If the primary market blows up, cap rates in the other markets would go up too.

I could be overthinking this, and would love to be convinced otherwise. I do like the simplicity of this asset class vs. other RE.

I am relatively new to real estate syndication but am exploring opportunities to invest in self storage as a passive investor. On the surface, self storage sounds like a great investment - low maintenance, recession resistant, multiple cash flow sources, easier to do value-add than MF, etc. But after doing some research, the following trends have come to light:

- Massive construction activity over the last 4-5 years with inventory growing 10%-20%+ in a lot of markets. Even COVID only barely slowed the trend in 1H20 and the activity resumed in 2H20.

- A flood of new capital driven by flight to safety from underperforming sectors (office, hospitality), as well as new capital from other areas (e.g. stock market is at the all-time high, but the future is uncertain).

- Big boys are coming to the sector - case in point, Blackstone acquisition of Simply Self Storage.

- Downward pressure on the cap rates from the competing new capital, while, at the same time, new supply applying downward pressure on rents.

All of the above makes me wonder, is self storage industry in the late stage market cycle and the end is near (3-5 yrs)?

@Adam Lacey agreed, although I'm looking at this from the passive investor standpoint, so having a very experienced operator taking this on would be a key for me. 

MAG Capital Partners has an interesting niche - industrial sale leaseback transactions.

Lack of tenant/sources of cash flow diversification would be the biggest concern for me. There is a lot of downside risk with potentially long vacancy periods, re-work needed for a new tenant, etc. Also, agree with @Aamir V. , if you are buying into an asset with existing long-term lease forced appreciation is limited.  

It looks like the hotel industry would not fully recover for a long time, so what are your thoughts about converting hotels to multifamily? It seems there could be an attractive entry point in this environment. Concentrating on the extended stay hotels that have studio/1-/2-bedroom units with kitchenette could minimize conversion costs. I guess zoning could be an issue, and specific local market conditions could play an important role (not everyone would want to live next to an airport!).  

@Kaylee Walterbach

I wish I would have known that investing for cash flow beats investing for appreciation any day of the week.

Not exactly a real estate book, but "7 habits of highly effective people" by Stephen Covey had a huge impact on all aspects of my professional life.  

@Marc Cohen I'm with you, experience and track record in different market cycles are critical. As the good old saying goes, everyone is a genius in a bull market. It does look like during the last 7-10 years there have been an explosion of the new players in the field. I myself have been looking for ways to allocated capital through syndications, so would be interested to see the recommendations.

Praxis Capital - Brian Burke's book "The Hands-Off Investor" was great.

I've also head some good things about Ashcroft Capital.