Saw a post today about a girl being a “pet psychic” who is apparently super successful. Wondered what other examples are out there.
Saw a post today about a girl being a “pet psychic” who is apparently super successful. Wondered what other examples are out there.
Not anymore
Can you, elaborate? I know 2 guys who own storage facilities and they can’t spend the money fast enough. They only need to rent about 10 units (out of 100-200 units on site) to cover the cost of labor to have people working there, the insurance is low (because insurance doesn’t cover anything and the buildings are metal and cinder blocks), maintenance is low (again, cuz metal buildings) so every remaining unit rented is money straight into their pockets. As long as some other dumbass doesn’t build one across the street then they’re set for life.
Guy I work with had 8 units at one point. I said dude you are insane. Over 10 years you spent $100,000 to store $10,000 worth of shit.
Sure. They are overpriced.
You used to be able to buy these at 10 caps (10% per year return), and then increase their profitability to 20%+ or even 50%+ if it was in bad shape. Along the way, debt prices went lower and the asset values grew so refinancing or selling for a huge gain was pretty common. These are typically the stories you hear. Gurus get clients by convincing people this is still possible.
Today, everybody is aware of this asset class, so the entry price might be a 2 or 3 cap, and you’ll do a lot of work to get it up to a 6 or 7 cap in a great scenario. Don’t believe me? Ask a broker for some pricing and this is what you’ll see. Those aren’t the exciting returns of years past. Most people buying today at these super high prices are institutionalized. They capture value by putting 100 units into a bucket of 10,000 units that they can sell off to PE shops at a premium (these typically have a $10M min). They can buy for a 1 cap and still make a ton with this model, although if they don’t know how to operate they have their own troubles.
Btw, this same concept has played out in multifamily, mobile home parks, self storage, HVAC companies (not totally yet with these), car washes, etc…. There are a variety of factors that go into it, but if you had to boil it down to a single affect, it’s essentially just price discovery.
I personally believe that this is the most important piece in analyzing businesses. Just because a business is extremely stable, doesn’t mean that it can’t be extremely risky if you overpay. Stability + spread over costs are what makes businesses stable.