Profiting from America’s Junk Problem

[Intelligent Income Daily]( Welcome to Intelligent Income Daily, the free newsletter from wealth and income expert Brad Thomas. In it, Brad and his team share the safest, most reliable ways to earn and grow your income in any market condition. You can find all past issues [here](. And if you have any questions, please contact Brad and his team [here](. Profiting from America’s Junk Problem By Brad Thomas, Editor, Intelligent Income Daily Visiting The Breakers in Palm Beach, Florida, is always a treat. And I always find a way to add even a little more fun while I’m there. Source: Wide Moat Research More than 100 years old, the hotel was originally built by Henry Flagler, a longtime partner of John D. Rockefeller and father of the Florida East Coast Railroad. Even after a century, it’s still a destination for many traveling to South Florida, including yours truly. The views are amazing. The drinking and dining options are hard to beat. And the full 18-hole golf course is every bit as worthwhile. If you ever get the opportunity, I can’t recommend it enough. But when I traveled to The Breakers last week, I wasn’t there for gold. In fact, I wasn’t there for leisure at all. I visited The Breakers specifically to meet with one of the largest private landowners in the country. He and I sat across from each other over dinner, exploring a potential sale. And you might be surprised to hear what it was for… America's "Junk" Problem In a world that’s obsessed with the future-forward capabilities of artificial intelligence (AI), you might be surprised to know I’m interested in purchasing something as “old-school” as a self-storage facility. That’s why I was at The Breakers. I was speaking to my contact about potentially purchasing a self-storage business from him up in my neck of the woods. Most investors are laser-focused on Nvidia and the future of artificial intelligence. And in full disclosure, I do have some stake in AI as well, including a real estate-oriented startup. But at Wide Moat Research, we believe in finding great businesses for our readers, whether they’re “popular” or not. Physical spaces designed for commercial purposes are what I know best. I have far too much experience in their slow-but-steady money-making power when properly managed. And in the world of commercial real estate, or CRE, self-storage stands out especially. It’s big business, believe it or not. It might fail to make splashy headlines (or headlines at all) most days. But my team and I don’t care about celebrity-level publicity stories. We look for great businesses with solid foundations and room to expand – regardless of how often others talk about them. It’s much more about how often they use them. And people definitely do use self-storage. America has a “junk” problem, with more stuff than we need or know what to do with. Some of us can keep our additional assets in our basements or attics. But 11.1% of households have overflow that ends up in self-storage facilities. That’s a significant consumer base to work with, to say the least. A Lot to Like… And One Downside Like any other CRE category, self-storage has had its booms and its more subdued moments. Unlike some other CRE categories, it can easily cater to a range of economic conditions. When money is flowing, people buy more stuff and therefore need space for any excess. During downturns, they look for ways to save money, including by moving into smaller, cheaper spaces – and there’s often items they want to keep that won’t fit into the new accommodation. Either way, self-storage is there. Another positive to this business model is that building costs are minimal. Self-storage, as a general rule, doesn’t require intricate plumbing and lighting considerations, allowing fast construction and easy maintenance. There’s also few employees necessary to keep these facilities going, and “tenants” tend to be pretty faithful, renewing their leases for an average of 14 months. It’s an easy expense to justify when rent averages out at $135 per non-climate-controlled unit per month. There are defaults, of course, but they’re minimal. Think under 1%... and then compare it to retail’s 7.6%. Really, self-storage’s biggest issue is overbuilding. There is simply no need for the U.S. to host more than 50,000 of these structures, much less the new facilities that are started and finished every day. The more there are collectively, the less each one can make. This is especially true after the pandemic when demand skyrocketed due to the shutdowns. On top of families moving to get away from cities or moving in with each other due to lost income, many others renovated their homes to make room for office space. So, investors poured money into new facilities all the way up through to today, when demand is declining to more moderate levels. People just aren’t modifying their lives or living conditions as much anymore, and they’re beginning to pull back on spending too. That means self-storage just isn’t as profitable as it used to be… unless you know where to look. Everything an Investor Could Want When it comes to CRE – or any other business out there – location is enormously important. That’s why parts of Florida can still be so lucrative for the oversaturated self-storage market. With all the retiring or retired baby boomers down there, with more of them coming down every year, there’s plenty of demand. Consider especially how many of them live in condos and retirement communities… with their limited (or non-existent) basement and attic space. But there are gems in less well-known markets too. Like my backyard. That’s why I went down to Palm Beach last week. The private landowner I met with is based in Florida, but the actual investment I’m inquiring about is in Spartanburg, South Carolina… right next to two land parcels I purchased last year for $700,000. I plan on turning those empty plots into a U-Haul dealership, giving my son the management reins to get his business feet wet. While he won’t be running the adjacent self-storage facility I’m confident I’ll close on soon, it should help make his job a whole lot easier. Again, it’s very much about location… location… location. This one happens to be a well-trafficked area with plenty of retailers and other relevant businesses around it. It’s an attractive building that’s well-maintained both inside and out. And believe it or not, there are no noteworthy competitors in the area. Add to that the larger industry picture I painted above with its easy maintenance and steady, reliable rent… and you have a picture of success that’s too attractive for me to pass up on. And for most investors, it should be as well. Chances are, I know, that you probably won’t own an entire self-storage facility yourself. But there are ways you can profit from the concept all the same. It’s an area of focus in my team’s and my research. And paid-up subscribers are the first (and sometimes the only) to know about deals we find in this area. I have contacts in this realm that I make sure to stay close to… with some of them expressing intense confidence in where their respective businesses are headed. For any paid-up subscribers to our Intelligent Income Investor service, we do follow a REIT that operates in the storage space. It pays an attractive dividend yield of 4.2%, a dividend it’s raised every year since 1992. Feel free to [learn more here](. Regards, Brad Thomas Editor, Intelligent Income Daily [Wide Moat Research]( Wide Moat Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.widemoatresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Wide Moat Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-415-6046, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@widemoatresearch.com). © 2024 Wide Moat Research. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Wide Moat Research. [Privacy Policy]( | [Terms of Use](