E07: A Cash Flow Cage Match Between Self Storage Rebel, Mike Wagner & Alt Housing Heavyweight, Pete LaBarre

Cash Flow Fight Club

This episode of the Cash Flow Fight Club podcast features two heavyweight real estate investors - Pete LaBarre who owns several RV and mobile home parks and Mike Wagner who invests in self-storage facilities. They go deep discussing the business models, risks, returns, and strategies for generating cash flow and passive income in these asset classes. .

Here are some power takeaways from today’s conversation:

[03:51] - Backgrounds of Pete and Mike

[16:11] - The benefits of investing in mobile homes

[28:31] - The cost of investing in mobile homes

[32:14] - Timeline for cash flow and distributions for mobile homes

[34:59] - The benefits of investing in self-storage

[42:10] - Where to look for value-add properties

[51:47] - Risks and Opportunities: Self-storage vs. Mobile homes

Episode Highlights:

[03:51] Round 1: Get to Know Mike and Pete

Pete shares that he has been investing in real estate since the 1980s, starting with single-family homes and then moving into mobile homes and RV parks. He bought his first park in 2007 and then transformed it into an affordable housing solution by renting land for tiny homes and park models. On the other hand, Mike started as a landlord of single-family and duplex properties but wanted more autonomy and cash flow. In 2011 he transitioned into self-storage, quitting his job as a physical therapist. Though it was a big pay cut initially, he was able to turn his first struggling storage facility around and has been investing in storage ever since.

[16:18] Round 2: Mobile Home Parks vs. Self-Storage From A Business Standpoint

Mobile Home Parks

Pete explains that RV and mobile home parks can generate higher returns per square foot of land compared to multifamily properties. By renting land for tiny homes and park models, they can get $7,200 to $14,000 per lot annually versus $4,200 for seasonal RV rentals. The business model focuses on providing affordable housing solutions through a land lease arrangement. Residents have been able to build equity in their homes while the parks have seen rising revenue. The main risks are government regulations and overpaying for properties.

Self-Storage

Mike describes how self-storage benefits from lower operating expenses of 25-28% compared to 50-55% for multifamily. This yields higher profits per square foot despite similar rental rates. His strategy involves buying underperforming, neglected properties and deploying systems to improve operations and cash flow. He aims to double or triple the value of the properties within 2-4 years through a combination of buy and hold, value add, and fix and flip strategies. The main risks he mentions are overpaying due to cheap debt, interest rate resets, and a potential buyer's market in self-storage due to the current economic environment.

[51:47] Round 3: Risks and Opportunities

Mobile Home Parks

• The main risks are overleveraging properties and rising interest rates when debt refinances come due.
• There will always be demand for affordable housing solutions as long as population growth continues.
• Investors can expect returns in the 15%+ range once properties are stabilized. It typically takes 3-5 years for investors to recoup their initial capital.

Self-Storage

• The main risks are overpaying for properties, high leverage, and interest rate resets that impact cash flow.
• Self-storage is recession-resistant due to drivers of demand like downsizing, foreclosures, and job displacement.
• Investors can target equity returns of 16-20% and debt returns of 8-12%. Minimum investments are typically $50k-$250k.

Overall, both investors emphasize the importance of a long-term view, risk mitigation, and focusing on lifestyle and serving customers/investors over chasing the highest returns.

Resources Mentioned:

www.redicommunities.com

www.thestoragerebellion.com