The Journey of Self Storage Development: Insights from Clint Harris
In the world of real estate, particularly in self-storage development, patience and strategy are key. Clint Harris, a seasoned investor with a wealth of experience, shares his journey from medical sales to becoming a successful partner at Nomad Capital. This blog post explores his insights on self-storage investments, the challenges faced along the way, and the evolution of consumer needs in this sector.
Understanding the Self-Storage Market
The self-storage market has seen significant shifts over the years, especially in response to broader economic trends. Clint emphasizes the importance of understanding occupancy rates and the break-even point for self-storage facilities. Typically, the break-even point for most self-storage facilities is around sixty to seventy percent occupancy. However, due to their low cost basis, Clint’s team often finds themselves breaking even at around forty percent occupancy.
National averages for storage occupancy rates have fluctuated, dropping from a peak of ninety-three percent to around eighty-eight to eighty-nine percent recently, largely due to a frozen housing market. This presents both challenges and opportunities for self-storage developers.
Clint’s Background: From Medical Sales to Real Estate
Clint’s career began in medical sales, where he spent sixteen years implanting pacemakers and defibrillators. However, in 2017, he pivoted to real estate, motivated by a desire for financial independence and flexibility. He began with short-term rentals and transitioned to multifamily properties, ultimately discovering the potential of self-storage.
His partnership with Nomad Capital, a family-owned business, allowed him to focus on converting old retail spaces into climate-controlled self-storage facilities. This strategy not only revitalizes these properties but also meets a growing demand for storage solutions.
The Nomad Capital Approach
Nomad Capital’s approach to self-storage development revolves around acquiring vacant big-box retail buildings, such as former Kmart locations, and converting them into self-storage facilities. This process involves significant value addition through renovations and climate control features, making the storage facilities more appealing to modern consumers.
Clint highlights the importance of vertical integration in their business model. By managing construction and property management in-house, they can control costs and timelines more effectively. This strategy also allows them to take on properties that may have been neglected or mismanaged by previous owners.
Challenges in Self-Storage Development
Despite the advantages of their strategy, Clint acknowledges that there are always challenges in real estate development. From navigating zoning laws to managing construction issues, the process can be fraught with obstacles. For instance, if a property requires environmental remediation due to past uses, it could significantly increase costs and timelines.
Additionally, the current economic climate poses unique challenges. With rising interest rates and a frozen housing market, the demand for storage can fluctuate. Clint notes that self-storage is often seen as a necessity during life transitions such as downsizing, divorce, or moving, but these situations can be affected by broader economic conditions.
Consumer Trends in Self-Storage
Understanding the evolving needs of consumers is crucial for success in self-storage. Clint points out that millennials now make up a significant portion of storage users, often utilizing climate-controlled units for lifestyle items like sports equipment and seasonal clothing. Unlike previous generations, who might have used storage for bulky items, millennials are looking for flexibility and accessibility.
This demographic shift means that self-storage facilities must adapt to meet the changing demands. Features such as easy access, climate control, and security are becoming increasingly important. Clint emphasizes the need for self-storage operators to stay attuned to these trends to remain competitive.
Marketing and Lease-Up Strategies
The marketing strategy for new self-storage facilities is critical to their success. Clint’s team begins marketing efforts during the construction phase, building anticipation and awareness in the community. They utilize online marketing platforms and local outreach to generate leads and create a waiting list before officially opening the facility.
Once operational, they employ various promotions, such as discounted rates for the first month, to attract tenants. Clint notes that the leasing process can take anywhere from eighteen to thirty months to reach cash flow positivity, depending on the facility’s size and market conditions.
The Financial Model: Cash-Out Refinancing
One of the standout features of Nomad Capital’s strategy is their approach to financing. After stabilizing a self-storage facility, they often refinance to pull out capital for future investments while maintaining ownership of the property. This method allows them to provide returns to investors without needing to sell the asset, creating a cycle of continuous growth.
This strategy is particularly advantageous in times of economic uncertainty. By holding onto assets long-term, they can benefit from inflation-resistant cash flow, allowing for sustained growth and stability.
Future Outlook and Growth Goals
Clint and his partners at Nomad Capital have ambitious plans for the future. They aim to grow their portfolio to one billion dollars in assets within the next ten years. With a current focus on the southeastern U.S., they are strategically targeting markets with strong population growth and limited self-storage options.
As they expand, Clint emphasizes the importance of building a community of investors and fostering relationships within the industry. By sharing their experiences and knowledge, they hope to inspire others to explore the potential of self-storage as a viable investment strategy.
The Path to Independence of Purpose
Clint Harris’s journey from medical sales to self-storage development is a testament to the power of adaptability and strategic thinking. His insights into the self-storage market, consumer trends, and innovative financing strategies offer valuable lessons for aspiring investors.
Ultimately, Clint’s goal is to achieve financial, time, and location independence—a vision he believes can be realized through careful planning, community building, and a commitment to understanding the evolving landscape of real estate. As the self-storage market continues to adapt, those who can navigate its challenges and seize its opportunities will thrive.