Self Storage and Mobile Home Park Investing With Mike Peters & Martin Mei
Good afternoon. My name is Mike Peters, and I am the commercial mortgage manager here at Lens City Mortgages. I am pleased to have with me for this podcast, Martin May. Martin's a real estate investor specializing in self storage facilities and manufactured mobile home parks or manufacturer mobile homes. I know that a lot of my clients, my investors are very interested in the revenue generating potential of self storage facilities and increasingly manufactured homes and manufactured home parks are also something that I'm seeing with a great deal of increase anyways, but I'll just briefly introduce some of Martin's background early on in his real estate journey.
Mike Peters:He became one of the top producers of our off market multifamily opportunities on the East Coast. I'm gonna interject here and say the amount of interest that, I presently have from investors for east coast properties is grown tenfold this year, just because of, you know, the price compared to prices in other, you know, saturated markets like Ontario. And the rents, the rent rolls are pretty decent. So we're able to get over the last month, 2 months, maybe, 10 mortgages out on the east coast for everything from single family to, student housing. Anyways, Mark Martin's focus is on wholesaling, which is also a, an up and coming trend that a lot of my investors are interested in.
Mike Peters:It's basically marrying up, you know, the seller with the buyer Burs by I love this. It's freezing here in Windsor, so it's kinda burr, but buy rehab, rent, refinance, and repeat with OPM, which is basically a 3rd party finance flipping and STRs, which are short term rentals. Anyways, Martin, after conducting over 80 property transactions, he's built a 7 figure wholesaling business. He's acquired over 38 doors in 15 months, operating under the name, Meili Properties. So Martin holds a bachelor's degree in commerce from McGill and pursued continuing education at Massachusetts Institute of Technology and the commercial real estate appraiser Institute of, Canada.
Mike Peters:I know from being a commercial mortgage manager that commercial Tro real estate appraisers are few and far between. I mean, there, there are a number of appraisers who pretend that they can, dig commercial properties, but to do them property properly is, is an art. So basically what we're going to do today is I'm going to allow Martin to talk about a couple of of his key strengths. And so let's talk a little bit about wholesaling. How did you get into wholesaling and and how is that part of your business doing?
Martin Mei:Yeah. No. Mike, thank you so much for having me on the show. I'm excited to get to know your team, get to know, you know, what you do, and also share my story with your platform, with your audience. Yeah.
Martin Mei:First of all, thank you so much for having me out. Wholesaling yeah. It it was a strategy that we, you know, adapted. We it it was essentially a strategy that we were doing a couple years back when we first started investing in real estate. My first property was this duplex in Montreal.
Martin Mei:And from that property, I kinda realized the importance, first of all, of tenancy rules in the market that you invest in. Secondly For sure. How important it is to do your proper underwriting, trying to make sure that, you know, you're able to cash flow. To make my duplex cash flow in dupe, in, in Montreal, I had to house hack. Right?
Martin Mei:I had to rent out room per room, to maximize the rental income, in order to just barely pay for the mortgage and barely pay for all the operating expenses. So all the frustration, I was looking at other markets, and I came across New Brunswick as a market, to invest in. I was doing the math, and I realized, the cap the price per door, exactly to your point, it's a lot more attractive. The tenancy loss are a lot more attractive. And this was right during COVID times.
Martin Mei:Right? So people were actually moving from the bigger cities to Moncton, to Saint John, New Brunswick to, you know, all the East Coast cities. All of these contributing factors, you know, were essentially contributing to significant population growth. Pair that with how attractive the real estate market was, it led to a lot of buyers just flooding to the market. So at the time, I still remember this.
Martin Mei:Whenever I made a offer on just, you know, a duplex or a triplex in New Brunswick, Mississippi, and Moncton, there will be about a dozen other offers coming in. And most of them were cash offers coming from Toronto buyers. So all the frustration, all of that experience, I learned about wholesaling. I learned about how to find off market deals. I learned about how to negotiate directly with the seller instead of just waiting for your realtors to send you whatever deal is on the market.
Martin Mei:So that's how I started, a couple years back. I started with my partner at the time, And then we essentially packed up our car. We packed up the bags. We fully committed to that market. We moved from Montreal to Moncton, New Brunswick.
Martin Mei:That's how much we believe in that market back in 2020.
Mike Peters:Mhmm. Without sharing, you know, your strategy because, wholesaling is an art in itself and we don't want to increase your competition, but, you know, I have a lot of investors that are looking for our investor hub here at Lens City. We have over 500 members and, you know, they're looking for opportunities. You know, the numbers for I just ran a, debt coverage ratio on a condo and, you know, condo fees and and what's going on in Toronto. They're just not making much sense.
Mike Peters:So a lot of our investors are interested in this wholesaling concept. And how do you find the buyer? Not so much, you know, the seller, that's your niche. That's something that that's something that's proprietary to you. We won't get into that, but then how do you engage buyers and how do you find your buyers?
Martin Mei:It's a great question, Mike. When we first moved there, we actually had absolutely zero contacts. Right? We were Correct. Absolutely a nobody in the real estate game.
Martin Mei:So what we started doing was because we went through that process of buying remote. Right? We were trying to make offers all the way from Montreal to properties in Moncton, New Brunswick. But guess what? We knew nothing about that market.
Martin Mei:We knew nothing about the neighborhoods. And all we what we have was Google Maps and some YouTube videos. Right? So all the questions that I had when I was in Montreal, I wanted answers to them. So what I started doing with my marketing background, I my first intuition was actually to produce videos.
Martin Mei:So I wanted to add value to people right away or even just add value to myself. Right? I will have conversations with market experts such as yourself. I will talk to property managers, mortgage brokers, short term rental property managers, contractors, ask them questions like, hey. What are the common property issues?
Martin Mei:How are the properties built? How do I do a duplex conversion in Moncton? So ask some questions like that and I would just simply record it similar to this format. And and guess what? I would just upload it onto YouTube.
Martin Mei:So what started happening that was really interesting, Mike, was people were starting to watch it. Right? So if someone is watching a video about duplex conversions in Moncton, New Brunswick, you better believe they want to invest in that market. Right? Because that's a very niche topic.
Martin Mei:So those people started, you know, reaching out. They wanted to work with me in different capacity. Either wanted to do a venture with me being boots on the ground or simply just want to buy deals off my of my deal funnel. So that's how I naturally grew my buyers list from absolutely, you know, literally 0 to over Yep. Around 2,000 emails organically to to our team.
Martin Mei:So that was, I would say, one of the biggest factors which is, you know, we from the get go, we were trying to add value. We're trying to educate ourselves. We're trying to educate Mhmm. You know, people that were also curious about the market.
Mike Peters:And so then, you know, if you successfully complete a transaction for somebody in Toronto, interested in investing in new Brunson, you gain traction. You know, they may have found you on YouTube too, or they may have found you on Yahoo Finance or wherever they found you. That first client, it seems to me that you've been able to translate, this, your success into not only repeat business with that client, but also, you know, word-of-mouth starts to spread. Right. And that Martin's the go to guy for that type of, property.
Mike Peters:Now, do you mainly focus in on duplexes or, you know, your BRRRR strategy? Are you actually the one that is redoing, or you have a group of contractors? You're the head contractor, and you got all these subs, and so you're buying the property, repositioning it. And then at that point in time, are you selling that to your investor?
Martin Mei:Couple of things. Right? So first of all, like, we evolved over the years. So when we first started, we were looking for duplexes. You know, that was the the product that we're looking for.
Martin Mei:Wholesaling was always just a tag on strategy for us. I never really caught ourselves a wholesaling company. We're wholesalers. We were always investors first. Right?
Martin Mei:So the whole premises of looking for off market deals because we were genuinely interested in that market. We believe in that market. We wanted to find deals, more competitively and also more aggressively. So we started sending out mailers and we ended up with too many leads for just ourselves. That's when we started wholesaling.
Martin Mei:That's when we started dis disposing these deals to other investors that that wanted a good deal. Right? And so they could get it from us. They paid for marketing. You know, I paid for a couple of new employees generating some short term income for us.
Martin Mei:But, you know, from the get go, we were always investors first. We wanted to buy properties for ourselves, want to generate long term wealth. We wanted to build, you know, these passive cash flows for ourselves. So at first, we were doing, you know, smaller multifamily. We transitioned into, you know, 6 plexes, 8 plexes, these, you know, bigger multifamily deals.
Martin Mei:But the more units we acquired, the more we actually realize how painful it is to manage that many tenants under one roof. Especially, you know, you're dealing with these a bit rundown properties and you're trying to do value add renovations to that. That means you have to deal with, you know, evictions. That means you have to deal with rent increases to make sure you're meeting the investor returns. You're managing contractors.
Martin Mei:You're doing all the carry all the renovations. You're dealing with a lot of single moms, dealing with a lot of immigrants, and and it's really hard on on me to even have my property managers deliver those notices. Plus, no matter how much you screen the tenants, things could always go wrong. Like, we had a perfect tenant that moved into a brand new unit that we just renovated. Within 2 weeks, he set the kitchen on fire accidentally.
Martin Mei:It was a grease fire from the pen, and he just poured water directly on it. It burned the entire cabinet. He threw the pen on the floor, destroyed the floors. So stuff like that, destroyed the cash flow that we thought we're gonna have. No matter how much your budget is.
Martin Mei:Yeah. You have human being beings living in these multifamily buildings. No matter how much you prepare for repairs and maintenance for your monthly underwriting, there are always things that could go wrong. So that's why out of frustration, the asset type that we focus on nowadays is actually the lower maintenance commercial real estate asset types that are very much manipulated by net operating income instead of comparables. Right?
Martin Mei:So that's why our focus has shifted to self storage facilities and mobile home parks. And, obviously, we're gonna get dive deeper into those asset types a little later. But even for those asset types, you know, like wholesaling, it's really just one revenue stream. But our purpose for our entire company is really we're investors first. We're looking for these assets to acquire.
Mike Peters:And it's really interesting to see how you've evolved. You've evolved out of necessity out of experience, and that that's kind of, I guess, how we all do, but now I can see how you've ended up with what I see as 2 major significant emerging trends. I myself right now have a self storage facility because I'm moving and then I needed a place, to put in order to stage my house. And I'm getting a lot of, lot of interest in the manufactured, home parks, as well as, you know, the barn dominiums and, the, that that's, an up and coming, actually I got a barndominium project in Nova Scotia right now.
Martin Mei:I love that.
Mike Peters:But I just wanted to ask you with the rules kind of changing in New Brunswick, do you have a lender base or do you deal with mortgage brokers, commercial special lists like myself to actually get the mortgage for your client that, you know, once you position the property, how do you, make that transition from, oh, yeah. You've got an interested buyer. He lives in Ontario. You know, a lot of the New Brunswick lenders will not lend to, Ontario out of province lenders or out of province purchasers. Are you seeing more of that in, like, restrictions in terms of Ontario investors investing in New Brunswick?
Martin Mei:Yeah. So I am not a licensed, broker in any shape or form. My ex partner was. She was a licensed real estate agent in in the province of New Brunswick. So we draw the line very clear.
Martin Mei:Right? We only do what we are supposed to do. So when it comes to, you know, referrals for mortgage brokers, we have contacts. It's never really been a problem. We have contacts for property managers.
Martin Mei:We have contacts for lenders, a lenders, b lenders, private lenders, all different types. Our value add, again, for our investors, whoever was investing to New Brunswick, wanted to learn about the market, wanted to, you know, check out different neighborhoods, wanted different contacts, we had a whole Rolodex for them. Right? Ready to go. But we never Yeah.
Martin Mei:Perfect. Tried to broker a deal of any sort. We were simply just assigning the purchase right to them as wholesalers.
Mike Peters:Yeah. Yeah. You're the intermediate any intermediary between, you know, your client and the potential person that got a mortgage. One of the one of the ways around it that we're seeing and is that, you know, you set up a new branch of corporation, and that is the applicant even if the person is, Ontario resident or the shareholders of the Corp are Ontario residents. So let's talk a little bit then about self storage facilities.
Mike Peters:I have had numerous inquiries in terms of buying. My clients wanna buy 1. There's not a lot for sale because there's such profitable enterprises in most, most instances, unless there's an there's extra land and there's an opportunity, you know, there's enough demand, there's enough extra land and there's an opportunity to expand on the size and the number of units. So I, I often have, you know, clients looking to purchase existing storage facilities. I also have clients that are looking to build their own.
Mike Peters:Let's talk about that. Could you assist? Let's start with this first. Could you let's say my client, Sam, wants to build a self storage facility in Belleville. He has a lot that is zoned just outside of town and he's ready to go.
Mike Peters:How far can you take my client down that
Martin Mei:path? So I will say, there, there are a couple of different things, right? So we're talking about ground up development instead of buying system first. So ground up development, the one thing that's really important is really to conduct a feasibility study. So even for us, our team, we usually hire a professional consultant to conduct a feasibility study upon the research, upon the due diligence that we've already done in house.
Martin Mei:Right? So we essentially want this consultant to verify all the findings that we've already done and to make sure that we covered all the grounds in terms of any new developments that are currently in the pipeline that the city knows of because self storage
Mike Peters:Right. Is
Martin Mei:very much supply and demand. Right? In a given area, let's say a 5 mile radius around your site, that's really the market Mhmm. That you're catering to. It's similar to a grocery store.
Martin Mei:Yep. People are not going to travel like 30 minutes away just to go to buy a dozen of eggs. They're gonna go to whatever is the closest to them. So it's very similar to self storage. Right.
Martin Mei:So if in a given area within a 5 mile radius, you already have, let's say, 4 other facilities with, let's say, 400,000 square foot of net rentable square foot of self storage, you might want to consider the population density that you have in that 5 mile radius. And that's calculation. It's usually calculated by square foot per capita. And that's how the self storage industry measures the the relationship between supply and demand. So what's really interesting is whenever I come across a site, let's say your client has a site, it's property zone for self storage, sounds like a a home run of a project, We would leverage different data tools, date data aggregator tools to check that square foot per capita metric to see whether or not this area, it's already oversupplied or it's in need of more self storage.
Martin Mei:That's probably one of the most important first steps. Secondly,
Mike Peters:I also Just a quick question.
Martin Mei:Yeah. Quick question. Do do do you
Mike Peters:charge for that service? Because, I mean, I have a number of clients that believe that, for example, that Belleville I'm just using Belleville. This is not where actually I do have a client. It's it's not Belleville. But, you know, do you charge?
Mike Peters:He thinks that Belleville needs a new self storage. He just, and he had, he inherited a piece of land from grit, his grandmother. And, you know, it's just outside of town. It it's not yet zoned. It's it's just on the fringe of, the car dealership right next door.
Mike Peters:It will get rezoned. It just takes some time. So do you charge a fee to take him through that process right from rezoning to construction? Like, he doesn't know who the contractors are. He doesn't know who's gonna bring in the stone to put the base down and, you know, all of that stuff that you provide that service.
Martin Mei:Yeah. So as of right now, I'm not a professional consultant by any means. I'm simply just a general partner. I'm a working partner on these self storage deals. So that's my day to day.
Martin Mei:Right? I'm I'm not doing that for other people just yet unless it's a joint ventureship. Right? So unless, you know, your client wants to do a joint venture with me and my team, which we'll be very happy to discuss, you know, we don't necessarily charge for this service because we're not consultants. We're not suppliers.
Mike Peters:Okay. Great.
Martin Mei:Own deals. But
Mike Peters:Yeah. No. I I I can see that happening because, I mean, I'm not gonna call them newies, but they are. You know, they just think self storage is the way to go, but they have no idea where to go or how to go. They don't have the resources or the time they may be a dentist and not have the time, but have the wealth and really like that opportunity.
Mike Peters:So I think there's some room for some collaboration there for sure. Yeah. Now let's move up.
Martin Mei:For sure.
Mike Peters:Yeah. So let's move on now to your next favorite market niche. And one that I, I very much like as well, you know, these with the cost of real estate and, you know, first time home buyers, you know, there's been this sort of that mobile home parks are the first to get hit by a tornado that and you the rundown, you see too many movies of, you know, Southern Texas and everything where, you you know, trailer park boys are from the maritimes.
Martin Mei:That's right.
Mike Peters:But these are you know, when you go to Florida and you look at a manufactured home park, it's it's a beautiful community, right, with with some amenities or pool, whatever. So tell me a little bit about your manufactured home park strategy.
Martin Mei:Yeah. Absolutely. I do want to finish off the thought on self storage. If should I mention it now? Sure.
Martin Mei:To it. Okay. No. No. Yeah.
Martin Mei:So regarding self storage, as well. Right? Like, when when it comes to defining what type of site is best for it, let's say your client has a site that's that looks very interesting. So check the supply and demand. Check the occupancy levels of your current competitors, of the current facilities.
Martin Mei:And also check the rental rates that a market can bear. Right? Because not every market is the same. And in with the current interest rate environment, if your market rates are a bit too low, it's going to be very hard for that deal to cash flow. So a lot of development deals actually don't even pencil it out in 2023, 2024 because of the high interest rates.
Martin Mei:And so I will say these are some of the biggest things that your client might want to consider whenever they're building from the ground up. Now, the biggest opportunity in self storage that we see as a company is that right now in North America, most of the self storage facilities are actually owned by mom and pop individual operators. Right? So the REITs, the Real Estate Investment Trust, the nationwide operators such as U Haul, the REITs like Public Storage, CubeSmart, combined together, they only control less than 30% of the entire market share. So these massive companies
Mike Peters:I did not know that.
Martin Mei:They're actually looking to acquire more and more market shares from people like you and me. Right? So that means if we buy a self storage facility, we increase the net operating income, we increase the value. We don't sell it from Mike to Martin. We sell it from Mike to Public Storage.
Martin Mei:We sell it from Mike to Blackstone. We sell it from Mike to CubeSmart. So that exit strategy, potentially, it's essentially a private equity play. Right? So that's one of the most attractive parts about self storage beyond just the low maintenance, beyond, you know, the no tenancy loss.
Martin Mei:So I would say for those of you who are listening that are interested in self storage, definitely dive a little deeper. It's not a industry that's Yep. You know, it's essentially an industry that has significant exit strategy potential. Now for mobile home parks, I go into that very much for the same reason as self storage. I wanted something that's easy to maintain, that operates at a higher cap rate compared to multifamily.
Martin Mei:But in Canada, the more I'm, you know, making offers, the more I'm repositioning these deals and more I'm talking to these real estate brokers that specialize in mobile home parks. I'm starting to realize mobile home parks are essentially the ultimate form of affordable housing. Right? Let's say you have a family of 4. You could either live and you're low income housing.
Martin Mei:You could either live in one of those government subsidized apartment buildings. So squeeze your entire family into a little condo. Likely you're paying very little for rent, but your quality of living has been significantly reduced, right, to the bare bones of just like a 2 bedroom or 3 bedroom condo. Versus if you were to own your mobile home, but you can pay simply the lot rent every single month to have your own detached home. Right?
Martin Mei:So that is a lot more attractive for someone with low income. You have your own yard, your dog can run around, and you have your own detached private suite. So that's what I see being really attractive. At the same time, there's already a lot of mobile home park, owners, a lot of developers that are sourcing materials, prefab homes from China, from other countries. So that means the cost of these homes are only gonna come down.
Martin Mei:But guess what? All of these homeowners are still gonna foot still gonna need a place to place their homes. Right? So that's why I see Mobile Phone Park being a very advantageous play and a very attractive asset type because of the the potential value it has to to provide affordable housing for all the Canadians and for the only Americans. And you pair that with how easy it is to maintain if you own the park.
Martin Mei:If you're only renting out the lots, you don't really need to care about your repairs and maintenance of the actual homes because you don't own the homes. You simply need to take care of the amenities, the snow removal, the landscaping for your park. And we are adding value to the park.
Mike Peters:Yeah.
Martin Mei:You get to, you know, raise the lot rent and you have that economy of scale. Right? You have 50 lots. You have a 100 lots. If you increase the rent by 10 bucks, 20 bucks, that plays a significant change in your net operating income.
Martin Mei:So based on these reasons, I absolutely believe in mobile home park as an asset type as well. And we're actually actively looking for more deals to add to our portfolio.
Mike Peters:Okay. Great. Yeah. No. My involvement with mobile home parks on occasion hit the roadblock of, ministry of environment, getting the services out there.
Mike Peters:Now, traditionally, what I see is, as you say, it's a $500 almost like a condo fee. They're gonna do your snow. They're gonna cut your grass. You have water. You have sewer.
Mike Peters:You have your separate hydrometer. Correct? So you may have a small mortgage on the mobile home. We work with lenders that, you know, will provide mortgages. Usually, a lender wants the client to own the land.
Mike Peters:And so there is a niche pool of lenders that will do mobile homes because especially if they're newer and the park is well maintained and has a history of some turnover for profit. But on some occasions where I've had some developers or some clients interested in purchasing and expanding in the instance of purchasing the services are there. But just to get those services extended to the, the greenfield site, which is attached, there's some hurdles there. It it does take some time. So do you have some expertise in in dealing with the ministries of environment and getting these approvals?
Martin Mei:And So, Mike, you raised a really good point and that's also another sentiment. You know, essentially that's a huge disadvantage but also a huge advantage when it comes to mobile home parks. Right? So everything you said about, you know, getting permits, getting amenities, getting a city to be on board with your strategy, it it could be a huge advantage for mobile home park owners who are very, efficient, of getting that. The mobile home parks, the reason why cities don't like them is because they generate very little property tax revenue for the city.
Martin Mei:But the residents who live in there, they get to enjoy the same benefits. Right? They get to get, access to health care. They have access to a public school system. They have access to, you know, all the public transportation systems.
Martin Mei:But they generate very little property tax revenue for the city. So what that means for mobile home park owners is that the city is not going to easily approve any more mobile home parks. Because for the same amount of land, for let's say 10 acres, 20 acres, it's way more beneficial for them, way more lucrative for them to develop a multifamily building or to develop a retail plaza.
Mike Peters:And they're and they tend to be on the fringe of the municipality, which is where the $1,000,000 homes are going up. So Exactly. The tax base is significant.
Martin Mei:So that's what's really interesting about mobile home parks is they're not making any more of it. Right? It's very different from self storage. They're popping up everywhere around Ontario. They're popping up everywhere in North America, to be honest.
Martin Mei:So the biggest threat to self storage is more self storage. But mobile home park, that's not really an issue. That's the bare bone form of affordable housing and the true definition of something that's extremely easy to maintain, and they're not making any more of it. So it's a scarce product. So everything that all the hurdles that you're describing, it's fully worth it.
Martin Mei:Right? That's why, you know, you gotta pay close attention, to working with the city, establishing that relationship, because if you already own the park, there's really nothing they can do to essentially change back the zoning. Right? It's already grandfathered yet. But if you have a a piece of land that you're trying to turn into a mobile home park, you're gonna face a lot of hurdles.
Martin Mei:It's very unlikely that any city government is gonna let you open up a new mobile home park.
Mike Peters:Yeah. And that's why I have so much interest in by clients, that, you know, have found 1 and and quite a few in between the Toronto Ottawa corridor that, you know, they found 1 just that in terms of its land, you know, it's a really 50% capacity. There's 50% Sitting there that that could be expanded upon. And so one of the ways that they're doing it is just more new and innovative, environmental measures. You know, the, just the way that solar panels, you know, just the mobile home operator reducing, you know, pressure on the environment and, and the energy grid, you know, that part of the, if you can integrate that into your strategy, it's kind of like with CMHC housing and affordable housing and their programs.
Mike Peters:You know, if you can show that if you buy a building, you're going to make it more accessible, you're gonna put, you're gonna reduce its energy footprint, you're gonna do various things, then CMHC will assist you in in in purchasing that and and getting those upgrades. So I I think there there is still an opportunity to get them through municipalities. As I say, they are on, tend to be on the outskirts of municipalities as municipalities grow, obviously, some are right in the middle, and those are ideal, those properties, because they're right in the middle of it transit, etcetera. The others you do kind of require your own transportation to get from a to b and, you know, etcetera. And then to get the school buses to run through there.
Mike Peters:That's that's another thing, but I see them as a really good money generator. I, and I find that a lot of the people that actually built them back in the day were in, waste management. They, they were pumping, you know, like sanitation, you know, pumping, septic tanks and that kind of thing. And then they were at least down in the region that I'm in, they were instrumental in getting them approved because they already have relationships with the Ministry of Environment. They already had the equipment to make sure that everything was maintained.
Mike Peters:We have a really nice one down here. They built a golf course. Again, it was a sanitary related community. Yeah. I just wanted to ask you.
Mike Peters:I I I wanna jump back only because, you know, you've explained very clearly that mobile home parks are not an infinite opportunity. The it's what's there. The experience operator, you know, is actually there's companies that are buying up mobile home parks like crazy and upgrading them. I think one of them is named Parkland, for example, that's bought a bunch in Southwestern Western Ontario. But at what point in time do you think that the self storage is going to reach saturation.
Mike Peters:I know you do your independent market analysis for each municipality that you're going in and you got your formula for doing that and your due diligence, but, they do seem to be popping up all over the place. What is a reasonable occupancy rate in one of those, just as a generic number, the 60, you know, if you're buying a motel, you kind of look at the occupancy rate in order that I get motels financed. And, you know, if you're at 60% occupancy on average, then you're pretty pretty good at in a good position to get yourself, a mortgage or a refinance. When do you think we're going to hit capacity in, self storage? Is it geographical is the key?
Mike Peters:Is it smaller communities, versus, larger metropolitan areas like Montreal? Is it where the migrants are going? You know, there's a big push. People are moving back out west because of opportunities, as well as the maritime Yeah. Coast.
Mike Peters:So is it geography based?
Martin Mei:So, yeah, I will say it's very market based. Right? So the consumer behavior in downtown Toronto versus someone in San Antonio, Newfoundland, they will use self storage very differently. So if you think about someone in downtown Toronto, they don't necessarily have access to their own private garage. They likely don't have, you know, multiple cars per per household member.
Martin Mei:And they probably don't have a lot of big toys that they need to store. Right? Versus someone, you know, in Alberta or Newfoundland, they might have, you know, 2 ATVs and a snowmobile that they need to store. And they each have 2 trucks and a sedan. Right?
Martin Mei:A summer beater. The consumer behavior is very different, but I will say our country as a whole in Canada, the equilibrium between supply and demand, it's roughly 3 square foot per capita. So that's usually calculated by the total net rentable square foot in any given market divided by the population density in that area. So in the data aggregator tool that I taught that I told you about, I will simply put in the address of a site or facility I'm looking to purchase, and that tool is able to tell me how much square foot per capita is currently in that market. So if it's slightly above 3 square foot per capita in a 5 mile radius with multiple sites, with multiple facilities around it, I would know, okay, this area is likely already oversupplied.
Martin Mei:And the occupancy levels, I can tell you what REITs are usually trying to target. Right? Real Estate Investment Trust. So Public Storage, one of the biggest REITs in North America, And they try to target anywhere from 85 to 92% occupancy. So if they have a facility that's closer to a 100%, guess what?
Martin Mei:They're going to jack up the rates. Right? They're going to do dynamic pricing to make sure that they're never at a 100% occupancy. So with that in mind, that's actually one of the really good ways that, you know, our company and also any investor that's listened to this, it's a really good way to see if it's mismanaged. Right?
Martin Mei:If a facility is running at a 100% occupancy for days and end for years and end, that means the owner has totally given up, dynamic pricing on trying to maximize the potential of the property. So for us as a company, we're always trying to, you know, target 85 to around 92% occupancy just like the REITs.
Mike Peters:Yeah. I have a daughter that, is going to university in in downtown Windsor, and, you know, she's moved 5 times and every summer, maybe she comes home. We've gotta find her self storage. And the nature of the structures are are horizontal versus vertical land. You know, they're old warehouses.
Mike Peters:And even here in Windsor, the, general motors trim plant, half of it was demolished and stores cars. And the other half is one of the biggest self storage units that I've ever seen. And it's thriving. It's owned by UHO. And, and Mike, this is
Martin Mei:the most interesting part. I came from an immigrant household, you know, like I came from a Chinese background. My family is very frugal. We're always at, we would never rent out self storage. But we had to rent so many self storage Yeah.
Martin Mei:Throughout our real estate investment career, and just because of life. So self storage has proven to be one of the most recession resistant asset types during the good times and the bad times. So during the good times, that's what you're talking about. Your daughter goes to Windsor for university. You know, life happens, right?
Martin Mei:Like, university, operating lifestyle, people getting married, or, you know, even COVID. People had to make home offices. They had to empty out rooms to make additional room for their family members to come back. Back. Yep.
Martin Mei:But guess what? If we're going through a recession, when people are going bankrupt, when people are losing their homes, they're not gonna give away their family heirlooms. Right? They're not going to give away their yearbooks from 2 years back. They wanna hold on to that forever.
Martin Mei:They don't wanna go with their baby's first toy or their first baby clothes. They wanna store that in a little box, in a self storage unit, even though they just downgrade it from a 4000 square foot mansion to a little condo. Right? So self storage actually flourishes Mhmm. During bad times.
Martin Mei:And a perfect example of this, because I'm actively investing in the US as well, I visited this CubeSmart self storage site in Florida, in Cape Coral to be specific. It was one of the areas that got absolutely destroyed
Mike Peters:by the
Martin Mei:last hurricane last year. And I was just checking. Right? I was checking with the property manager. I was asking them, hey, this facility looks pretty new.
Martin Mei:How occupied are you guys? He was telling me we're already at 97% occupancy, and we just opened 9 months ago. I was like, how is that even possible? You guys have hundreds of units.
Mike Peters:Yeah. They're
Martin Mei:like, it's because of the hurricane. Because, people are losing their homes, but they don't wanna lose their stuff. So they're renting self storage units to make sure their belongings are safe. Right? So it's a bit messed up as a concept.
Martin Mei:Yep. Yep. The worse the environment gets and the worse the economy gets, the more people actually need self storage because it costs only a $100, $200 to make sure your, all of your belongings are safe and people are willing to pay for that.
Mike Peters:Yeah. Yeah. Yeah. And so you mentioned, the US, so you, you are active in the US market. And that's a good thing because we as well are now licensed to land in the US and in every state, but the Dakota.
Mike Peters:We will get there shortly. But, yeah, I was just down at Fort Myers, which is just south of Cape Coral. And I was down just after the hurricane last year in December. And, you know, the devastation was just crazy. And I was looking at some of the self storage units and, and, you know, the other thing that I'm starting to see is that they're making space for these pods as well, right, which is the self storage that you can move to your house, etcetera.
Mike Peters:How do you see those affecting the self storage business? There are a number of companies that are popping up that are are just strictly, pots, you know, stored on top of each other.
Martin Mei:I will say it's a very exciting new trend in the self storage industry, but it definitely wouldn't disrupt the way people store. Right? The beautiful part with, you know, the U Haul, the public stores that people see, that you're listening your listeners are likely based out of in Toronto, in GTA, Ontario, those are multiple levels. Right? They're they likely have 600 units, 700 units on one site.
Martin Mei:So those owners are benefiting from economy of scale. Right? So if they jack up the rent by $10 across 7 706100 units, that's over 1,000 of dollars per month added revenue to their bottom line. So that plays a huge effect on your net operating income, on your valuation as well when you divide it by the cap rate. But when you're dealing with pods, that's essentially a more high value, more targeted, more personalized approach.
Martin Mei:Right? So it's doesn't have the economy of scale that we usually have with a traditional self storage facility, but it's essentially a very different product. It's a very for service that you get to cater. I love POTS. I think it's a great product, but, essentially, it's not as straightforward as a real estate play compared to the traditional self storage facilities.
Mike Peters:Right. Yeah. It it's and in fact, I'm using 1, and every time they touch it and move it, from one house to the next or one place
Martin Mei:Oh, it works.
Mike Peters:It's as much cost as much as it does cost for 1 month of, of storage. I appreciate the time that you spent with us. It's been very insightful. Is there any questions you have of me in regards to, you know, commercial mortgages for, you know, the mobile home park, the commercial mortgage side is buying a park, and there's not really too many of those for sale. And you seem to have the investor pool, in place to buy that, but I would have some clients that would be interested in participating in a joint venture, even as a small shareholder within the bigger picture.
Mike Peters:But then the self storage, again, I've got a ton of people that are looking in into that. I look forward to introducing them to you. If you are looking to increase your investor base. Is that something that you're looking to do or are you comfortable at the level you're at?
Martin Mei:Yeah. We definitely have, you know, a lot of investors. If any of your investors are accredited investors and they want to help contribute to solving the affordable housing crisis in Canada by investing into mobile home parks, by turning these poorly run, mismanaged, beautiful facilities and turning into something of its full potential. And we're always looking at a 5 to 7 year exit. So as I said, we'd like to buy from mismanaged mom and pop, operators and sell it to the big private equity groups or to the REITs as a consolidation plan.
Martin Mei:Or if they want to invest in something lucrative and low maintenance of self storage in the US, definitely reach out. Most of our investors, their profiles are high income earners, you know, if they have a t four or w two job, or if they're small business owners and they need to Yep. Invest for depreciation benefits. And that's mostly of our American investors. Right?
Martin Mei:So they have Right. Small business that's doing really well this year. They need to, you know, write off 200,000 off their taxes, off their taxable income. So they will put that into commercial real estate, and they will get depreciation benefits that essentially lowers their tax bracket. There's a lot of win wins, a lot of synergies that we can definitely discuss.
Mike Peters:Okay. Great. Again, thank you, Martin, for your time. You're very well schooled in, in not only, you know, storage facilities. It's just apparent that when you dive into something, you dive into it, with both feet and that you have a good team behind you, and that, you will continue to grow.
Mike Peters:So I hope that, you know, through some of my investors and even us here at Lend City, we can assist you along that path. The US is a very exciting opportunity. As I say, we now have, we're licensed to lend in the US and if you need some assistance there, we're more than willing to give you a hand. So again, thank you very much for your time and, good luck in the future. And I hope to, see you again soon at one of these events where both you and I are on a panel speaking about, mobile home parks.
Mike Peters:I, when I, when my mother threw me out of the house, when I was 19, I moved into a mobile home park, because that's all I could afford. And that house or that mobile home park sits there in the same shape it was when I moved into it in 1976. And that's one of those mismanaged mobile home parks, right in the middle of the city, right next door to a home Depot, you know, that, that has opportunity to be, to be a beautiful facility in the midst of of a city. How I guess my final question is besides dollars and cents, you you convince these traditional mobile home operators somehow to sell. So I guess, you know, scouting them out is a big part of the value that you bring to the table is understanding that it's time and that these people are ready.
Mike Peters:And, you know, in some instances, they they they just didn't have the energy anymore at 75, 80 years of age to to be putting effort and money into the park. And, you know, they really do wanna leave, but they wanna leave a legacy of some sort. You know, the park name, whether it stays the same or just things like that that that will help entice them to so your ability to scout out those opportunities is something that is of extreme value to any investor.
Martin Mei:I I appreciate you saying that, and that's very much I I would say that's the biggest value that we have. Right? So our brand, we used to go by the name of mainly property solutions because we really see this being more than one solution. Right? We're more than just buying your property.
Martin Mei:So that's why I'm actually going through the extent of getting my own real estate license as well. Let's say I come across a seller from mobile home park. They want to get market value. Guess what? I'm just gonna list it for you.
Martin Mei:If you're willing to sell your property as is without any renovations and, you know, you know your product has a lot of problems. You're willing to sell it for 60¢ on a dollar. I'm going to inform you this is the potential market value of how much you can get on the market, but this is how much I'm willing to buy it from you directly without any of the hassle of listing. Right? And you wouldn't have to pay me as a realtor.
Martin Mei:I would just serve the buyer. Right. You know, just having additional tools in my toolbox such as, you know, getting a real estate license, that's gonna help me further serve the sellers that I'm talking to. Right? You know, how I see it is really just having multiple options for the seller and getting into exactly what their needs are, addressing the needs, solving a problem for them, And that's how we can really create a deal for your investors and yourself.
Mike Peters:Okay. Alright. We've got a couple minutes over because the topics are very close to my heart. I appreciate your time. And I look forward to speaking with you again on behalf of, some of our investors and some of the opportunities that I come across with just because of our marketing engine here at Lens City.
Mike Peters:My commercial division. If we publish an article on mobile home parks, I've I get 10 inquiries the month that article is has been published. If we publish an article on storage facilities, again, I get 10 inquiries. And the majority of them is are people that just know that there's money to be made in that market, but they really don't have any idea on how to proceed. What again, whether they're a professional and, you know, their focus is on their dental practice or their law practice.
Mike Peters:But these are the types of people that I'll be able to introduce you to.
Martin Mei:Ace. As we move forward. If your investors want to find me on Instagram, I'm on every single channel under Martin May. May is m e I. Where if on Instagram, they can literally look up Martin Self Storage, and my name is going to pop up.
Martin Mei:Mobile home park self storage. That's all. All right. Perfect.
Mike Peters:All right, Martin. Thank you very much for your time. This was a great session. I look forward to talking to you again in the near future. Bye to the audience, look us up.
Mike Peters:We'll help you get into the mobile home business. Even Martin's still active in the BRRRR strategy, his knowledge over years of doing that short term rentals, you know, run them by me and, I'll run them by Martin or go to Martin direct. Okay?
Martin Mei:Thank you.
Mike Peters:Alright. Thank you. Bye for now.