AJ Osborne, CEO of Cedar Creek Capital, has lived and invested through a recession and believes another economic downturn is already upon us.
He is well aware of the fickleness of investors during a recession. The knee-jerk instinct is to pull out all your money and bury your head in the sand until the worst has passed, but Osborne says ‘no.’ Though he knows that no industries are unimpacted in a downturn, he thinks that the niche where he focuses his investments, self-storage, is the best bet investors can make in a changing economy.
“In this kind of environment, the safest and best real estate asset during a recession is self-storage,” he said. “It has performed the best through all of the recessions and has outperformed any other commercial real estate asset in the last 26 years.”
It makes sense. In times of flux, people sell and lose homes, move locations, or downsize properties. They need a place to store all the things they can’t bring with them. Voila, a built-in market for self-storage spaces.
Osborne references the 2008 recession as a case in point. “Self-storage not only survived the 2008 crash — but it thrived,” he said.
The CEO is emerging as a thought leader among investment entrepreneurs, who subscribe to his popular YouTube channel and often refer to his book, Growing Wealth in Storage. This handy how-to book is a bestseller written in a straightforward manner. It’s become popular with young investors who share Osborne’s vision for the future of self-storage.
Low Risk, Great Returns
Osborne recently sat down with us to explain why self-storage has other investments beat when the markets are tough.
“Self-storage facilities have a big profit margin. They have low capital expenditures and operating expenses, so they have a large margin for profits,” he explained, referencing the minimal infrastructure, staff, and services needed at these properties as especially good for keeping costs down.
He also mentioned the heightened need for storage during a recession. “It’s all about the stickiness of the tenants. As economies shift and change, people actually need storage more,” he said. And surprisingly, he noted that it’s hard to leave a storage facility and tenants often put off moving out. “It’s hard to leave a storage facility. You have to go and collect all your stuff; it can take a lot of time and be very expensive,” he said.
The last reason he points to self-storage as a great recession investment is diversification. “In a facility with, say, 600 doors, if one tenant leaves, it doesn’t really matter, we have 599 more units, it has very little impact on the financials,” he said.
When tenants do move out, it’s an easy process to prep the unit for a new tenant. “You just clean the unit and bring a new tenant in with few capital expenditures, keeping that margin high,” he said.
The Cedar Creek Way
Cedar Creek Capital holds a massive portfolio of over $300 million in assets, and welcomes more investors every day. One of Osborne’s recent projects is converting a retired newspaper factory into a high-quality, keyless-entry climate-controlled storage facility, purchased for under $5 million. Once completed, the facility will presumably be valued at over $30 million.
Based in Boise, Idaho, Cedar Creek offers investment opportunities in 22 locations across eight states. Investors can own part of a deal for just $50,000, including equity, appreciation, cash flow, real estate, and more.
Osborne is a rarity in the investing world, he turns a profit on every deal and has been working in the self-storage realm for nearly two decades.
“We’ve never lost an asset, and always beat our expected returns. But does that mean that’ll never happen? No. Which is why we always make sure to look at things that we can’t control so we can do our best to mitigate risk on every deal,” said the CEO.
That said, he sees the risk on self-storage investments as particularly low. The risks are made even lower when the investments are made Osborne’s way. That means a lot of research, risk assessment, long-term forecasts, geographic locations, and more. Think of it as calculated risk-taking.
While building wealth during a recession might sound difficult, Osborne’s straightforward wisdom on the subject tells us that it’s possible, plausible, and a pleasure.
About AJ Osborne
AJ Osborne, CEO of Cedar Creek Capital, is the leading expert and voice in the self-storage industry. He has been featured on top real estate podcasts and is the go-to resource for self-storage investment advice across social media platforms, including YouTube. Accredited investors can find more information here: https://www.cedarcreekwealth.com/
