The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.
When working with high net worth investors, they typically made their money elsewhere. They haven’t had the experience in hard assets like self storage like they would in their main industry like tech or medicine, so they’ll need to learn the ropes. While it’s not necessarily difficult to educate these investors, it is a step that many don’t realize is necessary at first.
Richard Wilson: What lessons have you learned regarding raising capital for commercial real estate from high net worth investors?
John Manes: Some of the lessons I’ve learned which are interesting is you need to educate them about self storage just like you would educate anybody else that’s giving you ten grand. So I’ve always found it interesting that the SEC defines an accredited is somebody that’s worth a million dollars or more in their personal net worth outside of their homestead, and makes $250,000 or more of income. I’ve always found that interesting because money doesn’t necessarily translate into education, and education doesn’t necessarily translate into money, right? So because of that, what I’ve learned about a lot of high net worth individuals is you have to teach them the same about self storage, and how to invest in a different asset class or a different business model than what they’ve made their money in. Because that’s what they know, right? So if they made it in tech, they know tech, they know how many multiples tech trades at after you build up a company, and then you move it over to a hard asset like self storage and they go “Okay, I’m going to start all over. Tell me what I need to know.” The good news is they’re more educated than most, but they’re not fully educated to why storage is a good asset, or how to invest outside of what they’re used to.
Richard: Right, great. Makes sense, okay.