Joe DownsCEO & Co-Founder, Belrose Storage Group. Founder, Storage Moguls.

The 20 - Tenant Rule_Hidden Concentration Risk

7 Apr 2026 · 1 min

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In this brief talk, the speaker warns that having a single tenant accounting for 20% or more of a property's revenue creates a significant concentration risk, regardless of the business type. He advises investors to probe the tenant’s lease term, the nature of their relationship with the current operator, and whether the tenant would remain if ownership changes before finalizing a deal. He also stresses that a single year of rent‑roll data is insufficient, especially in seasonal markets such as boat and RV rentals; at least two full years are needed to distinguish genuine trends from anomalies, like differentiating a one‑off strong October from a consistent market health signal.

Chapters

Single large tenant over 20% of revenue. That's concentration risk. I don't care what business you're in. One tenant representing a fifth or more of your revenue is a significant exposure. What is their lease term? What's their relationship with the current operator? Would they stay if the ownership changed? Definitely get those answers before you close. One year rent roll data, not enough. In boat and RV with a clear seasonal cycle, you need at least 2 full years to distinguish a pattern from an anomaly. With one year, you can't tell whether the fall rush is growing, flat, or softening. One strong October doesn't tell you the market is healthy. Two consecutive strong Octobers, that might tell you something's real. With one year, a bad summer looks like a problem.