I had the chance to interview Jay Schuminsky at the latest ReConvene conference, and he’s a complete badass in real estate. Jay’s life changed eleven years ago when his father, a sweaty real estate entrepreneur with a mixed bag of asset classes, passed away. Jay was working in the back office and was tasked with taking over the business at 30 years old. This was an old-school small operation with ten employees and no acquisitions team.
He started off by buying shopping centers at an 8-cap, but ultimately wanted to come up with something different. After looking closely at storage, he started developing massive self-storage facilities of over 200K square feet. Starting new developments like this, especially many in the same time frame, seems a little crazy in hindsight, and probably because it was. But Jay saw it as a bet on locations that he liked, and a bet on creating the infrastructure and systems for them to succeed.
Development takes a long time, but properties eventually started popping up. The problem is they were all popping up at the same time. Jay had to work on the tools to manage them, the call scripts his employees used, and the entire backend operations. Tons of people see real estate as a passive investment to put their money to work, but Jay saw it as a business and focused on operating a really good business.
At one point he had 8 million square feet of storage and had turned down generational wealth from brokers who were inquiring about his portfolio. But a few years ago he finally decided to close the portfolio, all 52 facilities, for $1.5 billion. His next step wasn’t to retire, or to go on vacation, but to minimize his tax hit by acquiring new properties through 1031 exchanges. Jay still saw the long-term value in real estate investing and wanted to keep the snowball rolling as he continuously re-invested.
There are strict rules around 1031 exchanges, so Jay was sitting in front of a spreadsheet trying to find where to put his new money and made large investments into multi-family housing. At the time, multi-family had the same cap rates as self-storage and offered the convenience of brand new buildings with no need for inspections. His portfolio sale closed on December 1st, and he had his first multi-family deal lined up the next day.
It takes a ton of drive and discipline to not sit down with millions in the bank after a portfolio sale. Jay sees this as the wealth-growing portion of his career, and that he’s in control of his performance, unlike the stock market. While some people feel the need to see cash in their bank, he’s tried to minimize his income to focus on building long-term wealth and has maintained positive cash flows.
Our conversation quickly turned away from business and towards another component of entrepreneurship on my mind: managing a family and raising children well. When we now have generational wealth, it can be hard to not instantly solve problems for our kids, but we know that would only harm them down the road. Boundaries are important with children, and you’re doing yourself a disservice if you get too involved in their affairs instead of letting them work through things in a healthy way. I want to teach my kids to struggle with grace, and I want to hold them accountable and teach them to work hard. If they do something wrong, I’m not going to bail them out.
Jay laughed earlier in the discussion when blaming me for the storage market being frothy, and asked me why I dedicate so much time to classes, consulting, and podcasting. My business partner asks me the same thing often. The truth is that while my goals aren’t totally clear yet, I know that an audience will help me achieve them. And, selfishly, my audience has led to great networking and a strong deal pipeline. And if some entrepreneurs are able to operate better because of my sharing my experience, I see that as a complete win for everybody.
The full interview talks even more about revenue management, interest rates, and an impending bear market, and more, and I highly recommend you give it a full listen.
Check out our free Hiring and Delegation 101 course!
Work with us! Click here to apply: sweatystartup.com/apply
Check the show notes here: https://sweatystartup.com/the-sweaty-startup/
Join our Real Estate community: https://sweatystartup.com/rec
Special thanks to the sponsor: http://supportshepherd.com
We have a Reddit community: https://www.reddit.com/r/sweatystartup/
Twitter Growth Mastery Course: https://sweatystartup.com/twitter
Want to hire me as a consultant? Click here: https://sweatystartup.com/storage