This episode was recorded using CallIn, which gives me the chance to take questions from and talk with listeners live on my podcast.
Last week was a huge milestone going back to a self-storage facility we bought in upstate New York in 2020 from Loopnet for $1.2M. It was a small-town operation that competitors were barely focusing on, and was bringing in $24K per month in revenue.
We managed to organize seller financing on top of bank financing, effectively putting almost $0 down, and have grown it into a $42K/month revenue operation. We just took out $3.7M of debt on the property at a $6M appraisal and had $2.6M wired to us tax-free in a cash-out refinance. That’s a huge accomplishment that we’re proud of and a big bonus for the whole team.
As of recording this, it’s May 1st, which means I spent the first two hours of my morning reviewing the books for our properties. At the start of every month, I dive deep into our revenue, costs, tenant behavior, impacts of rent increases, etc. so that I know how our portfolio is performing.
Lastly, I get to play at Peach Tree Golf Club soon. It’s one of the nicest courses in America and an exclusive club in the Atlanta area. I’m incredibly excited and blessed to be able to attend.
Now, onto Q&A.
Q: What will be your most lucrative business segment in 5 years? Real estate, consulting, or content?
A: Definitely real estate, it dwarfs the other two. I buy storage for a living, and if we listed our entire portfolio for sale it would be a $120M+ transaction. The courses and consulting are a way for me to learn, meet people, and follow my passion.
Q: If you were to enter the fitness space, what would you do?
A: I’d train kids in sports. I was really good in track and field, an All-American in college, so I’d utilize that to build a training company. Parents will spend gobs of money to get their kids on talented teams.
Q: What industry in the real estate space holds up best for the short-term future?
A: We’re seeing a period of high inflation and rising interest rates. If interest rates go up, debt gets more expensive, and property values fall because acquiring a property will cost buyers more. On the other side, inflation means more revenue.
Without a debt crunch, I think inflation balances out the rising interest rates. Responsible real estate investors will get through this, and people with irresponsible debt structuring will be the ones who struggle.
Q: Would the best time to buy a home be now, in 2023, or 2025?
A: I have no idea how to time the market. Demand is high, inflation is high, and debt is getting more expensive. That could be better or worse in the future. My advice is not to think about your house as an investment, it’s an expense. Buy a house when you need a house; it may be an investment in 20 years, but right now it’s a need.
Q: How do you take away work that was delegated to somebody if they’re underperforming?
A: I tend to be good at letting people down firmly but easily, but you have to have the hard conversation. The one job of the business owner is to take care of your business. You need a healthy profitable business, so you need to do what needs to be done.
Q: What do you believe that most others don’t?
A: Kids are the most important part of life. It’s not a popular sentiment, because kids take hard work and sacrifice. But as they age, the amount of work goes down and the enjoyment goes up.
Q: What are your life goals at this stage?
A: Career-wise, it’s building a sustainable real estate private equity firm. We’ve been riding a rocketship with self-storage, but I want to be protecting the downside and operating for decades on end, investing responsibly, and making investors happy.
Personally, I want to stay married until I die. I have a whole journey I get to share with my wonderful wife, and I want to maintain that.
I also want to raise hard-working kids, and teach them to not blame other people for their failures. I want to raise kids who take ownership of their lives.
Q: What are your thoughts on Fundrise and other sites for introductory real estate investing?
A: It’s probably not the best option for people with under $2M in net worth, it’s easier to buy REITs at that stage. REITs are publicly traded real estate companies, so you can get real estate exposure without making an illiquid investment. Fundrise and other companies are great, but they’re not an excuse to overlook the impacts of debt, risk, leverage, underwriting, etc.
Q: How much cash do you need to start investing in real estate?
A: It depends on how many wealthy people you know. If you know a lot, you can start now. If you don’t know any, you need to get cash and grow your network. My answer for most people is to ignore real estate and start making cash, then buy real estate.
Q: Do you worry about funds before or after you get a property under contract?
A: The first handful of deals we worried about cash before we did them, and it really impacted how we look at deals. Now that we know what fits our books and have a large investor base we’re focused on landing the properties and then organizing financing.
Q: How does a founder know when they should stop being responsible for customer inquiries?
A: When you don’t have time to sell and work on the important but not urgent activities, then you need to hire and delegate. You want to be able to spend at least half of your time investing in growth, systems, processes, recruiting, and other important but not urgent work. Experienced founders can make this move sooner than brand new ones since they can probably protect the downside.
Q: How do you deal with an employee who is not an A-player in a tough labor market with no replacement? He’s losing us customers and letting us down time after time.
A: Fire that person today, it will be a weight lifted off of your shoulders. Then, stop making excuses that there aren’t more employees out there. The Lowes and Home Depot in your town have over 100 employees, you can’t find one?
Go hunt and find people. Keep business cards in your pocket, and frequent local businesses. I identify people that I see working hard and always ask them if they know anybody looking for a job while briefly describing the benefits, then hand them my card. Do the hard work that doesn’t scale.
Q: Have you looked into solar technology for self-storage facilities?
A: I have not, and I have no intention to. I used to say yes to things all the time, but now I get to say no. Opportunities come the more money you make and the better you get at your job, to the point where you can turn most of them down. I can get wealthy by focusing exactly on what I’m doing right now and keep doing it year after year.
Q: How do you recommend landing your first local deal?
A: Use Google Maps to find facilities in your area, primarily up to 15K square feet, jot down the phone numbers for those facilities. Don’t target CubeSmarts or other large brands. Call those numbers and make your pitch to whoever picks up the phone. It’s about volume, don’t overthink it.
P.S. If now is the time to start your own journey, the real estate community is for you. I weigh in on almost every post, and there are a lot of people smarter and more accomplished than me.
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