Rick’s journey into the world of self-storage investing makes for an insightful episode you won’t want to miss! Starting with a background in accounting and real estate, Rick shares his strategic transition from other real estate projects to self-storage ventures, guided by expert Stacey Rossetti. Discover how he leverages her turnkey program for coaching and virtual assistance to maximize his investments in facilities across Texas. From the Odessa deal to his plans for Lubbock, Rick delves into his decision-making process, partnership with a storage management company, and methods for boosting occupancy and revenue. Tune in for valuable tips on expanding your portfolio and managing properties like a pro!
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Student Showcase: Rick Uses 3rd Party Management to Manage His Facilities
We have a special guest that’s going to come on, Rick. He’s a student. He is going to go over the facility that he just closed on. He is going to talk about that. How did he find it? How did he fund it? How is he running it now? That’s going to be cool. If you guys have not been here before and this is your first time, I teach people how to invest in self-storage. I’ve been doing this for a while. I’ve been investing in self-storage for eight years. I’ve been investing in real estate since 2011.
I flipped home for homes for about five years, and then it got to be too much for me. I decided to move over into passive income, and that’s how I got into storage investing. My very first facility was a small facility. I worked my way up to owning larger facilities now. We have sixteen facilities. We’re in the process of selling three of them right now and offloading those. We’re going to roll that money over into another deal or something is what we’ll do. That’s it on my side.
I wanted to let you guys know that I teach here every week. It’s not the same content every week. It’s whatever I feel like teaching. It’s all about self-storage investing. I try to find them, fund them, and run them. I do a lot of deal analysis. If all the questions that you have in your mind about how to get started, I cover those here in the sessions or if you want to go even deeper, if you feel like it’s a little bit too much of an overview in this session, then what I would do is I would buy my online course and my deal analyzer.
In fact, if you don’t have a deal analyzer, then you’re not going to be able to make any offers. The whole point about buying storage facilities is you have to make a lot of offers because there’s a lot of competition out there. We offer a couple of different courses. The online course shows you the step-by-step, finding them, deal analysis, funding them, and then management is what it does. That’s what that is. That’s available.
Also, I have the deal analyzer. If you need a way to run a deal analysis, then I highly recommend that you get the deal analyzer. The deal analyzer is a course that takes you step by step on how to run deal analysis on storage facilities. It’s an Excel spreadsheet, but it shows you how to use it, how to input your numbers, and things like that.
Finally, I want to mention that I do have a boot camp coming up, and it’s right here under the boot camp page. I typically only let my students come to those, but this time, I’m opening it up to the public. If you need help with finding money for your deals or if you’re thinking, “Maybe I can afford one deal, but how does Stacy buy sixteen of them,” this is the boot camp for you. I will go through how I fund all my deals in traditional ways and with creative deal structures.
Also, raising private money because I’m almost 100% privately funded. Out of all sixteen deals, I have one deal that is through a bank, and I’ll never do that again. I’m more of a creative structure type of person. I also like syndicating funds, private lenders, and raising capital. That’s what I got into the two-day boot camp. With the boot camp, you get access to the deal analyzer. You get the deal analyzer for free.
You could essentially buy the course, get started now on that, come to the boot camp, and then within the next month, you’d be rocking and rolling. Rick is from the coaching program. It’s called the Storage Nerds Coaching Program. If you want more information, I don’t have the doors open to that right now. I don’t know when I’m going to open the doors. Make sure you get on the waitlist so that you can get notified if you’re interested in coaching and mentorship.
I have ten virtual assistants that work for me, and they do nothing but call owners. They do all the dirty work. If you want to hire my team to find you a facility, which is how Rick found his deal, turnkey acquisitions are the best of the best because we hand you leads. It is what we do. You also get to look at all the deals. You can go through the application process to get more information on that. We have Rick here and I’m going to have him go over his deal that he closed on. I think you guys will be pleasantly surprised about this one. Rick, are you there?
Thanks, Stacy. I do appreciate the opportunity to join you and the group. It’s been an interesting journey for me. I’ll first tell a little bit about myself. I grew up in Western Springs, Illinois, which is a suburb of Chicago and I moved down to Texas. I lived in Fort Worth, and I’ve lived in the Fort Worth area ever since I got out of college. I’ve been involved in the real estate business superficially.
I’m a full-time, CPA and have been since I got out of college. As another way to try to make income, I’ve been involved in various real estate projects. The first one I closed on was in 1992. I had been involved in raw land, single-family homes, office buildings, parking lots, strip centers, and all kinds of stuff but never self-storage until I came across you and your program.
Foray Into Storage
What attracted you to storage?
There were a lot of things. When you’re involved in office buildings, which I had done many of with partners with some big buildings in town here. One of the things about it is if you get a new tenant who says they’re ready to move in, the first thing that happens is you have to spend a fortune on all their tenant finish out, commissions, and all this stuff. If they move in and have a problem, all of a sudden you have a problem.
One of my very good friends is a real estate broker here in town, and he specializes in self-storage. I’ve had numerous discussions with him, and he kept telling me about self-storage. He finally said, “What you ought to do is go on Stacy Rossetti’s website. What you’ll find there is a whole ton of information,” and I did that. I reached out to you and started asking you about the turnkey program, which includes the coaching and the virtual assistant program. I signed up for that.
What attracted you to the turnkey acquisitions versus doing it yourself?
First of all, I didn’t know anything about finding these opportunities and what your group was talking about was finding off-market opportunities. Anybody can go on websites and find stuff, which is typically going to be priced at the full market but I did not know how to or didn’t have the time to do any of the turnkey type stuff cruising for the opportunities for off-market storage facilities. I didn’t have the time to do that. I thought, “We’ll see what happens here.”
I think you said you work 60 hours a week or something.
Yeah. I’m a partner in a big firm and it’s a full-time job plus. I was blown away by the number of opportunities. The minute I signed up, I started getting opportunities or leads from your group. They would be in various different locations, sizes, and composition. Within two weeks, I was making offers and it was about 30 days later that I found one that I was interested in. It was about four and a half hours away by car. I jumped in the car and drove down there. I met with the owner and made an offer.
When you were looking at all the leads that we sent you, we have leads that are 200,000 to 3,000,000. How did you decipher which deals you were interested in too? Was it just money or was it something else?
No, it wasn’t just money. As a first deal, I wanted to get one that was small enough that I could afford and large enough that it would provide an actual opportunity that would be significant. The other big component of this is that I don’t have the time to manage any of these myself. I started looking into finding a storage management company that would be able to do this. Based on the numbers, they certainly charge more for larger facility groups and less for smaller ones but nevertheless, it had to be big enough where the numbers would justify having a management company involved.
How did you find the management company? What was the process like?
We hired Copper Storage Management and they were referred to me by the same guy who referred you to me. I reached out to them. They couldn’t have been more responsive to taking on a new client. They managed at that time about 200 of these facilities all over the country. They’ve got the storage in their blood, so to speak. It’s a lot of family members. Interestingly enough, another one of your students who is in the Dallas area, which is not very far from me, uses them. I spoke with her about them and she was really happy so that’s who I hired.
Facility In Odessa
We sent you this lead and then what happens after this? How does the process work for you to be able to get it under contract? What happened to you?
I have a picture up in Colorado. It’s a picture of my wife and me. She looks like she’s about half my age, but she’s only a year and a half younger than I am. We were at a Dallas Stars game. I have a map of the state of Texas and Odessa, which is where the facility is that we ended up buying. I live in Fort Worth and it’s right down I-20. It’s about four and a half hours to Odessa.
Were you thinking like, “That’s not too far?” What is your mindset behind it?
It’s not that bad. It’s about 115,000 people.
Did you want something closer to you or what were you thinking?
I didn’t have anything like, “It has to be this,” or, “It can’t be that.” Once I decided to have the management company that I was hiring, I stopped worrying much about where it was. I wanted it to be close enough that I could get there if I had to. If something happened and I needed to get there tomorrow, I could do that.
When was the last time you went there?
I’ve only been there once and that was the day I went to go meet the owner there. I haven’t been back since. I haven’t needed to be. The management company hired a guy and he’s there. He lives there. We have an apartment there and he lives in the apartment on-site, which is fantastic. He’s a resident of Odessa. He’s there as much as we need him to be.
Now that you have this facility, you’re like, “I haven’t been there since the day I met the owner.” Are you thinking, “I want to still stay close,” or are you open to kind of going more out for the next ones? What is your thought process now?
Through your same program, we found another one and that is in Lubbock. It’s a little bit bigger than the first one. It’s almost very similar. It’s only a couple of hours away by car.
From Odessa to Lubbock, how far is that?
It’s about two hours or something like that. It’s not bad and it’s about the same distance for me to get there from Fort Worth.
When you started looking at this deal with all the information that we sent, what did you like about this deal?
I am a CPA so the first thing I wanted to look at was the numbers.
Did you keep the name Presto Storage?
Yes. It’s the same sign.
Did you get that number ported over?
Yeah.
You kept the name, the number, and the sign. That saved you a couple thousand dollars.
It was more than that because of all the good press. Fortunately, one of the things that I researched was whether or not their brand was good or their rating is good and they’re really good. That’s why we decided to keep them.
Also, you looked at their Google Reviews and this kind of stuff is what you did. Is that what you’re saying?
It’s not sexy.
Storage is not sexy.
No, but what’s sexy is the math. That’s what it looks like. It’s out there in Odessa in West Texas.
It is not sexy. That’s for sure.
It’s West Texas.
It’s oil and gas.
It’s doing fine.
A lot of people travel in this area because I have a friend that goes and stays there for six months and then goes home for 1 month or 2 or something like that. A lot of people are traveling so I think storage is a necessity over there too.
It is. When we bought it, the occupancy by square footage was right about 50% and the people that we bought it from had bought it about five years before. When they bought this, it was at zero. They were just tired. Ironically, the main guy in the ownership group lives about 15 minutes from me in the Dallas-Fort Worth area. It was far for them. They were not using an offsite management company. They were doing it themselves and they got worn out.
Managing A Storage Facility
People don’t realize how much work it is to manage a storage facility. I know you and I talked. You were like, “I had to turn the utilities on. That was so much work.”
It was a lot of work.
Even the utilities are a lot of work. People don’t realize how much work it is. They’re like, “I could just stick a sign up and that’s it,” but the truth is now with marketing and boots on the ground, it’s a whole thing.
It’s a team. I’ve read a bunch of books and I’ve listened to podcasts all the time. One of the phrases that I’ve heard used, and you’ve said this to me too is that storage is very similar to operating a retail store. There’s activity happening all the time. It’s not complicated. Not any one thing is a big deal, but if left unattended, it can become a big deal. Fortunately for me, I found a group that’s able to take care of this stuff. They’ve got a call center. We hired a guy who works there very part-time and they do all the collections. They do all the auctions.
What is the square footage and the number of units?
It’s 309 units, which includes four small offices. It’s just under 50,000 square feet. It’s two different locations. One has 83 storage units and the other one has all the offices and all the rest of the stuff. They’re about seven miles apart. They’re pretty old. They’ve been built anywhere between 1960 and 1985.
When you were looking at the office space too because it’s a building with four office spaces. Was there anything that stuck out maybe doing during due diligence or anything you were like, “Let me look at this,” because I know you already had experience with this?
What stuck out to me was opportunity. There was tons of opportunity.
Did you have the office spaces rented?
Three of them were rented. One was the office that was used as the office there at the storage office. One has moved out since we bought it because they didn’t think they needed to pay their rent. We have two that are available for rent now
Even the office space, you’re also going to rent that?
For sure.
What are you all doing to find tenants for that? Does Copper help with that too?
Yeah. When we acquired it, the rent roll, if everybody in a month paid it would be about $17,000 and that has gone up about $2,000 a month.
When he was looking at this, it was making $17,000. That was the numbers.
It was about $204,000 a year of gross revenue or money taken in and then they had expenses, note payments, and things like that. When I was looking at this pro forma, these are what we thought. We paid $2.3 million for it. We did some bank financing and we did secondary financing there. We ended up borrowing 85% total and one primary note, which was an SBA loan, and then another one for 10%. It was about $480,000 equity put in. If everything goes well, we may have to fund a little bit more. I’d put in $60,000 extra to float it for the first six months.
When you closed, did they say, “Let’s just put an escrow in?”
I did but it wasn’t escrow. It was just money that I put in.
SBA asks for that too. Sometimes SBA is like, “Let’s put a little bit extra in.”
They didn’t ask me to do that.
The income for year one is roughly going to be around $260,000.
That was the goal. This is the pro forma. It’s not like we have to have astronomical or huge gains. These are not terribly huge.
That’s increasing occupancy because you’re at 50% full. You’re like, “Maybe this year I’m 50% or 60% and then 70%. You’re also increasing rates at the same time. Mm-Hmm. This is something that you and Copper talk about on a regular basis when should I increase the rates and things?
They just reach out to me and tell me. We think we have an opportunity here so they did it. We closed on January 2nd and starting in April, they were getting 15% increases on almost all of them. Not all, but most.
It was like all the previous ones. They tried to figure out what the prices were for all the empty.
Let’s talk about this. Is that the price that you paid to Copper?
Copper for these facilities is $2,600 a month and some add-ons. We are paying for advertising. We pay separately for other things that are passed through expenses that they have. We have the boots on the ground guy. None of those are expenses. The only one that is incremental is the $2,600 of management because we’d have to be paying for all these other ones anyway.
How does the marketing work? Do you say, “Your budget is this per month?”
It’s pay-per-click. They have an advertising thing and we set the budget at $500 per facility. Once it hits that, it stops. They’ve added on a little layer of some other thing. It’s $400 a month. I couldn’t tell you exactly what they’re going to do for it.
Copper’s expenses are spot on with what we charge as well too because we have a management company in our facilities. I think their prices are very reasonable. This will be something for everybody reading to get an idea of what it’s going to cost. It’s not that much more expensive to hire a management company and have them do it versus you managing it.
No, it’s not and the best thing about it is given the fact that this is the first storage facility I’ve been involved in, it would be a pretty fair thing to say I don’t know much about it. Hiring these guys was a grand slam idea because it was the way for me to get into it. I’m not saying it takes zero time of mine, but the time I spend on this is a fraction of what it would be if I were fielding phone calls and all this stuff.
You have a $2.3 million facility that’s taking hardly any time up where you could say, “If I go and buy maybe a $500,000 or less facility, it probably won’t take up that much time but if I’m managing a facility that’s like a $2 or $3 million facility myself is a lot of time.
It would be a lot of time. We’ve got two locations. By the way, it’s four and a half hours away so it wouldn’t work very well. The other thing about this, Stacy, and I failed to mention this. When I was thinking about, “How would I be able to make an impact?” Just like somebody who’s deciding, “I want to go start investing in the stock market.” You would never expect them to buy one stock. What you would expect them to do is end up with a diversified portfolio.
What happens is I thought, “If I’m going to buy one of these things, I need to be able to plan on buying more than one.” It might not be ten in the first year, but it needs to be more than one. Maybe more than two or maybe more than three. I just don’t know. We’ll see but I knew that if I were managing these things myself, I would never be able to do it without a team.
Income-Producing Facility
You have property taxes, utilities, insurance, and total expenses. You’re taking it from $164,000 to $300,000. Other things to consider are prices and occupancy.
That’s in six years. What that tells you is if you use a 6.55% cap rate, sometimes it’s going to be lower than that or sometimes higher. Let’s say it’s %6.55. What does that say? It was $2.3 million when we bought it. Whether it was a little high or a little low, I don’t know yet. We’ll figure it out but if we hit this, we’ll be at about $2.5 million and then continue. At the end of six years, it should be worth about double what we paid for it. This equity here, which was put in at $480000, goes from here to a little over $2.9 million. That’s multiplying it by about five times.
What you’re doing is perfect for this time because another thing too is that your property was an income-producing property that wasn’t producing what it’s supposed to be producing, which I call mismanaged facility but it’s income-producing. When a bank looks at it, they look at it as an income-producing property. Luckily, you are making $200,000 and they were saying, “You are going to be able to afford the mortgage. We know that. That’s a big thing for banks right now. I think this size of a facility, if you can afford it and do something like this, I’m telling you there are so many deals out there exactly like this one.
The one that we have under contract, the big difference between this one and that one is just that their occupancies are about 90% on the one in Lubbock as compared to this one.
However, you got it under contract for almost the same price.
Some of the units are parking. There is that difference. What I was going to show is even though I’m a CPA, since I don’t have time, I’m having these guys do the accounting for me. It’s going great. This is what the actual income has been. This is the collection for the first three months. We’ve collected almost $50,000 for the first three months. If you multiply that by four, you’re at $200,000. I will say that would be a little bit less than the previous owners but I will also say that things in April have taken off. I knew that would probably happen. There were some tenants that moved out. They don’t like the remote stuff. They don’t like the price increases and everything.
You only went down from $17,000 to $13,000 so that’s pretty good. I’m telling you, there is an uptick in storage necessity right now. We are converting week after week. We have a lot of conversions. I think if the marketing goes well and they’re doing the marketing, then you should be able to lease this thing up because you are right on track with what we’re doing like a good half of our facilities.
There is an uptick in storage necessity right now. We are converting week after week. Click To TweetHere’s the rent roll. It says Dixie but it’s for both locations. The rent that’s being charged now is $18,422 per month and there is the insurance. There was virtually no insurance for the tenants that was being taken. I think we get half of this. That would be $750. It’d be a little over $19,000. Now, all of a sudden you’re going up at a nice rate there. Regarding the tenant turnover, we’ve had some move-out and some move-in, but nevertheless, the revenue has gone up pretty substantially. It’s more than 10%.
Storage Management System
It’s just a management thing. Trying to figure out occupancy and prices, staying on top of making sure that people are paying their rent, and if they’re not, getting them out so that you can get more people in. Also, maybe doing a little cleanup and boots-on-the-ground stuff here and there. That’s the gist of it. This is storage. How did you choose a storage?
It was chosen for me. It was who Copper used? I pay a subscription for that. I don’t know how much it is. It’s not very much and it’s a fantastic program. Ironically, that was the same program that the sellers were using so the transition was pretty easy.
Now, what is it like working with Copper? Also, this is with any type of third management company. Do you have weekly meetings or monthly meetings? How do you keep up with what they’re doing?
We meet whenever is necessary. I have a scheduled meeting. I have a customer service guy and he’s my main point of contact once a month for about 30 or 45 minutes. Other than that, we text or call him on a fairly regular basis whenever there are questions or anything like that. The amount of communication has dropped dramatically from the first month to now and that’s due to two things. One is getting all the utilities and all these things smoothed out. The second thing is there isn’t all that much need for it.
I always say the first 90 days after you buy a storage facility is chaotic. You’re trying to figure stuff out and get it all and running. After that, it goes on automatic. You’re working on maybe systematizing stuff a little bit better and coming up with some automation, but that’s it.
We installed different keypads at the gates to get people in and out so everybody has their own number so we can tell who has been in. They had a system, but it didn’t end up working too great for us.
Did you end up using the storage system?
It’s called SpiderDoor.
SpiderDoor is one of the best.
It’s working. It was not expensive to put in and run. We’ve not had any issues with it. It’s been great.
SpiderDoor works good. You have this one and then now, you have another one just like this one or a little bit bigger under contract. You’re going to close on that and then it’s going to take you another 90 days or so to get that up and running.
It won’t be as difficult.
It won’t be as difficult because it’s income-producing.
Also, I’ve done it once so it’ll be easier for me. I won’t have as many questions. I won’t fumble. It’ll be a lot easier.
After that, are you thinking maybe one more for the end of the year or what is your thought process on this?
I’m already looking at a couple more so certainly, it wouldn’t be out of the question.
Once you figure it out, once you get it down, you just pick everything off. That’s the whole point. Your time is freed up. You’re in turnkey acquisition so you don’t even have to look for deals. They’re just handed to you. You have a lender that’s a good lender and then you have a management company that’s managing everything. This is as passive as you can get.
It’s pretty passive.
That’s good. That’s where it should be.
I will say that for those people who are thinking about, “Should I get involved in this or whatever? I do remember several conversations you and I had along the way between the time we got this property under contract and the time we closed on it. Not that I planned on backing out, but there were a number of times that you said, “Don’t you dare back out of this. This is too good of a deal.”
What does your pro forma for the second one look like? Are you able to double that too or it’s not at double? Is it double too? It’s six years but double. There are so many deals out there like this. The one thing that you do well, and I say this over and over is as soon as we find a deal, you’re like, “I’m going to go beat the owner man.”
You jump in the car and go because there’s nothing like being with somebody personally for several hours or whatever. It’s different than if you’re over the phone or going through email or whatever. It’s personal touch, personal experience, and letting people know you care, you’re excited, you’re interested, and all these things. There’s no better way to do it than to drive four and a half hours, get there, and make it happen. The other thing is that if it’s such a great deal, it’s going to be gone. Somebody else is going to figure this out too.
I’m telling you, all the deals that I have, as soon as I see it’s a good deal, I’m like, “Let me go over there and meet the owner,” because they can’t say no to your face. That’s another thing too they’ll negotiate maybe a little bit, but they’re not going to be like, “No, I’m not going to work with you. You suck. You’re a horrible person.” They’re not going to do that. What they do is end up working with you a little bit better.
There is no question about it. The folks that we ended up buying the property in Odessa from couldn’t have been more accommodating and any nicer. It worked out great.
Owners are just like us. They’re regular people.
They are regular and nice people.
StorageNerds
You’re doing a great job. I look forward to seeing the deals you’ll be doing and looking at. Finally, the last thing I wanted to ask is you’re a storage nerd. You’re in StorageNerds. What is your thought of StorageNerds? What did you get out of the coaching side and the turnkey acquisitions so everybody has an idea?
What I have found is that essentially anytime I need to talk, I jump on there, set up an appointment, and get on a team Zoom call just like this with you. It has worked out fantastic in terms of accessibility to you, Stacy. In terms of your being helpful, you and your team have been tremendously helpful the whole time since I first got on my first call with you. That’s about you and the program. Also, your support team has been fantastic as well. I have been pretty much a walking billboard for the StorageNerds group because it’s been a fantastic experience. If it hadn’t been for you, I wouldn’t have found either of these.
I actually have been pretty much of a walking billboard for the StorageNerds group because it's been fantastic. Click To TweetIt’s a team effort.
It’s that simple.
If you are willing to talk to owners and go look at deals, maybe it’s not difficult and put offers in.
No. Now, I’ve made some that got rejected. I have called people who have not been interested in talking very much and that’s okay. That’s part of it.
That’s what you do well too if you’re like, “Let me talk to the owner.”
Talk to them. They’re not going to bite us.
A lot of people are scared of talking but the truth is they’re just like us.
Especially if it’s somebody who wants to sell. It’s even better.
If they’re open to talking or meeting, I’d say to go for it. It’s a learning experience anyway.
What I have found is that the people that we bought the Odessa group from have been extremely helpful to me since we bought it. I would expect the people in Lubbock to be the same way. They will be extremely helpful after we buy them. I have no doubt. I’ve made friends that I’ll have for a long time. I still am in contact with the guy from Odessa, even though he lives right here.
I think you’re on the right path. You bought a $2.3 million facility. You got an SBA loan. You only had to put 15% down with some fees, escrow, and stuff like this is what you did. You got a fixed rate as well too. A lot of people are nervous about SBA loans because they’re worried that they’re variable rates. A lot of them are variable rates, but there are fixed rates out there as well.
If this is something that you’re interested in, all you have to do is find the right lender. You’re going to be finding deals, talking to owners, putting offers in, talking to lenders, and then also figuring out how you’re going to manage the facility. Those are the pieces. We got to put all that together is what you have to do. I appreciate you hanging out with us.
If this is something that you're interested in, all you have to do is find the right lender. Click To TweetThank you so much, Stacy. I appreciate you.
Everybody else, thank you for reading as well too. I’m here if you guys need anything. Go to email Questions@StacyRossetti.com and we’ll answer all your questions. Thank you, Rick. Take care everybody.
Thank you all.
