Have you ever considered self-storage as an investment but felt overwhelmed by the jargon and hidden details? This episode is your key to unlocking the truth behind the industry. Ditch the brochure, ditch the hype! We’re diving deep into what “investing in self-storage” REALLY looks like. Whether you’re a seasoned investor or just curious, this episode is packed with valuable insights to help you make informed decisions. So buckle up, join the ride, and get ready to invest in your financial future.

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What “Investing In Self-Storage” Really Looks Like

Get Your Facility Under Contract

I’m going to go over to give everybody an idea of not how the storage industry works but how buying and owning a facility works. This is Basic 101 stuff, and then we’ll pick a topic and get into that. The way that I teach is that there are four stages. It’s good i f you own a storage facility and where it is if you do, but if you don’t, then you are in stage one. Stage one, your goal is to get a facility under contract. I talk about this all the time. There’s a whole bunch of steps that you have to go through in order to get a facility under contract. That’s stage one.

Most people that follow me and tune in to the show, this is the stage that you’re at. This stage of all the stages is the hardest stage. Getting a facility under contract is the hardest stage of everything. When I say hardest, I mean most challenging. That’s because finding a facility to buy within your buy box and your parameters is a lot of work.

 

We track internally what it takes in order to get a facility under contract. We track as we do this. For a student, it takes anywhere from 30 to 40 offers to get 1 facility under contract. Think about that. If you have 30 to 40 offers, how many owners do you have to talk to in order to do this or even go to Crexi online, wholesalers, or what it is? For us, internally, 200 phone calls equal 1 offer. That’s how much it’s taking.

You always have some random things like, “I called one person and they’re like, “It got under contract.” Back in the day, this did not happen. When I got started in storage in 2016, 2017, 2018, and 2019, That wasn’t 200. It was probably maybe 50. 50 calls equal 1 offer. Now, it’s 200. What does that tell you about the market? T he truth of the matter is a lot of people really want to buy storage. Everybody that’s tuning in, you all want to buy a storage facility. How many people are going to call 200 people in order to be able to put 1 offer in? Not a lot of people. Hardly anybody does this at all.

A lot of people will call. That’s why all these owners are getting super frustrated. People are like, “Would you be interested in getting an offer?” We hear this all the time. It’s like, “I’m tired of you guys calling all the time.” The truth of the matter is this is the key. The key is putting the offer in. Why would you waste your time calling 200 people in order to find that 1 person who wants an offer? The rule for us is that you have to put an offer in. I talked to somebody. The owner wants $1.2 million and our number came out to $800,000. I was like, “Put the offer in. It’s an offer.” Every offer that you put in makes you better at doing that. Think about that.

The key is putting the offer in. Don't waste your time calling 200 people to find the person who wants an offer. Click To Tweet

200 phone calls equal 1 offer. I want to make sure that you all understand. This is cold calling, which is what I teach. I saw a post from Nick Huber. He had said that he put in over $200 million in offers in 2023, and bought 1 facility, which was $1.2 million. This is the same stats that we have. We have $100 million in offers out and only have maybe 3 under contract.

To get this stage one done to get a facility under contract is a lot of work. You have cold calling, and then you have Crexi. We had Crexi come on. We have worked very closely with Crexi. I love Crexi. You have all the online ways or you have realtors, brokers, and stuff. The truth of the matter is we put an offer on every storage facility in Crexi. We put an offer on every facility under $3 million in 2023 and did not get 1 under contract. It was 40 facilities or something that we put an offer on and we didn’t get 1 under contract at all.

We put an offer on every storage facility in Crexi. We put it off on every facility. Click To Tweet

Everybody thinks that you do the easy way of going to Crexi and then looking at the deals and stuff. The truth of the matter is it is as hard on Crexi to find a deal as it is to cold call because prices are so expensive. There’s a lot of competition there as well too. If there’s a good deal,  that will be gone in a day. If you do not know how to run deal analysis and put out offers, you’re only shooting yourself in the foot.

The thing with storage is that it’s getting harder. Every year, it’s getting harder. The downturn is when you get more offers. You have to learn how to combat stage one. Stage one is, “What do I need to do? What do I need to learn in order to put offers out so that I will eventually be able to get a facility?” That is stage one, and that is what you’re here for. Sitting here for 1 hour to 45 minutes every week, it’s going to take you months to figure out how to do all that. Speed it up. Buy the course and the Deal Analyzer and you’ll be able to put offers out within the next couple of weeks.

40 offers equals 1 under contract. 200 phone calls equal 1 offer. If you have 200 phone calls equal 1 offer, how many phone calls equals 40 offers? 8,000 calls to equal 40 offers, and then you get 1 under contract. Could you imagine? It’s a lot of work. I’m not going to sugarcoat it. If you don’t have a strong stomach and you don’t want to play the game, then there’s no reason for you to be out there trying to find storage facilities.

Back in the day, from 2015 to 2020, it was a lot easier, but it’s not easy. That’s under contract. One person here, Lisa, has a storage facility in Kentucky so she knows these stages very well. I’m guessing that Lisa is back on stage one. She already owns a storage facility and is like, “How can I beat this game and buy another one?” That’s why she’s back in stage one. It is to look for another facility.

In stage two, you’ve got a facility under contract. You’re like, “It’s a good time.” Having a facility under contract does not mean that you will buy the facility. In fact, one of my students had a facility under contract. She had it owner-financed. She was all happy and stuff, and then she went out and she did her due diligence. In the end, she ended up canceling that contract because of a lot of work that needed to get done and the numbers were a little bit off. She thought she was paying too much for the property.  Getting a facility under contract does not equal closing the contract. I can’t remember how many deals we had after the contract in 2023, but only half of them closed. That’s how this looks. There is a 50% chance that you will close on the deal if you get it under contract.

Onboarding and Funding

Stage two is you’ve got it under contract. What do you do? Stage two is, first of all, you have to find funding and you have to do what we call onboarding. Onboarding for us internally is the 60 to 90 days before you buy the storage facility. It’s that time when if you do have it under contract, you typically are closing within 60 to 90 days unless it’s an SBA loan or a bank loan. Sometimes, it goes out to 120, 160 days, or whatever it is. We’ve had deals that took us five months to close. When you bank stuff, it takes a little bit longer.

On the onboarding side, you got a storage facility under contract, and then what? It’s everything that you have to do in order to be ready for day one. I  want you to think on day one of owning a storage facility, what are the things that you have to be prepared for? Y ou have to think about this. We have what’s called an onboarding checklist. There are 50 things on this checklist that you have to do to be able to be prepared for day 1 that you own the storage facility. That is the onboarding phase.

One of the biggest things is your software. You can’t be like, “I’m going to start using this software here,” and then you start taking tenants and stuff. For the software company, it takes weeks for you to get onboarded into their software. Someone said, “Moving invoices to new accounts.” That’s good. Someone said, “Setting up insurance and covering liabilities.” I f you buy the Deal Analyzer, you get the onboarding checklist inside the Deal Analyzer. I t’s called Checklist. That’s our onboarding checklist. The Deal Analyzer takes you all the way through the financing and then onboarding part. It takes you through stages 1 and 2.

For onboarding, the main thing is the software. The way storage works is your facilities are managed by software. If you don’t have software, then you have to do everything yourself. Who has time for that? You’re going to have  50 tenants, 100 tenants, or 200 tenants. You want to be able to manage that. Every storage facility that we’ve bought, a lot of them do not have software, but it’s changing. A lot of them do. Even if it doesn’t have software, you are getting software.

What you have to do is you have to get all these demos of all these different software. When we started out, there were only three options. There are ten options. You demo every single one of them. You pick whichever one you can afford and what’s best for you, and then you have to onboard that and get it all ready. That could take upwards of 1 month or 6 weeks to do the demos. It takes a couple of weeks to go through them all, and then you have to pick 1 and do the onboarding. It takes at least 1 month to 6 weeks to do that. It’s super time-consuming, but it’s one of the most important things that you can do, which is onboarding. That’s stage two.

The funding part is, “How am I going to buy this?” You want to make sure that you have your banks lined up. If you’re going to do a create-a-deal structure, then you guys are working on that as well, or if you’re going to syndicate it if it’s a big deal. If you’re somebody that’s reading and you’re like, “I want to buy a $2 million, $3 million, or $4 million deal,” then you could syndicate that as long as you have somebody on your team who knows what you’re doing. If you’ve never bought a storage facility before, you don’t want to be syndicating a deal unless you have a strong team, like other people who are GPs on it.

If you’re going to buy something that’s less than $2 million, typically, you’re going to either go to a bank and get a loan or you’re going to do some creative deal structure where the owner’s involved in the equity and stuff. That is the funding part. Trying to even get the funding and trying to figure out your funding structure takes forever. You have 60 to 90 days to figure out the structure.

Let’s say that you find a facility that you want to buy for $1.5 million. You have to have maybe at least $400,000 or $500,000 to put down. Banks are requiring 30% down. That means that if you only have $200,000, you have to bring other people in to partner with you. You have to figure out that structure, and then you also have to create your operating agreement.

There are a lot of steps in getting the funding ready. If you’re going to be buying a $1 million property and you’ve got $200,000 or $300,000 to put down, then you don’t have to create the structure, but you still have to set the company up. You have to get the bank to do all their stuff as well too. That takes forever because banks are taking a long time. It’s a downturn. Banks are being conservative.

If you are going to buy a facility and you know that you have to get bank funding, first of all, you should be talking to banks so that you know what their terms are so you can run the numbers and put that into your Deal Analyzer. Second, you have to make sure that if you’re talking to a realtor or you’re talking to the owners, they understand that it could take upwards of 3 or 4 months to close the deal. You have to make sure that’s in the contract. You have to understand, be aware of, and be ready to do these when purchasing the facility. Onboarding and funding is stage two.

Property Management Software

We have stage three. I feel like this vibe is for any type of property management software but especially for storage investors. I noticed that when you buy a storage facility and you get the property management software set up, the software has so many bells and whistles. The truth is that 80% of all owners only use maybe 20% of what the software offers. My husband’s very good at the, “If they offer this, let’s try it and see if it works,” kind of thing. Those are auctions or whatever it is that you do. The vibe is like that for me . Stage three is you bought a storage facility, and then what? That’s what it is.

The purpose of stage two is to get your software set up and then all the other stuff that you have to do like insurance or whatever else everybody posted. Also, the main thing is that you need to be able to take payments on day one. Stage two is all about, “How am I going to be able to take payments?” A lot of times, you end up closing at the end of the month. You have to be ready on the first day or day one because that’s when everybody wants to make their payments. We try not to close right around the first. We try to close maybe a week before or a week after to get us prepared for that. If you close a week before, you have to be ready to take payments.

If the facility that you bought has software and let’s say they’re using ESS and you’re going to be using storEDGE, you have to set that all up. You have to make sure that all these tenants can get in and put their account information and payment information because that does not transfer over. If you buy a facility that’s already using storEDGE and then you want to use storEDGE, it’s a little bit easier. If you’re buying something where they’re using one software and you’re using another, it’s a nightmare, honestly.

I  had a meeting with one of my students I’m partnering with. They were using ESS and then they moved over to storEDGE. I was like, “How was that process?” She said it was a nightmare. That’s why it’s so important to do these demos of all this software and then think ahead and say, “What is my goal for storage? Am I going to have this one little tiny storage facility and that’s it or do I plan on growing my portfolio, adding more storage? How do I want to automate this? Do I want everything to be as passive as possible or do I want to be hands-on and do it?” You go through that in stage two. Knowing that on day one, you have to take payments.

Also, you have to get everybody into the account. You could be letting everybody know that you are the new owner. You’re like, “We have a new system. You need to call us. You need to log on or go online and set up your new account.” This process right here is not easy at all. This is a lot of work. In fact, this is the bulk of your work when you buy a facility in the first couple of months. I call this chasing tenants. You’re doing that for the first 60 to 90 days and trying to get everybody in. After about 60 days, you’re like, “Let me do an auction. I’m tired of this.” You’ll start doing the auction process right after that. That lights a fire under everybody’s foot. All of a sudden, you get this new wave of all these people who are like, “An auction? Fine. I’ll do it. I’ll pay.” This is the whole process.

Within 90 days of owning the facility, you do what’s called transfer ownership. Transfer ownership is, electronically, inside their account, setting up their account, signing the contract, and then getting all the payment upfront. It is then chasing everybody and trying to get them all to do that. After a few months, you’re like, “Screw this. Let me do some auctions.” You do that again for the next month or so. The auction process could take 30 to 60 days depending on the timing of how it all works and stuff.

This is the first six months of you owning a facility on top of trying to figure out who’s going to answer the phones and trying to figure out your boots-on-the-ground person. Are you going to be the person answering the phone or are you going to hire a company, get a virtual assistant, or whatever it is? Are you going to be the boots-on-the-ground person or are you going to hire somebody to help you take care of them all? That’s what this is, a boots-on-the-ground and then call center maybe or whatever.

That’s all of stage three. You own this facility for a couple of months and you’re like, “I’m getting the hang of it.” It’s typically around six months of ownership and then people are like, “I should start looking for another deal. I really should start getting out there.” That’s what I see for my students. I created the cycle based on seeing my students over the last few years and what they’re doing.

Automation

You have stage four. Stage four is like, “I can breathe a little bit. I’m getting the hang of this whole software thing. I’ve got my basic systems set up. I’m treading water. I’m putting a whole bunch of fires out.” That’s what stage three is. You’re putting out a fire. Stage four is automation. This is where you start thinking, “How can I create my systems? How can I make this as passive as possible so that I’m not having to go to the property more?” That’s what this is.

Automation is when I talked about utilizing your software. It’s not taking in tenants, getting them to sign the contract, filling out the payment information, and then getting them their gate code. Every software can do that. Automation is like, “How do I figure out my pricing? How do I look at my occupancy? How can I tell if I need to raise prices or lower prices?”

Pricing is a huge part of stage four. Pricing is a thing. If you are not looking at your pricing every single month, then you are shooting yourself in the foot because pricing is all over the place. There are facilities doing promos. There are facilities doing website rates. You have promos. You have website pricing. You have your standard pricing. You have your phone pricing. You have your Google ads pricing. It’s however you want to do it. It could be that your Google ads are your marketing price, which a lot of times comes into your promos.

If somebody calls you and they’re a drive-by, you can negotiate the price with them because you want to close that tenant. If they come in through the website, reserve something, and then move in and it’s completely contactless, that’s another way of getting prices. When I look at a storage facility’s rent roll and I see that they have the same prices all the time, I know that the owner does not understand revenue management and dynamic pricing. You want to be the owner who understands these two things, revenue management and dynamic pricing.

Not all software can automate this. Most software is manual on this, which sucks. That’s why I know they don’t do revenue management. You have to sit there, look at your occupancy and the competition, and manually look to see what your prices should be. There are some software that will manage this for you. That is probably the best way to go if you can afford that kind of software. If you’re thinking in your mind, “I’m going to go to a tertiary market. I’m going to buy a facility that’s $500,000. I’m going to put my sign off and see what happens,” then in the next couple of years, you will be that person that buys the storage.

We’ve noticed from 2016 to 2020 or 2015 to 2020 when you started really getting into this business, it wasn’t that big of a deal to understand these concepts. You put a sign out and people would call. If you were doing a little bit of advertising and marketing, you were fine. Gone are those days. If you are not doing any online marketing, if you are not doing revenue management and dynamic pricing, or if you are not looking at your pricing and looking at your occupancy on a monthly basis, then you will be crushed.

Remember. In storage, everybody is here thinking that they can go and invest in self-storage. They’re like, “I want to start investing in self-storage.” The thing is that’s great because you’re buying property and the appreciation goes up over time. That’s one of the best things about storage. Also, you have to remember that storage is an asset-based niche. It’s based on how much income the property produces.

When you buy a storage facility, you are buying a property that should be producing income. The value of that property is based on how much income that property is producing. The value of the property is not on the land or on the buildings. It takes money to build those. It takes money to buy the land. The truth of the matter is the value of your property is based on the income that it produces.

We’re looking at a facility in Utah. We talked to the owner about it. It’s on ten acres of land and it’s 76 units. There’s a ridiculous amount of space where we could build on, add, and do whatever we wanted to do. The thing that matters to me is how much money that storage facility is producing. The owner’s like, “I got ten acres. You can expand and stuff.” I’m like, “What is the value of that property? What are you paying taxes on?”

The value of that land was $89,000 and the value of that building was $176,000 or something. It came out to $250,000 or $300,000. I was like, “You are paying taxes on land that’s worth $90,000. There’s no way that this property is worth more than $1 million.” He said it was $1.5 million. I was like, “Where are you getting the values?” He was like, “The value is in the opportunity. The value is in the appreciation. You could add more land and more units.” I’m like, “It doesn’t look like that. That is not how commercial real estate works. There’s a little bit of opportunity. You can build on it, but it’s not worth a lot of money to be able to do that.”

If I take that piece of property to a bank and say, “I want to buy this property,” the bank is going to say, “Can you afford the mortgage? What’s the income?” That is the definition of asset-based lending. That’s something that everybody needs to understand. The more money that you make, the value of the property goes up. You are truly buying a business, and this business produces a cap rate. If the cap rate is what determines what the value of the property is. Based on what the income is and what the market calls for, that’s the value.

The value of the property goes up the more money you make. Click To Tweet

You’re in stage four. If you’re reading and you own a storage facility, your job is to figure out how to keep your occupancy at 90% and make sure that it stays there. What do you have to do in order to make sure that it stays there? If you are full and you are at the highest amount that could be what the market calls for, then how can you make more money off of this property so that you could increase that value?

That’s the basis of having all these different prices. If you call us, you are going to get a different price from us than if you go online. If you see one of our Google ads and go in through that way, you’re going to get a different price from us than if you get a coupon emailed to you. When you look at our rent roll, there’s no way for you to come up with a price for any one of our units. Our 10×10 unit based on this alone could be anywhere from $50 to 250 depending on what happens and where it comes from. That’s called dynamic pricing.

This blends into what is your occupancy. What that means is that if I’m 80% full, what are the prices for these things right here? If I’m 85% full, what are the prices for all the units? If I’m 90% full, what are my prices? A lot of times, people are like, “I have only one unit left.” That one unit price should be way higher than the price that’s 80%. If you can’t manage this and you can’t understand this concept, then you’re shooting yourself in the foot. You’re missing out on income that you could get by having your 10×10 at $50 no matter what the price.

For instance, we’re leasing up a facility. It’s a brand-new facility. We got it all fixed up and renovated, and we’re leasing it off. It’s 50% off the first 3 months. That’s for all of the unit sizes. We have another facility that’s full except for some reason, we have 10×30 that we cannot get leased up. Only that one unit, that 10×30, is 50% off the first 3 months but all the other stuff is not. The way that we market that is super important. We have 100 different ways we market. All the different ways that we market are determined by not the entire facility but by unit by unit. If you think about that, buying the storage facility, putting a sign up, and hoping for the best are only going to screw you over.

We’ve called 35,000 storage facilities in this country. We’ve talked to a ridiculous amount of owners. We put offer after offer in. From 2020 until now, there has been an influx of everybody who wanted to get on the storage wagon. They wanted to buy a storage facility. They bought it in 2020, ‘21, or ‘22 and do not understand this. That is the issue. They are struggling with this, and because of that, they need to sell. Unfortunately, if you bought something from 2020 to 2022 and you did not get a banging price, you are losing money.

I talked to the owner in Utah. This is what happened to him. He bought this facility in 2021 and is struggling. On top of that, he bought it with an SBA loan for 10% down. The funding, which is stage 3 or stage 2, was an SBA loan for 10% down and 3% interest. That’s awesome. He was like, “Let’s buy at 3%.” He’s paying 13% because it’s a variable rate. When you have this issue, which is a lot of owners, and you have this issue where you do not understand this concept, the stage four concept, then you are going to lose. That is really the biggest part of the storage industry.

If you do not understand the stage four concept, you will lose. Click To Tweet

There’s already a huge influx of facilities coming on the market that were bought in the last couple of years and they’re struggling. You want to be on the lookout for that. The truth is for most of those properties, the numbers don’t work. The numbers are going to work if you can do this. You would not be selling a property. If you bought a storage facility in the last few years and you’re selling it, it’s because you suck at managing the problem and you’re not understanding this. You need to educate yourself to understand these concepts. That is how it is. It’s Business 101. It’s not Self-Storage Investing 101. That’s gone. It’s owning a storage business and being able to manage it properly.

Educate yourself to understand the concepts. Click To Tweet

Those are the four stages that I went through. Stage one is getting it under contract, which most of you are in this stage. Stage two is, “I got a facility under contract. Now what?” That is onboarding and funding. Stage three is, “I bought a storage facility. Now what do I do?” Stage four is, “Now I own this facility. I need to make sure that Stacy doesn’t buy my facility within the next three years. What do I do in order to be prepared?” Those are the four stages.

That is the end of my session. I appreciate you all for reading. I can have a couple of questions if anybody has anything. This is Self-Storage 101 basics. Hopefully, I’m not going to piss a lot of people off by not giving you the basics. Don’t forget. I hope that you do this. Get the Deal Analyzer, get the course, join the Facebook group, and come to the Wednesday training. This will help you to do this. If you’re reading and you’re like, “You scared me but I still want to do this,” this is what you need right here. The Deal Analyzer is separate from the training.

Lisa’s asking about the dynamic pricing. H onestly, we go over that really in-depth in the management course that we have and then also in the coaching program. You can buy the management course, which is a little bit separate. You could do some one-on-one calls. Lisa, we have what’s called the Facility Owner Mastermind. It’s only for owners. If you’re an owner and you’re reading and want to be more in-depth, I highly recommend that you join the mastermind. It’s only for owners. All of what we talked about is revenue management.

Whoever answers your phone will make or break your company. Ensure the people who answer your phones are highly skilled. Click To Tweet

For instance, we talked about phones. Lisa, this is important for you. Whoever answers your phone is going to make or break your company. How do you make sure the people who answer your phones are highly skilled people who can convert for you? Check out the Facility Owner Mastermind. All that stage four stuff is in the Facility Owner Mastermind. We talked about the phones. This is something that you have to consider. Whoever answers the phone is either going to screw you over or is going to bring in the money. In the mastermind, we talked about this. We had a guest speaker that talked about this as well. That’s part of the mastermind. I appreciate it. You guys take care. Have a good day.

 

Important Links

• How To Use Crexi To Find Self-Storage Facilities To Buy
• Super Simple Self-Storage Online Course
• Deal Analyzer 4.0
• Super Simple Self-Storage