This is episode #421, and my guest today is Scott Meyers.
Scott is the nation’s leading expert on investing in self storage facilities. After a bad bout of dealing with tenants and toilets, Scott wanted an easier way to invest without many of the challenges that exist with single family houses, and self-storage is where he landed.
If you’ve ever wondered about investing in self storage, or are curious as to how it compares to other types of real estate investing, this is a must listen episode. Scott doesn’t hold back, and shares the pros and cons to self-storage investing, as well as how to get started.
Let’s jump in…please help me welcome Scott Meyers to the show!
Mike:This is the FlipNerd.com “Expert Real Estate Investing Show,” the show for real estate investors, whether you’re a veteran or brand-new. I’m your host, Mike Hambright, and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility, and taking control of your life and financial destiny, you’re in the right place.
This is episode number 421, and my guest today is Scott Meyers. Scott’s the nation’s leading expert on investing in self-storage facilities. After a bad bout of dealing with tenants and toilets, Scott wanted an easier way to invest without many of the challenges that exist with single-family houses, and self-storage is where he landed. If you’ve ever wondered about investing in self-storage, or are curious as to how it compares to other types of real estate investing, this is a must-listen episode. Scott doesn’t hold back and shares the pros and cons of self-storage investing as well as how to get started. Let’s jump in. Please help me welcome Scott Meyers to the show.
Hey, Scott. Welcome to the show.
Scott:Hey, Mike. Thanks for having me. Good to see you again.
Mike:It’s good to see you. I got to tell you, selfishly, I’ve been excited to have you on the show again. I don’t have my notes in front of me. You were on here a long time ago. I think it’s been at least a couple of years ago.
Mike:I know you’ve created some other content for us on FlipNerd, too, about self-storage, but I got to tell you, I’m at a point, I’ve been a single-family guy for 10 years, done really well, but I see self-storaging is popping up, and I have some friends that are doing really well with multifamily.
So, some of the big-boy investing has been exciting me lately. And I knew you were coming up. We had you booked here for, gosh, probably a month, anyway. And I’ve been looking forward to this date because there’s a lot of self-storage activity happening all around me, and I literally have some questions for you, not just for the show, like, I’m asking questions today that I want to know. So, hopefully everybody will get some value out of that.
Mike:Yeah. Well, hey, Scott, before we, kind of, dive into it, why don’t you, for those that haven’t seen you on FlipNerd before, or not aware of you, haven’t been to any of your events or anything, tell us a little bit about your background.
Scott:Sure. The two-hour version or the podcast version?
Mike:Well, it’s about a 30-minute show, so talk as fast as you’d like.
Scott:I’ll give you the podcast version. How’s that?
Scott:So, yeah, started out investing in real estate, had a job, Fortune 500 firm, and I just wanted a hedge for retirement. I didn’t want to put all my eggs in one basket, meaning in Wall Street, even with a company match. And I just read “Rich Dad Poor Dad” and, you know, kind of, saw the writing on the wall that wasn’t a good idea, so I began buying single-family houses. And we were offering them up, mostly following the Carlton Sheets method, which is buying, rehabbing, refinancing, pulling cash out, buying more, and just doubling down and doubling down.
And so, we had a lot of rentals, but then didn’t have a whole lot of cash flow. And so, I thought, “All right, well, economies of scale will fix this, so I’ll just start buying apartments.” And, you know, I heard some guru somewhere talking about how great it is when a property management company runs it and they write the check, and all your problems go away for you, and, you know, it’s just much easier.
Well, got into the apartment side and that was just more tenants and toilets. And so we weren’t selling anything off. I wasn’t flipping anything out, which I should have to have some more cash flow. And then the recession hit in ’99, the tech recession which then, you know, nobody had money, we had issues with people that were leaving, and then, shortly after that, the Community Reinvestment Act was put in place where anybody that could fog a mirror can get a loan, which, as we all know, was what has created, you know, the Great Recession of 2008. So, all those years when that was in place, I was living the “Big Short,” except everybody was leaving my houses and apartments that we were renting to go buy houses.
And so, you know, we took a nosedive, and then I realized that, “Hey, this . . . you know, I’m either going to stay in real estate and do something different or I’m just going to get out altogether.” And I didn’t want to go back and work for anybody else, and so I said, “Well, I’ll eliminate those problems of tenants, and toilets, and trash, and being susceptible to this, and get into self-storage.”
So, began looking into it, sort of, buying self-storage facilities. You know, and then, for all the reasons I love self-storage today is the fact that there are no tenants, there’s no toilets, there’s no trash. There’s people just storing their stuff. You know, when the economy is good, people buy more stuff. When the economy is bad, people downsize. There’s a demand for storage.
And so we sold all our houses off and apartments and came out okay, not as well as I would have expected, but then, since then, you know, I have invested in other forms of commercial real estate, but just solely focused on self-storage right now, just 100% more doubling and tripling down on self-storage.
Mike:Yeah. That’s awesome. So, maybe just take a minute to just say . . . I mean, I think most people know what self-storage is. They’re driving. They see the little barn-like corrugated steel buildings that you could store your extra junk at. Sometimes you can keep a boat or an RV there . . .
Mike:Maybe just, kind of, explain . . .
Scott:It’s called treasures, Mike.
Scott:You don’t store your junk there. They store their treasures there.
Mike:Treasures. Yes. So, explain to me, the listeners here, maybe extrapolate on that a little bit, like, a little more about what self-storage is, because I know it comes in lots of different flavors, right?
Scott:Yeah, it does, you know. So I think most people’s exposure to it is on the shows, you know, “Auction Hunters” and “Storage Wars” where people bidding on the units. Well, I’m on the other side. I own the facilities. And so, you know, the business model is pretty simple, you know. They move their stuff in. They rent it. It’s a month-to-month rental, which means I can rent . . . excuse me, I can raise rents any time I want. They store their items in there, and, yeah, they all assume that it’s only going to be there for, you know, a month or two, but, at the end of the day, these folks stay for year, after year, after year, and we increase our rates.
If they don’t pay, then we are protected by the lien laws that we have in self-storage, not eviction laws, because we all know in habitation real estate, eviction laws protect the tenant, whereas with self-storage, it falls under the lien laws and warehousing where we are protected. So, if they don’t pay, we put a lock on their unit and they can’t get in until they pay us 100%, their back rent and late fees, and then if they don’t pay, then that’s exactly what you see on TV, which is “Storage War,” you know, we auction their stuff off to recoup our back rent and late fees. And so . . .
Mike:And you hope there really is some treasure in there then, right?
Scott:We do. I mean, the more the better, because then it drives prices up and we get closer to, or sometimes even more than the amount that they owed us in back rent and late fees. Now, we don’t keep any extra. We can, but, gosh, if we recouped 100% and we send the check off to the last known name and address so the person that was there.
That sure beats where I was with the tenants and toilet business whereas I’d walk out to court with a little piece of paper, you know, yellow, pink piece of paper and zero ability to be able to collect any rent on that, almost, and then they would trash the house on the way out because I was evicting them, and they were mad at me because they didn’t pay.
Where, in storage, if we auction it off, no tenant . . . it’s not a tenant client can come back and do anything, or if they leave on their own, all we’re left with is a steel box and a concrete slab. So we blow it off. You know, take a blower, blow it out, move to the next person waiting in line, and that’s it. We don’t have carpet, and paint, and drywall, and . . .
Mike:Holes in walls, and somebody left four dogs there, and stuff like that, right?
Scott:Yeah. That’s it. So, you know, after looking at the business model and being in that business model, it was really easy to step away from everything else, and haven’t looked back. This is all we do now.
Mike:Yeah. So, Scott, we talk a lot about single-family on the show, and, of course, we love all real estate investing, but talk a little bit about how this market has impacted self-storage. Like, a lot of people in single-family, they feel . . . from an investing standpoint, like, they feel like, “Hey, it’s more competitive in a long, long time, hard to find deals,” but when we get them, we tend to be more profitable than usual. So, kind of, talk about . . . just tell us, for folks that are single-family investors here, like, how that feels to a self-storage investor right now.
Scott:Sure. So, again, the economic cycles are a little different on our end because there’s a run-up in demand for storage during a recession. So, when people are downsizing and businesses are downsizing, you know, when they’re moving back home, moving in with somebody else, or they’re subleasing their office and they still put all their equipment and inventory somewhere else, it goes to storage because it’s the least expensive per square foot. So, we have this run-up in demand during a recession, and at the same time, during a recession, you know, the banks, they are turning off the faucet on their development funding, their speculative funding when they’re in the midst of it because they want to look at historical cash flows.
So, perfect storm for the investors that are already in self-storage. You know, they could fill up their units, and then if they have access to either capital from their own bank or a private equity, then they can expand their facilities or develop. But we’re left with this place where those that have facilities are in really good shape, and those have cash or access to private equity. So, when times are good, same thing, people are buying more stuff and they need more stuff, and then that’s when we have the development end.
You know, 2012 is when we begin to come back out of that recession. What we saw was a lot a pent-up demand. There was a neighborhood of $25 billion to $30 billion in development that was needed to keep up with the demand for storage, and so we started seeing the banks loosen their purse strings. They could see, you know, what was going on in the marketplace and they started lending again, and so we saw a lot of development.
And, some of your folks, you know, if they’ve paid attention, you know, they’ll see a lot of self-storage facilities being built, and we’re still trying to keep up with demand. I think, to the layperson, you know, I don’t know how many people say, “Well, man, market must be saturated. I see them all over the places.” No. We’re way behind. We’re still trying to catch up.
So, from our standpoint, you know, the way we approached it, buying existing facilities, and then we were coming back out, then everybody, you know, knows the business model works extremely well. So, had a lot of people coming into self-storage, which was driving prices up for the sellers. Sellers were getting top dollar but, in many cases, they didn’t want to sell because then they’d have to do a 1031 exchange, if they don’t want to pay taxes, and then they got to find, you know, another investment on the back end that was as good as the last one, and then they were paying top dollar on the back end. So, some are holding on.
So, then we saw the shift in development even from some folks entering the marketplace that were a little less advanced and started developing buildings, converting anything from grocery stores to industrial buildings, warehouses, you know, skating rinks, I mean, you name it, and industrial buildings that have zoning, or close to it being converted, and then either running them themselves or getting them ready to convert or partially developed, and then selling them off to the big guys who are trying to keep up with their investors, and selling up shovel-ready deals.
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Scott: . . . entering the marketplace that were a little less advanced, and started developing buildings, converting anything from grocery stores to industrial buildings, warehouses, you know, skating rinks, I mean, you name it, and industrial buildings that have zoning, or close to it being converted, and then either running them themselves or getting them ready to convert or partially developed, and then selling them off to the big guys who are trying to keep up with their investors, and selling up shovel-ready deals.
So, I think I’m going into the long version of this, but that’s . . .
Mike:Yeah. No. It’s interesting that you said turning . . . literally there is . . . I drive past it every day when I take my son to school. There is an old Kroger grocery store in Texas that has been converted to self-storage, and then literally a mile or two from there, there’s an entirely new development that’s been open for . . . in fact, within there, as I think about it, within a couple of miles, there’s a couple of different ones that have popped up over the past, like, year or 18 months, let’s say, but the other ones were, kind of, built from the ground up on, you know, land. And then this other one is a little more probably heavily populated right there. And they just popped right in an old Kroger grocery store that had just been sitting there empty for probably, like, five years or more.
Scott:That’s our favorite. If we can find some of those buildings to repurpose, because they’re already in, you know, an urban location, and it’s an infill location where it’s a lot tougher to get zoning to build a self-storage facility because it doesn’t generate a lot of tax revenue. I mean, the cost, you know, to build it is inexpensive and the revenue it generates is not very high on a, you know . . . comparatively to other asset classes like retail, or multifamily, or office.
So the assessments are lower, which means that the city isn’t apt to approve those as readily as some others, but that’s why we love to be able to find the older buildings that are in those infill locations, already have zoning in place. It’s quicker to market because you don’t have to build as much. It’s quicker to get zoning, and entitlement, and everything else. And so, that’s if we can get those locations, it’s much easier and a shorter path to profitability than it is a ground-up development. [inaudible 00:13:27]
Mike:Yeah. It’s, kind of, interesting to think about . . . if you think about, honestly, across America right now, you know, retail has been hammered. Like, a lot of the big stores, malls are not doing so well, not that you’d want to build one of these in a mall necessarily, but there’s . . . I think probably every town across the country right now has big old grocery stores, or you see a Montgomery Wards, or whatever it’s been that that retail company is gone. And I guess that opens up a lot of opportunities for self-storage.
Scott:It does. Yeah, it really does. I mean, the lion’s share of the conversions. And I don’t want to say the lion’s share of all deals. All units coming online are conversions, but, boy, there’s a lot of them just because of all those reasons. And, you know, we can buy the buildings on the cheap, less than it would cost to build those again, and then when we go inside and we’re just putting up walls and doors, it ends up being . . . you know, we can end up with a Class A temperature-controlled self-storage facility in a perfect location or retail location with high traffic counts, in some cases for less than the cost of going out on the outskirts of town, buying some land and developing a single-story facility that’s a Class B that is not temperature-controlled.
Scott:So that’s the attractive business model right now.
Mike:Yeah. So, you said something a minute ago, I want to clarify that I heard this. It’s the economy’s hot right now in pretty much everything. You guys are in a development cycle, but when the market turns down, your self-storage investments will actually perform better. Did I hear that right?
Scott:Yeah. I’ve been through three recessions now. The first one, I didn’t even know what was going on. The second one, we ended up about break even. The last one, we came out all right, and now we’re poised for the next one, and we’re going to be big players in the next one. And so, yeah, for the reasons I mentioned, you know, demand goes up in self-storage, you know. I saw one stat, and I don’t know if this is true or not, although there were stats that said that self-storage is second only to one other sector of our economy in terms of growth and profitability during a recession. Can you guess what the other one is, or what the top one is?
Mike:Across all industries?
Scott:Yep. You got it. Liquor. So, number one, you know, people can’t afford to go on vacation, they’ll go on a vacation at home.
Mike:Vacation in their mind.
Scott:So, second is . . . What’s that?
Mike:A vacation in their mind.
Scott:Exactly. So, the second is self-storage because there are so many people downsizing and businesses downsizing, and, again, the development funding drops off. You know, the banks stop all that speculative funding of everything. They go back . . . if they’re going to lend on anything, it’s existing, and they can look back on trailing history, because during a recession nobody knows what’s going to happen, and the banks . . . you know, financial models are all thrown by the wayside. So, you know, storage continues to go up into the right during a good time, boom times, but then actually during a recession, it skyrockets . . .
Mike:Wow. So that’s very interesting.
Scott: . . . in valuation and occupancy. And so, you know, it’s called the inflation proof and recession proof business sector, and that’s one of the things that attracted me to it. And now that I’ve lived it and I’ve been through an economic cycle and a half in self-storage, I’ve experienced it, and, yeah, so now . . . our business model right now is get real good at what we’re doing at the moment, which is developing, converting, and buying existing, but we’re really . . . behind the scenes, we’re building up a war chest of cash, and we have private equity investors, and we’re going out.
I spend a lot of my time doing that, you know, just introducing self-storage in the business model in a more elaborate fashion than what I just mentioned as to why they should be investing in it, especially as we head into the next recession, whenever that is. So we’re building up a war chest so that when the banks shut things off and the people that shouldn’t have had loans, or when it comes time to refinance and they didn’t have good terms on their existing facilities, then we’re going to step in and buy those.
Developments, if we can do some developments . . . I mean, that’s equity-intensive. If we can, again, get some of that lending, even 50% LTVs from the Small Business Administration and others and marry that up with the private equity piece, then, you know, I won’t say that we won’t skip a beat, because we do use lenders and we lay our equity on top of that. But we’re going to continue to move on where most of the other folks, especially the novices and the rookies, when they’re out of cash they are out of business. But we’re going to be major participants in the next recession, and we’re going to clean house.
Mike:So, for folks that might be interested in investing in self-storage, that haven’t in the past, would you say . . . is it too late? Like, did they miss the boat, or are we at the peak of investing activity there, or where are we now?
Scott:Yeah. I’m getting a lot of those questions, as you can imagine, you know, just leaning into, I guess, everybody in real estate is right now wondering, you know, what’s the case? And so, yeah, we have a lot of folks that come to our events and just talk to me about that because, once again, an unfair assumption that . . . or unfounded assumption that they see these things being built all over the place, “So I missed the boat, and everything’s at the top of the market right now. How can I, you know, possibly get in?” Well, it’s not the case. We’re still way behind.
Development’s a little tougher to get into from the get-go if you don’t have a vast amount of experience. The banks, you know, they want to know that you have experience in either real estate development or self-storage experience, and then obviously self-storage development experiences are key to that, but it doesn’t mean that you’ve missed the boat.
Buying existing facilities and going out and doing the exact same things that I did when I was buying single-family houses to either, you know, rent or eventually flip. You know, we’re talking about mom-and-pop owners, and, in many instances, it’s the same types of people. So, just going out and searching for those existing facilities and talking to those folks about them.
And, you know, it’s the value in commercial real estate . . . and I don’t know how many commercial folks you’ve had on here, Mike, but, you know, the value in commercial real estate is based upon the net operating income. It’s not based upon comps. You know, [inaudible 00:19:12] have a self-storage facility, and then you compare it to the other one, it has nothing to do with that.
Scott:That’s one factor, a small factor. It’s how much income is it generating, and what are the expenses? What’s my net? And then, you know, applying a market capitalization rate to it. So, there’s opportunities to be found on existing facilities right now, and then certainly on development and conversions, and the business model is to keep it for yourself during the recession.
But also because these regional players and national players in the self-storage business, you know, their job is not to go out and find those development opportunities or to find the Krogers. You know, they’re waiting for the brokerage community, commercial brokers to bring those deals to them. While commercial brokers are doing the things that we, as single-family investors, were doing, which is sending out yellow letters and post cards, you know, and talking to those folks.
So, finding those deals and then either, you know, getting them under contract, carrying them through on our own, or presenting a shovel-ready deal to the national players, the regional players, and making money in that sense as well. So, commercial wholesaling, commercial, you know, flipping, doing a little bit of work, if you will, is a fantastic way to make money in this business. So, I’m not sure if I answered your question or what the original question was . . .
Mike:Yeah. I mean, it’s interesting because obviously you just explained a lot of ways you could effectively, just like single-family, find deals and wholesale them on to other people that appreciate that they didn’t have to do that part of that work. But, yeah, that’s fantastic. And I guess another way to invest is just to be the money. You could just be an investor and . . .
Mike:Talk about that a little bit. Talk about, kind of, being the private money behind these deals, and not having to do any of the stuff that you’ve talked about so far.
Scott:Yeah. That’s what we learned through the Great Recession, is that the lending was, in all sorts, was just really limited, and the regulators were coming down, the FDIC was coming down on all these banks for making these loans. And so, when we looked at the amount of loans that we could have picked up at that time . . . you know, your growth is usually limited by the amount of cash that you have in almost all instances. And there’s also some deals that were so bad because the valuation, as I just mentioned, on commercial real estate is based upon the NOI. You know, in some cases, the price would be here, but the net operating income was down here, but it was only 10% occupied or 20% occupied. So, just a small amount of income, and the price was up here.
When it was full, the value was up here, but the value was down here now because it wasn’t generating a lot of income. But even if you were to get a loan to buy it here, this amount of income doesn’t cover the debt service coverage ratio. You know, it doesn’t cover, so the banks just said no, anyways.
So, those deals, for us, just fell off the desk, and went by the wayside, and then realized we had a number of those fall off because we saw that, you know, “Well, it’s here right now if we buy it, but holy mackerel, here is what the value would be when it’s 85% occupied,” and I just wanted to curl up in a corner and vomit, and I said, “Okay. Well, let’s not do that. Let’s just go and find private equity.” And we showed them that if we can take it from here to here, and then we split it, whatever that split is, that gives them . . . “
You know, I had to learn about that world, you know, their internal rate of return. What is average? What are they looking for? How long do they want to be in? Three years? Five years? What’s the risk? You know, all that. I got really, really good at raising private equity, and I had no problem. I knew what I was looking for, but I also wanted to see what the market was looking for.
So we got really good at that, and then we started raising private equity, and then, very quickly, went back through the trashcan and dug out all those deals, and all the others that came upon our desk. And the deals that were going back to the bank, the development deals, the conversion deals that the banks weren’t funding, we were funding with the private equity investors. And then, when funding came back, as we were out of this recession, then we were layering that private equity on top of loans, which means that we could grow that much faster because we only had to create this much of a gap, or bridge this much of a gap with the private equity instead of raise it all. So, right now . . .
Mike:Because investors were willing to take equity instead of necessarily debt or interest. Is that right?
Scott:Yeah. Nobody was a debt partner. Everybody is an equity partner, so they all took ownership in the deals. And so, I took ownership and I invested in those deals as well, so I had skin in the game in all of those in addition to that, and you, kind of, have to. If you’re going to ask other people for money, they want to know that you’re doing the exact same thing. So we began doing that and growing that way, and now we’re building a war chest, again, to take advantage of what’s going to happen in the future. And we’re ready and poised, and right now I’d say 95% of the deals that we’re doing are all have some form of private equity involved in them, and no cash to very little cash of my own.
Mike:Yeah. That’s awesome. So, Scott, where are we? Are we in a bubble? I mean, are we in a bubble here? Where are we at in the cycle? I know that it’s funny we talked a little bit beforehand and, you know, things that I thought might happen two or three years ago, like, they still haven’t happened, and I just, kind of, gave up on guessing, but if you had to guess, where are we in the cycle?
Scott:Let’s see here. I was looking for my crystal ball. I can’t find it.
Mike:Yeah. Can’t find it.
Scott:Gosh, you know, two years ago I said 12 to 18 months, you know. Year and a half ago I said 12 to 18 months. A year ago I said 12 to 18 months. And it’s not just me. I mean, I . . .
Mike:I’m the same way, yeah.
Scott: . . . not listening to anybody . . . you know, and I’m not listening to everybody, but there’s a handful of places that I think these people have their fingers on the pulse of what’s going to happen not only in the economy, but then also how that affects real estate and what people are doing. And we have these conversations in groups of investors that I get together with all the time, and we continue to keep skipping over, you know, where we feel the time in which, you know, we should be there. Look at all economic indicators.
You know, it’s funny, Mike, yesterday I gave . . . my kids are home-schooled. They go to school a couple days a week, and I went to present an Economics class about what starts a recession, and then all about the Great Recession, and talking about the “Big Short,” and everything else. And, you know, the indicators, you know, here are the indicators. And that is, you know, consumer confidence, high unemployment, high debt as a country and as individuals. And so, you know, these are . . . and then, two quarters of economic downturn, you know, then we’re in a recession.
Well, we haven’t had two quarters in which, you know, the factors that we measure our economy by have fallen yet, but we are seeing a rise in credit card debt and default, up to 8% now, no matter how you . . . I’m not going to get political here with the last administration, doubled the debt in this country. It went from $10 trillion to $20 trillion. This country is in debt, and the value of this country and its debt isn’t worth as much anymore.
So, that alone . . . you know, tensions in the Middle East, high oil prices, which we’re seeing right now, and then, you know, overall consumer confidence, and business bankruptcies being up. So, all of those are happening, but just to a small degree, with the exception of two consecutive quarters of the other ways that we, you know, determine whether our, you know, real GDP is down. So, there’s a lesson in economics for all y’all out there in 30 seconds.
So, until we get to that place where we have two consecutive quarters where some very drastic things happen which causes the consumer confidence to erode, we don’t know. That could be, you know, this tariff war that . . . not this tariff war. It could be a tariff war that, you know, Mr. Trump is teetering on by some of the tariffs that he’s putting in place. I’m sorry, a trade war caused by some of that. I mean, we’re one little issue away from, kind of, tipping us over the edge right now. And if nothing happens, the economy’s chugging along modest interest rates. You know, things are moving ahead right now.
So, I don’t know. If I had to guess, I’m still going to say two years out because history repeats itself every 7 to 10 years like clockwork, since the beginning of time, since we began tracking, you know, financial models, and economy, whether it’s ours or the world economy, goes into a correction or a recession. And so, we’re just flat-out due, and, again, you go all the way back, you know, we’re 10 years out. You know, the last one was 2008 is where it began.
Mike:We’re 10 years into a 7 or 8-year cycle, right?
Scott:Yeah. And we’re there. So, there you go. There’s my long-winded excuse for not telling you when.
Mike:No. That’s awesome. And I guess the great thing about your model is that . . . nobody wishes the economy would have a downturn, but if it does, your business . . . with your existing units, you pull back on development, but the existing units will do probably better than they do now even.
Scott:I was scared to death, and when we went through it with the houses and the apartments, because the values of those plummeted. And, you know, if you’re left without a model where you’re selling and flipping . . . I mean, folks don’t hold onto a lot when you start seeing it coming, keep that cash and play, and be liquid, and be able to get in and out. We didn’t. We had 80 houses and 400 apartments, and we were stuck, and that was a scary place to be.
But right now I don’t have any of that, and the asset class that I’m in goes up in value, and we’ve got a whole bunch of cash. And so, we’re really, kind of . . . you know, you’re right. We don’t want to see the economy go down. That’s bad. But for us right now, we’re just . . . that’s going to be our Super Bowl, or those . . . you know, the three-to-four years that we’re in the bottom of it until we start coming back out. That’s when we’re going to clean house.
Mike:Yeah. And I say the same thing on single-family. We’re preparing right now for the storm, because I’ve lived through that before. Last time I did well, but I didn’t really know. Like, I didn’t plan for it. It just, kind of, happened. This time I’m planning for it. When there’s a downturn, I’m ready to go to town.
Scott:Oh, my gosh. Yeah. Those that have cash, and are liquid and fluid, and can get in and out, and not holding a lot are going to be in really good shape. So, yeah, I think that’s the best advice that I have.
Mike:So, Scott, for folks that are listening to this, I know you share a lot of information or you have events. You have all sorts of stuff. I know you have a lot of great information on your website. If folks wanted to learn more, maybe, kind of, talk a little bit about getting started, and then maybe tell us where they might be able to go on your website to learn more.
But first, start off by telling us, if folks are like, “Hey, I’ve been . . . ” Let’s just presume they have been interested in single-family, because we have a lot of those folks that are listening to our show, and they hear this and they’re like, “Oh, that’s . . . I can supplement it, or I could move in that direction, or I can just skip over single-family if I haven’t started yet,” whatever it might be, maybe talk about how to, kind of, get started, I guess.
Scott:Sure. You know, we, kind of, have two camps over here where we spend our time. So, I spend a lot of time working with folks at a higher level, both on education and also partnering with them as well, but what feeds that is we have educational events and all types of tools and resources to get people involved in it. So, yeah, you can buy self-storage facilities for less than the cost of a single-family house in most markets, and added is another tool to your tool belt, another strategy, you know, to put in your investor portfolio.
And so, yeah, selfstorageinvesting.com is where that all starts, and we’ve got, you know, courses there for free to kind of dip your toe in the water to see if that is of interest. And we have home study courses. We have software to evaluate facilities, and then our three-day live events, which is a, kind of, three-day immersion workshop where we touch on, you know, all the aspects of finding, evaluating, purchasing, and managing self-storage facilities. It’s very tensive. It’s not all-encompassing.
And then we do have some mentoring programs for folks that want to do it a little bit faster, or want to go further, or they’re going to, you know, make a change and be all-in. An aspect of that is also partnering. We partner with our folks where they go out and we teach them what it looks like to . . . you know, anybody can get a lead on a self-storage facility, but there’s a difference between that and a deal. So we show them how to determine whether it’s a deal, and then once we determine if it’s a deal, you know, what’s it going to take to get across the finish line, and if that includes some of our resources?
Some of our private equity partners are lending relationships, you know, my signing on, you know, being part of the LLC, and then I’m assisting in the management with our management companies afterwards. You know, just hundred ways from Sunday to get a deal done. You know, what kind of resources does that person need from us to get it to the finish line? And then we determine if it makes sense for us to partner on it. So that’s probably the long-winded version, if that’s . . .
Mike:That’s great. Yeah. We’ll add links for your site down below here.
Scott:We’re anything from beginner to intermediate to advanced. We have something in which we can work with folks on education and the partnering side.
Mike:Okay. We’ll add some links down below for that for folks that want to learn more. I know you got a lot of great information on your site. Maybe tell us at a real high level, if folks are . . . like, in . . . you know, there’s, kind of, two camps in single-family. It’s either find, build your list of people that want to buy, especially if you’re going to wholesale, and then go find the deals to, kind of, fill those orders, if you will.
I’m in the other camp where, like, hey, if you find the deal, there’s no problem finding somebody to sell it to you in this market. What comes first in self-storage? The chicken or the egg? Is it about finding the deals first, or is it about raising money first?
Scott:No. It really is. You know, the folks that work with us, I mean, at least they know they have access to equity, or we have access to equity. And so, you know, I think everybody . . . not everybody, many people think that they have to, you know, do all those things first. You know, first of all, you can’t go to a bank and get pre-approved, because they say, “What am I pre-approving you for?” Because it’s based upon the value with the deal. You know, what is the deal? They’re not as concerned with you as they are with the deal.
So, raising some private equity helps, but if you’re not actively putting deals in front of folks, again, that’s just conversation. That’s just an elevator talk without much behind it. So, everybody wants to do those things, and they want to have their LLC and logos and everything set up. None of that matters until you go out and start finding opportunities, you know, liens that actually turn into deals.
So, it begins with the knowledge of knowing the difference. What’s a lead? What’s a deal? And how to make it a deal. And then knowing what to do with it after that given the resources that that individual has. You know, I’ve got a real estate experience. I’ve got some cash. I’ve got a decent credit, so I’m going to take this to my lenders once I have what I think is a deal to a lender, and then some private equity investors and have that conversation with them.
Scott:If it’s too big, if it’s too far away, if it’s something that I just . . . or I don’t have the capital, I don’t have the experience, then, yeah, they’re going to reach out to somebody, you know, like our organization or some other folks in the local market that are players, and either have them assist in partnering, if they bring anything else to the table.
But in many cases, if they’re broke and they don’t have credit, good credit, doesn’t mean they can’t do the business. It just means that they’re probably not going to be a part of the deal going forward. You know, they are a bird-dog. They will be assigning those and getting referral fees, but the good news is, for the wholesalers out there that are listening right now, you know, you may be getting 5 grand, 35 grand on a wholesale deal.
We’re talking about self-storage opportunities, whether they’re conversions, or existing facilities, or development opportunities, add some commas and zeros to that and we start a minimum of $10,000, and that’s a minimum. But most of our referral fees or assignment fees are in the $50,000 to $75,000, and one, right now, is going to close for . . . one of our students is going to make $227,000 fee for that. So . . .
Mike:For finding the deal. Wow. That’s great..
Scott:It is. So that’s it. I mean, it’s learning, you know, that side of the business and the knowledge of understanding, “Hey, truly, what is a deal that I can present to the self-storage investor marketplace to either partner with, or until I get to the place where I’m an investor? Let’s generate some of these referral fees so I know what I’m looking at first.”
Mike:Yeah. Wow. Awesome. So, well, guys, we’re going to add down below in the notes here how to learn more from Scott’s website. I’ll put a link down below. I know you’ve got a lot of great information there. Scott, thanks for spending time with us today.
Scott:My pleasure, Mike.
Mike:It was good stuff.
Scott:Thanks. Good to get in touch again.
Mike:Yeah. I think it’s important to continue to educate yourself in this space. And I told Scott before we started here I’m hoping to come to one of his upcoming events, because I’m fascinated by this investing opportunity, and I finally have got to a point in my life where I have time to go learn more. I’ve had my head down for so long, and we’ve done well with that, but there’s so many opportunities out there to make money, so maybe listeners here, maybe I’ll see you at an upcoming event, but we’ll add a link down below.
Scott, thanks, again, for spending some time sharing your information with us.
Scott:Hey. My pleasure, Mike. We’ll save a seat for you.
Mike:Everybody, hey, this is episode . . . Go ahead. Say that one more time.
Scott:I said we’ll save a seat for you and love to have you here. So, thanks for having me. It’s good to spend more time with you.
Mike:Absolutely. Hey, everybody, this episode number 421 with Scott Meyers. Very interesting information here. Hope you got a lot out of it. If you haven’t yet, if you love this show or you love listening to our show and you haven’t yet, please go ahead and subscribe to us on iTunes, Stitcher Radio, leave us a positive review, if you would, or anywhere else where you might listen to our podcast. You can also subscribe on YouTube and watch our shows out there. Of course, you can watch and listen to over 1,500 podcasts that we’ve created on FlipNerd.com. Appreciate you guys. We’ll see you on the next show.
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