Scott Meyers Self Storage Investing - How to Start a Self Storage Business

well hello everyone its Scott Myers here and in this short video we're gonna talk about some of the tech steps to take to start or develop your first so storage facility primarily the top three mistakes that newbie investors make and how to avoid them okay so first of all my Self Storage well that's because there's more opportunities in social stories in any other form of a rental real estate how about 24 million rental units out there across this country right now also is becoming two hundred and twenty billion dollar industry in this country right now representing just a huge opportunity for an investor to get in and why well that's because it's become somewhat of a consumer product yeah it's it's real estate it's a small business but one in ten households rent some one or more or so storage rental units in this country right now making it again a consumer product that people need and use and demand is on the rise let's face it we are a nation of packrats and people have an insatiable appetite in this country for self storage and why else will we be looking at self storage right now well that's because it is higher returns than any other form of real estate dominant meeting one of the reasons why you're here you've seen on the positive press lately about how cell storage continues to outperform all the other asset classes as a matter of fact the next closest competitor in terms of returns his apartments last year only returned eight point eight percent compared to thirty four and a half of for self storage healthcare retail office industrial lodging well I feel sorry for those folks down there four times more profit than apartments when it comes to investing in them self storage and certainly outpaces all other forms ok Scott well why would I go out and do that when I can just go on buy a single-family house it's real easy to get into they're all over the place well I could compare that to single-family returns as well if we get out of the commercial sector five point three percent national average that's why there's a matter of fact Michael Lombardi who tracks single-family investments up in rental real estate you know he made the comment recently my opinion is that the US housing market is dead for years to come so there you have it ok so my story well I have invested in all other forms of real estate that has been my experience in my background all types of single-family homes we ramped up the apartment of our businesses offices warehouses until it took us to the point of a near bankruptcy then I got formal education and I bought my first self storage facility and I decided hey this is the way to go and I sold off all other forms of real estate and we've continued to buy and develop ever since we've purchased over 2,000 units and we've developed over four hundred thousand square feet of self storage to date but people begin to notice what we were doing along the way and I was asked to speak nationally at some real estate investment groups and other investor and small business groups all across the country and I humbly accept the fact that now I am the nation's leading instructor on how to invest in self storage facilities and we found in our company self storage investing calm several years ago and now now that is the Internet's most powerful resource for teaching other folks how to go out and buy and develop their own and launch their own self storage of business as well okay fantastic Scott but interested in the business where do I find and these self storage facilities well target mail takes a little bit of work but there's this is where we're gonna find the deals you got to look under the rocks and we're sending out mailers to the sill storage facility owners of themselves targeting the mom and pops not too big regional and national players we're not going to answer our mail or our phone calls anyway we're targeting the mom-and-pop owners we're also partnering with the commercial brokers and also the self storage brokers and they supply us an endless supply of leads to be able to track down and then don't forget the business brokers there's an awful lot of sellers and owners out there that treat their self-storage facilities as a small business rather than commercial real estate so we're also working with the business brokers who are supplying those facilities to us and getting on their their business brokerage small business brokerage websites and then internet searches just a kind of a catch-all in addition to these to look for so storage for sale comma your your City Google cell storage for sale coming or sending to catch anything and everything else that may be out there alright we're going to talk about that top three mistakes that newbie investors make and how to avoid them and mistake number one that I've seen over I've been coaching and mentoring folks is improper analysis folks that they're trying to piece to get their software or get to a best-guess or looking at brokers figures or seller figures and determine what is this thing worth and am i overpaying for a self storage facility how do I know what this thing is worth and there's an awful lot of fear in that you just use the number one resource the number one software out there for analyzing deals go to so storage analysis calm this is a software that we use in the pros use for analyzing self storage facilities nothing else out there on the market like it for analyzing self storage facilities in the market for determining then operating income cap rates and getting down to the bottom line which is what does this thing work that takes the guesswork out of it also don't forget the market as well if the numbers look at on the facility physical standpoint it looks great well what about the market will it support to this so storage facility for those of you that are looking to develop as well you need to be drawing a 1 a 3 and a 5 mile ring and a radius around this so storage facility that you're looking to buy or land that you're looking to develop and finding out what the supply index is is it over built right now or will it be able to withstand more storage what is the competition in your market can you beat up on the folks that are there are they not doing a very good job or is it formidable competition that you may have a tough time breaking into this market and stealing similars Custer's customers away and/or gaining new ones above your competition who's already entrenched and then what the market itself kind of support us you know what are the demographics and the demand is the population increasing is it decreasing what is the median income now what is the overall demand what are the trends in the market as it pertains to not only occupancy but job growth and the demand for storage in a market ok great stop interested in the business but the biggest question I have is how do you fund these things I heard that there's no financing out there during this recession and as we're coming out of it for self storage how do I get the money for these things well you know what we're still going back to the same places we went to before and that's a community banks savings and loans credit unions because those are the folks that are clamoring for self storage because self storage has done so well during this recession and also during all recessions and inflationary periods so in effect so storage only has an 8 percent loan failure rate on average compared to all the other asset classes while comparing back again to apartments apartments have a 53 percent loan failure rate in this country so these banks they want the so storage deals because they know that they perform and they won't have to try to sell these things off or take them back the SBA also has two new programs that are available for self storage that they don't offer for any other form of real estate because they to know that this is the asset class that outperforms all others and has such a low loan default rate sellers are financing their deals as well these mom-and-pop owners have paid off pay down their facilities they don't want to pay capital gains taxes on them and so they're offering solar financing so that they can still get a check once a month for their self storage facility to further capital gains taxes and also not have to manage their facility it's kind of a win-win-win for not only them at you as buyers private lenders well really akin to the community banks in the SBA these are both the individuals that they're running out their own banking business if you will and they're coming out of the Woodworks looking for sub storage development deals and deals to loan on existing facilities because they to see that this is the best opportunity in real estate right now and also has the lowest loan default rates and pretty pretty impressive and this is what private lenders are looking for mezzanine lenders these are lenders that are bridging the gap if you don't have enough and down payment for your facility compared to what the bank is going to give you these mezzanine lenders are bridging the gap and they too love self storage and they'll help you get the rest of the way there depending upon how much of money you have to put down and if you still need a little help to get along the way well--there's debt and equity partners out there as well and this is a very very easy story to tell to those individuals that are the stock market refugees that are returned to the returns that they're getting to become partners with you now caution here on who you go into partnership with but you know what I would gladly give up 50% of a deal because rather than let it go because 100 percent of nothing nothing so begin looking at some debt and equity partners that you may be able to partner with as well to help to get you into these needles to begin with okay mistake number two kind of encompasses a lot here I see a lot of folks make a really bad deals because the deals were structured incorrectly they weren't really structured to last when they're adjustable rate mortgage came due they didn't create enough value in the facility to be able to refinance it and pull money out of it there was no operating agreement drawn up between the debt and equity partners and well amongst them all and a lot of partner divorces are causing these deals to go south and not getting refinanced and being sold on the market has distressed properties no attorney well it's got those things are returned and those attorneys are expensive and I can't afford that going into this so I don't need an attorney to draft my operating agreement or look at my deal structure enough said for due diligence and that encompasses looking at the sellers numbers and/or the brokers numbers to determine your net operating income are these true are these income and expense figures true and accurate so that you don't make a mistake before during or after the closing and looking at the market as well it's got a cash flow day one folks I've seen so many people they're so anxious to get into a deal that they set a goal that they buy the wrong deal and it doesn't cashflow and that some of the something is effective well I just want to get one under my belt and buy another one that's profitable and theme this one and now you know we'll just kind of move along after that now both it's got a cash flow from day one period no matter what business you're going into and no matter what division of a business that you're starting it's got a cash flow from day one and then what about your exit strategy are you going to have the ability to add or create enough value to be able to sell it at your target date which is when the loan comes due or when you need to cash out any debt and equity partners have you thought about the long term if not you need to and mistake number three it's not an ATM folks there's plenty of gurus out there saying these things are cashed house and set it and forget it I've heard and I've seen it all folks this is a business and you got to treat it like a business it is not a hobby you need to have process based management procedures put in place systems run the business and you manage you tweak the system and those systems fortunately for self storage included kiosks where you can manage these facilities without having a physical person on-site 40 hours a week if you don't want to and web-based property management software that allows you to monitor what's going on at the so storage facility even when you're not around having a solid marketing plan determining what are you going to be the market leader in price and amenities or are you planning to be the low-cost provider I prefer going with the high-end but I'll leave that decision up to you but at the end of the day just advertising in the yellow pages that is not a marketing plan you need have a marketing plan that looks out for the entire year and then local domination again we're looking at one to three to five miles that is your market in your trade area how do you get all the eyeballs on your website and all the door swings into your facility versus all your competitors and that encompasses a whole new set of a whole new skill set as well and then expanding square footage once you buy this thing the beauty of cell storage is that you can create so much value by increasing the square footage and adding additional buildings and also adding the additional profit centers and with so storage and there is no other asset class that I have seen or invested in that allows you to add the value just force the appreciation by adding a truck rental retail sales of LOX boxes and moving supplies propane tanks offering eBay services and life services wine storage it prefers and gun and arts and other collectibles and temperature control you name it delicious and it's over 40 different profit centers that we've added to our facilities to force depreciation and the value recently we've been adding meth labs to all our facilities it's a huge profit margin just kidding folks no plumbing no meth labs and cell storage so let's just get that out of the way right now no matter what you see out there on the internet okay so let's stop summarize now the top ten reasons why I love self storage and another reason why you should continue to look into it as well it is the most profitable surging demand it has been the fastest growing sector of commercial real estate over the past thirty years there's an abundance of financing since private lenders and banks SBA they love self-storage because it outperforms everything else it's recession resistant because what happens during a recession is businesses and individuals are downsizing and therefore that creates a demand for storage so storage actually is one of those rare industries that benefits even more during a recessionary period than it does during inflationary period when times are good but when times are good boom buy more stuff don't we and if we have another creates another opportunity and demand for so storage for all the goodies that we buy when times are good automation you don't have to be at your facility 24/7 you don't have to have a manager there forty hours a week you can use kiosks and web-based property management software to assist in the management of your facilities and then multiple profit centers and paydays no other form of real estate allows you all the opportunities over 40 different profit centers and additional paydays and ways to increase the value late at self storage my favorite is the fact that compared to apartments and single-family homes that have eviction laws where you have to kick somebody out after they destroyed your property and stolen all kinds of money from you and the court calls it non-payment of rent and they give you a little pink piece of paper versus lien laws like we haven't sell storage where you put a lock on their door you'd lock their stuff up and if they don't pay you then you auction it off and you get your money back that way you've probably seen the show stores or some auction hunters and then when they leave this is what you get you get a concrete floor in a steel box there is no carpet there is no paint there's no plumbing there's no appliances that is the reason why I sold off all the other forms of real estate tonight invest in nothing but self storage and that rounds out my top ten reasons why I love so stores is because there are no tennis no toilets and no trash okay so interested in more information on where I start as much as I can give you in this short video here are the next steps get formal self storage training a lot of free stuff out there on the internet and we offer free information as well but you really need to get yourself some formal education that starts by going over to our website Self Storage investing calm free resources include a free book called the blueprint for success my so story blueprint for success we've always got case studies that you can pull down and walk through the deals to begin to familiarize yourself with it it also has a camera of events of our next upcoming Self Storage Academy we hold three-day events all around the country that is not free but take a look at an event coming up near you so head on over to Self Storage investing calm began pulling down that information getting your formal education in it self storage so head on over there now and I look forward to seeing you on the other side

Channel: Scott Meyers

Views: 75,097

Rating: 4.8880405 out of 5

Keywords: how, to, start, self, storage, business, analysis, investing, franchise.

Id: wrDPOPHvWt4

Length: 14min 58sec (898 seconds)

Published: Wed May 16 2012