There are many opportunities in the self-storage industry. If you’re planning to start a business but don’t know what venture to enter, you can consider researching this type of industry. The pandemic has highlighted the demand for this business since many owners need warehousing services. Listen to Stacy Rossetti as she uncovers the biggest secret in the real estate industry. She explains the nine reasons you should invest in self-storage right now. What do you need to get started? Stacy shares her knowledge on different aspects of the business so you can explore what’s right for you. With the great things about this business, you don’t need to hesitate. Start taking action now and invest in it.
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The 9 Reasons You Should Be Investing In Self-Storage Now
First, I want to introduce myself. I’ve been teaching people how to invest in self-storage for a couple of years. I’ve been personally investing in self-storage for a few years. I’m a newbie, just like everybody else here. Everybody has got to get started somewhere. Before I invested in self-storage, I invested on the residential side and did a lot of rehabbing from 2010 to 2015. In 2015 is when I started getting into self-storage investing. I have a coaching program that’s called StorageNerds.
If you’re interested in checking that out, that’s where I hold your hands. We opened the doors in May 2022 and had a good handful of people come in. We already have so many people putting offers in. It’s awesome. We already have several people that have gotten facilities under contract as well. If you truly want to own a storage facility, then I highly recommend that you check out StorageNerds because you have somebody telling you what to do. You don’t have to figure it out. Somebody is there to hold your hand. That’s what StorageNerds is about. The doors open again in September for that. You can go to StorageNerds.com, and then you can get on the waitlist if you’re interested.
If you’re a DIY person and you’re like, “No, I want to do it on my own,” then get the course called Super Simple Self Storage. You can go to StacyRossetti.com for that. Another thing is I wanted to say hi to all my REI USA people. It is an online education platform for real estate investors and we teach all aspects of real estate investing. If you’re like, “I am interested in storage, but I may be interested in Airbnb, land, wholesaling, or something like that,” I highly recommend that you check out REI USA as well because I own it, but I also teach there.
We have fifteen other coaches and they teach on a regular basis as well. They teach their niches. We have Mike, who teaches land and Rachel, who teaches Airbnb. I wanted to point that out because I always forget to mention them, but they’re reading too. Thank you to all my REI USA people. The webinar is every Monday night on something on self-storage. You can come here for free.
If you’re the person that’s like, “I don’t want to spend any money on all my education. I want to get whatever I can for free,” then you should be tuning in because I’ll continue to teach every Monday so you can at least get some information this way. You could ask any questions and I’ll answer your questions. We have a YouTube channel, which is called Stacy Rossetti Teaches. There are a lot of videos there.
What we’re going to be doing is I’m going to be talking about the nine reasons why you should be learning how to invest in self-storage. This has been good, especially for all the newbies. I’ve gotten a lot of questions about, “Should I invest in self-storage? Why should I invest in self-storage? What’s happening in the market, and Is it going to concern self-storage stuff?” I figured I would talk about all that now.
There’s less competition in the self-storage industry.
This is in no particular order. It’s my nine reasons why we should invest in self-storage, and I asked my husband, too. My husband’s name is Pete. He is my partner in the self-storage and real estate investing world. We own eleven storage facilities. We also have a fund, which is called the Self Storage Fund Of America. I pitched that right after if you want to come and hang out with me and listen to the pitch.
We own 11 storage facilities and we have 2 storage facilities under contract. One of them is in Florida, and the other one is in the Northern part of Georgia. We own all of our facilities from the Northern part of Georgia all the way to the panhandle of Florida. We’re basically from Gainesville to North Carolina. We’re open to going to Alabama and South Carolina, but we’ll probably stay in the Georgia and Florida areas. If anybody ever has any deals in that area, please let me know because we’re always open to looking at those.
Best Kept Secret In The Real Estate World Best Kept Secret In The Real Estate World
We have a facility under contract in Florida. We’re in the due diligence phase, and then we also have another facility under contract in the North Georgia area. I will be going over that deal on the pitch. You can go to StacyRossetti.com/Fund. The fund is a 506(c). Anybody can come and listen to the pitch and you can see how I’m pitching and making money. That’s one of the top reasons we’ll talk about why you should be investing in self-storage. Personally, the number one reason why you should be investing in self-storage is that it is the best-kept secret in the real estate investing world.
We are going to do the nine reasons why. Number one, it’s the best-kept secret in the real estate investing world. This is something that I feel is very important. I love this part of it. What this means is that the self-storage industry is a very small industry. There are 53,000 storage facilities in the country. If you think about it, it’s roughly around, on average, 1,000 storage facilities per state. California and Texas are the big states where there are going to be way more storage facilities. There are a couple of thousand in each of those states. If you think of Delaware, there’s not going to be 1,000 towards facilities there.
It doesn’t seem that much to me in the realm of all the people in the country. Out of those 50,000 facilities, about 30% of those are owned by REITs. If you have 1,000 facilities in one state, and then you take out 30%, then there are only 700 facilities in the state that are owned by mom-and-pop. When I say mom-and-pop, I mean a regular person like me. It’s not REIT or a hedge fund. If you think of CubeSmart, Extra Space and all those, they’re all considered REITs, funds, and this kind of stuff, but 70% of all storage facilities are still owned by regular people like you and me.
It is completely opposite to any other commercial area, especially multifamily. It’s switched. It’s 70/30, where 70% of all apartment buildings are owned by big funds and things like this. Only 30% are owned by regular mom-and-pop people. For me personally, I feel there’s a way more opportunity to be able to talk and connect with owners directly and get them to sell to you rather than selling to a hedge fund. The truth of the matter is that mom-and-pop connects to other people that are the same as them.
I know this because we have ten virtual assistants that are calling and talking to owners every day. Every day they call 25 owners, so we’re calling 250 owners a day. We’re getting people that want offers left and right. They want a regular person to buy their property from. They feel like this on the bigger side when you have huge facilities that are massive facilities. Sometimes they want to talk to bigger companies because they know they’re worth a lot more money. We have one of my virtual assistants that called up an owner and wanted to sell his facility. He wants $16 million for it.
It’s a massive, huge storage facility. We’re running numbers and he wants to sell it to a regular person. He also has this massive, huge storage facility for anywhere from $13 million to $16 million. Even some of the big people want to talk to regular people. It’s part of this whole process and the whole thing. They just don’t want to do that. Personally, investing in self-storage is the best-kept secret in the real estate investing world. The reason why is because there are many mom-and-pop owners that do want to work with people like you.
If you want to get into and invest in self-storage, your job is to talk to owners directly. You are going through a realtor bogs up the whole process. If you can talk to an owner directly, it makes things easier and you get a better price. Honestly, a lot of people feel like they have to go to realtors to buy a product and ask them if they want to sell. When I got into real estate investing many years ago, I had no idea you could go directly to an owner and ask them if they wanted to sell their property. I thought you always had to go through a realtor. Take advantage of that.
The best-kept secret in the real estate investing world is self-storage investing. There are a lot of reasons why, but we’re going to go through a lot of these. There are not a lot of people out there investing in self-storage. I know it feels like there are a lot of people trying to get into self-storage, but in the grand scheme of things, most people don’t purchase something because it takes a lot of work and effort to go through that process, find a facility to buy and then be able to fund it. A lot of people want to buy storage facilities, but most people don’t do what it takes in order to purchase one. That’s another reason too.
Around 30,000 storage facilities are owned by mom-and-pop. We own eleven storage facilities, so a lot of the mom-and-pops own 2, 3, 4, or something like this. You had to take that into consideration. Let’s say there are 5,000 more of those, so there are 25,000 storage facilities that are owned by one person. There are 25,000 people in the entire country that are investing in self-storage. That’s not a lot if you think about it. There is so much less competition than all the others. Residential and multifamily is way too much competition.
Recession Resistant
The next one is one of my favorites. It’s recession resistant. Why should you be investing in self-storage? We all know what’s going to happen. Are we in a recession now, or are we not? Are we going to have it later? Most likely, we’re definitely going to be in a recession here. One thing I love about storage is that in an upturn or downturn, you make money. If you look at the history of all the real estate industries combined, self-storage is the most stable of everything else there.
There’s definitely going to be a recession soon, but self-storage is resistant to it.
That gives me great comfort. I’m sure it does and this is one of the main reasons why you do want to get into it. Self-storage investing is considered recession resistant. The truth is that before COVID, we were rocking, rolling, and doing great. All of a sudden, COVID happened. The good thing is that since we started in the business and the first year we got into real estate, we got into self-storage investing and bought our first facility. We tried to make everything as electronic and virtual as we possibly could.
For three years, we managed everything from our computer. We rarely ever went to the facilities, and then COVID hit. A lot of these mom-and-pop owners took a hard hit because the truth is, up to COVID, you had to go to the facility and sign the contract. You got to meet your tenant and get the signed contract. A few years ago, we moved up into the North Georgia mountains. We got a storage facility right next to our house. We went and rented a unit because all our storage facilities are in the Atlanta area and down South Georgia.
We rented the storage unit, and the guy did not have software. I had to mail him a check to pay for the unit. He mailed me the contract. I signed it and mailed it back to him. Every month I had to mail him a check. I thought that was the weirdest thing because we already owned 4 or 5 storage facilities at that time. We don’t even accept checks. Before COVID, it was very much not virtual at all. During COVID, they created this contact list.
In the storage industry, all these mom-and-pops, even the bigger REITs, all had to become contractless. If you go into U-Haul and want to rent something, they got those long, huge contracts that you have to sign and electronically sign this whole thing because they have all this paperwork that you have to do. Now it’s contactless. For us, we were already contactless because we had been that way anyway.
With COVID, nothing changed for us at all. I’m very blessed to be able to say that, honestly. We had about 1,000 tenants at that time, and a couple of people said they couldn’t afford their $50 or $100 a month. My husband came up with some payment plans and this stuff to help them out. Essentially, it was a handful of people. Out of 1,000 tenants, it was probably 50 people or something. In the end, most people paid everything off and got back on their feet and stuff.
For us, losing a couple of thousand dollars was not that big of a deal out of the grand scheme of things because we had so much money coming in. For us, it makes life so much better. You can go through something like that happens and still make money. We were still making income in all the properties that we had, except for a handful of people who didn’t pay. That’s why I say storage is recession-resistant. If we endured COVID and we were still making money during COVID, whatever is going to happen over the next couple of years and to the market at all, we have no fear about it because we know we have this income coming in on a regular basis. We’re investing in something that is not going to go away, and we’re still going to be making money on it.
Working Remotely
Unlike residential, we’re going to be taking a big turn here over the next couple of years. In multifamily, who knows what’s going to happen with that? I hope multifamily sticks with the game because we need affordable property. I love storage investing because it’s recession resistant. Another thing that I love about storage is you can work from anywhere. We live in an RV. This is where I work. All I need to work on is my laptop and a little desk. We traveled the country all the time. Every week, we’re in someplace different pretty much. We manage all of our storage facilities from our RV. During COVID, there became this term contactless. It was the new thing now.
People are doing webinars on how to become contactless still. I’m thinking to myself, “This is something we did several years ago.” The good thing is that you could have software. Any software that you want pretty much now can manage the back office of your facilities. They’re all web-based. Gone are the days when you need a desktop. Years ago, when I started, there were only three software out when I was doing demos. All this software has come out in the storage world have all come out in the last couple of years. When I started, I did a demo for ESS, which is Easy Storage Solutions.
I did a demo for storage and SiteLink, a desktop-based. It is a web component to it. ESS was a brand new software that had come out on the market. It was very bulky looking. Storage had come onto the market a few years ago. It was just starting to be this thing. Everybody pretty much up until 2010 to 2015 was all using SiteLink. There’s a U-Haul software that U-Haul uses. You can also license to use the U-Haul software. If you would hear owners back in the day using either Sitelink or U-Haul, those were the two ones.
Storage and ESS eventually came. Storage was very user-friendly and it’s the only user-friendly one. I’m just doing that one because it’s the most user-friendly. We set up Storage, and that’s how we started running our facilities through that software. In the first year that we bought our storage facility, our intention was not to be completely virtual, live in an RV, and travel full-time. What happened was that we worked that first year to become truly contactless. We worked on creating the systems that we needed and having boots-on-the-ground people we hired and phone people who would answer the phone for us. We are creating a virtual environment for ourselves so that we can have this. It took us a good couple of years.
We bought our first facility in 2017. It took us two years to become completely virtual. We had decided, at the beginning of 2019, which is almost two years into owning a storage facility, that we wanted to be able to travel around and manage our facilities at the same time. It took us a good process to get to do that. The truth is that you need a good team of people to manage your facilities. We have boots-on-the-ground people, phone support, an operations manager, my husband, and myself. I don’t really do anything. My husband manages everything. He does all the big stuff.
Bonnie is underneath us as our operations manager. She manages the team. What we’re doing is training Bonnie to manage the company. She will be the predecessor and the person that handles everything. She’s been working with us for many years. Underneath her, we have our boots-on-the-ground and phone support people. She manages all that herself. It’s a process to do that. Now we’re 100% virtual. We’re traveling around. You can manage your storage facilities from anywhere. A lot of people ask me because I talk to even students in StorageNerds, and they say, “I need to have a storage facility near me, so I can manage it the first time and learn how to do it.”
You can go through something as big as a pandemic but still make money through self-storage.
A lot of people think that way. The truth is that the closer your facility is to you, the more time you’re going to be spending at that facility. It’s true because we had a storage facility moved up to the North Georgia mountains and then I was driving along. I found this abandoned storage facility in the mountains. It happened to be 15 or 20 minutes from our house, so we went ahead and bought that facility. My husband was always at this facility. He’s like, “I’m going to go right to the facility.” He’d be gone for hours to go fiddle-fart in this until they get the facility.
I told him, “You are not managing this thing virtually,” and then we started traveling. All of our other facilities are 4, 5 or 6 hours away from us. Those were all done, but this one that was right around the corner from our house, he always spent all his time at. The truth is when you get out and look for facilities, what you should really be looking for is, “How good is the market going to be? How much money you’re going to be making in this deal? What’s the appreciation value?” Not, “I need to have something right next to me,” because what’s going to happen is if you only look for within like a 30-minute or 1-hour radius of your house, then you’re the opportunity of you being able to buy something is very minimal.
There’s nothing wrong with buying something that’s 2, 3, 4, 5, or 6 hours away, or even in different states. A lot of my students are in California. They’re not buying in California. I have a student going that will buy a storage facility under contract in North Carolina, and he lives in San Diego. The further away your facility is, the better it’s going to be. It will become passive income because you have to learn how to delegate all that work to somebody else. You start thinking about that, looking for deals that you can do that with.
Not have to have something next to you. You need to have something as far away as you possibly can. That way, it can become passive income. We’ve learned that over the years. That’s why you should be investing in self-storage because you can make it passive income, truly hands-off, and then create the lifestyle you want.
Passive Income
Number four is passive income. You get to have passive income. There are 2 or 3 different types of passive income when you think about storage investing. Most people think passive income is very little work. The truth of the matter is that when you buy a facility or any business at all, there’s going to be work involved. Passive income doesn’t mean buying a facility and then only working one hour a week or something like this. Although after you get it up and running and stabilize it, depending on what type of facility, you are going to have passive income.
Passive income is different from cashflow. Cashflow is net-net. What you’re going to be making? What’s your cash-on-cash return? After you have your income minus your expenses and mortgage, it becomes your net-net. When you think of passive income, you have to think of what type of passive income you want. Do you want cashflow? Cashflow is only one type of passive income. Passive income to you is appreciation on the backend.
Personally, passive income is the money I’m making by not doing anything, which is appreciation because cashflow requires work. When I buy a facility for $1 million, I know I can sell it for $4 million after I raise the rent. All I have to do is raise the rents. That appreciation is true passive income because all I’m doing is stabilizing the property and making money on the back end. You also have to be mindful of what kind of properties you buy. Income-producing properties will produce cashflow. You’ll make cash, but you still have to manage that facility.
It’s truly not passive income. People always say, “Get storage investing.” It’s because you think it’s passive income. The truth is that when you have to manage a facility. That’s not true passive income. Think about passive income means what to you. What I love about storage is the appreciation. I love cashflow too. A lot of people think, “I need to replace the income that I make right now.” I say, “How much money do you make now?” “I make $100,000 a year.” $100,000 a year net to you is a lot of storage facilities.
That’s a lot of doors because you have to think your cash-on-cash return could be anywhere from 10% to 20%. Every once in a while, you’ll find a smoking hot deal. Typically, your cash-on-cash return is 10% to 20%. The deal I’m going to go over in the pitch has a cash-on-cash return. It depends on whether or not we pay cash or leverage it out and get a loan. What we’re going to do on that deal is we’re going to pay cash and buy it immediately, stabilize it, and refine it out. The cash-on-cash return for that is 17% just by paying cash. Once I leveraged that money out and refi it out, it’s over a 40% cash-on-cash return.
That’s because the appreciation is so high on the backend. Cashflow is important. I get that you want to replace your income. You have to think in terms of cash-on-cash return. If you buy a $1 million property that’s making $100,000 and it’s netting 10% cash-on-cash return, you’re making $10,000 and getting that per year. You’re going to have to have ten $1 million facilities to make $100,000, which is about 100 units, which is 1,000 doors.
On average, across the whole country, 100 units are valued at $1 million. It makes around $100,000 a year. Your cash-on-cash return is 10%, which is about $10,000 a year. People think that you can buy one facility and you’re making $100,000, and that’s your income. The truth of the matter is that that’s the gross income. That’s not the net income. The net income is minus all your expenses and everything. Keep in mind that you’re going to have to build up your portfolio in order to make $100,000, and you will replace your income.
Minimal Expenses
I’ll talk about the next two together. These are all reasons why I love investing in self-storage. The next one is the minimal expenses. I teach, find them, fund them, and run them. I tried to come up with some reasons for finding, funding, and running them. Under the running part, this is minimal expenses and low overhead. The truth of the matter is it doesn’t cost a lot of money to run a storage facility. That’s a smaller facility. When you get into huge big facilities, like this guy wants to sell us a $16 million facility, there’s a lot of overhead in this.
Passive income is different from cash flow.
In these little tiny facilities, like 100 units, all these newbie facilities we all want to buy are perfect for this. It does not cost a lot of money to run facilities. I’ve been over this on the Deal Analyzer many times. Your property taxes, utilities, insurance, any type of maintenance expenses, software, and maybe any bug spray if you want to do this. There are not a lot of expenses when you own a storage facility.
Low Overhead
Low overhead means a smaller facility. When you buy 100 or so, you can manage this yourself very easily. You don’t get a lot of phone calls. If you buy a mismanaged facility, obviously, you have to clean it up. The first couple of months are a lot of work, but then after you start managing it, it doesn’t take a lot of time. The overhead includes the boots-on-the-ground person you delegate out to manage the facility on the ground. Maybe either answering a phone, your phone person or once you get bigger, your office manager. That’s it.
Financing
We own 1,000 doors, and we have Bonnie, Steph, DJ, and five people. That’s it to manage 1,000 doors. That’s what I’m talking about low overhead and minimal expenses. You still want to run your numbers for expenses at 30% to 35%. Once you get up, managed, stabilized, and running properly, your expenses should be pretty low. You never want to go off of what the owner tells you that their expenses are. You have to figure out what your expenses are and run numbers on that. You can’t go off of their expenses. Keep that in mind. Those are my two favorite parts about investing in self-storage on the management side. On the funding side, number seven is raising capital and getting loans or financing.
Everybody wants to invest in self-storage. We all know this. You are here trying to learn how to do it. The truth of the matter is if you put yourself out there and tell people, “I want to buy a storage facility and I need money to do it,” it’s very easy to find money to invest in self-storage. Everybody wants to invest in self-storage. It’s the best-kept secret in the real estate investing world. A lot of people are ultra-passive investors. They want to give you their money and they want you to do all the work.
Find passive investors. Find investors that are willing to let you do all the work and give you the money, and then you guys share in the profits. I noticed for a fact because I raise money every single week. Do you put yourself out there, you start asking people for money, telling them that you want to invest in self-storage, and this is what you’re doing? You shouldn’t have that difficult of a time finding money. Maybe you find somebody that has $50,000 or $100,000. That’s not a lot of money to go out and buy a storage facility, but that’s a good amount of money for a down payment.
Go out and find an income-producing property that you can take to the bank and get a loan. You can form a company and get a loan together. You can be the boots-on-the-ground person, and this person could be the finance person. You can work with a partner that way as well. You’ve got to start thinking outside the box and really educating yourself on creative deal structures, raising capital, and talking to banks. This is where I’m talking about banks. Banks love storage facilities as well.
If there’s somebody reading and saying, “I have a couple hundred thousand dollars,” start talking to local banks and see what they will offer you because banks love storage facilities. Private investors love storage facilities. Passive investors that invest in funds love the storage facilities. They want to partner, and then banks love it as well. You’re leaving a lot of money on the table if you’re not asking for it. All you have to do is ask.
I tell my students all the time, “Do you want to buy a storage facility? Ask an owner if they want to sell. That’s all you have to do. Do you want money to buy a storage facility? Ask people for money.” The big thing is to ask. If you’re not asking, then you’re not going to receive. The last two is a good ones. We all know that the market is going bonkers. We have no idea what’s going to happen, but we know something is going to happen. People in the storage investing world, real estate investing world, and the multifamily world are starting to sweat a little bit because they have this fear that something bad is going to happen.
Great Time
Right before a recession and the downturn, you get people that want to sell. We are working on a ridiculous amount of leads from people all over the country that want offers. Number eight is, now is a great time to invest in self-storage because there are many owners who want to sell because the market is volatile. We go back to ask. Ask for money and ask owners if they want to sell. Owners that don’t understand what’s going on in the market just know that the thing is about to hit the fan or whatever, then they feel like they have to back away and get out.
The thing is that you hear this all the time, “Cash is king.” A lot of owners are preparing for that. They may say, “Let me sell this so that when the downturn happens, I have that money to go buy a bigger facility, another property, or whatever it is I want to buy.” I’m doing this as well. There are a lot of people that want to sell. We are working on getting our facilities ready so that we can sell them and have that cash, and when the market drops, we’ll be able to go out and buy bigger facilities.
There are owners right now that want to sell their storage facilities. All you have to do is find them. One of my students has been coaching for one month. She came to the bootcamp and started calling the owners. She said she went out, drove for storage, and called the owners. She talked to 10 owners. Out of 10, 3 of them wanted offers. We worked, and she put in two offers, and she’s putting in another offer. They’re right around the prices that they should be. I’m very interested to see what the owners say and see what happens. Essentially, owners want offers. When you talk to an owner, you make sure that you say, “Can I just give you an offer? You don’t have to take it if you don’t want it. I would like to give you an offer, see if you’re interested, and give you an idea of what I think your property is worth.”
Create The Lifestyle You Want
If you’re not doing this, you have to start doing this now because now is the time. Many people want to sell right now. The last one, my favorite of all of them, is you get to create the lifestyle you want. The storage investing world and the way everything has happened made owning a storage facility so easy. We talked about being completely virtual and contactless. You can literally set up your entire company and not go to your storage facilities because you can have a boots-on-the-ground person that manages it and create the lifestyle you want.
Find passive investors that are willing to let you do all the work and give you the money. And then you guys share in the profits. Share on XI told my students a couple of years ago, “You should be able to be anywhere in the world and run your storage facilities.” That’s one of the main reasons why we did buy the RV and move into the RV because I wanted to prove to them that you can be anywhere in the world and have the lifestyle you want and run your storage facilities. I don’t know what your type of lifestyle is and what you want to do, but the truth is that you can create passive income and wealth, live in an RV and travel if you want, buy a facility or build up to a facility where you can delegate everything off and not even be an integral part of the whole thing. You can go out and do the thing that you want because you’re getting that income coming in. You’ve gotten to the point now where you have this passive income coming in, wealth that you built from the appreciation, and now you can go out and create this lifestyle that you want.
It may not happen on the first one that you buy. You’re going to have it like, “This is not for us.” It took us five facilities and a couple of years to get to that point. The truth is that if you stick with it, educate yourself, and set the systems up so that you can do it, you can have the lifestyle that you want. That’s the main reason why I love investing in self-storage. Those are my nine reasons why you should be investing in self-storage. I’ll close it out. I’m going to hop on to my pitch which is at StacyRosetti.com/Fund. I’m going to my Self Storage Fund Of America and go over the deal we have under contract that we’re trying to raise money for. I hope to meet you there. Other than that, thank you for hanging out. I will see you guys at the next session. Take care.
Important Links
- StorageNerds.com
- REI USA
- Stacy Rossetti Teaches – YouTube
- Self Storage Fund Of Fund Of America
- StacyRossetti.com/Fund
- CubeSmart
- Extra Space
- SiteLink
