Are you new to self-storage investing? Do you know what you should do first when investing in this industry? Well, Stacy Rossetti will make things easier for you! She shares the first steps to self-storage investing, providing you with a comprehensive overview of the self-storage investment process. Stacy covers six key steps involved in investing in self-storage facilities: office/administration, marketing, acquisition, finance, management, and liquidation. Waste not a second and learn why you need to cover these crucial steps in your investing journey. Tune in to this episode today!
—
Watch the episode here
Listen to the podcast here
The Six-Step System: Your First Steps To Self-Storage Investing
Step One: Admin
What I’m going to go through is called my Six Step System and what your company is going to look like once you start getting into storage. I’m going to take you through all six steps. These are the first six steps of what you’re going to do in order to get started in self-storage investing. The first one is you need to set up some admin for the office. The main thing is you want to have a phone. This is a phone for you to be able to receive phone calls from owners and stuff. It could be your own personal line or a different line because you’re going to be building lists and calling owners. The question that you have to ask yourself is, do you want your own phone line or a different line?
The way that I have it I have my personal line, which is for my friends and family and has nothing to do with work. I then have a business line, which is a Google Voice number, and I set it up. It’s free and then I give that business line out to all the owners. That way, when somebody is calling me on my Google Voice phone number, I know it’s an owner from a storage facility because of how I set it up. You don’t have to do that if you don’t want to but that’s how I do it. The truth is that you’re going to be talking to a lot of storage facility owners and looking at a lot of deals and stuff. I just like to separate work from business.
Another thing is you can work on the structure of your company. You’re going to be buying this facility, most likely in an LLC. If you’re going to buy and hold something, you’re going to hold it in an LLC. I’m not an attorney. I’m not anybody that can tell you how to structure your business. You should talk to your attorneys about this. For the most part, you want to have something that you can buy that’s going to be your holding company. That’s what we have too. We go through Wyoming. It is what we do for a lot of our holding companies. You don’t have to do that. You can just get it right in your state. The very first one that we did was in Georgia because we didn’t know what we were doing.
After that, we started going through Wyoming. I highly recommend that you start educating yourself on how to truly structure your business the correct way so that you are protected. Think about this. Let’s say you buy a residential house. You rent it out. That’s going to be one tenant that could maybe one day sue for some reason. When you are in storage, you’re going to have a lot of tenants. You want to make sure that you separate yourself as far away from those tenants as you can. You could buy a storage facility that has 50 or 100 doors and that means you have 50 or 100 tenants. That’s 100 times more than this residential one being sued.
We’ve never been sued or anything, but by the end of April 2023, we’ll have 2,000 doors and 2,000 tenants. That’s a lot of tenants. That’s a lot of risks. For us not having anything in our name, being protected is super important. I highly recommend that if you want to get into commercial real estate or any real estate for that matter, you should be thinking about the structure of your company. When I get started in real estate investing, I learned a little bit about structure, but I didn’t take it to heart honestly. At one point, I had 30 rehabs in one company. I was doing it all myself and then I was like, “This is too much. It’s 30 houses.”
I hired an accountant. The accountant was like, “Why do you have so many properties in this one company? Are you crazy?” I was like, “Maybe,” then he was like, “You need to get into better structuring. This is way too risky.” We then started figuring it out. We’re educating ourselves on all the different ways that we can structure your businesses, especially if you’re going to have a lot of property and stuff.
I recommend that you educate yourself on LLC or structuring how you are going to buy commercial property. That’s going to be something that’s under admin. Out of all the things that you do for admin to prepare yourself to get into storage investing, these are the two most important things. I’m going to put those here so that you guys know.
Step Two: Marketing
Start thinking about that. We have the marketing. These are steps 1, 2, and 3. That’s how it works. There are a lot of different ways to find storage facilities. In my boot camp with all my students, I go over fifteen different ways to buy storage. I’m not going to go into all of that right now, but what we do with all my fifteen virtual systems we have is cold calling. You don’t have to do this if you don’t want to, but for us, this is the best way to go about it. We are cold calling owners. We try to find the owner’s information and then we call them to see if they want an offer.
You never ask anybody if they want to sell. You ask them if they want an offer. Nobody wants to sell, but everybody wants to get an offer to see what their property is worth. Cold calling is a strategy. This is a numbers game. You sit there and call owners over and over again because that’s what you’re going to be doing with cold calling. Think about the mindset of a storage facility owner. They have two different mindsets.
One of them is that they’re not thinking about selling and then you randomly call them and say, “Would you like to get an offer?” They’re thinking like, “Maybe. I don’t know.” Let’s just say that we gave them an offer and they’re right on what they were thinking. They were like, “I was thinking that’s what it is. Maybe I should sell.”
All of a sudden, they’re thinking like, “Books are not perfect. I don’t have my tax returns, PNL, and balance sheet. I don’t have proof of income.” This is the mindset of an owner that you’re cold calling. You have to understand that going into calling, they are not prepared to sell. The second thing is that if you go on to Crexi, LoopNet, or the MLS and you go look for properties, they’ve already got all their PNL, balance sheet, tax returns, and everything all done. They are ready to sell and give you all their information. They’re on top of it. I wouldn’t say easier but it’s a different way of going about doing it.
You have to work with the realtor, the broker, and the middle in order to buy. The one that I’m buying right now, it’s not that realtor is horrible, but it’s so much easier to go directly to an owner and say, “Let me put an offer in.” The truth is this is the easier way to do it. Going to the realtor, going to a broker, and just looking on Crexi, saying, “Let me put offers in on all these things.” This is the easy way and the hard way. I’m going to put this here too, brokers and online. These are the two ways that most people are doing it.
These are the most important. I have been over many times using Google Maps to find storage facilities, virtually driving for storage, or getting out and driving for storage. Those are, for me, honestly the best way, but that’s not what we’re doing right now. Virtually driving for storage or using Google Maps, and then actually driving for storage. These are the three ways. When I first started getting into self-storage, I was driving around with all these little tiny towns, talking to owners, and seeing if they were interested in getting an offer. The good thing, especially in tertiary markets, is you call the number on the sign, and the owner answers. Mostly, secondary markets as well.
It’s not difficult to get ahold of owners in secondary and tertiary markets. It gets harder when you get into primary markets. This is what I did. I drove for storage and then after a while, I started virtually driving. I used Google Maps. I got in and looked around to see if I could find any storage facilities that way. This is what I did in the beginning. If you want to buy one facility, this is a very good way to find storage facilities to buy. If I have to buy a storage facility, a quarter is what I have to buy. We’re in a storage facility a quarter. For me to be able to buy a storage facility a quarter, I have to have a lot of people calling, talking to owners, and doing the cold calling thing.
We never go on Crexi or LoopNet to look for deals. That doesn’t mean I haven’t done that. I have personally never gone on to Crexi. The deal that I told you about earlier, a wholesaler brought to me and he said, “I talked to this realtor and I can get this for a good deal. Would you be interested?” I said, “I’ll take a look at it.” I didn’t do that myself. My team didn’t do that. Also, for our students, we do what’s called Turnkey Acquisitions, which is where they can hire my virtual assistants to find a deal for them. Every once in a while, a student will say, “There are some deals on Crexi. Can you please take a look at them?” We’ll then take a look at them.
My virtual assistants are trained to talk to owners directly. We don’t do a lot of Crexi, LoopNet, or online stuff because the prices are high. For instance, we did an offer in Montana where they wanted $2.2 million and our offer was $1.2 million. That’s a huge big difference on a deal. A lot of times, that’s how it is on online stuff. Even though it’s easier to find the facilities, it’s a lot harder to find a good deal. It’s harder to find the deals here, but it’s actually easier to talk to the owners. The easiest way to talk to owners is doing virtual driving, driving for storage, calling the owner, and talking to them.
Even though it's easier to find the facilities, it's a lot harder to find a good deal. Share on XStep Three: Acquisitions
Those are all the different ways. Step one is Admin. Step two is Marketing. Step three is Acquisitions. Acquisitions is running the deal analysis and making an offer. It’s getting the information from the owner so that you can put an offer in. This is what we go over. When I talk about deal analysis and all this stuff that I do live, I especially go over this in the course. When you buy Deal Analyzer, there are training sessions on how to use the Deal Analyzer, run deal analysis, and stuff. You’ve got to get all the information from either the broker or the owner to make an offer.
If it’s an income-producing property, you can get a PNL, balance sheet, tax returns, and everything. With a cold call, remember that they may not have all that ready. I’m going to tell you, typically, 80% of the time, they do not have their numbers ready. If you go through the brokers, they’re going to have all that ready. You’ll say, “I’m going to send you an email with what we need and then you give me that information.” That’s how it works with cold calling. You’re going to have to get the purchase price and the vacancy, which we call economic or physical. This is what they’re paying. Who’s there versus who’s actually paying?
We’re 85% full on all of our storage facilities, but we’re 69% economic occupancy. We want to get the total square footage and the unit mix. Typically, what we do is get the unit mix that we can get the total square footage because they’ll be like, “It’s 12,000 square feet,” and then we’ll get all the unit mixed and add it up. It’s 11,792 or whatever. It’s not quite 12,000. In square footage, you add some money to your deal. You want to make sure you get exactly the square footage. Being roundabout is okay but for true numbers, you want to get the unit mix.
Also, you want to get their pricing. What are you charging for your 10x10s? What are you charging for your 10x20s and stuff? You get the unit mix, the square footage, and the pricing. You can run numbers on that. You also get taxes on the property. This is all property taxes and then you get the utilities and insurance. The truth is this is a formula. This is public data. If you go onto our Deal Analyzer, and if you click on the squares, it’s a formula. Most of the time, we’re right on spot. Every once in a while, it’ll be a little bit off or whatever.
The property tax for them is going to be completely different for you as well. Let’s say they bought it for $250,000 and you’re buying it for $1 million. Your tax is going to be way more expensive than theirs. You want to make sure you have the right formula and look at the right numbers and stuff. That’s key. What you need to get from the seller is the purchase price if you can get the purchase price. They may not give you the purchase price. They’re like, “No, just make me an offer.” You got to have to run numbers and stuff. You want to get the number of units, the unit mix, the pricing, and the total square foot. This is where it’s at. You want to get the vacancy. What’s the physical versus the economic vacancy?
We’re running our numbers at 38% for our expenses. The gross rental income minus the expenses at 38%, which is your NOI, minus your mortgage. If you have a mortgage and then that’s your cash-on-cash return. That’s the net income percentage of what you’re going to be making. That’s how that works. That’s what you’re going to need in order to run the deal analysis. You don’t have to use our deal analyzer. You can use any deal analyzer. A commercial deal analyzer is what you need as long as you can put your unit mix in and you can separate everything out. A lot of properties that we look at, they’ll be storage plus an office that they rent out, some commercial space, a sign, or RV parking.
You do not want to mix all that together. When you’re running a deal analysis, each of those is a separate income and you have to run your analysis on each of those incomes. Your RV parking is not the same as storage because the national average for a 10×10 is $0.80, $0.85, or $0.88. Maybe in the United States, it’s in the $0.80. Parking is $0.20. If you put those together, that skews your price per square foot. If you put $1 a square foot on average for a commercial space, if you put that in with your RV parking, it’s going to skew everything. You want to separate all of your incomes out and run numbers on all those separately.
Somebody says, “With regards to your purchase price, can you have the seller sell you the property in lease separately?” Yes. You can do that. The one that we are looking at over here near Orlando, the owner is like, “Why don’t you just buy the LLC? If you buy the LLC, then you’ll save so much money on the taxes.” You could do this as well. I’ve had that proposed many times and we have not yet done that because I’m buying stuff in a fund. You can’t do that, but you have to buy property. You could do that if you wanted to. It’s better for capital gains.
Step Four: Finance
Step four is going to be your Finance. You got to raise the money. Raising the money could be going to an SBA lender or a local lender. We went to SBA and got the loan for the Clarkston one. You can also go to local banks. They love storage. They’re in need of loans. You can see banks are desperate right now. As soon as you find a deal, talk to the local bank. Don’t go to any of the ones that are having issues. We want to go to a small, local community bank. They’re the ones that will lend to you.
When you do SBA loans, it’s 10% or 15% down and prime plus 1 or 2 depending on your experience. Make sure you run the numbers based on that type of loan. If you go to a local bank, it’s a conventional loan. We’re going to be 20% to 30% down and be at 6.7% or 7% interest or whatever it is right now. We’re running our numbers at 25% down and 7% interest for conventional loans. That’s what we’re doing.
You have to understand that there are different types of loans out there and you got to run the numbers. Sometimes, SBA works better than the local one or whatever. Understand that concept. On top of that, you can do some creative deal structuring. That’s what I’m calling that here. This is why I talk about owner financing, carrying the second, and all kinds of wraparound, like mortgage wraps, contract for deed wraps, and then owner financing.
That is in the deal analyzer. In our deal analyzer, you can run numbers on creative deal structures. I’m telling you, the best way to buy deals right now is creative deal structuring. You have to understand this concept and what to do. Deal analyzer spreads. It goes over that very clearly. It’s very easy to run numbers that way.
Another thing I wanted to point out is that in May 2023, I’ll be having a two-day boot camp for my students. It’s only funding. It’s all things how you fund storage facilities. If you’re interested in learning how to raise money and how you can buy all this stuff, “How does Stacy buy all these deals and not put any money into the deals?” I’m 100% privately funded.
I’m telling you this here. The very first deal that I’ve ever bought with a lender is going to be the one in Clarksville. Other than that, I’ve either done something like this or it’s a capital raise either from a private money lender, syndicating, or crowdfunding. I’ve done all of these. Another thing is finding partners. I’ve done everything here on this list. That’s pretty cool. I’m partnered, I’m crowdfunded, I’ve syndicated, I’ve found private money, I’ve done a whole bunch of creative deal structures, and I’ve gone to banks and got loans. That’s what you’re going to have to learn. This is what the boot camp is about.
If you do not understand these things and how to raise money, you will not make it in the industry. You’ll be able to buy 1 deal or maybe 2 deals and then that’s it. You got to learn this. This is the most important thing of everything if you want to be a commercial real estate investor. Commercial real estate is expensive. Where are you getting $2 million, $3 million, $4 million, $1 million, or $700,000 to buy facilities? Where do I get all this money to do that? We have, “What terms do you typically get on the loans? How do we find more info than owner-structuring deals?” I go over that in my deal analyzer and in my course.
This is my forte. I am a money magnet and a fundraiser. This is what I teach. This is what I love. That’s what’s in the course. That’s in the training videos that come with the deal analyzer. Now we’ve found some money. This is the management. You got to run the things. This is where I’m training you. This is your contract and software, where you do your revenue management, dynamic pricing, and boots on the grounds. This is setting all this up.
Step Five: Management
From steps 1, 2, and 3, your marketing, getting out there, and talking to owners and step number three is putting in your offers, these two steps are the hardest steps of all the steps. You have to talk to owners and put in offers. If you are not doing this, then you will never find a deal. Everybody always thinks that raising money is the hardest part. It’s time-consuming and stuff, but it’s not that hard to raise money honestly.
Once you understand the concept of raising money, it’s not that difficult. What’s difficult is grinding. I am not a grinder. That’s why I delegate it to my virtual assistants. They do all the grinding. This is the hardest part. The fun part is trying to work with the owners and say, “How can we get this deal done? Let’s figure this out.” The management part is what my husband does. He manages all of our facilities for us. The first 500 to 600 doors, it’s not that much work. Once you start getting past 600 to 1,000, you’re like, “This is getting a little bit more work here.”
Once you understand the concept of raising money, it's not that difficult. What's difficult is grinding. Share on XAfter 1,000, you’re like, “This is getting a lot of work,” and then you become an asset manager. We’re about 2,000 doors and we’re hiring. We’re going crazy and stuff. If it’s your first 500 doors, it’s not that much work to run these things. The first 90 days that you buy something, you’re like, “What is going on? I need to figure all this out.” You’re setting up your software and contracts. You’re trying to get your tenants into the system, figure out your pricing, get the boots-on-the-ground person, and your phone is done. Once you get all that done in your first 90 days, you’re like, “I’m ready. Get up there and start looking for another.” That’s how you feel. That’s how I see my students doing this all the time.
How these works is management. I get them into this once a month. I do a management session and I’ll teach something on management. In the course, there’s a whole management session and my husband comes in and teaches a lot of that. He does the due diligence. He’s doing anything on the roof and showing you how to look at the roofs. He is talking about auction processes and stuff like that. That’s part of the course. If this is what intrigues you, you should get the course so you can see all those videos.
Step Six: Liquidation
Finally, number six is Liquidations. This is where we’re at right now. We have thirteen facilities. We’re buying two closing at the end of the month and we’re buying another one next month. We’re going to sell three of our facilities in the Atlanta area. It’s right in the suburbs of Atlanta. It’s a very good location. It’s the first couple that we bought. They’re smaller facilities. They’re each 60 doors and we’ve utilized these properties.
We’ve had them for 2 or 3 years and we’ve stabilized them. They’re making good money, they’re cleaned up, and looking good. It’s time to sell those so we can 1031 exchange that money for something else. You have to decide whether you’re either buying and holding them, going to 1031 exchange, going to flat out sell them, or maybe you could even owner finance it.
You could be the one that owner finances the deal. It’s a great way to make money. I’m so used to making $2,000 a month on this facility. Let me just owner-finance this and I can still get some of that money as well. You could do that. This is a fun part. I’m going to make so much money on this thing. I’m $100,000 or $300,000. I should sell that and 1031 exchange it into something else.
I’ll get a bigger deal and use that money for a down payment. This part right here is super fun for me as well. I’m excited about selling our first three properties, seeing what happens to them, and seeing how much money we get for them. I’m hoping I’m getting a good amount of money. If somebody is going to go get a loan, I can’t expect a super high price because there’s no lender that’s going to finance this.
I need to be reasonable with selling. Owners are not understanding this concept. It’s prime plus 1 or 2 out there. If you want to sell your property, you need to be selling it at a reasonable price so that we can go get loans on these properties. Otherwise, if you don’t want to do that, then you need to owner-finance those deals.
I hope that when you get to this point of starting to liquidate some of your properties, you’re thinking about that. If somebody was getting an interest rate for 3% like they were a couple of years ago, you could sell it at a higher price. You’re like, “It’s 3% interest. I can’t do that right now.” You can’t do that for the next couple of years.
For all sellers out there, if you want to sell your property, be reasonable because this is frustrating. Realtors as well. Please be reasonable. I don’t understand the concept of putting something listed for $2.2 million and running the numbers at a good cap rate, like 6% or 7% cap, and getting $1.2 million. How does that come? I’m not quite understanding the whole difference there. That’s my two cents about liquidations. I’m excited. We started looking in 2015 and 2016. I bought our first facility in 2017. It’s 6 going on 7 years right now in 2023. We’re starting to sell the first couple of facilities that we have.
The goal is that for all these smaller facilities we bought that are less than $1 million, we’re stabilizing them. We’re going to sell them, and 1031 exchange out of something else. There’s no reason to hold onto a property for 10 or 20 years anymore because you can make as much money in 5 or 7 years on the property. That’s my thought process. You could tell me differently if you all want to. I got to hop off because I’m going to go to my pitch. If you want to hop onto the Self Storage Fund of America pitch, go to StacyRossetti.com/Fund. If you’re an accredited investor, then you should listen to us. Join the family and do some investing with us.
This is Stacy’s Six-Step System. This is what I take you through in the course. Everything that I told you, this is every module. You’ve got admin, marketing, acquisitions, finance, management, and liquidations. That is all in the course. I had a couple of people asking me about that in the email. I figured I would do that, go over it, and take you step by step. There are around 100 videos in the course. They’re all probably 5 to 10 minutes. They’re not super long, but they’ll take you through all of this process. You have to go to StacyRossetti.com and you’ll see the courses and the deal analyzers there.
If you do the course Super Simple Self-Storage, get the deal analyzer, and show up to the Monday nights, this is going to help you over the course of the next couple of months get an idea of how to do this and also get you educated enough so you can make offers. Your goal is to get something under contract within the next 90 days and doing all three of those will help you through that process. I hope that you all check that out. I saw one extra question here that I’m going to hop off. “I’ve finished the course. I used Crexi and got my card for skip tracing.” We have Kim on staff and she does our skip tracing for us and she uses Whitepages.com.
If you get the information off Crexi and it’s not working, then try Whitepages.com and see if that works. We use another company. It’s called IDI. That is next level skip tracing company where they have to check your background and stuff like this but you can get access to people’s information if you need that. I would try Whitepages and if not, I’ll try IDI. It’s going to be more expensive to do IDI. Whitepages is a couple of dollars or something. I appreciate you guys hanging on until the end and I will see you guys at the next episode. Take care.
Important Links
