Some deals may not be right for you but that doesn’t mean you still can’t close and earn some profit. Introducing, wholesaling self-storage! In this episode, your host Stacy Rossetti breaks down how to wholesale your self-storage facilities. You don’t need to pass up a good deal. It may not be right for you, but it could be the right one for someone else. Stay tuned as Stacy defines wholesaling and gives super helpful tips on how you can get your foot into investing in self-storage. Grab your pen and take notes as she breaks down contracts, the marketing package, and more!
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Wholesaling Self-Storage
I have been investing in self-storage and real estate for several years. I’ve been teaching people how to invest in real estate for many years. I’m the type of person that if I know something works, I’m going to share it with the world. I’m an open book and I love teaching. I found out over the past couple of years how much I do love teaching. I’ve been teaching for a while. In the beginning, it was a lot of one-on-one coaching and some workshops. Now, I’m doing this coaching and I love it. It brings me a lot of joy.
I’m here to help you with your storage investing business. I’ve been doing this for years. In October of 2022, we’ll finish our fifth year. We’re in the process of buying our eleventh storage facility. You guys tell me if you all are in the real estate investing world, anything in investing is always like the eleventh hour when you’re trying to close a deal.
A Means To An End
A couple of things came up, luckily we figured all those out and we’re going to close. That would be number eleven. I don’t know how much storage facility square footage I have. I have no idea. I don’t know how many units of doors I have. I lost count. I’m not one of those people that’s going to be like, “I’ve got 100,000 square feet of storage facilities or anything like that.” I don’t do that.
For me, storage investing is a means to an end. A storage facility is only a product to me. When I was rehabbing a house, it was only a house to me. It wasn’t this thing that I loved and cherished or whatever. A storage facility is a means to the end. My end is spending as much time as I possibly can with my daughter, Lillian, and my husband, Pete, who is the manager of all of our facilities.
My personal goal is to spend as much time as I possibly can with them. I don’t want to miss anything with my daughter at all. We lived together in a tiny RV. We traveled the country together and we managed our storage facilities. For everybody here that already knows me knows that story. For us, I invest in self-storage for the purposes of lifestyle by design. Some people out there in the investing world teach you how to invest in storage as a business.
You want to 1031 exchange and everything, grow bigger and bigger. You want $50 million, $100 million, or $200 million worth of storage. That’s awesome for some people. That’s not how I am. For me, it’s all about owning as much as I possibly can but doing the least amount of work that I possibly can. That’s my personal goal. I would love to know what your goals are and why are you interested in self-storage because I love to hear other people’s stories.
This is a good segue to the announcement that this live webinar that I do every single Monday is also now a show. We are going to be releasing our first show. We are also going to make it into the Storage Nerds Podcast. I’m excited about that. I appreciate everybody for hanging in there and getting to know me. I am here to help you get started and get your foot in the door in self-storage investing. We started out with small storage facilities. Now, as we grow and get bigger, the bigger the storage facilities get.
Storage investing is a product that we own that provides us the lifestyle that we want.
We will be 1031 exchanging some of our facilities into bigger facilities. There’s nothing wrong with that. We will be 1031 exchanging some of them into different types of property or whatever we’re going to do. Our overall goal is not to have $200 million worth of storage. Our overall goal is to work as little as possible, to travel and spend as much time as we can with our daughter, Lillian. She is so cute right now and I don’t want to miss anything that she’s doing. Everything that she is doing, I’m like, “I love her so much. I want to spend as much time as I possibly can with her.” I’m the type of person that when I’m not with them, I feel like part of me is missing. That’s how I feel. We work best together as a family.
I see that we have a lot of people hanging out with us. I appreciate you guys all hanging out. We have people from Alabama and Charlotte. We have Charles from Birmingham, and some students coming on. “I’m trying to find the best real estate investment that has somewhat a passive income and provides a return that will support me in my retirement.” It’s doable because this is exactly what we do.
Storage investing for us is a product that we own that provides us with the lifestyle that we want. Whatever that journey and goals are for you, storage investing can do this and you can start. There’s nothing wrong with you starting with a small facility and working your way up to whatever size facility that you want.
Other Ways To Look At Deals
We did what we call driving for storage. If everybody follows me, you guys all know that this is how I find our facilities. I took a whole handful. There are ten of us that went out and we’ve been driving for storage on our in-field training data. This is part of the coaching program that we have for Storage Nerds. We went to 10 or 12 different storage facilities.
There are so many different types of storage facilities. We found a warehouse that was abandoned and it was only 15 acres. It would be a perfect place to either do a conversion or knock it down and build some more if you want to do that. We found truck parking. When I teach storage investing, we always talk about parking as well. We found a huge lot. All they do is park tractor-trailers. It looks like it was not doing very well. It’s abandoned.
We stopped by that, took a look at it, and assessed how many tractor-trailers we could put there. If you can put a tractor-trailer, then you can put up a whole lot of boats and RV there too. That land was prime perfect in a little tiny town. It’s like a Northeastern type of town where you could be fencing and put some boat and RV storage. It’s already a commercial property and zoned for parking. Why not get out there and buy that property, fence it in, and park some boats and RVs there as well.
Keep in mind that we look for storage as well. The reason I took them to many different types of facilities is because I want you to keep in mind all the different ways you can invest in self-storage. One of the facilities that we went to was a very big franchise where they owned probably 10 or 12 different storage facilities. They own them in the Southern part of New York and maybe the Eastern part near Philadelphia. It is in the bigger secondary towns. It’s where they owned all their facilities.
They had this one random storage facility. It’s 1 to 2 hours away from all their other storage facilities. It was out of the way. When you think of managing the storage facility, your manager can manage X amount of storage facilities, on average, 1,000 doors. You should be plotting those so that they’re near each other so that he does not have to drive 45 minutes this way, 45 minutes that way, and 45 minutes this way.
This one was 1 to 1.5 hours away from all the other storage facilities. A lot of my students said, “They already own ten facilities. Why would they sell?” My answer to that was because this one is causing them pain and suffering. They have that one boots on the ground person or that one operation person that’s managing that facility. Sometimes, you could look at facilities that way. We have one like this too. We have 4 or 5 that are maybe 30 to 45 minutes from each other. We had this one that’s an hour and a half and it’s totally out of the way.
It’s a pain in the butt. Our idea is to sell that one because it is taking our boots on the ground person 1.5 hours to get there and all day to work there. It’s not fun for him. Take into consideration that when you look for storage, another one that I took them to is another storage facility that also owns 10 or 15 storage facilities in the area. Most of their facilities are 4 to 5 stars on their reviews. This is an awesome facility and it’s great.
We went to one facility where it was barely three stars. It was like 2.75. We have this one facility that was annoying. For some reason, every once in a while, it gets some horrible review or something. It’s like, “Dump that sucker off because it’s bringing everybody else down.” When you look at storage facility owners that have a lot of storage facilities, if they’re getting bad reviews, maybe they want to dump that one-off.
The one that we bought in Florida, the owner owned three different storage facilities. Two of them were right around the corner from their house, and then the one that we bought was a 45-minute drive. They said, “This one is too much for us to handle.” They sold it to us. My point is I was trying to take all my students out and show them all the different types of storage facilities out there, all the ways that you can look at storage, land, warehouses, or whatever you can look at. Keep your mind open to everything and keep your eye open to these other ways that you could look at deals that you can find. There are a lot of facility owners that might want to dump 1 or 2 facilities because it’s causing them a little bit of pain. That’s tip number one.
What Is Wholesaling?
Tip number two is I wanted to talk about wholesaling self-storage because I do coaching calls with my students all Monday afternoons, which are my favorite days. We have one guy. He has a great deal that would be a good deal if you add it on. As is, it’s an okay deal. It’s an income-producing property. He got it under contract for $600,000 and it’s worth $600,000. It’s an income-producing property. There’s a little bit of space to add more units. If you added those units, I think it was like 100 units, that would almost double the value from $600,000 to $1.8 million if not more.
If you spent $250,000 to $300,000 to build these units, you would have a facility that’s worth $1.8 million-plus. I know this facility very well because I have a facility like this. I tell him, “This is exactly the same type of deal, but you have to know that going into a deal like that, you have to add units.” He does not want to do that. He wants to buy an income-producing property that’s ready to go. Maybe it’s 75% or 100% full, but the rates are low or something like that. That’s what he wants.
It’s a very good deal and somebody out there will want to buy this deal. I want to make sure that he doesn’t pass up this deal. I’m telling him that he needs to get that deal under contract and wholesale it. That is what he needs to do so. Now the question is, what is wholesaling? That is what I wanted to get into now.
Wholesaling is basically when you are the middle person between the buyer and the seller.
My personal opinion is you never want to pass up a deal that’s an okay deal. For you, it’s an okay deal but for them, maybe it’s a good deal. I got off a coaching call with another student. He’s wholesaling storage and I told him exactly the same thing. He’s getting a lot of deals coming in. People say you can’t find deals and he’s getting so many deals. He handed off 8 or 9 deals to a couple of students in the group. He was getting in some deals, and the students that he handed those deals off passed on those.
I said, “Even if a student passes on those deals, somebody else may want to buy it.” Don’t ever think that just because one person doesn’t want to buy it. Another thing too is that the lender that was going to fund this deal was the one that was exactly like mine. He talked to two lenders. They require 20% to 25% down because of the numbers. As is the numbers are okay, so they require a bigger down payment. He’s like, “I don’t want to do a bigger down payment.”
Just because those two lenders say that it’s a bad deal doesn’t mean it’s a bad deal. Those lenders were maybe ultra-conservative. They may not be the right lender for you as well. In the case where you’re like, “I know this could be a good deal, but it’s not the deal that I want,” which is a lot of deals that you’ll come across. Don’t pass up a good deal. Let’s get it under contract and let’s wholesale it. I wanted to get into what wholesaling is and how you can wholesale self-storage.
Let’s hear from everybody that’s in the chat or the comments. Can you please do me a favor and put like, “I’ve wholesale deals before I understand what wholesaling is,” or “I have no idea what wholesaling is at all. What is it? I’ve never even heard of it before,” so I can get a gauge on who’s wholesaling and who isn’t wholesaling. I would love to know that.
Charles says, “I have no clue what it is.” I love it when I get to teach new stuff. What we’re going to do is I’m going to share my screen. For everybody that’s reading, you won’t be able to see the screen but I’ll talk you through everything. You can always go and check it out on YouTube later if you want to do that. What is wholesaling? Wholesaling is when you are the middle person between the buyer and the seller. This is you in the middle. You have the buyer on the right, and you have the seller on the left.
The way it works is when you start getting out there, marketing and looking for storage, you’re going to come across deals that are not perfect for you, but you don’t want to pass those up. Don’t be afraid of saying, “I think this is a good deal. I know somebody is going to want to buy this. I’m just not the person that’s going to buy this.” People are buying stuff at crazy prices right now, low cap rates and everything.
How To Close Deals In Wholesaling
If you do come across a seller that wants to sell, don’t pass up somebody that wants to sell, and if you can at least get a good number. If it’s a crazy number, nobody’s going to buy it. If you can get it at a reasonable price, somebody might want to buy it. The way that it works is as the person in the middle, you are the one that’s doing all the marketing, talking to all the sellers, and trying to find somebody that wants to sell. Your job is to talk to people and to get them to try to sell.
You make the offer and once you make the offer, the seller is going to accept or not accept. If they do accept, you’re going to put that property under contract for a certain number. Let’s say you call up an owner and you talk to the owner. The owner says that he wants to sell his storage facility for $1 million. You say, “$1 million. That’s a great deal. I’m going to put this thing under contract.”
You’re putting a facility under contract for $1 million. You have the contract with the seller. Once you get it under contract, your due diligence period or inspection period or the period that you need in order to find the buyer is going to probably be somewhere between 90 and 120 days. You give yourself several months to be able to go out and find a buyer, and then allow the buyer to be able to close on that property in the amount of time that they need to close.
If you go out and find a buyer for that property and they’re going to go to a bank, that bank is probably going to need 90 days to close. You give yourself 30 days to get out there and find the buyer, and then you give yourself another 90 days for that buyer to close. Typically, between 90 and 120 days is what you’re going to put the contract under. It’s a 90 to 120 days contract to close. It’s what it’s going to look like.
You are not a licensed realtor. Most of us are not licensed realtors. By law, you cannot sell somebody else’s property. There are several states like Oklahoma and Indiana where it’s illegal to wholesale. Anybody can google it and tell you which states where it’s illegal to wholesale. I think there are 4 or 5 states. There’s not a lot but make sure that you find out which states those are.
If anybody knows by chance that you can’t do it in this state, let us know. I can’t remember which ones they are but there are 4 or 5 states where you cannot wholesale. In all the other states, you can wholesale. What that means is that you’re not licensed to sell the property but what you do is you give yourself equitable interest in the property when you’re purchasing it. You give yourself what’s called equitable interest.
You’ll do that by putting down earnest money on the property. You can have $10, $100, $1,000. Typically, it’s 1% but it could be less or more. You want to give yourself some equitable interest in the deal. You do that by putting down earnest money. That is how you’re able to wholesale your deals. I put the offer in for $1 million and I gave myself four months to find a buyer. I made sure that I put 1% in equity. Now I have equitable interest in this deal. Now, I can go out and try to find a buyer for the deal. That is where you are going to create what’s called a marketing package or wholesaling package. This marketing package on the commercial side is completely different from the residential side but picky. On the commercial side, we’re picky. We want you to do all the work.
What happens is let’s say you put this marketing package together, you go out and post out in Facebook groups and you say like, “I got a great deal. Is anybody interested?” I’m sure if you were a member of our Storage Nerds Facebook Group, you’ll see these types of posts coming up. Somebody is always pitching the deal that they have under contract. Those people are wholesalers trying to wholesale somebody else’s property.
You will get out and start pitching it. What will happen is that you will find people that are interested like, “Send me the information.” When I wholesale deals, I don’t randomly send out information to anybody and everybody because you will get like, “We want information.” I don’t like to randomly send it out to people that are maybe interested or maybe not. They just want to see the deal and see how you put the deal together or whatever.
What I do personally is let everybody know like, “I have a deal that I’m going to be wholesaling. I have it under contract. It’s a great deal. It’s in this whatever market that it’s in. If you’re interested, please sign up for this 30-minute webinar where I go over the deal.” I do pitching webinars. You know me, I like webinars. I’m always doing webinars. That’s how I do it.
Everything is negotiable.
What you also could do to pitch this deal is do a prerecorded video about the deal, post it out, and then you could see if anybody is truly interested in the deal. There are a lot of different ways that you can do it. I’ve seen a couple of wholesalers as well that what they’ve done is they have a website with a back office. They will give you a log-in. They’ll say, “Are you interested? No worries. All you have to do is fill this web form out.” Why do they make you fill the webform? They want to get your information so they can put you into their system so that they could email blast you with any deals that they have later.
That’s what they do. They will say, “Fill this web form out. Once you fill it out, you’ll have access to the back office, then the back office will have access to the deal.” All the sophisticated wholesalers create a nice back office where they can collect your information and then later, they can email it out to you as well. I get emails for storage facilities from a wholesaler because I’ve opted into their systems, which is something that I would recommend for everybody to do because not only do you get to see the deals coming up, but you also get to see how people are wholesaling their deals. You get to learn from them.
Once you’re out there pitching this deal with this amazing wholesaling package, eventually, you’re going to find a buyer. The buyer is going to be like, “I’m interested.” You guys are going to create a contract between you two. You have a contract between the seller and you, and you have a different contract between the buyer and you. You have two separate contracts. You could do this with an addendum if you wanted to, but I like to do two separate contracts. It keeps it nice and clean.
Ways To Earn Money In Wholesaling
You’re the buyer to the seller on that contract, and then you’re the seller to the buyer on the other contract. You’re just flipping the names. That is what you’re doing. That is the bulk of wholesaling. You’re the middle person. When you sell that deal, you’re going to make a wholesale fee. On the smaller deals like less than $1 million on average, you could get a wholesale fee.
In a bigger deal, you could get a wholesale fee. I have a student where she’s wholesaling a facility that’s over $3 million. She has the option of either getting a wholesale fee, which would probably be $150,000 to $200,000, or she has the option of getting equity in the deal instead. You could wholesale a deal and not get a chunk of change back. You’re going to make $100,000 to $200,000. You’d rather just get equity in the deal, and then that way you’re paying taxes on whatever you get on a quarterly basis instead of this huge $150,000 paycheck that you’re going to get. You can make that much money on wholesaling self-storage.
When you wholesale it, you’re going to wholesale it for a little bit more than what you put it under. You could make 1% to 4%. That’s the typical numbers in the industry, 4% being a smaller deal up to 1% being a bigger deal. The bigger the deal, the less money. If it’s a $10 million deal, you’re not going to get 4% or anything like that. You’ll probably get 1% or whatever. If you have a $1 million deal, you might be able to get 4%.
I’ve talked to others in the industry and asked around like, “What’s a typical fee that you pay wholesalers or people that are doing acquisitions for you?” They’re saying typically 1% to 2%, but they’ll go up to 4% because it’s what a realtor would make if they were doing the deal. A lot of times, people are okay with that. Hopefully, that makes sense. You are the middle person between the seller and the buyer. That’s wholesaling. “It would be based on the value of the deal.” Exactly, Jasmine.
It’s based on the value of the deal, but it’s also based on what you and the buyer agree to. It’s all completely negotiable. What I say is don’t be greedy because you’ll be able to get more deals like this. Don’t be like, “I’m willing to do this deal if I make $100,000, $200,000 or whatever.” Sometimes I wholesale them to get it off my plate and move on to the next deal. That’s how you think about it. Don’t be like, “Every deal, I’m going to get 4%.” It doesn’t work that way. Everything is negotiable and it’s a case-by-case study.
That is the essence of wholesaling. It’s not difficult. I know a lot of people are like, “I don’t know what Stacy’s talking about. I just wanted to come here and do some storage investing.” This is 1 of the 6 different ways that you can invest in self-storage. If you follow me on a regular basis, you know I’m teaching the six different ways that you can invest in self-storage. One of them is wholesaling. We’re doing a deep dive into wholesaling now. I want you to have your eyes open to other ways that you can invest in storage outside of just buying a property with 20% down income-producing property and you make cashflow on it. There are a whole plethora of ways that you can invest in self-storage.
The Marketing Package
Let’s get into this marketing package. When you think of putting together a marketing package, how are you going to market this deal that you have under contract? The way that you put a marketing package together and the way that you think about it is whatever you need to make a decision on whether or not it’s a good deal is the same exact thing that the buyers and lenders are going to need.
What you need to be doing to put a wholesale package together, this what I teach all my students and what I do, is you need some Cloud-based program where you can start a folder. Google Drive is what I use, but you need to have a Cloud-based system where you can start a folder. That folder name is going to be like Edmondson’s Property or whatever you want to call it. I usually call it the name of the city like Nashville or whatever it is.
You start that folder and then inside that folder, you’re going to have subfolders. You guys could start thinking about this. What do you need to decide whether or not it’s a good deal? If you were going to go out and buy a storage facility, what would you need to decide whether or not it’s a good deal?
That’s the question of the day because whatever you need is exactly what everybody else does. It depends on what type of facility that you have under contract. If it’s an income-producing property, you’ll be able to get a lot of stuff because they’ll be able to produce a lot of documents for you. If it’s a mismanaged facility, they may not be able to produce everything that you need.
We’re putting together a $3.6 million facility. It’s an income-producing property where the owner puts everything into his ledger. This is a mismanaged property. We can’t take the ledger and put it into Google Drive. We can’t do that, but what my student did because she’s wholesaling this deal is she took pictures of every page of the ledger, and then she put that those pictures into Google Drive.
She had a folder of ledger pictures. That’s where all the pictures of the ledgers are that she could go through and see. You will need a P&L and a balance sheet if you have access to this. You would need good pictures of the facility. It’s not like I’m driving by and taking a picture of the facility. It’s getting out and taking pictures because some of those pictures may be used by the buyer later for the website or something. You want to get nice pictures, not crappy pictures.
It frustrates me when people go and look at facilities and they’re driving by. Even my acquisitions person, I was like, “Chris, I need good pictures. My lenders don’t want to see pictures of you sitting in a car and you see the car window or something.” You need good pictures because you’re trying to make this storage facility shine. You’re trying to pitch this storage facility to a buyer. Crappy pictures are not going to work.
Step one is learning how to wholesale and understanding the concept of wholesaling. Step two is putting this package together.
When you go online to the MLS or you go to Zillow and you see crappy pictures of the property, what do you do? You skip past that one. If you want to buy it, you skip it like, “I can’t deal with that.” It’s the same concept with commercial property. Also, videos of the property. You want to make sure you get very good videos of every single piece of the property, even the vacant land. What’s good is spanning out around so we can see what the whole world looks like around us. What does this property look like from the ground?
You are the eyes and ears for the buyer. You want to make sure that you’re getting everything that you possibly can for the buyer. You need a rent-roll. Sometimes, with a mismanaged facility, they don’t have a rent-roll. In every facility we ever bought, there are hardly any rent-rolls. We bought an income-producing property, and that one had a rent-roll. Other than that, that’s the very first one we ever got that had one. Mismanaged properties, you do not get rent rolls, but income-producing properties, you can get rent rolls.
You want to get the lay of the land. What do the property borders look like? You want property borders. You want to be able to show, is there a room to grow on the property? Where are the boundaries of the property? You could get copies of surveys, plots or any type of easements. You want to get the land portion of it because as storage facility owners, we want to know the type of opportunity. Can we raise the rent or can we add on? We want to be able to see how we can do that. That goes back to competition.
Can we raise the rent? I want to know when I’m purchasing a property, what does the competition look like? I want pictures of all the competitions. I want to know what their facilities look like. I want to know what they’re charging. That’s why on our deal analyzer for Storage Nerds that all the students get, there’s a competition tab. This is where you get in and you start going through, you put in line by line, all the competition within, depending on if you’re 3, 5, 10 miles or however far you want to go out.
That’s how you’re going to determine if you can raise the rates because when you make your executive summary, this is going to be a PowerPoint presentation that you’re going to make for everyone when you make this executive summary or PowerPoint presentation, whatever you want to call it. In there, you’re going to give all of the reasons why people should be buying this facility. In your executive summary in this nice presentation that you put together, you’re pitching to everybody why this is a good deal. It’s the investor pitch or the buyer’s pitch.
With the fund that we’re putting together, we had to put together an investors presentation. It’s the same exact thing for wholesaling. As a wholesaler, you are going to be pitching this deal to everybody so you want to make this presentation. In the presentation, you’re going to have the executive summary. You’re also going to have market data. This is where you want to put your market data. Is that a growing economy? Is it a declining economy? Is it stabilized?
You want to have a picture map of the entire town, and where all the developments are. Where is it growing? Where are the new areas? Is it not growing or whatever? In our presentation, we have this map of the town. We point out all of the different bigger companies, developments and things like this. You want to show that and you want to also show the data of that town. You can do that by using Radius Plus. There’s are a lot of different ways that you can get that market data.
Another thing that we need is the unit mix and the deal analyzer. The unit mix is like, “What are all the different types of units that they have and how much are they charging for each unit?” You want to make sure you have that on a spreadsheet or some way showing so that they can look and see that. For all deal analysis on storage investing, you need to be able to show unit mix. You must have this to make a decision.
Whatever deal analyzer that you use like Storage Nerd or any other one that you use, you want to make sure that you have that deal analyzer in the Google Drive folder so that you can show them what the numbers are. You’ll also put the numbers into the executive summary and explain the numbers. I like to put that deal analyzer right in there. I put it as a PDF version. I don’t want them to have the actual built-in analyzer. They can take that and do whatever they want with it. I put it in as a PDF. They can go through and look at all the different numbers and take their deal analyzer. Whatever one they use, they can run the numbers based on what we have in the deal analyzer.
That is the marketing package. This is what I would need personally to figure out if it’s a good deal or not. This is the stuff that I look at. There might be some odds and ends stuff that comes up or whatever but this is what you need to determine whether or not the deal is a good deal. It’s also what you need to create an awesome marketing package for the deal that you’re going to wholesale. These are exactly the same things that your lender is going to need if you find a deal. If they are going to want to fund the deal, this is what they’re going to ask for.
On top of that, this is what your buyer is going to need if they want to buy the deal from you. This is what your partners are going to need. When I talk about how to wholesale the deal, step one is learning how to wholesale and understanding the concept of wholesaling. Step two is putting this package together. This package is what you’re going to need to determine if you want to keep the deal or wholesale the deal.
That is wholesaling in a nutshell. Remember what I said was that once you get this deal under contract with the buyer, it’s their job to find the money. You could always be the middle person that talks to the seller and make sure you get all the stuff from them, or whatever they need. You’ll be that middle person that’s doing all that. You’ll help them to take it through all the way to closing and get that thing closed.
I’m buying this one from this wholesaler now and this thing that came up. I was like, “What? This thing came up. This should have come up months ago.” I was pissed about it. The wholesaler stepped in and he started working his magic. He took care of the entire thing so that we could close. A wholesaler is there. If you’re going to be wholesaling a deal, your job is to make sure the deal gets closed. If you were a realtor, you would be the person in the middle putting up with all the BS that goes on trying to close the deal. It’s the same thing that a wholesaler does.
The difference is that wholesaling on the commercial side, you can make a lot of money or you can get some equity split. As a wholesaler, you could get a part of the deal. As a realtor, you can’t get a part of the deal. You can only make your fee and that’s it. You got to share your fee with the broker. As a wholesaler, you could be like, “I found this deal. Do you want it? Let me have a little cut and I’ll give you this deal.” That’s why I never got my real estate license, so I can do stuff like that.
Q&A: Tax Returns, Finding a Buyer, Separating Income, and More
Ask questions and I’m going to stop share. Let’s see what questions we have. It’s Q&A right now. “When you have no rent rolls, what do you use for their taxes?” I forgot to put taxes on there. Put tax returns on that list. That’s my fault. If you can get tax returns, that would be awesome. That’s P&L, rent roll, balance sheet, and tax returns. That’s the typical stuff that you would ask for if it’s an income-producing property. If it’s a mismanaged property, you probably won’t be able to get tax returns. Sometimes, but not really.
On a mismanaged facility, you’re not going to be able to take your deal to a bank to get a loan. You’re going to have to learn how to raise money. That’s the hard part about mismanaged properties. If 75% are full, you should be able to get tax returns. If it’s less than 75%, typically I buy stuff that’s 50% or less full, most of the time, they’re pocketing that money. I’m not going to have anything to show for it. Try to get tax returns if you can. If you can’t, you have to know that when you’re wholesaling the deal, you’re wholesaling it to somebody that has cash of their own, or they know where they can get private lending because going to a bank is not going to work.
If you’re going to be wholesaling a deal, your job is to make sure the deal gets closed.
What they’ll do is they’ll come and bring the cash in. They will partner with somebody to bring cash in, whatever they’re going to do, and then in a year or eighteen months, they’ll refi it out and they’ll get it into a real big clump once they get that thing up and running and they could show some income. If you’re buying a property or if you want to wholesale a property that has no way of showing how much money is coming in, but you know it’s a good deal based on the opportunity that it could be posing, then you know that you’re going to have to find a private lender or fund it yourself to do that type of deal.
“If you can’t find a buyer, are you on the hook for the $1 million?” I can’t afford $1 million. “Are you getting multiple people to get them to buy a property?” No, when you put the thing under contract, you’re giving yourself what we call a due diligence period or an inspection period. That’s the time that you can take to find a buyer. Let’s say you close in 120 days and you do an inspection period of 120 days or 90 days, you have that much time to find a buyer. You want your inspection period or due diligence period to be as long as it possibly can.
Inspection periods in commercial real estate, you can do 60 to 90 days. The bigger projects take forever to close. Typically, people are okay with doing 90 days of closings. I’ve never had anybody say like, “I only want you to have ten days of due diligence.” You need to have 30 to 60 days or longer of due diligence. You put your closing date to that time.
When you’re doing super huge income-producing properties, they may not allow you to have that much time, but they will give you at least 30 to 60 days typically. That would be your period when you would go out and find that buyer. As a wholesaler, you got to be rocking and rolling. You can’t be like, “I got 60 days. I would fall it around.” You’re going to need that time to go out there and pitch to find that buyer.
“Are taxes okay for housing?” Yes, taxes are great. If it’s an income-producing property, you should be able to find this. If it’s a mismanaged property, you might not be able to get any information, then you know that you’ve got to find somebody to buy that with cash. What I say too is if you go out there and you start looking for deals, you’re doing all the things that I tell you on how to find deals, then you’ve come across one that you’re like, “I don’t think this is something that I could possibly do,” contact me. I will help you to find a buyer. I promise.
As long as it’s a good deal. If it’s a crappy deal and it’s way too high, nobody is going to buy it. Some owners have the weirdest expectations for the deals to close. If you come across something that’s like, “It’s a reasonable deal but this is too much. It’s not what I’m looking for.” Maybe it’s a mismanaged facility and you only want an income-producing property, we still want to put that thing under contract. Contact me. We can partner. We can do what’s called co-wholesaling, and I can help you to find a buyer for that deal because I got a lot of people that want to buy storage facilities right now.
“What about a property that is offered along with other items? She’s offered apartments and a club because it’s all in one thing.” It’s the same concept. You still need to learn how to run commercial deal analysis but you have three separate products. You can’t be like, “All right.” I talked to a student where he has a storage facility and six houses that he rents out. He wants to sell all of those. He said that he knows he makes $425,000 a year, but he’s not 100% sure how much money the house makes versus the storage. You need to be able to separate that money out.
Rental income or that kind of income is separate income from a storage income. The reason why is because you want to know what the price per square foot is in the storage world versus the apartment world. You can’t combine that because it skews the numbers on what your opportunity could be. You’re going to have to separate all that out.
If he has a storage facility, apartment building, a club or whatever you said, how much are those making per year? That’s what you need to know. I also wanted to make sure everybody remembers that the waitlist to Storage Nerds is opening up on January 4th, 2022, and the doors close on January 21st, 2022. If you want to get on the waitlist to talk to me about my coaching program, Storage Nerds, then you need to get on the waitlist.
The coaching program is opening up for a couple of weeks. I only opened it up three times a year. During the time that it’s not open, I’m focusing on helping my students get storage facilities under contract, and helping them get the deal closed. What’s coming up is the Storage Nerd doors are opening and I’m looking forward to that.
For everybody, in the meantime, if you’re interested, you also have access to Super Simple Self-Storage. It is my online course. If you’re the type of person that’s like, “I want to do it alone,” or “I want to get started now but I’m waiting for the coaching program to open,” make sure that you check out Super Simple Self Storage, and you can get that there. You can get all that by going to StacyRossetti.com.
Here is where you will be able to find Storage Nerds where you can get on the waitlist. The online course is where you can sign up for the online course. We do have the bootcamp coming up, but only students can come to my bootcamp. My bootcamp is on January 22nd and 23rd, 2022, which is right here, Getting Started in Self Storage.
It’s two full days of getting started in self-storage. I’m going to take you through everything. You get out there and start rocking and rolling, but only students of Storage Nerds can attend that. Lots of good things are coming up. I appreciate you guys hanging out with me. I look forward to seeing and talking to you guys next session. Take care.
