How High-Income Investors Are Quietly Building Storage Empires

One of the things I've noticed is that passive investors want to invest.

But they really don't know what they're investing in.

So I want them to go through in our community the same exact training and education that someone who's going to be a self storage owner operator goes through.

Because I want to bring them together, I want them to understand what the deal they're investing in the same way that the guy I teach who's doing actually the hard work, the really hard part is out there, the grind, going out and finding the deal and evaluating underwriting, you know, closing it.

And I want to bring them together on our platform.

Welcome to Truly Passive Income.

I'm Neal Henderson.

And I'm Clint Harris.

And today's guest is Joe Downs.

Joe's the co founder and CEO of the Bellrose Group.

It's a commercial self storage investment firm focused on buying from mom and pop owners and building niche strategies within the niche.

With over 20 years in commercial real estate, Joe has reinvented himself through multiple market cycles from financial advisor to distressed debt investor to storage operator.

And today he helps investors access double digit returns in storage.

And he is developing large format pro storage units built for business owners in booming E commerce and others in the economy.

Joe, thank you for joining us here.

I'm really excited about this conversation.

How are you today?

I am great.

Thank you so much for having me.

Yeah, absolutely.

We were just talking and saying it's actually been a while since we've had another storj pro on the show and it was actually someone that you're already working with and doing a lot of great things with and somebody that we hold in high regard.

So very excited to have you here.

Tell us a little bit about your background for everybody that doesn't know who you are and what you're up to.

Well, I just, I heard you read through it and every time I hear it it's like that if you.

A little PTSD of all the things you had to go through to get to where you are today.

Right.

But yeah, we didn't.

That resonates.

There's some scars in that paragraph.

Yeah, but.

And, and I've had this conversation with others, but those scars mold you to who you are today and you carry those positive.

And usually it's the negatives.

Right.

Cause there was a lot of reinventing going on and from financial advisor to this to that, you know, to get to here, with the exception of one company I still have.

But there's scars from that because I don't actually that's what led me to Self Storage was my distressed debt company, which we still have.

But there was a period of time where there was regulation.

The CFPB was created, the Consumer Financial Protection Bureau, you guys are familiar with.

And that put, put some hurting on debt sales from banks.

So I was reinventing again, all of my reinventions before reinventing myself.

I mean I'm not an inventor, but reinventing myself, I've, you know, landed in a new place.

It's rare that I actually have one still existing, but we just had to survive it.

But that's what led me to Self Storage was.

Oh boy, this is not a business, this is a hobby.

I gotta go find a business.

And who you appropriate or you you mentioned was your last guest, you didn't say his name, but that same person, Mr. Scott Myers is who sent me an email and I guess I was on his list somehow, somewhere, some way, whatever.

And the email that I opened, he got me to open it was.

It blew my mind.

There's a paragraph in it that said 80% of all storage facilities self storage facilities were owned by mom and pop.

And knowing nothing about self storage prior to that email, like nothing never rented it even I was shocked.

I thought public extra space, Cube Smart were the market.

And here I'm learning in this email.

No, they're 20% of the market now.

They're, they're the market in the major metros, but they're not the market.

And that just screamed opportunity.

Mom and Pop screams opportunity to me.

And that's, that's how I landed in it.

That's.

I was tell my kids all the time, be curious, not judgmental.

And the curiosity hasn't killed me yet, but it led me here.

Yeah, it's surprisingly how fragmented of a market it really is.

And with so many mom and pop operators, one of the things about that is that they typically are not great at marketing.

So I don't think people even have the visibility to understand that the vast majority of these are not something you even know about.

Some of these places you find they don't have a website, nobody's answering the phone.

They haven't had, they've been full for 20 years and they haven't had any turnover.

But they also haven't increased the rates.

You know, you got doors rusting shut on some of them.

Every facility out There seems like they have somebody that's been in there since day one and maybe they opened 28 years ago.

It seems like it's quickly consolidating.

But the reality is as you're having that roll up and things are moving towards the operators that are creating a conglomerate and bringing a lot of these operators together, that there's a value roll up and there's a bump there and there's a, there's a cap rate compression that's happening as well.

So it's going to take a long time to get a lot of this fragmented market to really consolidate.

And it seems like it's a little bit of a gold rush in what honestly is considered a pretty boring business.

Like the idea of storage.

You're just renting someone a box of

air, metal box, to be honest, what

we say it's very important.

You're in a box, a metal box in there.

There's nothing inherently special about that.

But I think the business of storage right now is very, very intriguing and it's moving very rapidly.

It's been fun to see the transformation.

Go ahead, please comment.

I just wanted to piggyback on that.

I read an article a couple months ago, I've been probably been saying that for a couple months within the last year from Forbes.

It said two and a half million cash flowing businesses will change hands in the next 10 years because they're all owned by people 65 and, and older.

That describes a major segment of the self storage mom and pop industry.

Like the segment.

So there's another saying or this saying I, I like to use is if you want to beat Tiger woods at something, you can just don't play him in golf.

And maybe that's Scotty Scheffler today, but you get the point.

And so the who's the Tiger woods and the Scotty Schefflers in self storage.

Neil's raising a hand.

So maybe, maybe it's Neil.

No, no.

Sorry.

I don't want to play you in golf either.

Yeah, it's not me.

I'm gonna pause here for just a second.

Sorry.

We should have delivered this before we started.

Let's pause for a second because we'll edit this out.

Clint and I make hand signals at each other to let each other know who's got the next question.

You did tell me that actually.

Okay.

I thought I was trying to make a funny joke that you were raising your hand to include yourself.

With Scotty.

With Scott Scheffler.

It's okay.

All good question.

You guys go on Start, start at

the top of that response and keep, keep going.

You were on, there were some nuggets in there.

Keep going Joe.

So there's a saying that I have, if you want to play Tiger woods is something you can just don't play them in golf.

And for us Tiger woods is cube smart, extra space, you know those household names.

And then actually there's a layer of names you guys might know, but maybe your listener wouldn't because you gotta be in the space to know the names.

Like you see em at conferences but they're, you don't see their names on the sides of buildings.

And there are the institutional players, but they operate right now.

They used to operate in the 50,000 square foot facility and up, now they're down to 40.

They might even be encroaching below 40.

But you're fairly safe below 40.

Or let's, let's say this, you're very safe below 30,000 square feet.

You buy a 30,000 square foot, I'll bet you 95 plus percent of storage facilities that are smaller than 30,000 square feet are owned by mom and pops and they're cash flowing.

And that's what I mean.

And that's what does that represent in number of facilities in the United States?

I don't know, minimum 15,000, maybe up to 30,000 somewhere probably somewhere in the low 20s.

20 to 25 is where I'd say that number of facilities lives next 10 years.

Ample opportunity.

And when you to tack on that, you're right, you nailed it.

There's nothing special about it except there's some unique things about it.

Like you know, if you think about a hotel, they manage the rates by the night.

That's super operationally intensive.

On the other side of the spectrum you have multifamily, you have an annual contract, storage, you're managing monthly.

So you can, you can start to see trends and, and, and adjust as you go within the year.

Not as, as, as intentional, as nightly, not as unintentional, as, as yearly.

Not.

You're not stuck in something.

First time buyers, first time buyers, SBA, they get to use the SBA for 10% down.

They can put 10% down.

Just look at simple math.

Million dollar facility or million dollar storage facility or million dollar 20 unit multifamily.

Right?

20 unit multifamily.

I need 250 to 300,000 down, not including closing costs or capex or anything.

I can buy a self storage facility with a hundred grand, not including abc, X, Y, Z.

And by the way, my capex on self storage, I promise you, is less than multifamily.

So it's just such an advantage to get into the game.

For anyone listening who's thinking about your.

You're in single family, looking to make that next progressive move through real estate, or you're just looking to get into it.

I don't think people realize how accessible self storage is for most people.

All right, so we're gonna, we're gonna dump in.

We're gonna jump into the deep end here a little bit.

Cause we're all, we're storage, we're all storage veterans here.

And you've got how many, you've got how many facilities of your own?

We've acquired 20.

I don't know how many we, we sold some, so I think we're sitting on 14, but we're, we've got two under development, three under contract and how long.

And we teach students, so we're.

We're also involved in another 20 or 30 at any given time.

Got it.

Got it.

So, you know, I, it's basically you and I got in around the same time.

And, and it's been very interesting watching, you know, as a now a really deep self storage industry watcher.

And I'm in it now.

And so I see daily, daily what's going on.

You know, self storage went through a boom, like 20.

There's a lot of people were like, yeah, we're kind of hitting that end of the cycle.

And then Covid comes in and just shakes it up and reset that cycle.

Since then, I'd say, you know, as somebody who's been in the storage industry, it's been a, we've been in a bear market the last three years.

And now interest rates are a lot higher, folks.

Rental rates are way down.

You know, that value, you know, that valuation's probably not there anymore.

You know, and unless you've owned it for a long time, um, you know, you're, you're not just not going to get quite as much money as they maybe thought they Were.

I'm just curious about those conversations and how you have them with those mom and pop owners now who are selling and how to, you know, get them to understand where we are in the market right now.

I would love for you to tell me.

No, I'll seriousness.

Hey, talk about PTSD that the.

The 22 to 24.

So what I always say is Covid giveth and then Covid ticketh away.

And it wasn't just Covid.

So Covid.

Covid spiked up.

What, what Neil's referring to is because everyone was working from home, we cleared out rooms, we did whatever.

Occupancy, normal occupancy, self storage, you know, if you look at the history of it is we'll say stable stabilized, depending on your market.

Let's.

I'll give you a range, 85 to 90%.

During COVID we hit 95, 98% across the board, which obviously drove up.

Well, your occupancy is driving up your rates, your rates drove up.

Your values and interest rates were at all time lows.

So it was the perfect concoction if you were getting out.

So to your point, Neil, if you owned for a while, there was no greater time to sell than during COVID That was money you wouldn't see if you held on later, right?

So that if you bought during that time, that was challenging.

And then, Neil, to your point, there were brokers came out of nowhere.

People came, everyone.

People were just buying self storage.

You didn't even know how to operate self storage because it was worth more a year later.

So the entire market was not only shaken like you said, but the trees were shaken.

Meaning people that mom and pop sellers that were never contacted before were now being contacted and told your facility, which you thought was worth a million is worth three million or two and a half million, some astronomically much higher number than it was worth two years earlier and unfortunately was two years later.

And that's what you were referring to.

Those were some very difficult times when in 23 and 24 we saw interest rates go up 400 basis points in nine months, which, which crushed values.

We also, you know, we, we talk about, we didn't talk about on here, but you guys know this and I'll make sure your audience, your listeners know of storage is grading great times, economic booms because we buy a lot of crap, right?

And we're, we, we as Americans are in general are hoarders, right?

We buy stuff and with toys and we want it and we store it and, and, and then in bad times, recessionary times when we're downsizing, dislocation, all the, all the negative Ds that we, that we could throw out there, all those terms is great for self storage.

That's why self storage is, is recession resistant because it's actually a pretty good time for us.

It's the time in between like we experienced in the, in the prior administration.

I'm not making this political, but it's a fact.

We not only saw the interest rates balloon quickly, we had a period of stagnation.

Ask any real estate broker, mortgage broker, title company, how they did during that time as well.

There were no transactions.

The real, not the values.

The market didn't crash.

Real estate market actually continued to go up the values, but the transactions were nil.

So maybe this happened in the 80s, but it was such a different business back then.

I don't know that it's ever lived through a period of stagnation.

And we just did.

And that made it very challenging.

Neil, to your point, with all these sellers who have inflated values in their heads not accepting reality.

Now here's the good news.

A lot of those sellers weren't in the market to sell back then.

So I'm not talking today, excuse me, to people who have inflated numbers in their head.

The only inflation, the only, the only reason they sometimes think their facilities worth more than it is is because a broker has gotten to them and promised them it's more.

Right.

And this, this, I'm talking off market deals, not listed deals obviously because the broker got to them and was successful.

So.

But even the listed deals you see out now are not as inflated of values as they used to be during coming out of COVID They're actually fairly.

It's almost back to normal.

Almost back to like when I first started in 18 and 19 and 20 and you know, started to get nuts when Covid, probably six to nine months after Covid started.

It was, Remember, it was only two weeks.

Two weeks to stop the spread.

Yeah, for several years.

But my point is we're now having normal conversations again with people who did not have those inflated values in their heads and even those who did, unfortunately, and there's no good way to say this, they're older, they're in their 70s and life happens to you and it happens to you fast in your 70s.

The test that two years ago was nothing is now not nothing anymore or someone got sick or somebody passed away maybe, or you know, your life changes.

All of a sudden you, you do want to be in Florida in that house or in that rv, traveling the country and not dealing with these headaches.

So a long way of saying it was a tough road to get there to, to this conversation today where we are, but we're here.

And on top of that, and I say this, it sounds so self serving, especially as someone who teaches this and has a community of people, it sounds.

I'm going to acknowledge how self serving this sounds.

But right now we're buying trailing twelves that are on sale because they're not reflecting the performance that you're about to have.

Right.

And you've got interest rates that have normalized and are actually coming down.

You've got this current administration with so far a fairly healthy economic track record that's been pretty good and none of the policies are even in place yet.

So we.

I'm not telling, I'm not going to look you in the eye and tell you there's a tailwind at my back right now in self storage.

I will say it feels like a bay breeze and I think it's picking up.

I love that.

What a great analogy.

Listen, on those mom and pops, you're right.

A lot of them have recency bias.

They've seen four and a half caps and now it's six and a half sevens and, and still shifting.

But some of them have that recency bias from that inverse sticker shock of some, a broker getting to them and tell them what their property is worth.

The, the only, the person I've seen having the most success with that is, is implementing a strategy where they can help the sellers get there.

But you have to factor in the money that typically would go to the bank as interest and making multiple offers, utilizing seller financing and be like, hey, I can offer you $3 million or I can offer you 3.6 over this many years with this balloon payment.

This is the way you want to do it.

You've owned it for this long.

You probably don't want to show the taxes anyway.

A lot of times the money that you're looking for or the deal that you're looking for or the break or the rate that you're looking for may already be equity in the deal if they've really owned it that long.

That's.

I think there's Room for unique strategies there as you're helping people unwind a 20, 30, 40 year situation, sometimes that they've been in.

That's one way to try to create value there and have a strategic advantage.

The other is you change the basis.

Well, how do you change the basis?

For us, the basis means storage, conversions and that's where we're focusing on.

We buy old Kmarts, grocery stores, warehouses, big box retail furniture stores, boot factories, carpet factories, you name it.

We got about 800,000 square feet plus now of whatever it was that's being converted into storage because we can do that for half the cost of ground up development and in half the time we.

But it's very challenging and that construction sounds easy.

You take a big box, you chop it up into little boxes and that's it.

The reality is there's a lot more to it than that.

And luckily we have GCs in house.

But if you're paying retail cost for a building, the construction and the management, the juice is very likely not worth the squeeze.

But that's one way for us because of the vertical integration, we can kind of cut that basis in half.

And that's our niche, right?

The riches are in the niches and that's the direction that we're headed in.

But you mentioned something earlier, may honestly have been before we started recording about the holy grail of conversions.

Storage is a blanket term at this point in my mind when I hear storage like man, there's a lot of different things that can be storage, roll up industrial man cave units can be storage, right?

It can be climate controlled, it can be non climate, it can be boat and RV covered, uncovered, it could be fenced in, tractor trailer parking.

There's a lot of different things.

It can be.

There's several different flavors that you do that and have looked into that.

We have not, but you mentioned that holy grail.

So within your storage tool belt, what are some of the tools that you're looking at or utilizing when you're identifying a project for development or expansion or conversion?

Where does your brain go as a, as a full time professional in this space?

Yeah, great question.

I'm going to answer that.

Second, I want to comment on your first comment 100% agree with you on the seller financing piece.

Of the first 20 deals we bought, maybe eight were seller financed.

Of the deal we've had some deals fall out of contract for various reasons.

But of all the deals we put under contract lately, or which was probably six, but we've had three fallout for different reasons.

I think Five were seller financed.

There's.

There's a, there's a shift for sure because you're able to squeeze.

You gave a pretty big Delta example there with 600 grand.

But we are, we are seeing, we are able to get these sellers another 100, 200, 300 maybe, versus bank financing, because we can play with the other dials like the interest rate or amortization, you know, or.

Or interest only, even in terms of the verticals.

I love what you just said.

This has been a passion of mine for a while.

I don't.

I actually have to force myself to put the self in front of storage anymore.

Because what we're building, the community, we're building storage moguls.

It's.

There's not even self in the name.

And I now, I tell people self storage is probably what brought you here, but storage in general and all of the adjacents that you can find yourself having fun with and finding opportunities with are built on the backs of your basis and knowledge of self storage.

So in our community, in our education platform that we're rolling out shortly, either around when this podcast is released or Shortly thereafter, it's thestoragemoguls.com if I'm allowed to promote here a little bit, it's about storage.

So we're gonna have a core underwriting course, which is 75% of everything you need to know whether you want to be in self storage.

IOS, which is industrial outdoor storage, boat and RV storage, valet parking, or slash, we're calling it just parking.

I gotta come up with a better name for that vertical because we have one facility where we park cars for the soldiers up at Fort Drum because it's the most deployed base.

But it's freezing up there.

Like they probably 4ft of snow up there right now.

So we park the cars inside and we turn on the engines and drive around a little bit.

So we actually have a staff there making sure the engines don't freeze.

But that's like.

We park them like Tetris.

So there's.

We just call it valet storage.

And that could be boats and RVs valet storage.

But then there's also truck parking club, which is the Airbnb of truckers who need nightly, weekly or monthly storage for.

For the trucks themselves.

Right.

Which is really just an iOS play.

Industrial outdoor storage.

Right.

And then we've got pro storage, which we didn't create, but we are recognizing this needs to be a brand and it needs to be everywhere.

So our brand is store pro, and that's what we're Building the first two of one in Greenville, South Carolina is our first one.

And then we have dirt under contract in Hagarbor Township, New Jersey to build our second.

It's about 90,000 square feet of, you know, contractor storage, small business storage.

Also doubles as boat and RV storage.

Fully enclosed because you can drive an RV into it.

They're that big.

They're.

If you look at a self storage facility, I know you guys know, but for your listener, the two bedroom apartment of the self storage facility is the 10 by 10.

It's the most common unit size.

It's if, if you're listening, it's 10ft deep, 10ft wide with an eight foot ceiling, right?

It's a hundred square feet maybe in storage facilities we've had 20.

So I, we have a handful of units that are 300 square feet, 400 square feet.

But those are the four bedroom apartments, right?

Unheard of.

You don't want them and they're very rare.

And if you have one, you have one.

Pro storage, but they have lower ceilings.

Pro storage.

Our smallest unit is 450-500-square feet but we've got the 16 foot ceiling and the 14 foot roll up door, right?

And they're wide enough for whatever for your inventory, for your trucks to park your trucks into.

And we rent them month to month.

And so when you, when you have that, that unit size and that you have this new market and when I, when I hear you say I'm buying Kmarts and converting them into self storage, my first reaction to you before we started recording it, which I'll share with you, your listener now is well, in your feasibility, in your market study.

Kmart's, I don't know what they average maybe a hundred thousand square feet.

The Kmart, the Sears, the big box that's empty.

The what were the old tech ones?

Comp USA or I don't even Best Buy.

No, Best Buy still around.

Whatever the big ones were, is your market need a hundred thousand square feet and if it doesn't, why are we forcing it on the market or why am I trying to make a deal work with 30,000 square feet of self storage?

Because that's what I know my market needs.

What do I do with this other 70?

Not that you can't get creative and put triple net leases in there, but now you've got this other asset class.

So who's your buyer, right?

So your buyer is, is cube smart.

Your buyer is public.

Your buyer when you are self storage and a gym, that's a triple net is, whereas public Your buyer.

If you're 30,000 square feet of self storage, 70,000 square feet of pro storage, and your parking lot is boat and RV canopies.

Well, public, cube, smart and Extra space already have their tentacles into all of that and want more of it.

So you could.

What I love about the conversions is, and I'm not making them out to seem be super easy, Clint.

I know there's, there's plenty of hair and risk there and all that, but if you can find the right deal and the right, you know, either you're vertically integrated like you guys, or you could put together, assemble the right teams.

I love that route because I love the exit for it.

I'm now designing my storage facility for what that market needs versus trying to put a, you know, a square peg into a round hole.

And now I could look at all of those big boxes and say, what do we want this to be?

Maybe it's 70,000 self and 30,000 pro.

Yeah, well, we, you know, it's, it's an avenue we've explored as well.

Not on any of our conversions, but we've, you know, we recently had a project under contract, piece of land we, you know, looked at, wasn't going to work for storage.

But we did explore the idea of a ground up contractor garage sort of man cave, luxury man cave kind of thing.

And one of the things that we love about it is that you're talking, you know, you open up 100,000 square foot Kmart all self storage, 750 units.

Now, now you're white knuckling it as you rent, you know, one or two units, you know, every week, you know, and you just like hoping that, you know, lease up to stabilization, you're 20,

24 month lease up.

Oh, third right now.

So you want to go there.

Limited, but hang on.

Okay, we're probably going.

The same place is with a contractor garage.

Now you, now you, now you gotta, you know, you rent 20 of them, you're 50% occupied.

And at the same, you know, at probably a higher square, you know, price per square foot than you were getting

with storage, should be more.

Can I, can I give you another reason?

Go for it.

I want to hear it.

When you open that 750 unit Kmart converted to self storage.

Who's your customer?

How do you target them?

Residential density for the customer is usually 1, 3, 5, 7 miles the max.

Our pro forma tells us, and we have tons of confidence and the lender agrees, if we build it, they will come.

If you think about it, that's what we're doing with Pro Storage, I don't have to do that.

I can actually market to my likely customer.

I don't know if it's Neil or Clint that's going to rent a self storage 10 by 10.

I know there's Neil and Clint's out there and there's enough of them because the market, all the demand drivers say there's, they're out there and it's going to take 24 months to maybe you pointed out Neil, 48 months.

Okay, fine, I agree.

Call it three years if I've got a hundred thousand square feet.

We'll put it this way.

In Greenville, we're building 92,000 square feet of pro storage.

That's 137 clients.

And I know who the likely clients are.

I know Neil's Plumbing and Clint Electrician Co. Are targets for my use case.

I can actually market to you.

We expect to collapse that lease up to 12 months or less.

So are, are the actual units like inside of this?

And you're exactly right.

Like within the Kmart that we just bought it, it was actually not an, it was an original Kmart.

And most recently a call center which is obviously obsolete because of AI but it has these great big ceilings and we've got 60,000 going to storage, traditional climate control storage like we do.

And then we got another 40,000 on the other side that's going to end up being a triple net tenant.

But in this situation, very high ceilings on that side.

We even looked at mezzanine and we're like, well there's no, there's not even a demand for the base level.

Why would we even go up?

So we've, we've got a triple net tenant lined up there.

But what do the actual units look like?

You're not talking about squares on the floor and you can park in your square.

You're talking about legitimate build out roll up door with a man, like probably a man door and a large roll up door.

And you're parking.

You're running your window tinting business out of there.

You're running your asphalt lining business out of there.

You're running your plumbing supply business.

Anything else?

Well, yeah, well now you're, it sounds like you're you sounds like you're talking about a different use case where I'm actually working in the unit.

So Pro Storage is storage, right?

I don't.

That's where they're parking during the day and then like rolling you don't want,

you don't want people working.

No, that's small Bay Flex.

Now you could do that too, but now you got sprinklers, you got a different use in occupancy.

You're putting in more bathrooms, maybe one in every unit.

I've seen guys go back and forth on that bathroom and everything.

Your, your conversion cost in your case or your development costs in our case are, are way high.

20, 30% higher.

Hold on a sec.

Did you.

Are you making a point that Pro Storage does not require firewalls and sprinklers?

I am in my development.

I may not be making that point in a conversion.

So I'm going to put an asterisk on that one.

But you might already be sprinklered anyway in that Kmart.

And some of them we often are, and some of them we may not.

Or we have to.

Maybe it's way old.

We have to go retrofit or fix everything.

I can't speak to the municipality you're in and what the codes are going to be, but in a.

From a development sense, we are not sprinkling.

We don't have to because we've got the fire rated walls and that's in most municipalities we've looked at.

There's going to be cases where they say no, in which case we'll say, well, maybe this doesn't work here.

Then

partitions like that.

So we're clear, I am saying you're cutting, you're cutting holes into the exterior of the building for your doors and you're putting up walls so that my unit's my unit, whether I developed it like Greenville or I'm running a unit from you.

And I've been Kmart.

But you're, but you're treat.

We're not talking contractor garages.

Really?

For me, what Contractor garage is somewhere where a plumber can store, have like storage and a workshop.

You're very.

That's small Bay Flex.

Small.

Okay.

You're all right.

That's a different use in occupancy.

Got us.

Now you're working on site.

Now I need parking.

Now I need bathrooms.

Definitely need to be sprinklered.

Yep, yep.

But different.

But if it's like a flooring company and they need a place to store LVP or real hardwood and let it acclimate or something like that.

Look at an HV H Vac company or a plumber that has, you know, how, how many water tanks sitting there.

H Vac has a unit sitting there.

I leave the trucks there at night because I live in an HOA and I can't park my truck or I don't want to put my truck in my driveway or on the street because of theft.

Right.

I want a place that's secure to store my truck.

So think about the father, son electrician team.

Here's another use case.

Catering company.

Catering company needs a retail place, office to meet the bride and groom, the corporate event planner, whatever.

It's gotta be a nice office.

Usually.

Sometimes they're retail centers, right?

You want the foot traffic.

They'll pay 35, 40 bucks a foot for the foot traffic and the sign, right?

But they don't need to pay 35, 40 a foot to store tables, chairs and racks of glasses and dishes.

They just need a thousand square foot box for that furniture inventory.

I mean there's so many use cases.

Very sticky asset class for that consumer as well.

I'm assuming your retention level is probably significantly higher than.

And because we're storage, not to say you can't sign a year lease or lock in a rate for a year, but we also have the month to month option.

Your seasonal, you need another.

You've got a thousand square feet, you need 500 square feet because you're an H Vac company and it's the winner and that's when they all break down.

So you want to store in 500 square feet, an extra 30 units, H vac units, you need them for four months.

Great.

Four month tenant.

I love that.

Flex up, flex down.

Quick segue here, but basically talking about the same property.

Okay, so now let's look at the outside.

One of the interesting things of conversions is you go from a big box retail building that may have two to 300 parking spots.

Now all of a sudden what we need is about 15 parking spots.

So one of the things that we'll do is we will out parcel and sometimes sell to a fast food chain or a Jiffy Lube or something like that.

But one of the things that we've also looked at is truck parking, boat and RV parking.

Like basically fence it in.

What you're talking about is covered boat and RV parking where you're putting basically just roofs in the parking lot.

Like talk to me about this, what does this look like?

You're metal posts with covered roofs for a couple rows on the edges of the parking lot.

How does that look?

So boat and RV, you have completely uncovered canopy, three sided, fully enclosed.

Those are the four ways we, we park and store boats and RVs.

Completely uncovered.

Just a parking lot.

You could have a section that's that.

That's your $75 a month.

A $50,000 RV.

It's not worth a lot.

But I'm not paying $400 a month to put it inside.

Fully enclosed.

Right.

Might depend on your climate too and your customers and all that stuff.

Canopies now I'm mostly covered.

It's just.

And by the way, where are we doing this?

So in some states where they're where we can sell power back to the state, we're not building canopies, we're building solar support structures and they're solar panels generating electricity that I sell back to the state.

By the way, the tax credits on that are insane.

I'm getting paid by the state for the energy I'm creating and I'm parking an RV underneath it.

Then he got three sided which is just looks like storage.

There's just no doors on it.

So you got a roof side, one side on each end and a back.

Kind of a waste.

But it's more, there's more protection from the sun if they're built certain ways than others.

And that's really what we're doing here is protecting from the sun.

Sure.

The elements, you know, wind and rain or snow and rain and whatever, depending on our climate.

But it's mostly they're protecting from the sun.

And then you have the fully enclosed inside which are your contractor units.

The, the pro.

What we call pro storage.

We call it pro storage because you could.

There's all kinds of uses for it.

Anything on a trailer boat, rv, business equipment, inventory, whatever, or vehicles.

So that's, that's what your, those are your options in your parking lot.

What do you do?

I don't know.

What's that market Bear?

That market might dictate that we don't.

It's not worth it to spend a dollar on the parking lot.

We're just going to park open air.

Right.

Because the rates aren't there for boats and RVs.

So that's our option.

The other thing you could do is and you got to look at your site.

How's it laid out?

Is there parking behind the Kmart?

Because I might carve that up into iOS yards or truck parking club.

Maybe I don't want or maybe I'm not allowed to have my unsightly tractor trailers parking in the front of the Kmart because of the aesthetics and by the way, not a great look anyway.

Maybe I put them in the back and I put the nice looking RVs up front or the.

I would put probably would probably do canopies.

If.

If it was up to me and it was, you know, a blank check, I could do whatever I want.

I'd probably go canopies up front.

I'm.

I'm thinking about the design and the.

The look and feel of the curb appeal of the facility.

But the point is, you have all these options.

It just depends on how you look at it.

And, and if.

And what we're teaching in our community is really how does source evaluate, underwrite for anything?

Yeah, well, it's.

And it's.

One of the things that I love about storage is the just multiple niches, niches within niches that you can target.

And there's just all these.

And it goes all the way back to commercial real estate is there's just so many different levers you can pull.

Yeah.

From expenses to, you know, to revenue generation to everything.

And it's a rapidly changing industry.

We could go on for another three hours, Joe.

Easily.

But in the interest of time, we're going to start wrapping it up.

One of the questions we ask all of our guests is, is there a book or resource besides your own that you recommend?

You find yourself recommending more than any other to friends and colleagues.

Two books, neither of which I've written because I haven't written one yet.

On the business side, the Road less Stupid, Keith Cunningham.

Phenomenal.

Wish I listened to it years ago.

On the personal as well as business side, but, you know, less kind of numbers is be your future self now by Dr. Benjamin Hardy.

Oh, I love Benjamin Hardy.

He co wrote who, not how and with Dan Sullivan.

Yeah, his.

His.

His next book about scaling.

Yes to my Q.

It's.

It's fantastic.

It's.

There's like knowledge bomb after knowledge bomb.

Very, very strong.

I was going to say the road less stupid was more your kind of book.

You think so, but I've already colored that one.

Listen, I'll.

I'll highlight.

You know, what this conversation is doing for me is.

Is highlight lighting the power of community.

And I. I know you host a mastermind.

I'm not making a softball pitch here.

But the reality is, I thought I knew this industry, and the reality is it's still changing.

One of the reason it's changing is because the consumer is changing.

It's not baby boomers in there two or three times a year.

It's millennials sometimes in there two or three times a month.

We have renters that are increasing.

When you rent, you don't have the basement, the attic, the whatever.

That typically comes when You're a homeowner.

As that consumer is changing, the industry is changing, and the industry is adapting to that.

And then you factor in things like adaptive reuse, cap rate, arbitrage, you know, whatever you want to call a conversion.

It gets the creative juices flowing.

And then you're basically just looking at what are all the different levers that I can pull.

And the reality is nobody knows them all.

And that is still rapidly moving and progressing.

So it's going to be something that's constantly changing.

And I think that highlights the value of a mastermind or a community or a group of people that are collectively putting their eyes on something to help everybody unpack that.

So with that in mind, feel free to expound on that if you'd like to and along the way, help explain that if any of our listeners want to connect with you, hear more about what your group is and what you have coming down the pipeline.

What's the best way for them to do that?

Yeah, I mean, the best way is to.

You can email me or just join our.

So we have a website that we launched.

It's a coming soon, but it's ready to receive, you know, a registry, a preregistration for our community that we're launching.

But it's called Storage Mockels.

We build it because we're practitioners.

We're not, it's not, you know, we're not gurus or professors.

In fact, we're terrible gurus.

I'm working, I'm getting better at speaking in public.

But, you know, we're.

I hope, I hope they.

People think we're better practitioners than we are speakers.

But, you know, it's because we've acquired.

Because I've been teaching at the, speaking at these academies, Scott Myers Academies, and now fulfilling the education with students, we interfacing with them all the time.

So we're building this based on what we've seen as the gap in the market, you know, and as someone who's acquired 20 facilities over five verticals, the only vertical we are not involved in yet is small Bay Flex.

And I'm working on it right now.

But we're in all the other verticals that I've mentioned that are all adjacent to storage, to self storage.

So we saw that gap and we built this platform not just for passive investors, by the way, but for people that want to learn the business we're bringing together.

Oh, and what I think is, I don't know, you guys can tell me if this is not brilliant, but I think it's brilliant.

One of the things I've noticed is that passive investors want to invest.

But they really don't know what they're investing in.

So I want them to go through in our community the same exact training and education that someone who's going to be a self storage owner operator goes through.

Because I want to bring them together, I want them to understand what the deal they're investing in the same way that the guy I teach who's doing actually the hard work, the really hard part is out there, the grind, going out and finding the deal and evaluating underwriting, closing it.

And I want to bring them together on our platform.

But then you might say, well, they don't know each other.

And my answer to that is I agree, but we're going to asset manage.

So we're not just bringing them together and saying, hope it works out.

We're going to bring them together in our community and stay involved.

So we'll oversee everything for that passive investor, whether that you know, at the GP level or just truly passive syndication investor that, you know, that smaller dollar amount.

So that's, that's what I think is exciting.

The community is the storage moguls.com I'm a Penn State fan, so I hate having to say that like Ohio State.

The Ohio.

It's painful for me to say it that way, but it is the storagemoguls.com or actually I want to a B test this so you can email me@joe thestoragemoguls.com or I believe because we didn't even talk about AI.

My other passion in life, which is driving a lot of this, especially our community.

Our community is going to be multimodal learning using AI to create multiple forms of the same content.

So you could learn through video, through podcasts, through slideshows, through mind maps, through quizzes, through flashcards.

Like all of the modes are there for the senses based upon the way that you learn, the way you learn.

It's all going to be there for you so you can consume it how you want, but it's all going to be there.

So we didn't even get to talk about that, but I know we're long, so.

So joe@thestoragemoggles.com or joe@storagemoguls AI.

Hey.

Oh, there it is.

I want to see if the AI starts to take off in this new AI world.

Anytime I see somebody with a dot AI, I'm like, okay.

They get it.

They get like, this is moving so fast.

They get it.

Like I put the kids to bed and then I go down the Rabbit hole on YouTube about AI videos and what's happening with Grok or Claude or anything else right now.

So I get that.

I absolutely love it.

I actually started a podcast with a, with an AI guru, Peter Swain.

I'm in his mastermind, learning AI.

I'm in Claude all day, all day long.

Manus.

It's, it's changing everything.

It's folks, if you're not embracing it and learning it, just start learning it, using it.

You have to, have to.

It's so powerful.

Oh, this could have been a seven parter.

Maybe we'll have to have a follow up on AI.

But for now, I just want to say thank you for your time.

We really appreciate you coming in, sharing.

I've certainly learned a lot and I've learned a lot about storage, which isn't something that happens every day around here.

So really appreciate it.

Look forward to connecting with you, hopefully in person next time and getting you back here on the podcast.

So you've already let us know how our in our listeners can connect with you.

I'm going to be checking out as well, so just want to say how much I really appreciate it.

Thanks for your time today.

May I?

Thank you.

Of course.

Thank you for having me.

And also I like to, I like to thank everybody.

Not to be long winded here, but I like to thank every host that has me because you guys are doing what we didn't have 30 years ago is providing this, providing this platform, this information, this podcast, bringing on.

Hopefully I didn't suck, but bringing on great guests to deliver this information which was really hard to come by 20 and 30 years ago.

So thank you for doing what you do.

No problem.

Yeah, man.

I remember when I was, I was going to the library and getting audiobooks on CD to try to learn about real estate investing.

Now you can drive around and listen to you in your car while you're looking at deals.

That's it.

And I recommend everybody does it.

Hey, thank you, Joe.

We really appreciate you, man.

Thanks a lot.

Thank you.

Thank you so much for listening and watching the truly Passive Income podcast.

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