Innovative Tools That’ll Define The Future of Self-Storage Investing with Tyler Sellars

Every deal is a great deal, depending on the price.

And that's something that you can certainly recognize if you are doing an underwriting is it doesn't matter how many drivers come by the facility or what the population is, or how much square foot per population size you're gathering.

It depends on the price of the asset that you're buying.

Welcome to Truly Passive Income.

I'm Neil Henderson.

And I'm Clint Harris.

Well, today our guest is Tyler Sellers.

Tyler, it's great having you, man.

How are you?

Thank you very much, guys.

Great to be here.

Thanks for having me.

So we were chatting a little bit offline.

You're a Canadian who is currently living abroad in Spain and you own some self storage.

You also passively invest in some self storage.

Can you give us a 30,000 foot view explanation of how you found your way into investing in self storage?

I don't think there's many people my age, I'm 30, that just walked into self storage without some sort of background in residential.

So that's where I started.

I did student rentals as a student.

Of course I understood that market.

I knew that I was paying someone else's mortgage, so I figured that might be a good way for me to start making some passive income.

Turns out that residential isn't as passive as a lot of investors online would have you think.

So I ended up getting into self storage during COVID selling all of my residential during COVID just with the shifting in pricing that I couldn't compete with outside money anymore in my provinces in Canada.

And then also the fact that I couldn't kick people out during COVID and they were getting free money from the government was quite frustrating for me.

So I got into self storage where it was a lot easier if someone wasn't able to pay.

I just send it to lean and go from there.

So it was a great shift and I'm very happy to be in the industry.

Now I see that you guys are also invested in that industry, so it's a nice topic to talk about with you as well.

Yeah.

So I'm 41 years old.

I found my way to storage because I was fairly heavily invested into Airbnbs, which I found out to be wildly active.

So I found a lot of older guys that kind of pointed me in the direction of really, really passive investments and I chose storage from that.

How was a 30 year old or obviously younger at the time?

First of all, I'm curious to know what your major was.

And secondly, when you decided to shift from student rentals which is a fairly active investment strategy because you're usually renting by the bedroom, I'm assuming.

Tell me how you chose to go in the direction of storage versus all the options that you had, because I'm sure you had plenty.

You're the first one to make me realize that there's such a nice little segue from renting bedrooms to renting storage units.

It's interesting that just came up in my mind from that.

But yeah, I didn't have money coming onto university, I want to make that clear.

But I did some snooping on Instagram to try to find people and I think right now is one of the better times ever in the history of entrepreneurship to build a business and also raise capital.

It's just more accessible, people are contactable.

Something that's beautiful in the self storage industry too is it's quite a small industry, so it's quite approachable.

I was able to get in touch with you guys and you guys back to me.

And it was a really nice way into the industry in general.

Just to understand how this industry works through the people in it already.

One thing that I can say is I only had to raise to get started, $9,000.

So for 5% down on $160,000 property, it had seven bedrooms, it was crap inside.

Like I had to completely renovate the thing.

But the seller was interested in doing some seller financing to help me out get my journey started.

So we made that happen.

And then I ended up learning the tricks of seller financing and also coming down on the down payments, getting that lowered as much as possible, allowing me to invest as fast as possible.

So within just three years, I had had over 110 units at that point.

Not just student rentals, but also apartment complexes at that point and such.

And then I ended up getting into self storage after that.

But that's essentially how the journey started for me.

I love this story because it's such an example.

It's a classic example of one of the things that you can do in real estate.

And you know, a lot of people nowadays, housing is tough right now.

Investing in real estate is tough right now.

And a lot of people look at it, they think, oh, I've got to put 20 to 25% down.

This is what it's going to cost us with the interest rate.

And they just throw up their hands and they give up when.

Whereas I often say, like, look, there's a lot of things in our life that are not our fault, but it's your job to figure out how to navigate the problems.

And what I love there is like, you didn't have a whole lot of money.

It doesn't sound like you had a whole lot of experience and used a creative way to get into a property.

Yeah, I will say that podcasts like yours and other podcasts like AJ's or Brennan Turner, BiggerPockets, that was my intro into this industry.

And that's why I say that's one of the best times to become an investor or just understand any industries, because some of the most world class investors or people within any industry are online for free.

And so if you want to really do something, you can.

There's no excuses anymore.

This is the best time to do something.

The only excuse is on your ability to do it.

And I understand there's limitations.

Like one of the first things that people will say is, okay, we don't have any money, so we can't get started.

I understand.

I was also in that position and I felt that way as well.

I'm sure you guys might have felt that way in one time in your careers as well.

And also as you guys are growing el fundo, it's interesting because you go from doing maybe a smaller fund to begin with to then bigger funds and bigger funds, but if you had started on that large fund, it would have been too daunting and you probably would have never gone forward.

So raising $9,000 was quite approachable for me and it allowed me to get my feet wet, understand what I was doing, and then kind of grow from there.

So the next time that I raised, I think it was 24,000.

Then the next time it was 75,000, then the next time it was a million.

And so I just ended up growing from that experience, naturally.

I think, to answer your question, I had a degree in marketing, so I wouldn't say that the degree in marketing had anything to do with it.

It was just more of a personal interest in marketing that got me interested in the world of real estate and what that looks like.

I know that you guys are doing a lot of marketing because of the real estate industry that you're in and how much benefit it has.

So that certainly has something to play within that role.

But I cannot speak highly enough of podcasts such as your guys or others within the industry that just allow for people to have the direct information that you need in to get this started.

And so the mentality shift that it takes to be able to start from literally nothing and then go from zero to even just your first property is such a shift.

That I think what we tend to do as humans is just compare ourselves to the people that are already in chapter seven.

And I'm not talking bankruptcy.

I'm talking chapter seven of their lives.

And so I think that it's interesting that we're always trying to compare to some people in the future, but if we just look at that $9,000 that we have to raise to get the first property, I think that's much more achievable.

Yeah, I think we share some core values there.

Especially, like I said, I'm older than you.

I'm 41, you're 30.

But I think we're in that generation where right now people talk about how do I get started or what do I do, or what direction do I go in?

And a lot of times, you know, that implies some level of ambiguity, which in my mind is just a lack of education.

And what people don't realize is that, you know, education is free.

It's out there right now, and more people are putting it out there and sharing it than ever have been before.

And you and I have been around long enough to remember the times before everybody had smartphones and when there weren't podcasts all over the place, and I was around when there wasn't Facebook, you know, groups that you could join to learn and things like that.

My concern is, like, for those of us that didn't have that and then did have it, the ability to network and connect.

I'm speaking with you in Spain right now.

Like, the ability for us to connect and share ideas and experiences drastically increases the likelihood that we're going to have more success.

When I have the opportunity to learn from other people's mistakes and give people the opportunity to learn from mine, my concern is I've got two young sons, four and one.

It's like they're never going to grow up wondering, you know, what it's like to be curious about something.

You can just Google it, right?

The value of the information that comes from networking means so much to me because there was a period in my life when I didn't have it.

And I attribute all of the success that we've had, financial, time and location independence as a result of the networking that we've created, and the ability to find new asset classes, like AJ Osborne, connecting you with self storage and things like that, like, to fast forward where you want to be in life, because you have the ability to connect with other people on that, I think is huge.

Speaking of fast forward, part of my journey is, like, I want to look at who's farther down the line, who's past that, chapter 10, chapter 12.

Right.

And who's got the life that they're accomplishing what I want and kind of walk backwards from that.

Not in terms of stuff because money's not that important, but experience, quality of life, everything else.

So you've been in Spain for three years now.

You started out as an active investor, obviously in college, which I think is wildly commendable.

And then you went through, I'm sure for a period of time at least, this happened with me.

Student rentals and residential was probably what you thought was a destination for you.

And it turned out to be a stepping stone onto something bigger and that was actively investing into self storage.

And now you started to do a little bit of passing passive investing into other self storage deals.

So talk to me about the mentality shift of you being all in as an operator with self storage, potentially looking at doing passive investments in storage.

And what does your future look like?

Are you going more active, more passive?

Are you doing it because you're remote in Spain or, you know, what are some of the challenges you face being overseas?

So I want to know where your mentality is now.

And you seem like certainly a bright enough guy that you put thought into where you think it's going to be in the future.

I'm really curious to know what you think that journey looks like.

Yeah, there's a few pieces there.

I'll start with the shift of mentality that took me to be able to get to this position.

I guess today was just the fact that money was now involved.

When I had no money, I would work whatever it took to get some money.

I think I was getting something like $600 a month Canadian, by the way, so like 400 or something like that, US per month just to be able to live.

So that was essentially my rent.

There was no grocery money.

There was no play money to go out.

So raising $9,000 literally seemed like winning the lottery for me.

At that point in time, I thought I was rich and coming out with a marketing degree with 70 other kids coming out with the same marketing degree around the same period in time certainly didn't do anything for my mental health to be able to say, I'm going to be rich someday.

So I think the thing that really drove me to the next level was I wanted to be wealthy.

And I'll just be honest, like, money did mean a lot to me because when you're broke, it's all that you can think about.

But when you have Money, then you have that luxury of saying, it's not that important.

But you only realize that once you've gained it a few times.

And there are lucky people that of course are broke and can see that.

But I think it takes a complete different shift than I was at at that point.

So once I started gaining money, that allowed me to say, okay, well, what can I do in order to make this $1 into 2 or $3 into 9?

And what allows me to do that?

And I just didn't see myself working three times harder to be able to make that money turn into that $9.

What I did was I ended up building other businesses, for example, well, that are similar to you guys.

You have your management, you have your investment, you have your construction, you have your development.

Like all of those things allowed me to become wealthier.

And then I would sell those businesses off.

So I built a construction company that ended up doing renovations for my flips, for example, that I was doing.

And then I would sell off those contracts to other companies, and I would end up finding deals just from a landing page that I would create within my construction company.

And that ended up winning a little bit of money than painting companies and drywall companies and all these kind of things.

And then it turned into Covid era, where you could charge anything you wanted as long as you would show up to the job.

And so that really shifted things for me where I was like, wow, I don't have to work harder, I just need to charge more.

And as soon as I started charging more, I just didn't see how this was going to play out in any good way for any investor.

I knew what people were paying and I knew what their bottom lines were, because I was also in that position not that long ago.

And I couldn't see how this would sustain in the residential space.

So then I shifted my entire mentality and just went with whatever was cheapest to develop, and that was storage, concrete and steel.

And we would throw those things up as fast as possible and start renting them out through my marketing as fast as possible and just test things.

So I did three on my own.

Took that knowledge and those horrors, the sleepless nights and the nightmares, and I turned that into knowledge that I could turn into investing into other companies that may not have that same experience, but but want the experience.

So that's where I got into kind of like a GPLP position where I would still have some say.

And it wasn't completely passive, but it was certainly more passive than before.

And then now I'm just completely passive.

And Covid really was the push that made that happen.

Similar to employees getting into office and then out of office and now coming back into office.

I was in that position where I thought, okay, I could do this on zoom all day.

Let me go to somewhere that has some more sun than Canada.

And originally I wanted Austin because Joe Rogan went to Austin.

So I thought I'd be cool and move there as well.

And I really wanted to go see his comedy stuff.

So I ended up going visiting Austin, went to the mothership and loved it over there, but then decided on Spain in the end.

And it's been a good decision for me.

There's not as much business over here, but there's a great story of Spanish fisherman with an American friend.

And the American friend looks at the Spanish fisherman and says, guys, what are you doing?

You're working four hours a day getting a couple of fish, but you're only feeding your family.

And the American invests a ton of money into him and gets him working 16 hour days and he's making a lot of more money.

And he ends up reflecting on the fact that he only did this to be able to feed his family and spend time with his family, rather than spending 16 hours a day and making more money but not being able to spend time with his family.

So I think that those two mentality shifts.

Coming from an American background, but then living in Spain is a nice balancer for me.

There's a concept of like, what's enough?

Like how much is enough.

And as Americans, culturally, I think there's a good aspect of that.

We're very driven to just keep pushing and keep pushing.

There's the rest of the world that's kind of like, hey, I've got enough.

I've got enough to feed my family.

I get to spend time with my family.

I live a good life.

Life is good.

I don't need to push that much harder.

And I think you see that life on the other side of an enormous amount of effort.

So I have a question that I want to circle back to.

My understanding is you built your self storage facilities in the ground up, so you never bought a facility that was already in.

I bought a car.

Yeah.

I bought a mechanic shop that I ended up converting into self storage.

And then I developed on that land as well.

But that was the closest that I got to buying an existing facility.

So it's funny, our partner, Eric Hemingway, very similar story.

He came from a construction background.

He was building houses.

I think he was building some commercial Buildings, things like that.

And one day this friend of him came up to him and said, you know, hey man, this self storage thing sounds pretty good.

It's like a cash cow, you should do it.

And his risk tolerance is off the charts.

And so he went out and he built about a 45,000 square foot self source for these from the ground up.

And so it's funny that the synergy there and it's a very brave thing to do to like not just jump into a business but to do it.

And a lot of people will say it's probably the riskiest version of it, which is development.

I wouldn't disagree.

And I wouldn't tell my son to do it, that's for sure.

I would never say that.

But I think it was the only thing that I knew what to do, the only way that I knew how to do it was doing it myself.

And I felt most comfortable controlling every aspect of it.

I'm a lot less like that now.

I've kind of grown through that experience.

However, I would argue that there was something that was the mindset at that time also it was during COVID the development.

So we know, you and I, but for the listeners it's an extremely expensive ordeal to develop during COVID And also there were tons of people looking to get into storage also as land.

If you wanted to buy land, there was no losing on land at that time.

You would look like a genius by just buying and selling land at that time.

So I think there was no losing in the real estate sector.

I got really lucky to get in before COVID exited at Covid and now I'm managing throughout.

I will say that it's a lot more difficult now.

I don't know what your guys experiences are, but I've certainly seen a shift in better operations needed in order for us to see the same numbers that we were just being gifted before.

So that's certainly something that has been shifting within our business.

Which is why I developed this app that we can talk about later.

But it allows me to manage everything from outside here in Spain, but then gives me a better idea as to what's going on.

So I'm not really great at reporting, to be honest.

And so coming from a marketing background rather than maybe being a great CFO or a financial analyst, that wasn't my forte.

I was more interested in the what can I build as a brand and who can I get it out in front of.

That shifted things quite a bit for me once I started managing an active business rather than just building and building and building things.

On the marketing side, I'm definitely excited.

To talk about the app and what you developed there.

But before we do, leading up to that, I want to talk about, you know, something you mentioned, is that you can't be the same operator now as you could.

Like there was operators a couple years ago, like, everybody looked like a genius.

Not just in self storage, but in syndication in general and multifamily, like across the space.

Everybody looked like the genius.

And then the interest rates shot up faster than they ever have in the history of the country and things got tough and it really separated the sheep from the goats.

And you find out who the really strong operators are.

And there are really strong operators that still got caught, right?

People got caught with capital calls and pausing distributions because, you know, nobody was prepared for that.

It was unprecedented.

But that having been said, obviously the people that did weather that and do it in a good way were very good operators.

The people that are coming in and doing it now are excellent operators.

And you can't have the same methods before.

They don't work right now as they did a couple years ago because you just have to be really, really buttoned up.

And the margins are very thin.

So it kind of puts you in a situation where do you want to go back to being an operator and like, know thyself.

Like, I am not a great operator.

I can be an operator if I need to be.

Luckily, I've got partners that are fantastic operators.

So it puts me in a position where it makes more sense to invest in them in the different asset classes that I'm invested in.

I want to partner with people that are better operators than I am because it's a who, not how situation.

So knowing that and when the margins are thin that you better be betting on the right person because there people, we've been exposed as an industry, the whole industry has been exposed and the cream rises to the top.

So because of that, and I have no doubt that you can be an operator and be a very, very good one.

But in your future, are you looking to do more operation in the future or are you going to continue to stay as a passive investor?

Maybe do some of both.

But like, what does your future look like when you're 50 and 60, which is a long time from now?

Like, what does that look like?

And what is your diversification strategy?

So I cannot say exactly even what I'm doing in the next five years.

So I certainly wouldn't be able to justify a solid answer for you and with confidence for the next 25 or 30 years.

But I can say that I don't see myself as an operator going into the office every single day and managing a big team or a big staff.

I don't see the world moving in that direction.

Regardless, I see a lot of shift within every industry thanks to AI.

And this great quote that I saw was, AI isn't going to take your job, but someone that understands AI will.

And so something that we're moving all of our businesses into is utilizing virtual assistants and AI to be able to manage things a lot cleaner, easier and cheaper so that bottom line can stay in the same place.

So, for example, I was paying someone about two to $2,500 a month for managing my three facilities in Canada.

I'm now paying $400 a month for virtual assistant.

And essentially the only difference is that they can't go on site.

So the only shift that I had to make there was I have someone on call that anytime that there's a need for someone to go on site to clean something, check on something, fix something, it's $20 an hour.

That has shifted my bottom line significantly.

It's only three facilities.

There's not that many requirements within just three facilities.

And during COVID was okay, because we were smashing any kind of trajectory or forecasting that I had certainly made on a conservative level.

But now in this time, rates have gone down, occupancy's gone down in my facilities anyways.

I can only speak on mine, but I don't know what you're experiencing.

However, I have seen this shift within our clients at Cactus.

But the thing that's significant is there's a huge shift.

I mean, we were seeing this before COVID there was a drop before COVID and then Covid picked it back up to record levels.

And so there was this excitement in the industry, like, oh, we survived it.

And I think what happened was it was going down this weird thing in the world that's never happened really before within our lifetime or our parents lifetimes shifted everything back up.

And then now we're reliving what was previous to Covid and we're going back into the norm.

And I think like you said, the cream of the crop will survive.

But even those, it just depends on the purchase price.

Every deal is a great deal depending on the price.

And that's something that you can certainly recognize if you are doing an underwriting is it doesn't matter how many drivers come by the facility or what the population is or how much square foot population size you're gathering, it depends on the price of the asset that you're buying.

And if you can justify that purchase price, then great, go get it.

Get everything that you can.

The problem is when you overpay like people did during COVID and I certainly did during development.

Now I'm living the experiences of like, oh, crap, okay, I got to shift things significantly to make it a new business now.

And it is a new business.

It's a completely different thing.

We were franchising out our model because we're fully automated on the NOKI system.

We have payment plans within our solutions so that tenants can come in for cheap and then live with us for long or live within this ecosystem for a very long time.

Including all the other businesses that I had vertically, we had this huge model that was really interesting and I was super excited about as a marketer.

But as it's.

Everything's getting tougher.

I ended up selling off the businesses or downsizing the businesses or whatever just to be in that survival mode.

And I think that that's just realistic.

It's crappy.

I understand, and I've certainly gone through the stresses of it, but it's a business owner's life, and I think that that is just the reality.

I've never lived it before.

I'm sure you guys may have, but it's what every story goes down when you own a business.

And so I'm just living it at the moment.

I've been in the storage industry.

And there is that, you know, storage has boomed.

It's been booming since the Great Recession.

And as you said, you hinted is there was this brief moment right before COVID where it started to kind of hit its peak and it started to come back down, at least to the norm.

And then Covid hit and just threw fuel on a smoldering fire.

But it wasn't forever.

I contend that part of what's happening in the storage industry right now that's causing any kind of slowdown is just interest rates, is that interest rates are so high that one, your cost of capital has gone way up.

So if you're not buying right, you're in real trouble.

If you're buying on a variable rate, you're in real trouble.

And the other is, and this is to Me, the temporary part of this, and it's why I'm still very bullish on storage, is that the interest rates are high right now and it's frozen the housing market.

And a large, a good percentage of storage customers are people moving.

A lot fewer people right now are moving.

They're kind of stuck in place with whatever housing they have right now.

And it certainly hasn't killed storage at all because you still people moving because they have to.

It's just to me, it's a temporary issue that as soon as interest rates start to drop back down again and people start moving again, we're right back to where storage was pre pandemic.

And obviously you still got the issue of you don't want to be going into a market where it's, you know, you've got too many storage facilities oversupplied.

But to me, it's less of an issue.

We're not going to have as much of a problem with as you're saying.

Where rates are being pushed down and occupancy pushed down, I think you'll get much back up to a much more normal rate.

That's my opinion.

As a Canadian, I don't know if you know what the rates are in Canada, but my current interest rate on one of my facilities is 9.25.

So to live a 9.25 is like going back to the 70s and almost feeling like you're paying an interest rate like a credit card.

So it's curious to me.

However, I will say I know people that have defaulted on their personal homes.

Of course I know people that have defaulted on their investment properties on a residential side, but I don't know anyone at the moment that I can think of that has defaulted on their storage.

And the reason for that, in my opinion, is because our expense ratios stay between 30 to 35%.

And if you can even drop that down just a little bit, you know how much money that means on your bottom line.

So that's the only difference that I could make in my business significantly to shift things and moving it forward towards where we are today.

Whereas in residential, if I did that, what that would mean is kick everyone out of my residential properties and shift new contracts to say you're responsible for your own bills and that's it.

Almost do like a triple net lease for residential in any way possible shape or form and put the ownership on the tenant.

But that's impossible on a student rental.

So these are the shifts that I started seeing where you only have one meter in a home, but Eight bedrooms or something like that.

How do you say this person's been using X amount of water?

This person's been using X amount of the stove.

So electricity or gas, it's impossible.

So that's the one way that I saw with self storage was we didn't put any plugs.

All of the lights are on timers.

We use a Nokia battery powered smart system for our locks and we can lock people in and out of their facilities depending on their current payment status through a portal on a website.

So it allowed me to shut down a lot of my expenses.

And really the most expensive thing that we're experiencing in Canada is property taxes, which is significant in our province.

And the only other thing that I can see the difference between when I invest in LP and GP is capital gains.

I noticed that your guys capital gains Biden has just tried to implement a shift on that.

The same thing has happened in Canada.

They've now put it up to 66% instead of 50% of your capital gains.

So it's a significant shift that essentially means that 50% of your capital gains gets taxed at 50%.

So 25%.

Well now it's 66%.

So June 25th in Canada is when that changes.

To think that that's going to be a positive thing for the country is hilarious.

No one's going to want to invest in Canada anymore.

Everyone's going to want to move their money anywhere else.

And we can now because it's a globalized economy, we are now able to shift the money into Bitcoin and send that over to China or wherever we want for a significantly lower fee than anything else.

So I think that it's going to be interesting to see how this shifts.

But the way that we're currently doing things in Canada is depressing as a Canadian.

And so this is why I started investing in the United States was just because it's a lot more investor friendly.

As a gp, you guys can charge fees on the management and on other things as well.

Which was interesting to me coming from a GP's perspective in Canada we couldn't do that.

So yeah, I was very interested in the United States from an investment perspective also.

We do not have that in Canada.

When you sell a property, you pay the taxes first, then you take your profits and you can reinvest that into something, whatever you want, but you have to pay your taxes first.

1031 exchange.

At least I can take my profits and as long as I'm investing in Something within the next six months that's bigger.

Good for me.

Go.

Me grow.

Go get it, son.

But the Canada just says, well, pay your man first and then we'll talk about you potentially growing.

Wow.

That was.

So if not that, like if you have a property up there, like even if you have a ton of equity, why do you want to sell at this point?

Like your taxes are so high, like it's going to stick.

A lot of people just holding on to equity that they have for a long time and it's going to push other investors out of the market.

That's really interesting.

What it's really going to do is get people to refinance when they didn't really want to.

And then if anything shifts, it's default central.

Exactly.

So refinance is non capital gain.

Right.

And you bring up another point.

You brought something up earlier that we kind of glossed over that I think is really important.

So I want to circle back to it is that you know, whether or not a self storage facility or any kind of asset class and within self storage, you already touched on it.

But the reason, one of the reasons I love it.

Of all your gross potential rental income with a multifamily property, you might have 60 or 70% of that are expenses.

The office staff, the maintenance, the landscaping, you know, everything that goes along with that.

And you might have 30 to 40% is your net operating income.

With storage, it's the inverse.

It's 30% expense ratio, 70% net operating income.

And as you get past the point of leasing up and you're doing less advertising, less promotions, a lot of times that might shrink below 30%.

And it's unbelievable.

You're literally just renting someone a box of air and you've got a thermostat that has a wider range than you set at home and you got lights on a timer.

So it's a very good asset class to hold long term.

But the thing that you said that I think people should make sure that really resonates is that whether or not a storage facility is a good deal or not doesn't depend on the price per square foot in the market.

And it's not represented by the occupancy in the market, the vehicle traffic count or the residential density in a 1, 3, 5 and 7 mile radius, the growth of the town.

What really determines whether or not it's a great deal is what the price tag is.

It's what you're into it for.

Right.

And residential properties right now could be not a great investment strategy for your run of the mill investors.

However, if you're a wholesaler and you're getting discounts, you're getting properties at 50%, then it's probably great, right?

Because when you flip a house, it's not about what you sell it for or what you renovated it for.

It's what you bought it for when it smelled like dogs and cats.

Right?

It's what's your initial cost basis?

So if you have a skill set like you can do construction even though you were doing it in a really tough time during COVID when the cost of materials was sky high and supply chain issues created a long timeline, so those carrying costs were a lot more.

If you have a skill set that allows you to get into an asset class for cheaper than the baseline retail investor, that can make it a good deal for you when it's not a good deal for other investors.

We've seen this a lot of times, like it used to be people that had access to mobile home parks, if they could become a mobile home dealer and get the trailer parts for half price.

Like some kind of edge, right?

Whatever it is, there's an edge for us with self storage.

We do conversion projects.

We don't build ground up self storage.

We buy nasty old Kmart's grocery stores and warehouses and all in for the building, the construction and the conversion, we're at 65 bucks a square foot, so about half the cost.

So even within self storage, if it costs you $120 a square foot, we have a strategic advantage through that vertical integration.

My point is, anybody out that's out there that has something or some relationship or strategic partnership that gives you an advantage, you can't make blanket statements like this isn't a good strategy, this isn't a good asset class.

Because whether or not it's a good strategy, asset class or investment depends on how you got into the property and what your initial cost basis is.

So I love the fact that people think that, you know, new development on storage or storage may not be great right now, or it's not what it once was.

Because we have a niche there.

And so for us, they make a lot of sense.

I have people that in a high interest rate environment that I'm friends with that are crushing it as house flippers.

It'd be a horrible time to try to get into house flipping.

But if you have your own deal flow, you're your own wholesaler.

That's what determines whether or not, it's a good investment for them and it is.

So whatever you're looking at, whether or not it's a good deal can't really be based upon the industry as a whole.

Most of the time it's based upon what's your individual experience with your initial cost basis of getting into it.

I just wanted to hone in on that because I think that was really, really valuable.

And the market may be telling you right now don't do ground up development, but maybe it's not telling you that if you own the construction company, especially if you can get build multiple at the same time and have economies of scale to get the materials cheaper or whatever.

So like that blanket statement's not always true.

It could be true like, hey, if you're a retail investor, don't go build self storage from the ground up right now with a 9% interest rate.

But it doesn't mean that you don't have a skill set or have some asset class that even though it may be have a negative connotation right now, you can get it in a lower cost basis or have a strategic partnership.

And this is a segue to being an LP investor.

Now specifically looking at passive investment strategies with anything people, you know, multifamily apartment complexes, RV parks, self storage, people buying hotels and converting them to condos.

I think now is a really good time to look for creative operators that have a niche that can make a good deal for them when as a whole it's not a good deal for most people.

So I think it's really valuable time to be looking at potential syndication investments, general partners that are operating at a high level that you may want to partner with as an lp.

And along with that, I think that I'd love to talk now with the time that we have left about the transition to the reporting system that you put together with Cactus and how that helps you keep your finger on the pulse of what's happening with different markets, different operators and things like that.

But I'm sorry to circle back on that.

I think that was powerful.

I don't remember anybody else talking about whether or not it's a good deal has nothing to do with the asset itself.

It has to do with the initial basis.

I think that was powerful.

As humans we love our rules of thumb.

So I get it.

It's just a human instinct.

It's like how fast can I calculate if this is going to be a good deal?

Here's my 1% on residential or 2% or what does it look like from Expense ratio for the self storage right now versus what it could look like optimized or stabilized or whatever.

Is there an opportunity for stabilization?

You can look at that.

I understand the per square foot analysis, I get it.

And at Cactus, we still mention it.

We do a really good job at kind of showcasing in the underwriting tool that we've built what that looks like.

But our biggest thing is the price because for us it's not so much like what is our suggested price at Cactus because we have market data and then we also have tons of data on in terms of like what this property looks like today versus looks like in five years.

But then any deal can be profitable.

We have this little drag and drop thing where it's slider where you can just slide the purchase price and you can see all the numbers change so that you get a better idea as to this is the important piece right here.

This is really the important piece because I certainly understand the KPIs, I certainly understand IRR Roe if you're managing your facility for a certain period of time or ROI or roc, like all of this is, yeah, fancy stuff and I like it.

But I think the really important piece is did you get it at the right price?

If you got it at the right price, everything is going to be so much easier.

And if you got it at the wrong price, then I wish you the best of luck because it's going to be extremely difficult regardless if you're a great operator or not.

We have great operators in this industry and they overpaid like crazy because they had the cash and now they're in a situation where they have to raise more cash just to service their debts.

And we'll see how they play out.

They might be selling for dimes on the dollar because they made some bad decisions when they were rich.

And I think that that is certainly something that we will see play out in time.

But yeah, I think that that's been my biggest mindset shift and also the way that we communicate within Cactus.

So just for context, try Cactus.com is a company that I created with all these kind of learnings as a GP and lp, understanding reporting and understanding the cash flow.

I understand how reporting is an easy thing for someone that does it all day every day, but it still takes up a significant amount of time for those people.

And it's quite difficult for an accountant to be able to take something like this, like a reporting spreadsheet and be able to explain the context behind all those numbers.

And so one thing that we do at Cactus is we just make it so much easier for you to understand what's going on within the operations, the marketing and your financials so that you can send that off to banks, you can send it off to your advisors, investors, and it can be easy.

But in the underwriting piece in particular, I love using that tool for any deals that come through, just so I can justify saying no.

And most deals don't pencil out, so I just send that report off to them.

We do an open book.

I say, hey, look at the numbers.

This is the purchase price that you're saying.

If we did it at this purchase price, it might make sense.

Take a look at them and see if we can make that happen.

If they hit the right purchase price, then we make a deal.

But otherwise it's not worth it.

So, Tyler, I want to make sure that I understand who's the end user of Cactus.

Someone like you and me.

Someone who's looking to either raise capital, someone that's either developing, growing.

Some of our users own one to three facilities, very small time operators, but they don't have the staff to be able to manage a CFO or some reporter.

Other teams have hundreds of debts and they're managing all of their debts within Cactus and managing their portfolio within Cactus to be able to understand that side of things.

And they have a reporting team.

But again, the reporters are financial analysts.

They understand the numbers that they're reporting on.

But then you want your operations team and your investors, who may not have that same training, to also understand what's going on.

And so the way that we've developed this platform is to make it really easy for everyone to come together at the same table and understand what's going on.

So the end user for us has been self storage brands.

For now, it's a focus that we've certainly honed in on.

Like I said earlier in the podcast, it's much more approachable industry than where I came from in the residential side because those are big, big names, big players.

They get sold everything under the sun all the time.

And whereas storage, there's little solutions in the storage industry for something like this.

So that's where we play at the moment.

We're learning from our user base.

We have four tools at the moment, so a full underwriter.

So stage two and stage three underwriter.

So once you've finished that mental math, then you go into Cactus.

You can do kind of a napkin deal.

It builds you a report that you can certainly send out.

It's a free tool.

Then the stage three is a full underwriter that builds also a landing page and website for you to be able to send out to your investors so that they can commit to the deal and that can live within your ecosystem being embedded into your website.

Or just live within the Cactus ecosystem and you send it out shareable URL.

But then we also have the debt management, where all of your debts can live in one place and you just kind of download the report and send it off to your debt provider, so your bank or your broker and they can get that reporting every time that they ask for it.

So in my case, my reporting was I was required to send reporting every quarter.

So I would just download the report in Cactus, send it off to my broker and they would have fun at it.

And how we're able to do that is because we are reporting on everything that's coming in from your property management system and your accounting software.

So we have your rent roll, we have your income and expenses and we can take a look at how things have been shifting over time.

And then we utilize the data that we get from everyone else in this sphere.

We don't sell that data.

We're not interested in selling your data.

We're just simply utilizing the data to be able to showcase to our investors, or, sorry, to our users, what their portfolio looks like in terms of the industry in comparison.

So I think it's a powerful tool.

It certainly has been a powerful tool for me.

I developed it for myself when we first started because I was here in Spain and then I made the mistake of sharing it on Facebook and on a Facebook group and it got some wins.

So we ended up building a company around it and it's been good ever since.

We've raised some money from some good names and we're developing a pretty cool tool.

But I think the real value is how much time it saves on the reporting and understanding from investors, can certainly save tons of time and also allow you as a transparent syndicator, to be able to raise more capital with confidence in the market.

Well, Tyler, this has been a wide ranging conversation.

It's been very interesting.

We barely even touched on the idea of living abroad in Spain.

So we'll have to have you back on to talk about that.

The Nomad part of my life.

Exactly, exactly.

It's one of our favorite parts.

But if somebody wants to find out more about you and more about Cactus, what would be the best place for them to go and do that?

Yeah.

So try cactus.com is where the reason why I wake up in the morning is for that company and then I am on LinkedIn as well.

So my name is Tyler Sellers.

I'm sure you'll put it in the show notes there, but my last name is spelled S E, L, L, A R S.

I think I'm one of the only ones in the world spelled like that, so pretty good for me anyways.

All right, well, listen, Tyler, this has been a great conversation.

Appreciate your time, man.

Thanks a lot, Tyler.

Appreciate it.

I appreciate you both and congratulations with everything that you're doing.

Congratulations Tele Fundo so far.

And I'm looking forward to potentially investing in it as well.

I've been looking at you guys.

I'm very impressed with what I see.

Thank you.

Thanks, man.

Have a great day.

Stay tuned for Fund Dos.

Okay.

El Fundo Dos.

Nice.

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