If you’re tired of dealing with tenants and want to build a recession-resistant business, then Lauren and I are about to discuss the perfect topic for you! Tune in to learn more about storage units, which has been the hot topic probably for the last 15 years!
Welcome to the Real Estate Masters podcast, where we interview the top names in the Real Estate game. If you want to grow your Real Estate business, see more podcasts, or get free resources – Go to www.REMmastermind.com. The only podcast that allows you to directly connect with the guests and many of the highest level names in the real estate game.
You are in for a treat with our next guest. Do me a favor, subscribe to the podcast, leave us a review, and don’t forget to go to www.REMmastermind.com to connect with some of the highest level Real Estate professionals in the United States through our community and through our high-level masterminds. Let’s go.
Itunes – www.TonyJavier.com/itunes
Welcome to the real estate masters podcast, where we interview the top names in the real estate game. If you wanna grow your real estate business, see more podcasts or give free resources, go to www.remcommunity.com. The only podcast that allows you to directly connect with the guests in many of the highest level names, a real estate game, you are in for a treat with our next guest. Do me a favor, subscribe to the podcast, leave us a review, and don’t forget to go to REM community.com to connect with some of the highest level real estate professionals in United States through our community and through our high-level masterminds, let’s go well,
Welcome to today’s show. We have Lauren Elle on the line. She’s with Spartan, uh, investment group, uh, in 500 rated real estate investment company. We’re gonna talk storage units today. Um, that’s been a hot topic probably for the last 15 years. I think 15 years ago is, uh, when I really started hearing about storage units. Um, from what I understand, very, um, hands-off, you don’t have to deal with the tenant. You don’t have to deal with toilets. You don’t have to deal with that kind of thing. So I’m looking forward to hearing what Lauren, uh, has to say about storage units. So Lauren, welcome to this show. I appreciate you joining us today.
Absolutely. Thanks so much, Tony, for having me on.
Yes. Yes. So I’m excited. I, I love, I love things that people aren’t talking about a lot. So I know 15 years ago, again, I think it, it was a hot topic, and then it faded out. I don’t know if it became, became too competitive. I’m not sure what happened, but you don’t care about it quite as often, but what appeals to me again is not, not having tenants, not having toilets, um, and that kind of thing. So let’s start with where you got started in the self-storage business, kind of where you got now, what you, uh, have learned through that process and any value that you think you can, um, give, and then we can kind of conversate on that.
Sure. Well, I’ll start off with Spartan. So Spartan investment group, uh, they were founded in 2013 by, uh, Scott Lewis and Ryan Gibson. And they actually started in kind of the multifamily condo conversion type of side of things. And then in 2016, they saw the market shifting and they wanted something. It was a little bit easier to manage a little more recession-resistant and that’s when they go into storage. So, um, ever since 2016, that’s really mainly what they focus on. Um, I joined Spartan in 2019. I started off by setting up and doing their property marketing. So at the time, I think we had five or six assets under management, a couple of storage, couple of RV parks. Um, so I really took those kinds of individual marketing pieces off the ground learned how to market these self-storage facilities and RV parks and tertiary markets, um, which is a totally new thing for me.
I came from a background of, you know, bringing tech companies to market and CBD oil companies kind of public. So it was totally different, but all that experience, um, was helpful. And I was able to kind of think outside of the box on, you know, how to market, uh, RV park for long term workers out in the oil fields of Texas. So super interesting. Um, since then I’ve transitioned into the investor relations side of Spartan. Um, so I help investors, police capital, uh, speak about our deals, all kinds of stuff like that on daily basis.
Awesome, great. So there are two things I kind of want to, uh, dive into and we we’ll go left and then we’ll go, right. So on, on the left is, um, just storage units themselves. So, you know, as I said, it was a hot topic, you know, 15 years ago. I think that’s when, you know, social media kind of started taking off a little bit and there’s just like, you know, this buzz around a lot of different things. So tell me about self-storage. What do you love about it? What are some things you’ve learned if someone wanted to get into the storage, um, the storage space, how would you recommend they do that?
Sure. Um, well, what we love about it, as I said, it’s pretty recession-resistant. Um, even during 2020, and COVID times we didn’t see a drop in occupancy or anything like that. Um, if anything, we saw an uptick just because people were, you know, in their homes, they were like, okay, we need our garage back. You know, let’s get this stuff outta here. Um, easy to maintain, easy to evict. So, you know, on the housing side of things, it takes a long time to evict a non-pay tenant within storage. I think it’s 30 days, you know, if they don’t pay, um, and you can auction their stuff off. So that’s great. Um, we have a lot of ancillary revenue ins, uh, incomes that come from, you know, the self-storage facility itself. So we can add U-Haul to the property for an extra stream of revenue, ups, FedEx, drop offs, ice machines, um, stuff like that.
So there are a lot of different ways to bring in revenue other than just the storage tenants themselves. And I would say for someone getting into storage, um, start kind of small, you know, go to some conferences and learn how to manage them, learn how to market them. Um, even though they’re a little bit easier to manage than other assets, they’re still tricky in this sense that you need to, there’s a lot of legal things with the evictions and the tenants and timelines and all kinds of stuff that you need to know. So going to conferences, learning all you can about them. Um, and then starting small, don’t start with a thousand units. Um, you start with a couple hundred and go from there.
Okay. Awesome. And how, how hard is it to raise money for that kind of thing? So actually I’m I’m I skipped another question I had. So you had you asked about, or you talked about value add, so that’s something I never thought about with value ad, cuz anytime you can buy anything and add value to it. So on the residential fix and flip side, it’s obvious you renovate the property, you sell it on commercial. There’s some of that where you renovate and then you, you know, stabilize rent long term or resell, but on the, on the storage unit side, obviously occupancy can be raised, but then you, you mentioned U-Haul and some of those other things, uh, is that part of your value add where you take facilities that don’t already have that. And even if you don’t raise occupancy, kind of take those things, um, that you can add, uh, you know, additional income to, and then all of a sudden the property’s worth, uh, quite a bit more just by doing that. Yeah,
Absolutely. There’s a bunch of ways that we add value. Um, one way we add value is just operational, you know, improvements. So a lot of times we buy these little mom-and-pop facilities. They’re not collecting rents. The rents are, uh, super below market rates. So we’ll raise the rent to the market rate just to bring that economic occupancy up to the physical, um, where it needs to be. We will have a manager there that actually shows up and answers the phone. You know, you’d be surprised at how many times that’s not happening. So bring in great customer or service. Um, new branding kind of makes it pop, cleans up the facility. We do improvements like repaving the drive aisles or fixing the roofs if there’s leaks or things like that. Um, and we also like to improve them by expanding them if we can. So a lot of times we’ll look for facilities to have extra land or a huge parking lot that we can potentially add more units to. So that’s kind of the two main ways that we improve.
Awesome. Cool. So, um, from a standpoint of your strategy, I, I looked at your guys’ portfolio. You said you’ve only been doing storage for not too long, but your, your portfolio looks fairly impressive just in that period of time. So, um, from a standpoint of like, you know, know raising money for those types of things, um, that’s one thing I, I kind of wanted to touch on. And then also what’s your exit strategy? Do you guys turn ’em around and resell ’em within a year to two year period? Do you keep ’em five, 10 years? Are you keeping ’em long-term? Like what’s your, um, what’s your strategy for raising the money and then also your exit kind of towards the end?
Sure. So, um, so far raising the money has been fair, um, easy. We have a huge investor network, um, and they really trust us. We’ve never lost investor capital. We really conservatively underwrite all of our deals and we go and put a 675 point due deal checklist, put the properties through that checklist every time before we buy it. So you do your best to mitigate any issues upfront. So that keeps our investors reinvesting, cause they like where our projects are going and they trust us and we’re very open and transparent every month with how they’re doing and what improvements we’re making, what kind of marketing we’re doing to bring in new tenants. So I would say it’s, you know, it’s pretty great. And a lot of the properties are cash flow. So that’s also the plus for investors to kind of make it look like an attractive deal. Um, and the other part, sorry, what was the
Other part strategy? Yeah. Disposition. Do you guys keep long-term? Do you dispose after a certain amount of time or what’s your, what’s your strategy there? Yeah,
So we usually look at about a five-year hold. Um, so either refinancing the current out, if we decide to keep the property or, you know, potentially selling our whole free up portfolio after five years or so to a read or someone bigger would be kind of our exit strategy, but
Gotcha. Gotcha. Cool. How’s the competition right now? Like, you know, I, I, I feel like it could be a very competitive industry. Like if someone’s doing it and they’re doing it well, there’s probably some big players in it to where they’re gonna find the good deals I feel like, and snatch ’em up. Am I, am I right about that? Or there’s still a lot of deals out there that can be found. You just have to find them.
Yeah. You’re I mean, both, you’re definitely right. There’s a ton of competition. There’s a ton of REITs that have a bunch of money they’re coming in, snatching up huge portfolios. Um, but there’s still opportunities out there. So a little bit further and few between a little bit, you know, lower cap rates, but still stuff out there. We’ve actually tripled our acquisitions team, uh, in Q1 of this year. Just get out there and find all the deals they possibly can.
Awesome. So it’s not the traditional method of marketing where you’re doing like postcards and text messaging. It’s like, you’re probably, um, you know, finding business list, maybe going online and seeing what’s, um, what’s available. Are there any other strategies that you can give us that you can, uh, I guess kind kind of tell us would be good to, to help people find storage facilities?
Yeah. I mean, we definitely started off by sending postcards and we got a few of our facilities that way, so oh really? That old method’s still not dead, but, um, but I think it’s all relationships these days, you know, having people with the broker relationships or the stellar relationships, um, you know, so maybe having them in having that relationship so that they like you and they want to sell their facility to you. Um, I think that’s what kind of makes us stand apart and helps us with our deal flow is just having people out on the ground, making those relationships. Um, yeah.
Yeah. One of the things you mentioned was investors. So I’ve been investing for 20 years now and literally the first deal, all I did, um, I raised investor money and I’ve been doing it ever since. And, and one of the big things that you kind of touched on was you’ve never lost money for an investor, which I can say I’m, I I’m, I’m in the same boat over 20 years. I’ve never lost, uh, an investor’s money. Um, I, I take really good care of my investors. I treat their money like my, like it’s mine. Um, and once you can, and you can kind of expand on this, but once you get someone into an investment and you give ’em a return and you do what you’re gonna say, you’re gonna do like that to me is huge. Right? Like you say, you’re gonna give them a check on, on every month, you know, making sure it’s on time.
Um, when you’re giving them, um, to me, when I’m giving someone a return, like a lot of our deals are fixed return, so that’s easy. Uh, but I’m getting into some deals that are more like a little bit variable where they can make a lot higher, but I’m giving them like, here’s what I expect it to be, but I’m giving ’em like way higher returns, right? So from people that are like people that are raising money, um, some people think it’s really hard, um, which if you’re new, it can be harder. But what are some things that you guys have done to help with that investor pool? Um, obviously you’ve got more longevity, but, um, just from, from your experience, what are some good ways for people to find money and, and, uh, get, get investors into the game to allow them to do deals like this? Sure.
I think it’s super important to same with kind of the acquisitions team for the investor relations team to be out and about. Um, we go to conferences, we go to local meetups all around the country just to meet investors face to face. It’s a lot easier to, you know, know like trust people when you actually meet them, you have a real conversation about life with, with them and not just talk about, you know, an investment opportunity. Um, so a lot of our investors are like personal relationships and then referrals from those relationships and, you know, friends and family members and they refer to their other friends and business partners and all that. It’s a lot of word of mouth. It’s a lot of getting out there and you know, having to meet you face to face know that, okay, these are trustworthy people, they know what they’re talking about. They’re smart, you know? So it’s like, okay, let’s dig further into those details of the offering after we’ve kind of met them and, you know, understood what they’re all about.
Yeah. That’s a big one. Referrals are a big deal because if you treat people right, you do what you say you’re gonna do. Not only are they gonna invest more money, but people who have money hang out with people with money. Right. So it just, it could be exponential. I’ve got, uh, my CPA, I found him, I think eight or nine years ago. Uh, and then he learned what I was doing. And he is like, oh wow, I want to invest. So he started investing and he sent so many investors to us. I want to say it’s probably 10, some between 10 and 15 investors, um, that, that are investing with us at any point in time. So, and I’ve got other investors that have done the same thing, so treat people right. They’ll invest more money and they’ll send people your way. So exactly great.
Um, so what other value can you add to our listeners? What other lessons have you learned in this space? Um, obviously, um, you know, real estate is, it can be very lucrative, but also there’s like deals fall apart all the time. You could think something’s gonna go, right. And then you do your due diligence. And then all of a sudden, you know, something can blow up last minute. Um, and there’s a lot of lessons learned from those deals that don’t happen or even deals that happen. That don’t go the way you want ’em to be. So any kind of lessons you can share that you’ve, um, you’ve had in, in your real estate world that you can kind of, uh, kind of share with us.
Sure. Yeah. I would say no, probably the number one biggest lesson that is instilled in us every day through our co-founders Scott and Ryan is transparency. Be transparent, no matter if it’s good or bad. Um, we had one of our RV parks get hit by a tornado right at the beginning of COVID last year. So it was kind of a double whammy of, you know, the oil fields kind of shutting down and we got hit by a tornado. And so the park wasn’t doing so well for a while there. Um, and we sent out a video update every day. We had Scott flew down there and a heartbeat every day was a new video. You know, it’s with an update email, um, just things are, things are going to go bad sometimes and you just can’t help it, but you need to tell your investors be super honest about it.
Don’t hide it. Um, tell ’em how you’re gonna fix it. You know, tell ’em exactly what’s going on. So they’re not wondering, oh my gosh, like where’s my distribution, this on what happens? Um, cause they’re gonna be a lot more forgiving if you’re open up front, you know, this is what happened, this is what we’re doing to fix it, you know, before, before, you know, two months goes by and it’s like, all right, you know, what’s going on? Um, I think our investors really love that and respect that. And it’s like, okay, you know, it’s that, that happened, you know, we’ll invest in the future. You’re transparent, you’re honest. And you’re doing all you can to fix some issues. So
Yeah. Yeah. That’s a really good point. I’ve got one deal right now that, uh, one of my investors is invested in and it’s not going really well right now cuz the borrower did some things that we’re not above board. Um, cuz we’re doing funding for, for other people’s projects as well all and uh, that’s one of the things super transparent once, you know, things started happening fully transparent with him and actually it’s kind of, uh, you know, I’ve such a good relationship with this investor that if he if he doesn’t get his money back, I’ll write the check for it. It’s one of those things that it’s worth it for me to lose that money and, and gain that investor’s respect. And I’ve never had to do that in any other investment, but 20 years finally, I’ve got a deal that I’m like, okay, now I may have to write the check for, but um, they’ve been really good to me and they’ve invested in millions of dollars in deals.
So for me to do that, it’s not a big deal. So another way to take care of your investors is through communication. And then sometimes you just have to step up and, and do what’s uh, not, I don’t wanna say what’s right. Cause honestly don’t have to do that, but it’s one of those things that I just, you know, I just feel like I should do cuz they’ve been so good to me. So, um, well, great. So, you know, um, I guess we can start wrapping up. I mean, we’ve talked about money, we’ve talked about getting into, um, the storage business, um, you know, no toilets, no tenants, recession-proof. Uh, anything else that you want to share about the business, uh, before we kind of start wrapping up?
Sure. Yeah. Well, we’re super excited. Uh, we launched a national brand in Q1 of this year. So, um, we transitioned 13 of our current self-storage facilities into our new free-up storage national brand. Um, and everything we acquire here on out, it’s gonna be also free up national brand. So, you know, standardizing everything from our customer service to our signage, to everything so that, you know, no matter if you go to a free up storage location in Georgia or Colorado, you’re gonna the same exact top-notch experience. Um, which is, you know, it’s gonna bring our customers, our investors’ portfolio, a lot of, um, great recognition, SEO presence, um, purchasing power. So that’s been something we work on. We’re really excited about it. Um, we’re wanting to acquire 24 new storage facilities in 2021. So we definitely have our work cut out for us, but we’re, we’re super excited to get that brand in every state. Hopefully
no, that’s great. That’s another thing I did forget to touch on. You said customer service, you said getting someone in the facility that actually answers the phone. Like to me, that is a huge thing in all of my, so I, I have multiple businesses and I’m like, you know, what if people call, answer the phone, if you don’t answer at least get back to them within like, you know, in our business with, with real estate, you know, you need to get back within an hour, cuz that could be 30, 50, a hundred thousand dollars profit deal. That that goes by the wayside. Right? So adding value that way just with customer service and something like that, I bet is huge because if you have someone that doesn’t answer their phone, that could be one, two, three, four, five, ten clients a month, potentially you could be missing out just by not answering the phone or not returning the call.
So that, that right there can, can be a, a, a big thing. And then I think you mentioned, I think you touched on like just the experience, right? Like the, because you know, when you walk in somewhere or even when you’re just talking to someone on the phone, there’s a huge difference between a company that knows what the heck they’re doing and just a company that doesn’t care. Right? Yeah. You can feel it and you can, like, I can tell by the way we communicated by email that you guys are, are, uh, do things like a certain way. And like, uh, it was very, um, you know, I, I know I can just feel it from you guys. So, um, adding the value that way and just being, uh, be being of service and making the experience better in anything you do, doesn’t matter whether it sells storage or, or wholesaling houses, like, you know, you’re gonna get a good, good name by providing great service.
And then you’re also gonna get potentially a bad name by, uh, not doing things the right way. So, absolutely well, great. Well, thanks law. Right. I really appreciate you coming on. Hopefully those that, you know, thought about self-storage, it gives them a little bit of a, a of in, on what they should look for and kind of, um, maybe a little bit, you know, some nuggets they can potentially push them towards that edge or, you know, there’s some people that want to maybe invest money and, and just want to say, Hey, I want, I love self-storage. I, I love the concept. It sounds great. And maybe they want to invest some, some money. So I’m sure you guys are, are, are still looking for more investors. So if someone wants to get ahold of you for any reason, whether it’s investing or anything like that, uh, where would you like them to go?
Sure thing. Yeah. Um, shoot me an email. email@example.com
Lauren at okay. Yep. All right. Fantastic. Well, thanks again, Lauren, for adding value to our community and we’ll catch up with you soon. Thanks Tony. Thanks
Thank you for listening. Now go to www.remcommunity.com to connect with today’s guests. See your high-level masterminds and to get free resources. Don’t forget to share this with a friend in Levi, a five-star review. We’ll see you in the next episode.