fbpx

5 Ways to Make Money in Self-Storage with Stacy Rossetti

Share This:

Episode Summary

Listen on iTunes
Listen on Spotify
Listen on YouTube

Ever been curious about the booming real estate investing niche of self-storage? We’ve got the expert, Stacy Rosetti, of StorageNerds.com on this episode. In this interview, Jeff and Stacy discuss the ins and outs of storage investing, how it can actually be easier than residential investing, why storage is recession-resistant, and the five different ways to make money.

Episode Transcript

Stacy Rossetti 

Storage is like recession-resistant, in the upturn, you’re doing great because like people are like, “I’m gonna buy more crap.” And if it downturns, you’re like “Crap, I have more crap, I got to put in too much crap, I got to downsize and put it into my storage.”

Jeff Stephens 

Welcome to Racking Up Rentals, a show about how regular people, those of us without huge war chest of capital or insider connections can build lasting wealth acquiring a portfolio of buy and hold real estate. But we don’t just go mainstream looking at what’s on the market and asking banks for loans, nor are we posting We Buy Houses signs or just looking for quote, motivated sellers to make lowball offers to. You see, we are people-oriented dealmakers, we sit down directly with sellers to work out win-win deals without agents or any other obstacles, and buy properties nobody else even knows are for sale. I’m Jeff from the Thoughtful Real Estate Entrepreneur. If you’re the kind of real estate investor who wants long term wealth, not get rich quick gimmicks or pictures of yourself holding fat checks on social media. This show is for you. Join me and quietly become the wealthiest person on your block. Now let’s go rack up a rental portfolio.

Hey, this is Jeff from a Thoughtful Real Estate Entrepreneur. Thank you for joining me for another episode of Racking Up Rentals. And this episode is actually quite a special episode. I’ve got a special guest interview to share with you today. Today’s guest is Stacy Rossetti, and she runs a website called StorageNerds.com. And she is a storage expert in the real estate investing field. And in this conversation, we talked about a lot of different stuff about how easy it actually can be to buy storage unit properties, how can actually be even easier than buying even single-family homes, how the financing takes place, and how it’s so perfectly set up for our thoughtful approach to negotiating directly with the seller in a very relational manner. And using seller financing whenever possible. She explains a whole lot about how the whole storage investing thing works, especially one of my favorites was when she broke down the five different ways that you make money in investing in storage facilities. So you’re gonna want to listen to this episode and check out the whole interview. It’s really, really good. Show notes for today’s episode, including a transcript will be at www.thoughtfulre.com/e41. Please do yourself a big favor and hit the subscribe button please do us a big favor and hit that subscribe button too. It truly helps the algorithms on iTunes and the podcast platforms to let people know that you’d like the show so that they can share it with other people who are like you and me looking for this group of thoughtful real estate entrepreneurs to join. Okay, without further ado, we’re gonna go straight into the interview with Stacey.

All right, Stacey, thank you so much for being with me today.

Stacy Rossetti 

Thank you. I appreciate and honor. Thank you for letting me come on.

Jeff Stephens 

Yeah, I was so grateful to get a chance to meet you recently via the amazing internet. And as soon as I heard just a little bit about what you do, it seemed like a great fit kind of alignment between, you know, our styles. And so I think the listeners are gonna get a ton of value out of, you know, hearing how you go about doing your things. I think it’s very much up our alley.

Stacy Rossetti 

Okay, awesome. Cool. I’m looking forward to it. Yeah, letting people know kind of, you know, how to get into this industry.

Jeff Stephens 

Yeah. Fantastic. So all right. Give us, give us the big picture. Give us some context — who is this person we’re talking to today?

Stacy Rossetti 

So, I’m Stacy Rossetti. And I’ve been investing in real estate now for about 10 years. I got in right at the upturn, 2010-2011 so I haven’t had a downturn yet, but I’m looking forward to that. And I’ve been preparing for the last 10 years to really get into that. And so — and then I started out wholesaling and rehabbing did a lot of flips. I was one of those types of people that were doing like 10 or 15 rehabs at a time.

Jeff Stephens

Wow…

Stacy Rossetti 

And then what happened actually was in 2015, I got pregnant. And at that time, I was doing 15 rehabs and I actually had 20 rehabs in the pipeline. So in my mind, I was thinking like, as a woman and as a mother, you know, I was writing up you know, if you do one rehab, you know, you’re running around like a crazy person, right? And if you have 15 rehabs, it’s just like I was just all over the place. And you know, I was good at like automating and systematizing everything but you know, you still got to like work you have to work, you know, so, in my mind, I was thinking how am I going to have this little tiny baby and like, be a mother and be a good mother and like run like all these rehabs like there’s just no way. And at that time over, you know, over the past five years, all we had focused on was just like scaling up, scaling up, scaling up, I was always about like, cookie cutter, you know, growing scaling systematizing and I wanted to be one of those, you know, those rehabbers that was just doing like a zillion rehab. I’d never ever focused on passive income, essentially, it was always active income. And so, you know, when I got pregnant, essentially what happened was I was like, “Okay, well, if we stop rehabbing, essentially, we’re not going to make any money at all, you know, we’re not gonna make anything. So you know, what are we going to do?” So at that time, I just started really thinking about passive income. I started looking at like, portfolios, it’s okay, well, I can just roll all of my lender’s money over to maybe like a portfolio, or I can go on buy like multifamily. But fortunately, like what happened was, I got, like, a storage facility, got dropped into my lap, and actually was just like, 15 minutes away from my house. And I was like, “Okay, well go take a look at it.” And, and so we did, we went to go take a look at it. So, 2015 I got pregnant — 2016 Lillian was born. And, and right around that time, right towards the end of 2016, is when I found the storage facility and went to go take a look at it. And it was like the dump biggest ugliest storage facility in the world. And for me, personally, as a rehabber, looking at the storage facility, I was like, totally could do this. Like nothing had scared like nothing at that point could scare me, you know. And so and you know, and I was walking around the storage facility, and we’ll get more into it. But as I was walking around the storage facility, I just kind of realized that this was really a good opportunity. But I had no idea what I was doing. You know, so that was kind of the start of me actually thinking about passive income, how I can start building my wealth. And it’s really all because of Lillian. And that’s why our storage facilities now, the one we have our storage facilities now and it’s called Miss Lillian self-storage. That’s exactly yeah, we actually named after her. And actually, everything is for her. And that’s what I’m doing is we’re building that passive wealth for her and being able to hand that down now. We go to the storage facilities with Lillian she’s like, “I’m bored!”. And I’m like, “What? This is your, this is your future.”

Jeff Stephens 

You give her 25 years. She’ll get it.

Stacy Rossetti 

Yeah, I know. That’s what we say. So, but yeah, so that’s essentially what happened was now like, everything that we’re doing, it’s all focused on passive income, building passive wealth. And that’s really just, that’s just really what I’m, you know, I’m here to do is just help as many people realize that this is really the way to long term wealth, you can rehab and wholesale all you want. Awesome, you make a lot of big chunks of money. But in the long run, I mean, I did that as well, too. But in the long run, you’re not building any wealth, you’re just making money with what you’re doing.

Jeff Stephens 

Yeah, absolutely. I wanted to like point out two things I took note of in there. The first one is a why you’ve got a strong why you know, you’ve got a vision for the life you’d like to help your daughter have right. And so she’s kind of a driving force. I think that you know, obviously, as you know, in entrepreneurship, there’s lots of moments where you stop and go, just what the heck am I doing? And then you know, that why, you know, continues to then pull you into the future. But then the other thing was just kind of the idea that almost like adversity, sparks innovation, and not that getting pregnant is adversity, but it forced you to say I can’t keep doing exactly what I’m doing. I’m gonna have to pivot here in some way. And it wasn’t, you know, yeah, it was a great pivot It was a pivot actually led you in a whole new direction that had that you know, that forced change of perspective, not come. You might not have ever done that though.

Stacy Rosetti 

Yeah, exactly. Before I was, I was working, I was making a lot of money, but I was working my butt off grinding, I was grinding. And when you get in, in real estate that was talking about grinding, you got it? And so now like, essentially, what I’m doing as an investor is, I’m becoming a lot smarter, because the reason why it’s going to ask myself, like, how can I make the most amount of money with the least amount of work? And that’s kind of that’s kind of how it just spawns for me. And works for me is like, you know, I can go out and buy, you know, do whatever I, you know, do any type of deal I want to do. But like, how much time is that going to take away from me and my family? You know, and that’s kind of how that’s how we look at things.

Jeff Stephens 

Yeah, yeah, that makes great sense. So I’d love to ask you a whole bunch of questions about storage, and even maybe just started kind of with this first deal. So you mentioned it was not in good shape physically. Talk to us, if you will, about the seller — who is the seller, I mean, I my assumption is that you’re not buying your units from, you know, cube smart like you’re, you’re buying them probably from mom and pop kind of people. So can you tell us a little bit about the people that you’re doing business with in these cases?

Stacy Rosetti 

I think this will resonate a lot with the people that listen to you. So essentially, you know, I rehabbed homes for many years, and I was actually 100% privately funded, I got really good at raising money. And, and that’s why I could do so many rehabs at a time, right? And but the thing is that when you borrow money from private lenders, I mean, they don’t have like millions of dollars, they have hundreds of thousands of dollars. And that’s it right most of the time. You know, most people most lenders are not going to just hand you over a million dollars for a storage facility, right? So what happens is I have all these lenders that I’m working with, and they’ll give me like, they’ll give me like a couple hundred thousand dollars for a deal, you know, maybe up to $500,000 or something like that. And so like, as I was finishing up all my rehabs I was rolling, I was basically convincing my lenders to roll that money over into storage facilities. And what it when the only difference was, is that instead of a year term, it’s like three- or five-year term. And then what happens is they don’t get paid at the end of the year; they get paid on a monthly basis. And most of my lenders are just like interest only loans. And what happens is that especially with like, mismanaged facilities, right, so storage facilities, the ones that I buy, and there’s really there’s a handful of different types of storage facilities. The ones that I buy are mismanaged facilities. And this is what I’m good at, because I’m good at just crappy stuff, you know? And so, so, the, what happens is that these mismanaged facilities, they’re either, they’re probably like, I would say, 25 to 50% full. They’re, the owners have had them for, you know, 20, 30, 40 years, and they’re just tired of them. They don’t want to do it anymore. You know, they built them in the 80s, or the 90s. They ran and made great money. Never once actually ran them like a business but ran them like a hobby. And, and so in, like, even if they were 50% full, they were they didn’t care because they were making a couple thousand dollars. And, you know, they didn’t have to clean anything out or do any work or whatever.

Stacy Rosetti 

And essentially, this is what happened with the one that I found was that the guy had had is an older guy for like, 80 — in his late 80s, I would say 85 years old. He built it in the 80s. Right? So he had it for like, 30 years, he just so tired of it. His wife was tired of it. He was tired of it. And what had happened was that, like people would come in and move in. And then like, you know, and they only paid cash. Right? He only took cash. And guess what he did with that cash? He did not, I’m gonna tell you, he did not sit down and put it into QuickBooks. Instead, he just pocketed that money. And, and so and this is I’m telling you, this is completely normal in the industry, right? This is this is like; this is half of all storage facility owners out there. Because you know, they just have one facility and they run in and make a couple thousand dollars. And that’s good to go. Now, the industry is changing a lot now. Because you know, you get all these big boxes coming in and stuff like this. But out in the countries, this is how it is right out in the middle, not in the cities, but outside in the middle of nowhere. This is how they’re This is how they’re run. And so yeah, they’re 25 to 50% full.

And so the guy, his name was Big John, Big John Storage, all right. And so I went, I went and I met him and I walked around, and I had driven up there took a look at the facility and was like this, I really feel like this is gonna be a good deal. So I just called my lender and I was like, Hey, would you be interested, just meet me with this, you know, storage facility and just come meet this owner. I was like, sure. And so I took the lender over and we walked big john, and me and my lender, and when my lenders and I said, Okay, you know, I said like, tell me about the facility. And he said, Okay, well, it’s 100% full, and I was like, awesome. How much money are you making? And he said, $2,000 Well, I had known just by looking at it was 64 units, you know, just by knowing 64 units, if you’re charging, if you’re charging $50 a month, $50 a month for 64 units that’s already like at least three grand. Right? And then it was this on a three-acre lot. It’s a three-acre lot and it’s surrounded by parking. And the parking like you went up and like he would just like yeah, just go find the spot, you know, and they would just be like all is just like the craziest parking like no structure at all. And I was like, well as we were walking and looking around, I was thinking I was counting to myself like one lane, two lanes, three lanes, I was literally like trying to figure out how many lanes I could actually have ended up being like 50 to 60 lanes, and he probably had like 20 or 30 cars there. Wow. And they were just like taking up all the space or whatever. And so I just I just knew it was a good deal, you know, so but then the thing is, is now what he was doing is he was trying to sell the property because it was actually listed on the MLS and rarely do ever find property for storage facilities on the MLS but this one’s obvious. And it had been listed on the MLS for five years and no idea. And the reason why I’m going to tell you the reason why is basic is storage facility owners and most realtors, sorry, but they just don’t know how to run numbers on storage facilities. They don’t — it’s actually calculated as a warehouse. It’s calculated per square foot. It’s not even like it’s not even like multifamily at all. It’s per square foot. And it’s per population. There’s a whole bunch of different factors that go into it. And it’s, you know, it’s based on income. And so he was actually he had he had it listed for $500,000. And the truth of the matter is, and this is exactly what I told him, as I said, Look, Big John, I said, are so John, big john, I said, Look, John, I said, I was like, you know, if your facility was 90%, full, cleaned, and you know, making the income that it’s supposed to be making your facility would be worth $500,000. I was up, but the truth of the matter is, is that it’s not even worth a quarter of that. Because look at the way you’re running your facility. It’s like it’s 100% full. Now learn this, it’s 100% full for only 25% of your tenants are actually paying, like, and he was like, you know, he’s like, yeah, it’s 100%. Boys, like I said, Well, how much is that? $2,000? I said, there’s no way that it could be 100% for you’re only making 2000. Like, what are you doing is like he’s like, Well, yeah, it’s 100% full, but like, it’s all full of just crap. And nobody’s paying for it.

Stacy Rosetti 

You know — a very important distinction. Yeah. And so and so, you know, so I told them, I said, Look, john, I was like, I just, there’s, as a, nobody’s ever gonna buy this facility for $500,000. And, in fact, nobody’s ever going to buy this facility. And I’m going to tell you why it’s because the only way that anybody would ever buy this facility is if they had their own cash to do it. Because they can’t go to a bank and get a loan, they can’t go to a broker and get a loan, because you have no p&l, you have no balance sheet, you have no tax returns, you have nothing that you can hand over to a bank, so they can see your income and see what you’re making. So somebody is going to have to have their own money to buy this, and I’m going to tell you that nobody is going to buy this for $500,000 nobody’s even going to buy this for like, you know, 300,000 so what are you going to buy it for? And I said, I’ll buy it for $200,000. And he was like, no. And I looked at the lender. I was like, “What do you think? 200?” And he said, “Yeah, 200 is good, you know?” So, I said, “Okay, well are offers 200,000. And I’m going to tell you that, you know, I’m saying it’s a very good offer for what you have, you know, because it’s just this is not making the environment look don’t be it’s like tires everywhere. I mean, it was just horrible. And he was like, No, I’m not going to do toners Okay, well, that’s my final offer. So just let me know, like what you think or whatever. So, yeah, so a couple days later, he called me back. And he said, Okay, I’m not gonna do 200, but I’ll do 250. And I said, Okay, I’ll do 250. And in my mind, I already knew was gonna be $250,000 anyways, you know, that was a number that I was thinking, you know, what offer 200? Just to see what he was saying, you know, he’s like, No, I’ll do 200 the distinction is, is that I had, I was able to roll my private money lender money over, and they’re okay, now actually, my lenders, they love getting those monthly checks, instead of waiting that year to get that check. They just get that that monthly. And then I have like a three to five-year loan, because essentially, for these types of facilities, it takes a couple of years to get that up and running. And then also you need to have like two to three years of tax returns, that you can hand over to the banks showing a profit. Yeah, once you show that profit, once you show that income, then you can go out, go ahead and get those refight out and get lower interest rates, you have to make sure that you have enough spread in the game. And so essentially now, so I bought that facility for $250,000. I mean, it’s worth it’s probably worth six $700,000. Now, you know, so it was an awesome deal. It was a great deal. And it took us a long time to figure out what we were doing and trying to run it and optimize it. Yeah. By now. I mean, I haven’t been to that facility like a year. Mm hmm. I mean, essentially, we do nothing to run our facilities, once you optimize them, you know, they don’t even themselves.

Jeff Stephens 

Yeah. So that that is a great transition to just a question I was going to ask, which is, I guess when you’re buying a storage facility, you know, you’re buying what you’re buying, but you could think of it as you could probably think of it in lots of different ways. I mean, as you mentioned, it’s sort of be marketed as warehouse. And you could think of it as buying a property. But I would think that the most accurate way to think about it that you’re buying a business, right, that has real estate as one of the assets, right, so how is that transition from being a real estate buyer to a business buyer does take, I would assume a little bit of a, you know, change in mentality. So how was that? I guess for you, I mean, I try to think of every property I buy, you know, whether it’s a house or a small multiplex, or whatever, as kind of like a small business that’s not optimally performing. But this truly is business with almost a bit of a retail component. So how did you make the transition from being owner real estate to owner of operating business?

Stacy Rosetti 

And that’s honestly, that’s the key is that when you’re and that’s the one thing that I tell everybody that I talked to when you’re buying a storage facility, you’re buying a retail business. Yeah. All right. So you don’t, and you don’t want to become the person that the company or the storage facility that I’m going to buy in five years, because the truth of the matter is, is like, what is it like 85% of all businesses fail in the first five years or something? Yeah, because people don’t know how to run businesses. So essentially, like, what I teach my students is like, it’s a three-step process, finding them, finding them and then running them. And running them is actually the most important part of the whole equation. Everybody’s always were like; how do I find them? How do I find them doesn’t matter — that’s the easy part. The hard part is that you have a business you have to run for, you know, for as long as you hold on to that thing. And not only do you have to run it, number one, you have to learn how to make a profit, which is very hard for any entrepreneur to learn is how to run a business and actually make a profit. And then number two, how do you and what I teach is, how do you automate it so much so that it truly is passive income. Because when you buy a storage facility, you don’t want to buy a business. Now, there’s people out there that want to buy businesses, and they’re huge million-dollar facilities, and you can run those and have overhead and all this Well, I focus on storage facilities that are completely passive. And that literally take maybe an hour or two a week to run. And that, you know, I can be anywhere in the world and run. Right And so those are like no overhead storage facilities. So you see, like, million dollar or less is kind of what I focus on. But um, but you know, you get, the more now, the bigger the facility that you buy, the more money you’re going to make, believe me, I get that I totally get that. But like, my lifestyle is not about that. It’s about spending time with my family. It’s about making money and not having to work and spending time with my family and traveling. Right? Yeah, so I go the opposite direction, which is very, very small niche. So million dollars or less. And, and you need to learn, but you still need to learn how to run that facility so that it is passive income and you’re building passive wealth. And once you get one down and you start automating it, you can know and are also easy. Yeah, what I what I do is I kind of do portfolios. So like also often go out and find a storage facility and say, Okay, I like don’t want to buy this one. Okay, well, now, the rule is I need to buy three other ones, right in the same area. Yeah, I’ll buy like, let’s say, a 60, or 70, or 80 or 100 units, right, but then I’ll have like, you know, three or four of the same size, kind of within like a 30- or 45-mile radius. And those can actually be bundled as a as a portfolio. And then somebody can buy those and say, okay, like, it’s really, it’s five facilities, but it’s really 500 units, because they’re all right there. And that’s kind of my strategy is bundling them as a portfolio, and having little tiny ones that really require no bit no money, no nothing at all, to run them. And so that way I can be away and really have it passive.

Jeff Stephens 

Yeah, that’s very, very cool. So what Yeah, in terms of your exit strategy, I was going to ask, then, you’re looking for passive income. So you know, you and you’ve got them so dialed in, it’s easy enough to hold them. But it sounds like if an opportunistic opportunity came up to sell a package of them together, is that something you would do once you feel like you kind of extracted as much value as you could build as much equity as you really good in the

Stacy Rosetti 

portfolio, your goal is 90%. Full. Right. And so and that’s it, because essentially, in commercial real estate, the way it works is all income based, right? So you want to be 90% full or higher, so that you can get the greatest amount of money for your property and for your deal. Right. So essentially, the goal is 90% or higher, and then a portfolio of three or four or five in an area where you could just bundle those together and sell those off. And that’s literally what we’re doing. Right now. We’re in the process of building as many portfolios as we can, that we can hold on to build up manage, and then maybe sell off later. And then and then and then take that money that we make and roll it into something else, either a bigger facility or you know, whatever.

Jeff Stephens 

Yeah, yeah, that’s, that’s awesome. So now, in that case, you said that property had been on the market for five years, but you were able to meet directly with the seller. So now when you’re in your typical buying mode, are you going direct to sellers, are you looking at listed properties? Again, I know you mentioned like storage facilities a little bit rare that they get listed, but are they usually represented by others or you able to sit down straight and directly with that seller?

Stacy Rosetti 

Well, if you want the best deals, you go directly to the sellers because the reason why and no offense to commercial brokers or real estate agents, it’s just that most of them if you know when you have when you have are a realtor to represent you, they say, Oh yeah, I can sell your storage facility, like, they just, they just a lot of them don’t understand how to run the numbers. And what they do is they’ll run the numbers on like a 7% cap rate, or something like this. And the truth of the matter is, is like five to 7%, it should be like in the city. And the further that you go out, you’re running your numbers on like double-digit cap rates, you know, so nine, you know, like, I would say, like, there’s like, you know, the, the, you know, the downtown market is like a five to 7% cap rate. And then as you go out, there’s like the secondary cap rate, which is like an eight to 10, maybe, or eight 910. And then as you go out, it’s like 10, to 12. And then you go in the middle of nowhere, and you can get like, ridiculous amount kit cap rates. But a lot of people don’t understand that concept. Most people don’t, most realtors don’t understand it. So, what happens is that the realtors they’re running their numbers based on like some person like 567 percent cap rate out in the middle of the country and trying to get like hundreds of thousand dollars for these like facilities that should be like 100 or $200,000. So you want to get to the you want to get to the owners before they do is really what I what I teach all my students is just get to the end, I call that the hidden market, right? And so and so there’s an what I do is I honestly, I just drive around, I drive for storage facilities, that’s driving for storage facilities, I name that I post that out everywhere. And I just do driving, just driving for dollars, but it’s driving for storage facilities. And the best thing that you can do honestly is and then I teach this to everybody, this is not this is not a secret. I teach this to everybody, everybody, anybody can do this. You just drive up to the storage facility. And guess what the phone number is on the storage on the bill? Why is he not gonna do any skip tracing or anything like that? Right? And then you just call up and you just start talking to the owner and see if they’re interested in selling. And that’s literally all I do. So my marketing budget for storage facilities is a big fat zero. Yeah, all it takes is just time and gas. Yeah, that’s what it takes. Yeah. And that’s it. Now, do people want to do that? And most people don’t even want to do that.

Jeff Stephens 

Yeah,

Stacy Rosetti 

yeah. Why? Like, that’s really what I do. And that’s how I get the best deals out there. And I’m telling you, there’s way too much competition. Everybody wants to buy storage facilities now. So I get everybody that’s listening. I know, you’re like, yeah, I’m gonna go buy some storage facilities. It’s like you need to you need to do exactly what I’m saying was a find that hidden market, because everybody’s going on to the MLS correct. Seeing all the typical places right now. Yeah. So what you want to do is you want to you want to get to those sellers, before those commercial brokers do, you know, they want to sell, they want to sell that facility for as much as they possibly can, because they can 10% or whatever it is, you know, yeah. You know, and they and they’re just and they’re not 100% sure how to really run the numbers, you know, so you really need to learn commercial deal analysis. This is this is huge in, you know, an all commercial, but you need to understand cap re ROI. cash on cash return is I’m talking a very like easy layman terms right now, but truly to make a good decision on a facility, you have to learn commercial analysis.

Jeff Stephens 

Yeah, yeah. Okay. Now, I’m putting myself in the shoes of maybe some of the listeners who have been focused probably on like residential properties, to a large degree, maybe single families, probably maybe some small, multi families. And I can imagine that maybe an objection that comes up in their mind is like, Oh, that sounds a little outside my league, you know, and I’ve never really thought so much about storage, specifically myself. But I definitely had those moments where I thought, wow, that’s outside my league, you know. So let me ask you, because I have a feeling, I know what the answer is. But I don’t know. I don’t want to jump to conclusions is negotiating the purchase of these storage units. significantly more difficult than negotiating the purchase of a house? No, that’s what I thought you might say. easier. Okay. Tell us tell us why.

Stacy Rosetti 

No, no, why, but owners of stores facilities are so open to any type of negotiation that you have out there. It’s like, a dream come true. I mean, it really is. They just they and what it is to what it is, is that they don’t want to pay capital gains. Yeah, tell them that, oh, you’re gonna make like 300 grand on this thing. Like, you know, we’re gonna have so many taxes, why don’t you just own her finances, sucker to me. And, you know, and then that way, you can just prolong that. And I’m going to tell you now, a lot of them will be like, you know, I never really even thought about that, you know, and let me talk to my accountant about this. Whoa, I didn’t even know about this. You know, so you want like, you’re going to be educating a lot of them on this concept, but when you educate them and tell them about this, they are totally open to this. It’s just it’s a weird, it’s a weird concept, but it’s true. I’ve never done more creative deal structuring in my life than in store the storage world. And I do a lot. I do a lot even this in residential properties as well, yeah, awesome. Okay, me too. Us too, I should say our listeners as well. So with big john, you, you had your other lenders already lined up and so you just kind of rolled their funds into this but is now when you like if you’ve got a call today is your sort of go to plan a some kind of an owner financing deal if you could make it work always. Okay. Always I’m always like one of the first things that they’re interested in selling, I’m saying I you know, I’ll and actually I just had I just have one that I’m working on right now what it was, and it’s three storage facilities. And well and the thing is, what happened with this is that I offered $550,000 for all three of them. He wanted $620,000 and I said okay, well, if you want 620 you’re gonna have to owner finance it to me, I’ll pay that. Yeah. Okay, what do you want? You know, and it was actually worth like, way more, but essentially, I was like, I’ll pay 620,000 but you’re gonna have to owner financing me. So then we worked out a deal where like, all bring a lender to fund some of it. And then he’ll fund some of it as well, too. Because he wanted that price.

Jeff Stephens 

Yeah.

Stacy Rosetti 

Which is why this is which is what I do, you know, so and I’m okay with paying a little bit extra more, you know, more on a facility if they’re going to owner finance and me because it just, it just takes so much, you know, less work to just close the deal. I mean, commercial broker and you know, all the paperwork and everything you know, is there’s a lot of work. not as difficult or not, you know, you can’t do it, but it’s just like, you know, either getting a lender or a private lender or closing owner financing. It’s just so much easier.

Jeff Stephens 

Yeah. So when you negotiate on our financing, just in generalities, can you give us a sense for like, what some of those basic terms might be like in terms of, you know, your down payments, your interest rates, the duration of the terms, payment structures, things like that.

Stacy Rosetti 

I have one deal that I was driving for storage, and I just pulled up right in front gave him a call and I said, you know, I’m just okay. I’m just it was rainbow storage. But it did not look like a rainbow. It was like a craft. Okay. And, and I was like, and I was like this is Stacy. I was like I’m just you know, I’m an area I’m looking for I own a couple storage facilities around the corner, like, would you be interested in selling this one? And he was like, where are you? And I said, Yeah, I’m in front of your facility right now. I was like, I’ll be there in like, two minutes. right around the corner. And I pulled up and I was like, you know, so. You know, so like, you know, like, tell me about it? He’s okay, it’s 16 units. I said as a full of course. Yeah, it’s full. What are you making for income? 2500. And I was like, yeah, that should be like five grand,

Jeff Stephens 

nonpaying customers. That’s what I meant. Exactly.

Stacy Rosetti 

Yeah, exactly. And he was older. And he was right. He was actually like, in his 80s as well, too. But he also he owned this storage facility and own like car washes, as well as like his thing. And he just sold off all his car washes and it was selling he really wanted to sell this one. And so I said, Well, I’m definitely interested. I was like, What do you want for? And he said to 25? And I said, Okay, I was like, 225, I was like, I’ll take it, let’s just do it. And so he was like, Okay, I said, Okay, well, you know, I can I can just, you know, pay to 25. And we can just close on and be done with it. Or I said or you know, if you want you can owner finance it to me. He’s gonna finance I said, Yeah, so what if I, you know, what if I just you know, what, if you just become my bank, would you be interested in doing that? You said, Yeah, yeah, I’d be interested in doing that. So okay, so what about I said, What about, like, you know, what, about zero down? And said, What if we, what if instead of two, what if I buy it for 225? What if we just finance it for $250,000? He was like, Well, let me think about it. So he called me back the next day, he said, and I was like, what I want is $25,000 down, I want, I want 6% interest for 10 years, if you own your finances. So in my mind, so I tried like to do like the, the amount that I could try to get, but in my mind, I was calculating that up, essentially, it comes down to like $75,000 in interest if you calculate it. Now, if you go to like, if you go to like SBA and get a loan, or if you go to a bank and get a loan, your interest is going to be roughly between four and 6%. And that’s just how much it is no, right now, it’s a little bit last more of the four side than the 6%. But if it’s 6% that’s not gonna last forever, right? And, but essentially, like, you’re going to get about four to 6%. So when he said 6%, I mean, essentially, I knew that he was like, you look at you probably went in with like, what interest rates and I look up and it’s like thinking about it. And so really, the truth is, is like $25,000 down is what is that is that 10% up to 10% a little more. Yeah, yeah. And then like with 6% interest is really like exactly what I’d be if I went to a bank saying so.

Jeff Stephens 

My brain damage.

Stacy Rosetti 

Yeah, exactly. So I was like, I was like, Okay, let’s just do that. And we literally closed in like two weeks. And we just closed like, you know, I just gave him 45,000 and we closed Whereas like, if I would have gone to a bank to do that now I could have just gotten my lender to come in, like, I could have got another private lender to come in. And I would have had to pay them like nine or 10% or something like that, right? Because I pay my lenders a higher rate. But he was he paid 6%, you know, so I was like, I’ll just take that and do that. And it’s so much easier than going to the bank, and not really extending myself out. And like, you know, and really just leveraging now I have, you know, I could use the money that I have other money to go buy more storage facilities. Yeah. But yeah, that happens. I mean, essentially, that happens all the time with storage facilities. So they’re not, they’re not stupid, they’re not going to take zero percent interest was zero down. And to me, no, I’m not going to do that. But like, you can always ask, I was asked to get there, it gets them, like their brain churning. Because once he once we started talking about it, I was like, I could see he was kind of like, Wow, I didn’t even really think about that, you know, I could do like an extra 75 grand, so he’s gonna make actually $300,000 Yes. Already. That you know, over time.

Jeff Stephens 

Yeah, that’s something I do. Not every time but depending on like my read with the seller, and how engaged or not they are in the idea of seller financing, I will often calculate like their total, their total interest and say, Well, you know, you wanted 300,000 year old millionaire and to get 500,000 beat with, with all the interest over these years I’ve proposed or whatever it might be. That’s cool. So okay, let me ask you this. You mentioned before storage is very popular now. And that’s just been my kind of observation, I guess, as well as people talk about a lot. Now. Why do you think it’s such a popular? I guess, asset class? Maybe you’d say?

Stacy Rosetti 

Because, I mean, there’s I mean, first of all, there’s not enough storage in the world. It Well, at least in the United States. There are old just not enough storage facilities out there, especially now in the cities. Yes. There’s like way too many storage facilities I you know, in Atlanta, or Austin or Orlando, I mean, it’s like ridiculous amount of storage facility. And actually, those big box companies, all these reads, and on public storage, and u haul, I mean, they run their numbers are like 70 to 80% full, I have I have a friend that owns two storage facilities in like upstate New York, and they’re about 250 units each. And he’s always like, 75%, full, he never he’s like when it gets to 80% full, he’s like, so happy. I’m looking into myself, like, why would you spend like $2 million on a storage facility, and you know, and make like to, you know, make a couple hundred thousand dollars, when you could spend like $250,000 on a storage facility and make a couple hundred thousand dollars, I found an abandoned storage facility, there are advantages for storage facilities out there. So you got to start looking, you’re looking and you’ll find them, I found an abandoned storage facility. And it was 76 units, and I picked it up for $150,000. I mean, it shouldn’t really been like, now it was there’s no income coming in. Right. But I mean, it’s worth like 76 units is worth a couple hundred thousand dollars. And then we got it 100% full, I mean, it’s worth like 450 grand right now. So I spent $150,000 to make like 200, you know, 200 $250,000 All right, and it’s like, and you and I don’t understand why anybody would want to spend like $2 million to make $250,000, when you could just leverage that money. And you could go out and buy a whole bunch of little tiny ones and make 100 or $200,000 on those rather than just a couple hundred thousand dollars on one. That’s my philosophy, at least I don’t know, maybe some wheat will explain it to me one day.

Jeff Stephens 

So if, if a person is listening right now, and they’re saying, okay, I wonder if this is for me, you know, fill in the blank, the real estate investor who’s a good candidate for storage? is blank, like, what are the attributes of the person that you think is like, probably pretty well suited for something like this?

Stacy Rosetti 

Well, so what you need to do is you need to understand there’s actually five different ways for you to make money in storage facilities. And each one of these ways it’s a different kind of person. Okay, but it’s a different journey. Okay, so first of all, number one, one of my favorite things with storage facility that you can do is you can wholesale storage facilities, wholesale them all the time, and I love wholesaling storage facilities. So many people out there you just we talked about it, and when people want to go out there and buy and so learn how to wholesale stores, only thing you really have to do with that is really learn commercial real analysis. And you have to learn how to build a buyer’s package for commercial deals, right? So if you want to go out and wholesale storage facilities, then that’s a type of person that’s just like, you know, it’s a different type of person that somebody wants to like buy a storage facility, it’s a different mentality, or they’re just like, No, I’m going to go out there and it’s active income and I want to make like 25 or 50 grand on each deal. Right? Which is, which is on average what you make. Okay? The second one is you can do mismanaged facilities like what I do so I buy Miss news facilities, and I want what I want is I want value add over a period of time. All right? And so, and I’m okay. And the thing with mismanaged facilities is that you have to come, you have to know that you’re going to come out of pocket every single month. Right? So you’re going to buy, I’m going to buy $150,000 storage facility, but I’m not going to have any income. So I’m going to have to come up with a couple thousand dollars every single month. So the question is, Do you have money to come out of pocket every single month, a couple thousand dollars? And are you okay with doing that over the course of the next year or so until you till you start making money? You know, so that’s the second route is mismanaged facilities. And then the third route is cash flowing properties, you’re the typical cash flowing like, and this is like you can you can get a P&L, you can get a balance sheet, you can get the tax returns, and you can go to a bank, and you can get 3% or four or 5% interest rate, and have a 25 year loan on the storage facility and build this great, awesome cash flowing viable business, right. But you need 20% down for that. Right? You need 20% down. So the question is, do you have 20% down in order to buy a facility, and you can always do what I call like reverse engineering. It’s like, Okay, I’ve got like, 100 grand, okay, that’s going to get me X amount of storage facility, I know I can, I can afford this amount of storage. So I’m going to be looking only in these areas, right. So then you can really, you can really kind of reverse engineer what you want to be looking for just by knowing how much you have to put down. Now you figure that out, you can figure out the locations in the area and where you should be. So that’s number three is the is the cash flowing. The fourth one is you can you can do conversions. That’s like a huge thing right now everybody wants to do commercial diversions and develop right, I was looking at storage facilities today online and there’s one that’s like an old and you see this now to like, isn’t a little tiny town that has one of these like kind of strip malls, that’s just like dead and nobody is in there. And they just went in and bought it and made it into a storage facility. Well, and that is a great, that’s a great concept right now. And I think you’re gonna be seeing a lot of those because you know, all these retail businesses are going down the business, right. But storage is of course, storage is like recession resistant. And the upturn, you’re doing great, because like people are like, I’m gonna buy more crap. downturns. You’re like crap, I have more crap, I got to put in too much crap, I got to downsize and put it into my storage. So storage is very recession represent recession, recession. I mean, what I’m saying recession resistant. Okay, so that’s the conversions and development. Like, I haven’t really, I have a good friend that’s in the industry. And like, he just goes and buys old factories and stuff like, you know, those like downtown old factories are sitting, the red brick ones are just like with the busted-out windows and the graffiti, right? So he does, he goes and buys those and converts them into storage. And then you know, and those costs, right? And I know that that cost a lot of money to do that, right? So you but you have to learn when you and that’s kind of like that’s like, you know, you’re scaling up and like now I’m like, I can start doing some development. You know, like, that’s where I’m at. Right? So that’s like long term. And then finally, it’s like you just buy a new construction. The fifth one is new construction, you can just be like, I got me some land, I’m gonna build me a storage facility. Right. And so that one is a lot of like, upfront cost. That’s like, you know, you got to buy the land, you got to do the feasibility study, environmental studies zone, it doesn’t get properly rezone. It’s like a year’s worth of work. And then all of a sudden, now you’re like, yeah, I can build it. And it takes a couple months to build these things

Stacy Rosetti 

all year long. And that’s a whole different journey as well, too. And that’s a whole different, like, a cup of tea as a whole. How much money do you have for that? So only like five different ways five different journeys, which one fits your personality, and none of them. None of them are wrong. They’re all awesome ways to get into storage facilities.

Jeff Stephens 

Yeah, I love that. So really, the question isn’t so much. Am I suited for storage, it’s really of the five models, which if any of those do I feel, you know, fits me and my skill set fast and my resources and stuff. Okay, awesome.

Stacy Rosetti 

It just as long as you remember now outside of wholesaling, just as long as you remember that now you’re buying a retail, you’re building a retail business, and you’ve got to be a business owner. So it’s not like buy it and forget about it. Right. So it’s a long-term commitment, or I have a building it but if you can really automate and systematize think about how you can really make it passive. I’m telling you, I mean, we have, you know, we have we have about 500 doors, so we’re not like huge or anything. We’re slowly building I’ve been doing this for like four years now. Yeah. Like, you know, we’re slowly building and growing and, you know, but we weren’t, you know, we went we traveled for four months this year. You know, when COVID Yeah, so like, essentially what happened was I think March, April May, like COVID was all crazy and stuff. And that’s when I just got out and started teaching and teaching and teaching. And then like, from like May, June, July and August, and we just hit the road. Yeah, we literally we did 16 national parks in 16 weeks. And all the while I’m just like coaching and traveling and making money. You know. And that’s like, that’s the long-term goal. And essentially, we get into real estate investing, because we want to, like, you know, have the lifestyle that we want. Right? And that’s what storage facilities can do. But essentially, the truth is, honestly, is you just have to make a decision to do that.

Jeff Stephens 

Yeah, yeah. Awesome. Well, thank you for teaching us about storage. I’ve got two questions. I like to ask people in general, you know, what we call what we do thoughtful real estate, entrepreneurship. And I can tell by what we’ve learned from you, and how you do business say that you are a thoughtful person. So when you hear the thoughtful real estate entrepreneurship, what does that mean to you? Like, what’s your interpretation of that?

Stacy Rosetti 

Well, I think we talked about this before we got on, but for me personally, it’s the secret, the secret to living is giving. So when I think of thoughtful real estate, for me, it’s all about the knowledge that I know, and the experiences I now sharing it with other people so that they can take that and take, you know, take it for whatever they want and utilize it in their and their education and in their, like real properties and stuff that they buy. So that for me is thoughtful real estate.

Jeff Stephens 

Yeah, awesome. I love that definition. And I guess in my experience, though, that’s not incredibly common, right, that I feel like we’re kind of in the minority, doing business that way of thinking that way. Why do you think that that is not more commonplace and more mainstream?

Stacy Rosetti 

That’s a good question. I’m thinking, you know, people just didn’t mean people, you know, people don’t, you know, they don’t, they don’t know how to think outside the box. I think that’s kind of the world that the big thing is that we’re all just like, we all just kind of like pushed into this box of like, what life is and how it should be, you know, we get up and go to work. And then that’s it. You know, I think you’ve been, I think it’s changing. Honestly, I think more and more people are wanting to share and share their stories and stuff. And I really am trying to help and push other real estate investors, especially women, to share because I feel like there’s really honestly not enough real estate investors out there, like me that are sharing their stories and their experiences. But I do think it’s sharing, but that and I do think it’s growing. But I really think, you know, there is a lot of people out there that that really shot kind of share their experiences, you know, so that’s why I push the secret of living skinny. Yeah, that’s my like, what I tell my students as well, too. And that’s actually the truth is, is the secret of living is giving is not about just like sharing your experiences. It’s about even like when you do your deals, right. So for instance, like I teach my students is like, you know, when because I teach a lot of creative deal structuring. And, you know, they’re all everybody’s always worried about the now, they’re always worried about, like how much money I make, right now, if I do like a lease option, or if I do, like, you know, owner financing, I want to make sure that I have that money now, so I can live and I get that $300 or $500 a month or whatever it is. But the truth of the matter is that you want to create like a win-win situation for everybody. And in the long run, what’s going to happen is like, you may only make a couple hundred dollars or five or whatever it is, on the long run on the back end, you’re going to make that money but the truth is, is that you’re really opening the doors for what’s all the other opportunities out there. Because when you start giving essentially what happens is that uh doors just start opening and then you can just receive all the other kinds of personally that’s what I believe. When you start giving, you’re going to be receiving all the opportunities out there. So it’s okay to you know, to be scared about how much money you’re actually making right now but in the long run when you start giving and that’s why I feel like I’m so successful. Because I get you know, work out these win-win solutions with everybody and make them happy in the end so many doors will open up for you.

Jeff Stephens 

Yeah, great answer. Great answer. Thank you so much for that. I’m sure there’s a whole bunch of people who are going to want to follow up and learn more about you so where’s the best place they can go to learn more about you what you what you do what you teach and all that.

Stacy Rosetti 

StorageNerds.com. StorageNerds.com. Do you want to be a storage nerd like me? Just go to StorageNerds.com!

Jeff Stephens 

StorageNerds.com. I love it. Awesome. Well, Stacey, thank you so much for chatting with me today. I know that if the listeners got half as much out of it as I got that we’re in good shape.

Stacy Rosetti 

Okay, awesome. I appreciate it. Thank you so much. Okay? Okay, take care.

Jeff Stephens 

Okay, wasn’t that awesome? Seriously, if you are not thinking right now that you’re going to go jump in your car and go drive around a smaller town a smaller market and look for a mom and pop storage facilities that you know you could run better than They’re running, then, boy, I tell you, that’s exactly what I’m thinking right now, that was super interesting, super fascinating. And I’m so grateful that Stacy took the time to share her expertise on this topic with us. Thank you for listening to yet another episode of Racking Up Rentals.

Again, show notes, which includes a transcript of this interview, are at www.thoughtfulre.com/e41 for episode 41. Please do all of us a big favor by hitting that subscribe button rating and review the show and your podcast platform as well. That also really, really helps us get the word out to other people. And also, did you know that we have a Facebook group for thoughtful real estate entrepreneurs as well. It’s called the Rental Portfolio Wealth Builders Group. And we would love to have you join us there. So, if you just go to www.group.thoughtfulre.com, it will redirect you right into the group. And if you liked this episode, please take a screenshot, post it to Instagram and tag us @thoughtfulrealestate.

I will see you in the next episode. Until then this is Jeff from a Thoughtful Real Estate Entrepreneur signing off. Thanks for listening to Racking Up Rentals where we build long term wealth by being a win-win deal makers. Remember solve the person to unlock the deal and solve the financing to unlock the profits.

Leave a Reply

Your email address will not be published. Required fields are marked *