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Jack Bosch

Episode 20: How to Make Millions with this Real Estate Investing System

Jack Bosch is a fairly recent immigrant from Germany. He came over to the US from Germany in 1997 literally with 2 suitcases and a bunch of student debt. Prior to the year 2000 Jack had never been involved in Real Estate and did not know anything about that subject.

He started in Real Estate investment in 2000 and over the course of 3 years developed and perfected a real estate investing system that allowed him to do over 3,200 deals, making millions of dollars in the process.

He has done deals all over the U.S., without even looking at most of these properties.

His students are now doing deals in the US while living all over the world. Jack just recently started sharing this unique system with the public in 2008.

What you’ll learn about in this episode:

  • The story of Jack and his wife Michelle’s journey
  • Why you need a mastermind group
  • The Ultimate Boardroom: Jack and Michelle’s mastermind group and what makes it different
  • Jack’s real estate investing system
  • The Four Pillars of Growth in any business
  • Feeling of complexity: the point where the business owner can’t do it the way that they’re doing it right now
  • How Jack helped me fall in love with my business again when I reached my own feeling of complexity
  • Why — if your business relies on you — if you can’t leave for two weeks — then you don’t have a business

Resources:

Mitch: This is Mitch. And yes, indeed, I am your wonderful-all-knowing-host here at Real Estate Investor Summit Podcast. I have a wonderful guest today, as usual, as predictable and just as you would have just expect. We have, Scott Meyers on the phone today and he is going to us about the self storage facilities. What a great business. I know a little bit about this business. I have about 1,100 doors myself and I’ve been growing my storage business since 1991, and so, I can attest that it is a great business. Am gonna talk more about why it is a great business. But, right now say hello to Scott. How are you doing, Scott?

Scott: Hey, Mitch. Great. How about yourself?

Mitch: I am doing good– am doing good. Now, I understand that you have over 3,000 units, you know.

Scott: That is 3,000 and growing. That is correct.

Mitch: Always growing never stop growing, right?

Scott: Correct.

Mitch: Okay. And you have been doing this since what, 2005. You’ve been in the storage business, right?

Scott: Yeah–yeah. I have. I started in real estate in ’93 and went through the single-family and then an apartment-tenant-toilet-roof and get into storage in 2005, and never looked back.

Mitch: Okay. And then you started helping people get into the storage business around 2007, correct?

Scott: Yes. That’s correct. You know I started teaching– I was running my local [Real-INAUDIBLE], central real estate investors association, I was the president. I’ve been running classes for years on land lording and different topics and I may have started getting into self storage or so, there’s a lot of people that are interested in that. And then, in a very short time I was holding some workshops locally and then they expanded and they had a couple of folks that had asked me in a national level to create a home study course and live events and everything that goes along with that. And so, I kind of– ungrudgingly get into the education and information side of the business and started teaching people about it. And I said ungrudgingly ’cause I really love it. I really enjoy what I do, but boy, if you know running a two full time businesses that could be 60 hours a week, it isn’t always the best scenario.

Mitch: No. It’s definitely work. People think that you just get on there and start talking and teaching people. I mean, if you really have the commitment to people, you really really have to put in some time and effort or else, otherwise– it’s not just worth it. So, I have to pay some homage here to some sponsors real quick. So give me one second then, we’ll gonna jump right in with both feet, all right, Scott?

Scott: Sure.

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Okay, Scott. We’ve got there out of the way. So, the first question of the day is, how did you get started in the storage business and the second question’s gonna be, how do you suggest other people get started. So, how did you get started in the storage business?

Scott: Wow. The long version or the short version?

Mitch: I think, we should do the short version, we’ll expound on it.

Scott: [LAUGHTER] Yeah. As I mentioned, at the top of our call here. I got into real estate investing back in 1993 and I own a lot of houses and apartments. We had over a 100 houses and over 400 apartment units and unfortunately, I was the real estate millionaire on paper. But, didn’t a penny to his name. And the tenants were basically, we’ll they’re just eating our lunch. The business was not doing well. I didn’t want to go back and get a job and do anything other than real estate so, I have to find a way to make money in real estate and I thought at the reasons why I wanted to make money in real estate, because, people can basically steal from you and then the courts call it, “nonpayment of rent”. They can destroy your properties and the court say it “excessive wear and tear” and over and over again, we continue to find ourselves in chasing tenants for money. They were destroying our properties. We weren’t able to collect the money on that and when I look at the business more, the reasons why we aren’t breaking even or into a loss, because people weren’t paying us and destroying our property. And there was nothing we can do much about it. And Mitch, we were in the war zones. We were in the battered areas of town. So, when I looked at the rest of the– [INAUDIBLE]

even the best [INAUDIBLE] can’t fix this, and so, when I started looking out other ways make money in real estate without tenants, toilet and trash. There were parking lots, parking garages and self storage. With parking lots and parking garages, you can’t increase the value of those, and so I looked at self storage. And the more I researched, the more I looked into the industry, I found this, how to hit and jam, it was the– at that time, the ugly stepchild of  commercial real estate because, you know, it wasn’t sophisticated. It didn’t have indoor plumbing, you know, we didn’t have carpets and we weren’t into the nicer parts of the town. I mean, we didn’t have pools. But, when I begin to peel like the onion and look at numbers, it was the best performing commercial real estate sector, period. It was the best performing commercial real estate sector in all of real estate, period. And it was recession proof, inflation proof and the benefits that I looked into just keep on and on, when you turn yourself sturdy over a year, you just sweep it out.  You don’t have to do carpet and paint and chase tenant for money if they don’t pay you, you lock them out. And if they still don’t pay you just sell their stuff off and you will recoup your money.

And therefore, I continue to look at this– you know, this was the basis for my education business was the top 10 reasons to invest in self storage and their ten most powerful. And I realized that, you know what, if i’m gonna stay in real estate, this is the way to go and I did that. So, I sold all my houses. All the apartments, dump my tenants and my toilets and start buying storage facilities.

The first one was a converted warehouse turned into a self storage, a portion of it. And, yeah saw the light and we put a kiosk on it, run it out without a property manager. And when the people didn’t pay, we locked them out and sold their stuff. Just like the law allows us to do and when the recession hit, we realized that you know what– storage is better [INAUDIBLE] because people downsized, businesses downsized and ours– our business actually exploded during the recession. And until today’s date, I cannot imagine doing anything else in real estate, let alone anything else, period. I just absolutely love this business and I love teaching people about the business as well.

Mitch: Man, that is a great answer because, usually– on a lot of reasons that I painted as a conclusions by myself, on my own out there. I started with 13 units in 1991 build up to a 1,100 units and I was always wondering what would happen during the recession and when the recession hit, what happened is exactly what you said, happened. People started downsizing, which means they had excess cut and they– you know, we are the United States of America, we don’t get rid of our junk.

Scott: Nope.

Mitch: We don’t get rid of our junk. As a matter of fact, my favorite words of all time in the storage business, is when my potential customer would say, “I’m only gonna be there for 60 days”. I have to try not to laugh when I hear that.

Scott: [LAUGHTER]

Mitch: Because, 5 years later, these people are still sending their check. So, maybe at they’ve got so many great points. One thing I wanna address is, you know, I recently interviewed a guy named Jack Bosch. In his book, “Forever Cash”, he talks about there’s three kinds of money. There’s one time money, which is like you buy a house and you flip it and you make the money, but there’s no more money from that deal, because you sold the house. So, you have to go get another one. So, it is one time money. Your job, if you work– if you trade hours for money, that is one time money, ’cause you trade an hour and you get the money. Then, there was temporary money, which was like creating a real estate lien note, which is what I specialized in– owner financing houses, buying houses with other people’s money, selling them for increased price, because you are offering to financed it to people who typically can’t get financing. And you are making a spread. But, the problem with these real estate lien notes is they have an ending date, right? They going to be over at some point, be it 5 years, 7 years, 10 years, 15 years, 20 years, 25 years and you may think, “Well, am making a 30 year note, that’s long enough”. F.Y.I, the average note– mortgage note in the United States of America lasts 7 and a half years. No matter how long it is on paper, it gets paid over, something happens within– on an average 7 and a half years. So, that is temporary money.

So, the trick is, am using temporary money or billing notes to create wealth, because it can buy something for 50 thousand and owner financed it for a hundred in the drop of a hat. And if I do things right. And that is where I create my wealth, you know that. Money printing machine tree, you know, that machine. But, the problem is, all those income strings will go away. And so you have to find, what Jack was talking about, Forever Cash. And that Forever Cash has to do with rentals. It is a part of complex’s parking lot, even buying businesses that you think will go on forever. But, I found the best Forever Cash, and the only rental that I wanted to be involved in, just like you have discovered Scott, well it is the storage business. And for all the reasons you listed, no carpet, no plumbing, no windows, no doors to speak of. I don’t know about where you operate, but in Texas where we operate, if I am Johnny on the Spot, you know I send out my notices, exactly each time the opportunity present itself. I can foreclose on a unit on the 32nd day they are late in Texas. So, I don’t get really far behind. And they don’t owe me a bunch, you know. Typical storage could be $52-125 bucks per month. And, I loved that business for that reason, because it is my Forever Cash, because it goes on, as long as we want to own these storage and we keep on increasing the rent over the years and hopefully the mortgages, you know, in theory should be going down over the years, if you have any mortgage at all. And it is not rocket science to run these things. They are not complicated. So, now that we sold everybody on the idea of storage, and you really don’t have to sell people on the idea, because there is not a person, I don’t talk to, that I tell them the storage business that didn’t wish that they owned one. And so, how would you suggest people to get started in the storage business from zero.

Scott: Well, there’s a lot of folks that are coming to us and in that same position Mitch. Storage has becoming– it is no longer the step foul of the commercial the real estate industry. And I know all eye balls are around self storage, and so we have a lot of folks that are visiting our website– or finding us at some of the limited speaking engagements such as that I hold but, in the very beginning, you know, I would state to do your research and determine first of all, whether it is for you. And I really don’t buy into, just maybe, it is unpopular but, I really don’t buy into, Mitch any longer the thought of, I guess it was Confucius who said, you know, “Find your passion. And you’ll be able to make money, the money will follow”.

You know, well, am passionate about storage but, only because of what it does. I mean, you can’t too fired up about this, you know. Frankly, buildings– steel buildings with rolled up doors. There is nothing that, you know, makes me too passionate about that. Other than the fact, that I really love what it provides, which is the lifestyle that it allows me to basically work, cash for down to now maybe 9 months out of the year, and our family takes off and on mission trips and we travel around the world and we get to go see things and do things that I thought I have to wait until retirement to do. So, looking what your goals are and how to get there, makes the business model makes sense to you, you don’t have to be passionate about it. But, if it does, then pursue it. To get into it, is to do just that. I mean, there’s a lot of resources out there, although– are– you can call the Self Storage Association, you can pull down some of their information, mostly of the stats in the industry, there is Inside Self Storage, it is the publishing arm of Self Storage Magazine and they hold the expo. And those are great places to start. There’s lot of resources there. However, I would put in a little bit of plug for our organization, and that is– we’re the organization that gets people into the business, to begin with. The association– Inside Self Storage, they teach to existing owners, the different pieces and different aspects of the business of owning and running at. Whereas, our organization, we teach people how to get to begin, and because we’ve been through that path. I share my business model with folks, and how to get in there. And when I go to the S.S.A shows and the I.S.S.A shows, and they speak there. I see, a whole lot of my disciples up there in the crowd that we launched their careers and got them into the business.

Mitch: So, while we are on the subject, in the show notes, listeners. You go out to–reinvestorsummit.com/storage and it will be listed on the show notes here for this episode. And you’ll be able to find out, a lot more about Scott’s organization, what he does, upcoming events, whatever Scott wants to let the world know, we’re gonna have it in there. And it will be a living-growing document out there that you’ll reach, so when things change, we will be able to change what is going on there. So, we’ll gonna get you updated. I suppose you have– do you put on similar stuff across the country, now and there, or often–or what, Scott?

Scott: We do. Actually, I kinda — our business is — have both [INAUDIBLE – borf], and we have been able to really stream line both of them. So, they work well with each other. So, before I have my investing business, you know, I suffered because, my education business was picking a lot of my time. There’s a lot of demands. I was asked to speak in a lot of different places and look after the place, where both of them are quite a bit more advanced, we are doing developments and some larger acquisitions and mergers, if you will in the storage side of the business. And so, in order–and that is where the real money is. And so, the education business is, has morphed along with that. So, now I don’t go speak all over the place, like I used to. I speak at certain– selected larger events. We hold our own events about 4 times a year. We are adding a developer’s events to the folder. We are the first to– ever coming up in Orlando. And so we hold our events, 4 to 5 per year. But, the beauty– what I am able to do now, Mitch, is what we are forced to do, instead of working two 60 hour a week jobs, is that, the education business, I dwindled it down and put some key people in places, certain places in the organization to run those aspects of it. And now, am really working  with higher level individuals that are entrepreneurial focused, like minded, similar to myself, that were running through mentoring programs and we are partnering with them as well. So, [INAUDIBLE], you’ll be teaching the newbies if you will and the people that want to learn about the business, but, my focus and my time is now spent on developing these people, so I can create a whole lot of bunch of folks that I invest, like I invest and we are creating partnerships and buying deals and developing all over the country, and we are just having an absolute stellar year. I think, we had a deal to beat last year, but we are closing on self storage facilities and land to develop at a pace that most individual– or single family investors, are buying houses these days. And we’ve been able to streamline them, and put people in place to make it happen. And we are just having a ball here right now.

Mitch: Wow. Wow. You are moving quite a cliff. And so, you answered a lot of my question, you do partner with series of individuals that has some– means and hopefully, some knowledge about the business. It is always nice to partner with people who have money and knowledge to combine with your own. So, when you talked to me about, the difference between rural storage and like inter-city storage. Do you prefer one over the other? Or they both have a place, or tell me about that.

Scott: Yeah. I think they both have a place. There’s money to be made, virtually in the storage facility, if you can buy it right and it is in the right location. Some folks in the rural areas, they may not have the foresight or hire a feasibility consultant to work with them to find the best site. Even the smaller sites will do very– every well. As long as there is enough population around it –to support it. You are not gonna be able to buy an existing one, and create a lot of value in terms of, building buildings, or additional buildings or leasing them up or raising rents because, they are not just enough activity, the farther out that you go, there’s not just growth. In contrast that to, inter-city or the urban areas, or the downtown M.S.As, I think the play there is, definitely– to try to find the industrial buildings, the warehouses, the plot of land that nobody else wants. You know, they could have picked over and passed over. The kind of guys, the retail guys, the apartment folks, nobody can find it use for these buildings or these plots of land, well then, guess what– storage will take it. And– we don’t care, that’s just certain views are, looking at another investor building next door, or that are a little more difficult to get to. For whatever the reason, when people need to store their stuff, they don’t care what school system, or if there is a pool, or they’re not concerned about the location or whether it is easy for them to get to, if it’s safe, it’s clean, and it is secure. And so, for that reason, we like those M.S.A locations as long as we can buy them right. Because, there is a moratorium for storage, it is tough to find something that works. You have to go up, in other words, building up and that gets to be expensive to do from the ground up. So, we like the conversion opportunities. But–both of those– neither of those–are where we are focusing our time and efforts and if we could find them, that’s great. But, right now we are in between. We are in the areas just outside in the Doughnut counties, probably it is the best way to describe it all– right across the country. You know, just right outside the M.S.A’s, in the areas where we’ve seen a lot of growth.

Mitch: M.S.A’s what does it mean?

Scott: Am sorry, Mitch. Metropolitan Statistical Areas. So–

Mitch: Okay.

Scott: You know, instead of St. Paul, or Minneapolis, or Indianapolis or Miami, you pick it. It’s the surrounding the Doughnut Counties, just right outside of that whole, or in the suburbs, or in the path of where the growth is coming, as an outstretched of the cities or the large M.S.A’s. We could still find land for decent price. We can find existing facilities that may have an additional land to develop or mom and pop owners [INAUDIBLE] beers and they haven’t raised the rates, they’re kind of tired. Distressed properties, distressed owners and they– we could find opportunity to create value but do not have to overpay. Like, we would if we to try to get something in those downtown areas or even in the outline rural areas, where you just can’t create value real very quickly, because there’s not just a lot of activities. So, we’re kind of– I won’t even say, in between, there’s a certain demographic that we are looking for, in terms of location and what makes us spot an existing facility, one that is a winner and then we don’t have time for that in this Podcast. But, it is safe to say that, we’re kind of in between, and that’s a long way to answer your question, Mitch. Is that what you are looking for?

Mitch: No. No. It is perfect. Because, you know, I started pretty rural. I live out by a lake, and so, I started– you might laugh at how I did this. Because, you probably doing it more professional, but at that time, what I did was, I found where I lived, there was two types of storage that were prominent. There was both storage on land–on dry land, dry storage, where people–back there, bought into a shed, closed the door and you couldn’t see it. And, because I lived in the lake, that was in demand. They didn’t have–we have a– the corps of engineers disallows people to build docks on our lake. So, that was a big plus for the boat storage business. You know, these people can’t store their boats on the water. They did have two– they have three marinas. The military marina at one end, and a privately held marina on both north and south of the lake. But, they fill up all the time. And they are also like $ 35 a foot to store, and then you’ve got the problems of when the storm’s to come, you both just get beat the hell out of it in the water. But– so, I like the idea that I could get a lot of different types of storages, so have a lot of choices for people. So, I have both storages, about 60 %. I also, like both storages because, people just don’t lock up and live their boats. And even if I do, sometimes the bank has a lien on that boat and the bank will make up the back payments, so they don’t lose their collateral. Before, we close. I could do covered parking. I could do open parking. And then, I could do just the traditional mini storages, self storage. None of which I have a climate controlled, just because out in the rural areas, it didn’t seemed to be much in demand. And I even ran ads for climate control. But, what I did was, I kind of– find every mom and pop all around the lake and I printed up, 5 years’ worth of letters and envelopes, and put stamps– forever stamps, and bundled them to go out every 6 months to every one of them. And for 5 years. I would go and grab this big bundle, and I would take it to the post office and say, “Hey, it’s time to go”. And I’ll set my alarm– you know, my counter, to remind me another six months. And I picked up another bundle and I went down there. And I keep pounding this community of Mom and Pop owners around the lake, I guess there was like 50 people. And, that’s how I ended up buying my units, and they are all owner financed. Do you have a similar plan– or how do you help find– how do you find storages? How do you find them?

Scott: Yeah, I did a lot of them, in the very beginning and [INAUDIBLE- that’s we’re intends] to do as well, I still think one of the most effective ways of finding facilities for sale is sending those mailers, out of those are direct mail letters to the individual owner’s, hand stamped, [INAUDIBLE – handed rest a number of] 10 envelopes, looks like a letter from mom that gets opened and the letters that we’ve been putting out there we’ve continued to tweak over the years, you know we’re pulling on somewhere now and in the neighborhood of 68% response rate which is unheard of in sending out direct mail, so that is still a big component of what we do here as well as our students, lately,[INAUDIBLE – let me ask with you] Mitch for a little different level than —

Mitch: Sure, sure.

Scott: — Folks out there starting out, than whereas, we’re teaching and coaching so people to do this, that they’re bringing the deals to us and so the line of sure the deals that we’ve done probably in the past 2 years, had been brought to us by students that we either just buy from them, you know we wholesale it and give them a referral fee or a “Bird dog” fee for a lack of a better word, or partner with them on it or we’ll wholesale it off to one of our equity investors, we’ve got a lot of folks, — a lot of folks had the right balls in our organization cause we’ve been out there for a while, a lot of equity investors that have 10’s of millions of dollars that want to invest in storage, so they come to us to get their supply of deals, and so we fell off to those folks as well, we kind of a, I don’t know, not survey clearing house but we do wholesale a lot of deals as well, and then a lot of brokers same thing, I speak on these shows, people know that we’re active and what we do and how we do it and we have the ability, and the money behind us with these equity investors to close quickly, so many many brokers throughout the country will bring stuff to us before it hits the market as well, so I’m in the very now enviable position, I’m very very blessed and fortunate that I don’t have to work very hard to get those deals to come across.

But I’ll tell you one quick little,– I missed that, I missed that Mitch, I — love the hunt you know, I don’t, I’m good at management and I understand what it takes, and I put those systems in place, but man that is draining, but you know what, the part of business that I love, is the hunt and going and finding them, so a few deal that we found recently, I guess, I think I have found on my own, because I’ll be in a coaching call with a student and be walking through how to find them and lo and behold, something will show up, and the student say “hey Scott, are you still there” and I’m just kinda looking at this and analyze [LAUGHTER], yeah I just found a deal in your neighborhood, I’m wondering whether I buy it or whether I’m gonna give it to you, [LAUGHTER] I love the hunt and still love to search for it and find property, it just that, a little bit of competition —

Mitch: OK, let’s stop right there for a second, cause I’ll share my last deal how I found it cause it’s kind of different is, but tell me what stood out about this, so you’re clicking through, — cause obviously you’re on the internet going to some things, — what jumped out and you

Scott: Well I think I guess, like you, you know, after a while you see something that you don’t have to really do the math, just because it’s already there in your head, you see a [INAUDIBLE – force] or a facility that only has a 150 units on it and they’re asking $200,000 for it, you’ll thinking — well –, all of a sudden in my own mind, I’m thinking we’ll that’s worth the price of the acre to loan, and that has an income stream on it and I can expand and build value if I can buy this for the income stream on it in place, and if he’s in cap rate I’ll snatch it up and then I get the land for free, essentially, and so those, you know, really quickly I can those types of opportunities or just a quick calculation on cost per square foot in an area in which they’re not offering other zoning for self storage, I mean there’s a lot of things that we look for, in terms land, they’re not gonna give a certain number in certain markets, that I don’t want to go over in terms of the cost, but if I can see the — the market will support it, you know in 5 minutes I can have the Google maps and run a search and determine whether it’s undersupplied or oversupplied and whether we want to pull the trigger on this piece of land or vacant warehouse, so — there’s a lot of things I could go into, but, you know, after a while when you get used to it, you can spot opportunities pretty quickly.

Mitch: Yes, when you own a corvette, you’d notice corvettes, when you own storage’s, you just, you’re just drawn to them, it’s like I’m driving on a highway and look at them, and there’s another one going up, I can even tell you by the framing of the slabs, well that’s gonna be a storage place, I can tell you right now. So, I was driving in a Rock or Fulton Texas, down there on the coast, and like I’ve said my eyes automatically go to storage’s and there is a lot of storage’s down there, I gotta tell you, I was kinda overwhelmed, my gosh the number of units must be down there, they’re like on top of each other, and — but I’m driving by this one and the sign is so faded that I can’t read the phone number — and I have this — I stopped and I turned, I mean I drove passed it and it started haunting me immediately, why is the sign on that, you can’t read the sign, 1 of 2 things either this guy is full that he doesn’t even need a sign or it’s mismanaged, but even if — a place was full, it’s mismanagement to not have your sign right, you know what I mean — My instinct says, stop turn around and — you gotta find out about this, so I turned around I got out of my car, if i got close enough to that sign I could make out the number, — so and I called and there was no answer, — it was a recording and I left my number and no one call me back, and I called them again and there was no answer and I left my number and no one call me back, — finally they call me back and I talked to the — I asked about the — I asked them,”hey” and I wasn’t there, I was a long way away in San Antonio, and I said “hey, I’m right here in town, I wonder if I can get store real quick, what do you got — what are you offering there –, what’s the price — to get my boat in”, and they said, “well, we can’t show it to you till next weekend because we’re not down there” and so — this is adding up — I know you’re already calculating, this place is being mismanaged — so, there’s a good chance it’s not full, next thing I did was, I got on the internet and I type in the name to see if they had any internet presence and they did not, no presence, so then now I’m saying to myself, OK, I think I need to ask this owner, if he’s just ready to sell and get in the conversation and quit playing games with him, and I asked him, he said now I had a falling out with my partner, I was the wealthy guy on a yacht that didn’t wanna handle it, he was the one that supposed to handle it, he’s not there anymore, I was still on my yacht, you know I don’t care, make me an offer let’s get this done, and so I bought it and turned it around within 18 months from making no money at all to making $10,000 a month — so, is this the kind of, — [INAUDIBLE – I was be] so interested to go to your, one of your seminars myself, if it falls, I wanna know, is there more sophisticated ways to find places than that or it’s just kind of a hair in the back at your neck.

Scott: Well yeah, yeah, it’s all of the above, I mean it’s doing the difficult things like that Mitch, which is, and I don’t think it’s so difficult, but many people do, it’s pulling doors, you know you see something like that, you stop the car, you turn around, everybody knows the distressed real estate looks like, whether it’s a self storage facility or not, and I think, you know those people that are new to storage listening to this call, yeah, they too will be seeing these everywhere now, but we all know what distressed real estate look like, it’s just unkempt and that’s either a distressed owner or it’s going back to the bank and so we need to go and investigate and find out, and it’s just asking questions, so many people are unwilling to do that though, they’re unwilling to even take that number and pick up the phone like you did as well, and so driving the market or just keeping your eyes peeled is one, we teach our folks to really 11 ways to find these things, you know scouring the “Loopnet” and talking to commercial brokers, that’s usually where everybody stops, you know, that’s basically call it one avenue, we take the approach where we know where to look, we know how to find these things, we know where to find these things, where most people don’t know how to look and it takes, you know due diligent and using all 11 of those ways to find them and following through and executing,

Mitch: So, I’ve gone that way though, but I seems like to me, what I do with the brokers, they’re only selling these things, some like 6% cap rate or 5% cap rate if they’re even telling the truth about the income and expenses, you know there’s not enough margin there for — a guy like me and so I’ve haven’t had a whole lot of luck with — and then even when they do find a place that might be a bargain or is a little mismanaged, I mean — they get me in a bidding war with a whole bunch of people, so I personally I haven’t had a lot of luck with brokers but I guess, you know, you have to get to keep your name out there, just in case one friendly broker, decides to let you have the pocket listings of something, you know, but — I’d — do you find — do you find [INAUDIBLE – facilities to] brokers,

Scott: Well, yes and no, most of, I shouldn’t say most, but many of the deals that you just see hit the market, are either overpriced and the broker’s hadn’t even able to handle those of to their list of buyers that they have, or their own buyers list, — so before it hits, they’ve already run a pass a whole bunch of people before it hits [INAUDIBLE – looks narrow], before it hits the open market, so yeah, I have had a lot of luck with a lot of brokers, I mean the ones that we see here are usually, yeah they are overpriced, and sometimes the ones that do come to us, I don’t think they are bringing it to me to get into a bidding war but they make me aware of it, — the approach that we’ve taking over the years Mitch is, to contact those folks, build a relationship with them, tell them what we’re looking for and that is, I want the turnaround stuff, — I tell them flat out I want your garbage, you know, give me the trash that your buyers list, probably don’t want anyways and put it in front of me first and give me 48 hours I’ll look at it and I’ll let you know whether I’m interested or not, and if not send it out to everybody else, but I’ve the ability to close quickly, I’ve the ability analyze it quickly, I’m not gonna, you know, take you down the road and jerk you around to ask you a whole bunch of stuff, give me the basics, give me a rent roll, and give me a [INAUDIBLE – pea now] and basic [INAUDIBLE – pea now] I’m not looking for last year’s tax returns, just give me a basic [INAUDIBLE – pea now] and I’ll figure out from there, and be close and if it’s close to what the price that the seller wants, then we’ll talk about it and you don’t have to take it out and create an offering memorandum and spend 30 hours doing that and create a bunch of wannabes and tire kickers and wish they could, you know, “wishtrepenuers” around the facility, and then we’ll close it, and they’ll bring those to us next time, so I tell them flat out, don’t put me at your buyers list like everybody else, put me over here for the small facilities that you won’t make much commission on and that you don’t want to spend a lot of time on and I’ll give you full commission or a flat fee if you put it in front of me first, before you have to do all that work and let me know, and I’ll buy it, and we’ll transact deals that way, so that’s how I position myself with brokers

Mitch: OK, they’re interesting, is there a lot of different websites that you monitor all the time or —

Scott: About 65 of them.

Mitch: 65, OK, do you have that set up kind of, for your students, — have you manipulated any of that yourself or you just kinda go one at a time and look at them

Scott: Yeah, kinda one at a time, but also depending, I use virtual assistants, that do that for me, so, we teach them, we train them, we show them exactly what to look for, and so they’re scouring and looking for those types of deals, and then we’ve opened our team up to our students as well, and though they have accesses as our folks has been with or they can hire their own VA’s and train them the exact same way that we have for them to research and find deals and many of our student who have full time jobs they come home at night and their VA’s that we’ve trained will present — put a whole bunch of deals in their inbox they just kind of sift through and call back and talk to the owners or the brokers or whoever may be in-charge of that deal, to see if they can strike a deal with them, it’s all about —

Mitch: Yeah, I love — I love VA’s, that’s just become a greatest thing on the planet these days, Virtual Assistants man do they do a lot for me, and the only reason we’re on this call right now is because of very, very responsible and sophisticated VA’s so, — actually I find — I joke around, but it’s not really a joke, it’s the truth, when people ask me what I do, we’ll I said I call my VA and I do whatever she says, [LAUGHTER]

Scott: [INAUDIBLE – Jasper] is wonderful

Mitch: She is isn’t she, you know, we’re coming of about 36 minutes, I wanna thank my — my sponsors livecomm.com L.I.V.E.C.O.M.M. dot com, be sure to watch the little 4 minute video on the homepage there, and also moat note servicing that’s M.O.A.T. moat note servicing, they’d love to take the responsibility of collections away from you, and teach your payers how to pay on time, without you having even having to lift a finger, anything else Scott you think we might need to address you can get hold of, and learn more about Scott at reinvestorsummit.com/storage, that’s REinvestorsummit.com/storage, we’ll be keeping all that current for you, so whatever he’s up to, we’ll know, anything we need to talk about or let the people know Scott before we go on our way here.

Scott: Well, that depends Mitch, I do 3 day events, where I teach people about us, we could talk for another 3 days or we could stop now, — so it’s your show, — it’s you.

Mitch: You know what, if you’re not up against a day of [INAUDIBLE – line] and you have another topic, I think it’s amazing, all the different niches even within the niche, — so there’s niches in storage, like I was describing, I have a place that has a hundred open, parked underneath the clouds and the sky and parked in the rain, storage facility which is basically a double wide mobile homes with a manager lives there, a fence around it, with electronic gate and a keypad and people come park in the open air on the ground, and I charge $65 a month for it, and there’s a hundred people, so it brings in 65 hundred a month, and it’s like the most beautiful business in the storage world I think, because you don’t have any cost, you know, besides the land and the fence and the gate and the mobile home, pretty simple do you have open storage like that? Or you’re gone why more sophisticated —

Scott: No, yeah, I won’t even say sophisticated, because, you know, storage isn’t all that sophisticated anyway, — I like cash flow, so that’s, you know, cash flow is sexy, it doesn’t matter what it looks like, if it’s a ground, a lot with a fence around it, [INAUDIBLE – I never lied] that’s sexy to me, if it’s cash flowing, but what I found, and you just have to look at the market I guess Mitch, is the best way to maybe answer your question here, that is in certain areas that are starved for outdoor storage for boats and RV’s and there’s perhaps the moratorium on any more that zoning board will allow, then if you have a piece of ground or you can find a piece of ground that will allow it, then buy it, and you may only have the game in town, or one of the few, and supply and demand takes care of the rest, to be honest with you, but we found in most areas is that when we build a building, we still get more money per square foot and return our investment by putting up a building and then charging more, so you’re getting 65 for an outdoor spot, that is great by the way, and who knows what the rest of the market looks like and maybe you do, but you know, if you’re getting — margin, you’re getting a $120 for a 10 by 10, you do the margins, and work the numbers backwards it might make more sense to build that building and depreciate it and borrow money on it and have it paid off, to garner the rent on that, you know, in the future, and so it’s just — really a function of looking — how much you can receive in rent for an open space versus building a building and rent that out on the roof, and then typically what we found primarily, is that you’re getting more money on the roof, there’s higher benefits, higher margins on the roof, than just renting an open space,

Mitch: Yeah, so I’ve put myself in that dilemma, my place is paid for, — so, in order just to build something there, I have to take everybody and tell them to go away, so I have to stop my cash flow, and then I gotta go to the construction and I’ll tell you what my biggest fear is, it’s the politics of the city inspectors and regulations and the, because it seems they can change their mind at will, they can tell you one thing and you go there the next day, you’ve done it and the next guy behind the counter says now you did it all wrong, and that’s what scares me, do you run into that kind of problem? With the municipalities slowing you down so much or changing the rules on you,

Scott: Well it doesn’t seem like that Mitch, that is the way it is,

Mitch: OK, OK, maybe it was just me, I didn’t know it was just my karma, I didn’t know —

Scott: It’s not everywhere, it’s not every person, but yeah, they hold the keys to the kingdom, unfortunately, and you don’t always get the clear answer, — and I guess I’ll bite my tongue here, but just realize the caliber and the pay grade and the education level of the people that you’re dealing with across the counter for the most part,

Mitch: Sure,

Scott: And that causes a lot of the delays, they’re just there at that counter to do their best, and I say that loosely, to carry out the decisions that have been made further up by the folks that do know what they’re talking about and are educated and they have a master plan for our community, but unfortunately, yeah, a lot of that running around and that changes and being told to do things differently, doesn’t always play out well for the developers, so yeah, on the development end, that is the, — it’s a great way to create value if you can buy a piece of land, build a building and put an income stream on it, you know, there’s a lot of margins to be made there, getting into the business is much easier if you just buy an existing facility that’s underperforming, that is the preferred way, —

Mitch: Yes.

Scott: — somewhere in between there Mitch, what we’ve been focusing on is buying these, industrial buildings and warehouses that already has zoning in place, that we can convert to storage, that is just a much quicker path to profitability than ground up, and much easier to find than existing, because it’s getting competitive  [INAUDIBLE – proper] for existing facilities and so we’ve been creating these opportunities in, by buying these other buildings and retrofitting or converting to self storage and that is been — a big focus of what — a big focus over here for the past 2 years now,

Mitch: So, I’m aware that there’s companies out there that will give you demographics and tell you, A if the area that you’re looking to build in is overdeveloped or underdeveloped in the storage department, they’ll also tell you — basically what I think, last report I saw they told us that, you know, there was X amount of people within the 3 mile radius and that they needed, you know, X amount square feet per person for storage, was the normal in this kind of environment, and that there was only these many people there that can stand these many more units, and then they would actually even tell you the site, what do you call these people there? Storage consultants? Or what’s the name of these companies that —

Scott: — They’re consultants and they’re conducting a feasibility studies, and so you can call them feasibility study consultants, but they’re consultants in the industry that will conduct a feasibility study for you.

Mitch: Yeah and so, are these feasibility studies really expensive.

Scott: Well, depends on what you determine expensive, anywhere from — I think I’ve seen as low as $1,000 for the basic ones, in which they don’t fly out to the site and do some of market research, feet on the ground, and then upwards of 5 to 7,000, we’re in about that 3,000 to $4,000 range, if we’re looking at a site to develop or a building to convert, and then they’ll spend a couple of days surveying the market, visiting the various offices within the local municipalities to find out the demographic information, meeting with some of the folks there, going through the competition, traffic and traffic [INAUDIBLE – hounds] and a lot of these can be done online, they do the [INAUDIBLE – lines of this] online, but they’re verifying the rest of these once again when they land here and looking to see whether these is feasible to build this self storage facility here or convert this building into a self storage facility, and then they’ll give you a thumbs up, thumbs down, or yeah you know, it may take a little longer than you expect that you think it may work here, and so, and you mentioned the findings, saying that yeah here’s the equilibrium in the industry is somewhere, depending on who you talked to, somewhere between 6 and a half to 7 square foot of self storage per person, and then we look and typically 3 mile radius and we determine what the population is, what the existing amount of square footage of self storage’s, what the competitors are already in the market, and determine if the market can withstand, and when I say the market, again within 3 miles 5 at the most, you know, if they can bring on another 400 units, another 30, 40 thousand square foot, whatever size of facility that you’re looking to add on, and if we think those numbers work, then we’ll do it, and if it’s too close or if that would put it into a position that, where it doesn’t look good and we back out, and if we [INAUDIBLE – ask] with you Mitch, we do most of these, the rough part of this on our own anyways, we can do this from our desktop and one of the reasons, the main reasons why we have a feasibility study down and pay the consultants to do it, it’s because nobody, none of our equity investors or bankers wanna here Scott Meyers say that this is the reason why, because I’m the one asking them for money, so we hire the consultants [LAUGHTER]

Mitch: Yeah, so you get the third party guys for the credibility of the information right? Plus, — you could relieve yourself of a lot of liability by saying, you know we [INAUDIBLE – owe it] by a third party, and this is what they have told us, you find them to be relatively accurate.

Scott: They are, and those are the 2 reasons by the way, I’ll just echo that, those are the 2 reasons to do that, now in terms of accuracy they match roughly what we say, but there’s kinda this joke in the industry now, whereas — these consultants, whether they think that the deal should go through or not, they’re always bullish on it because they don’t wanna seem non-bullish to you, and whether the market and it makes them tougher to justify their prices and you may not go back to them if they continue to give you bad news, I mean that’s what you pay them for to begin with, but there’s —

Mitch: Nobody likes that news.

Scott: Right, right, but there’s, you know jokes, that there’s of these consultants, the guys will say you know what, I’ve never seen him turned down, you know [INAUDIBLE – as I T], he says they’re all good, — so and in fact they may not be, and I don’t wanna sour, taint those — that industry or that section of our industry or those consultants, are telling everybody not to, because conversely, you know we purchase some facilities Mitch that these developers or entrepreneurs, they went out and build a facility, they didn’t get a feasibility study done, the banks didn’t check or else they use cash to do it, many times these guys were developers themselves in some other form, they decided to just give it a shot, when the recession hit, and they built it in an over supplied market, and then they couldn’t fill that up, and we’re buying these things at 50% occupancy, because that’s all the market will allow it, it stabilize at 50%, it’s probably not going up to 85, you know those units are gonna sit there for an awful long time and maybe forever, and so we gonna buy based on the value and the income stream that’s in place right now, and those folks wish they would have spent $5,000 on a feasibility study, because they lost millions, or they lost their credit because they had to handed back to the bank or worst, so they’re worth your penny to have that done for the reasons you’ve just mentioned, for credibility, for unbiased opinion, because the bankers wanna see that, and it’s an insurance policy against you, if you’re bringing in other folks, to say listen — we all made this decision collectively with the best information in front of us, and that meant all the information that we gathered plus what the consultants gathered as well.

Mitch: Yeah, that’s a great point, when you’re raising money for these, do you do them in completely separate L.L.C’s for every facility or you have some kind writ or what?

Scott: Absolutely, — never say never, but I doubt I’ll ever get to a writ, — not because — size — I’ll never get there — I mentioned we will, but I just don’t want to, I’d rather —

Mitch: Yeah, too much bureaucracy.

Scott: Yeah it is, it’s just a little bit of a liability too, if you [INAUDIBLE – follow] that money sitting there, and if you sell it young, you got [INAUDIBLE – all sitting] on that cash, you have to get that money back into play to make returns for your investors.

Mitch: Yeah, that just another job, right? —

Scott: It is, well it just makes you, — forces you to make bad decisions, and so yup, every deals has its own L.L.C. and has its own equity investors, we raise the capital, when we reached our mark, we close the fund, it’s done, and we don’t touch it until we sell it again, and everybody gets their distribution and we move on to the next one, asked them if they want to be involved on the next one, here’s what it looks like, so they’re all separate, all have independent’s investors, and their own tax return, and their own life.

Mitch: So, last question and we’ll call it a day, how, what do you typically do to turn a facility around?

Scott: Wow.

Mitch: [LAUGHTER] I had to give you a question that could be like, you know 4 days long.

Scott: Yeah, well, that depends on what’s wrong with it, I mean — we fix what’s wrong first, gosh.

Mitch: I don’t know, in that nutshell, I guess, that’s a really huge question. Is there some common things that you do to turn one around, what — recurs more often?

Scott: Well you know, here’s a checklist that we go down that we see that is basic to most of these, you know again we’re buying these distressed assets that’s what we do, that’s our business model, — I’m a Junker, always have been, and so we fix broken things, and so when we buy these broken facilities, first of all it’s usually broken management as you said, you drove by that one in Texas and there was no, you know, no signage to speak of, no website, nobody answered the phone, so those are the basics, I mean these is a commodity, you gotta — show up and you gotta answer the phone, that’s first and foremost, so we’re putting the websites up or driving traffic, we’ll join sparefoot or any of the other aggregators to try to leapfrog the competition even the big guys for traffic, we’re making sure that it rolls over to call centers after no more than 2 rings, so that they don’t on to the competition, we do curve appeal for the drive by, and we could go on to that, but you, it’s signage it’s clean, it’s landscaping, it’s painting when you need to, it’s replacing the doors upfront, and inviting office, we offer business centers, we offer security, we put the big monitors up on the wall on HD displays of our security system and so when people walk in they can see that it’s a safe secure facility, and all these really Mitch, is also geared towards our brochure, which is our website, you know, we have — we make sure that these facilities looked gleaming so that the pictures and the videos that show up on our website that’s what they see, and that’s what wins — our website is mobile and it’s — it allows them to rent a unit and pay the rent online from their smartphones, so we give them access, all our website are responsive websites, so they respond to whatever device it is that you’re using, so we just — we make it easy to find us, we make it easy for them to make their decision and make it easy for them to rent a unit from us, cause they can do it all in their smart phone, so gosh I mean we can go on to the rest, It’s, you know at the end of the day, it’s just running a business, you need to walk the four corners, you need to drive your expenses down and do everything on your power to raise revenue, and — seek other ways to do so, to the bottom line, because the power of the cap rating in commercial real estate, and that’s all gonna come back to us, tenfold and more.

Mitch: Yeah, absolutely, alright it’s been a great discussion I appreciate your time Scott, again go to REinvestorsummit.com/storage there in the show notes if you’re interested in learning more about Scott and his organization and maybe even partnering with him, what do you look for in partner Scott?

Scott: Well, it always helps, if you got a lot of money, [LAUGHTER]

Mitch: Well and you know, a really good partner got some money that he need to get out, someone he believes in and a product that he likes and I think storage is a wonderful product,

Scott: It is, and I joke about that Mitch, you know, that’s always helpful, but people that are, I guess more like minded, now life is too short, we got a lot of people with money, we’re looking for people that could bring deals to us, or deal makers, that understand what we do and get a little more like minded, you know, partnership are like a marriage and life is too short and we turned down people that have a whole lot of money, because I can [INAUDIBLE – per see] a whole lot of grief and I don’t need any grief in my life right now, everything is good, and — I enjoy what I’m doing, I enjoy my time with the kids and our time away, and if you’ve got partners that are sucking the life and the energy out of you, it doesn’t make business fun, and it doesn’t make your leisure time fun, so that’s really the most important things right now, is people willing to pull their weight, and — be able to, you know, I guess go along, — I don’t wanna say go along with, but just understand business and understand the way that we do business and there has to be  a fifth,

Mitch: Yeah so, you do the — you know, the interview or the — 30 minutes, 40 minute conversation make sure we’re on the right same page, got the right ideas and the right expectations and understand what’s gonna go on — it sounds good —

Scott: It’s like harmony, harmony, we do the speed dating.

Mitch: [LAUGHTER] [INAUDIBLE] Harmony, for storage’s, storage partners, alright Scott, thank you so much —

Scott: My pleasure Mitch.

Mitch: It’s been great talking to you, as always, and — man I’m gonna get out to see, if — I’ll have to find out your next event is myself, and go myself.

Scott: You have an open invitation anytime my friend, you know that, I’ve been trying to get you there, what — we’ve been talking about this for over a year now, you just need to put on to your calendar and get to our next one, we’re on a location that you want to, we’re all over the country, so you pick one and I’m coming along,

Mitch: Well you’re gonna see me now, alright, talk to you soon

Scott: Alright, thanks Mitch.

Mitch: It’s been great, bye now.

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