Retirement feels like death to most entrepreneurs. Click To TweetDo you work for or regularly spend your money at Subway, McDonald’s, or Starbucks? Did you know that if you combine all their locations in the United States, there’s still more self-storage facilities?
Today, I am talking with Paul Moore, a real estate entrepreneur, author, and podcast co-host. He’s made a lot of fun moves and money over the years, but a lot of mistakes, too. He shares how self-storage management offers a lot of opportunities.
[01:44] Paul’s semi-retirement pain from not having a plan in place.
[04:09] Entrepreneurs know things that work, that don’t, and how to lose money.
[04:21] What makes self-storage appealing and useful to property management.
[06:10] Passive real estate investment with a lack of optimization and systemization.
[06:54] Ways to juice returns, increase income and value.
[08:00] Where and how to find self-storage opportunities.
[10:25] Biggest financial leaks to generate revenue; know renters’ motivations and income levels, add U-Haul and ancillary services/fees, and restructure units.
[14:00] 7 ways to get into self-storage when you don’t want to do self-storage.
[15:42] All about Wellings Capital and branching out from multifamily investments.
[17:46] Paul’s property management tips (Apartment Life, ACH, and staging)./p
TweetablesRetirement feels like death to most entrepreneurs. Click To Tweet Entrepreneurs know things that work, that don’t, and how to lose money. Click To Tweet If you build self-storage facilities, customers will come. Click To Tweet
Jason: All right. Welcome, DoorGrowHackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are open to doing thing a bit differently, then you are a DoorGrow hacker.
DoorGrow hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it. You think they’re crazy for not because you realize that property management is the ultimate, high-trust gateway to real estate deals, relationships, and residual income.
At DoorGrow, we are on a mission to transform property management businesses and their owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert, Jason Hull, and the founder and CEO of DoorGrow. Now, let’s get into the show.
Today’s guest, I am hanging out with Paul Moore. Paul, welcome to the show.
Paul: It’s great to be here, Jason. I’m honored.
Jason: Paul, you have quite an extensive background.
Paul: Exhausting, isn’t it?
Jason: No, I wouldn’t say exhausting.
Paul: I once said it was.
Jason: It wasn’t too long. It was succinct. I enjoyed it. You’ve had quite a bit of experience. Introduce yourself and tell everybody who is Paul Moore and then I’d love to get into your background. Tell us a little bit about you.
Paul: Okay, great. In the mid-80s, I got an engineering degree which was my first mistake. Then I got an MBA at Ohio State. I went to Ford Motor Company. I had no idea who I was, Jason. No idea of my strengths and weaknesses. It took me a lot of years. I worked at Ford for five years, started my own company after that with a partner. I was in the right place at the right time on a couple of different occasions. Number one, I was Entrepreneur Of The Year finalist in Michigan two years in a row. That was in the 90s.
Then we sold our company. Wall Street went nuts after our industry. We did for HR what you guys do a great job for real estate. We were an outsource HR company. We did the HR management for companies, for owners for their company. It was a PEO, Professional Employer. Anyway, Wall Street went nuts around mid- to late-90s. A publicly traded firm bought our little company and I made enough money to semi-retire to the Blue Ridge Mountains of Virginia. I tell you, people think semi-retirement in the mid-30s sounds like a great idea. It was miserable because I didn’t have a plan.
I bounced around and I finally became a real estate entrepreneur around the year 2000. That’s what I’ve been doing ever since. I’ve done at least a dozen different things inside real estate since then.
Jason: I would imagine that retirement would feel like death to most entrepreneurs, which is given as goal by everybody else.
Paul: I know. I tell you, the fire, moving everything, I really appreciate that, but I tell you, I did not have a good plan. I started a non-profit organization that is kind of related to property management. If you remind me later, I’ll tell you how.
At any rate, it did not go really well. I made a lot of fund moves, made a lot of money over the years, made a ton of mistakes as well. In fact, I have a podcast called How To Lose Money. You know I know how to make mistakes, right Jason?
Jason: Yeah. You got to with a podcast entitled How To Lose Money. I think that’s something every entrepreneur knows is we know lots of things that don’t work, a few things that do work, and we all know to lose money.
All right, so Paul, you’ve got a lot of experience in the real estate community and today’s topic, we will going to be talking about self storage management. I think this will be really interesting to our audience. We have a lot of people listening to the show that manage maybe single family residential, maybe some commercial managers, maybe even some small multi, and maybe there’s a few of multifamily listeners out there. I don’t know that we have a lot of people involved in self storage, so maybe you can share with the audience a little bit about what makes self storage appealing or useful to property management business.
Paul: Absolutely. Self storage has become a popular real estate asset class over the last year or two and partly it has been driven by the crazy overheated situation we have in single family rentals, multifamily. There’s a lot of reasons those areas were overheated. In summary, there are 1031 exchange investors, there are international investors, there are institutions buying these up, there’s IRA money and honestly, there are some newbie gurus—I called them newrus—who are training and teaching people to do stuff that they never actually ridden through their own recession doing. I think they’re setting a lot of people up for failure. Because of that, people have realized, “Hey, mobile home parts and self storage facilities have a fragmented market,” meaning that there are a lot of opportunities.
There are 53,000 or more self storage facilities in the US. That’s as many as Subway, McDonald’s, and Starbucks combined, and about 40,000 are operated by mom and pops, so you want to talk about property management. A lot of these operators built these. They might have had a farm or some land outside of town or an old warehouse they converted in town and they considered it a passive real estate investment. So operating, talk about property management, they were passive property managers.
They believed if you build it, they will come. And guess what? People did come. But what these mom and pop operators didn’t do and what they don’t do, is they typically don’t optimize. They don’t have the systems, they don’t have the policies and procedures, they don’t have the marketing expertise, especially digitally, and they just feel like, “Well, if we’re here for the yellow pages, people will come by.”
But you know, there are literally dozens and dozens of ways to take a mom and pop self storage facility and juice the returns, increase the income, then leverage that to dramatically increase the value to get an outsized earnings, an outsized return on investment for the owners of these self storage facilities.
That is my overall premise that unlike large-scale multifamily right now where there’s very few opportunities, there are lots of opportunities in self storage to dramatically increase the income and the value. A great property manager is the key to doing that after the first key, which is to find the right mom and pop property to acquire.
Jason: Makes a lot of sense. Property managers are experts at optimizing, systemizing, figuring out how to do the marketing and getting their operations down, and I’m sure they would love these opportunities. How do they find the right opportunities? Where are these opportunities at?
Paul: Like I said, there are about 40,000 independently owned or mom and pop operations in the US. What you do is to look for one that’s in the path of growth. Look for one that is maybe a little tired, maybe passively operated but on a main road. I’m thinking of Roswell, Georgia right now and anybody near Atlanta knows Roswell marry out of Georgia area. Those are sleepy little towns in the 70s when these self storage facilities I’m thinking of, were built and these facilities have run semi-passively for many years. They are on main road. They have a traffic count that’s very high, let’s say 20,000-30,000 cars a day, that’s the key. They have visibility in that main road. They’re not behind an embankment or down behind a Walmart or something. They have the ability to increase signage, put a showroom out front, all that’s important.
One of the big factors as well is finding an area where these square foot of storage per person in a certain radius is the right metric. A national metric, and for the purpose of the little time we have today, let’s say you want to find a place that has less than seven or eight square feet of storage per person in a given radius. That will be a three-, four-, five-mile radius for example. If you find a place like I know of one in Chapel Hill that has one square foot of storage per person, that is a great location to build a new facility. If you find a place that has 20 square feet per person—I’m not talking about the one mile radius, that doesn’t really count, let’s say a four mile radius—then that might not be the best place to build. That’s how you find the right location.
Of course, you have to find the mom and pop operation as well. A lot of these don’t have websites. They don’t have a showroom. They don’t have point-of-sale items like locks, boxes, tape, scissors. They don’t operate a U-Haul truck facility out of there. Those are all things property managers can do later to dramatically increase income and value for their owners.
Jason: Interesting. Now you talked about once you find one of these locations and maybe create the deal, acquire this, you talked about juicing the returns and you mentioned a little bit like U-Haul and some other things. What are some of the biggest gaping leaks financially that they’re missing out on, revenue-wise?
Pau: One thing you might be thinking is occupancy. A lot of people would say, “Oh well, it’s already 99% occupied.” That’s actually an opportunity because that’s a sure sign, as you can imagine, that they’re underpriced. One of the things I love about self storage is that, if you have an apartment that you’re charging $1000 a month for, if you raise the rate 6%, $60 a month times 12 months, $720 dollars a year, your tenant might move for that 6% increase. If you have $100 a month self storage unit and you raise the rent 6%, they might grumble a little before or after it hits their credit card that month. They’re probably not going to spend a Saturday, rent a U-Haul, get their friends to move their treasures down the street for another $6 a month, especially when their impression is that, “Hey, I’m only going to be here a few more months, anyway.” By the way, they’re usually there a lot longer.
A great property manager will know the motivations, the income levels, even the financial situation, the credit score, where they came from, why they’re there, and they will raise the rates individually on each person that’s there. So, really smart revenue management would be one thing. To go along with that, really smart marketing. You want to get the right tenants in there. You don’t want to get the low-cost shoppers who just want a bargain. You want to get the people who are more likely to stay for a long-term. There are programs out there that can do that. The great property management companies have access to these systems that almost make them feel like Facebook. They know what you’re doing, they know where you’re from, they know your motivations, and they raise your rents accordingly. So that’s one great thing, marketing revenue management.
Adding U-Haul, that can add $2000-$4000 a month in revenue and it usually flows right to the bottom line because it doesn’t take that much additional CapEx, maybe paving a little parking area out front that’s not paved now. So that’s a huge one. Adding ancillary services—services are actually fees—like admin charges, late fees, selling things like point-of-sale items, locks, boxes, scissors, tape. Managing the square footage. We’re only talking about sheet metal rivets and concrete here. A great property manager will monitor exactly what size units are filling up. They’ll raise the rent especially on the last few units, on those units, and then they’ll eventually, if the demand for say a 10×10, is far more than say a 10×15, they might put up some new walls.
Like I said, it’s not that hard. It’s really hard for a passive operator who’s in Florida and just trying to collect checks. It’s not that hard for a great property manager. That’s what a great property manager does. These are just some quick examples of how to increase income.
Jason: Love it. Now, you don’t manage properties directly. Tell everybody how can they get involved in being connected to self storage if they don’t really want to do self storage?
Paul: I’ll try to give this a quick answer. There’s about seven ways to get in and all. I’ll see if I can remember all seven off the top of my head. One would be to be a deal finder. If you run into deals in your local real estate meetup or just you know a self storage operator that might want to sell, you can offer that up to an operator who might want to purchase that.
You can also be a money finder. You can link up with a self storage syndicator and raise money for them. There’s serious ramifications if you don’t do that legally, as you can imagine, with the SEC who really keeps a tab on money-raising.
Another way to get in is buy a Class C facility. You can find maybe 100-, 200-unit facility on the edge of your town that’s not operated that well, just purchase it, and just jump right in.
A fourth way to do it is find a mentor. There are mentors. There’s a guy named Scott Myers. He’s in Indianapolis I think and Scott has a great program to mentor people, teach them the business, and help them grow their companies.
Another way to do it is join a property. I know a guy in McKinney, Texas who actually turned down $120,000 a year mortgage broker job to take half as much pay to learn the business from the inside-out. He joined the property management firm and he’s learning the business from the ground-up because he wants to be a known or operator himself.
I think that’s five or six of the seven.
Jason: Great. Tell everybody about your company, Wellings Capital.
Paul: Wellings Capital has been around for about four years. We changed the name but we have been beating our heads against the wall, honesty. We’re all in our mid-50s. I know I don’t look a day over 40 you’re probably thinking—that’s a joke—but seriously, we’re all in our mid-50s and we all got frustrated with the lack of deal flow and how overheated the multifamily market is. Part of the reason is it’s such a popular asset class.
I wrote a book called The Perfect Investment, about multifamily. I still believe everything I wrote in the book. The problem is millions of other people believe it as well, apparently. Right now, multifamily is seemingly seriously overheated. Wellings Capital were just not willing to overpay for apartments, so finally about a year ago, about two months after closing on an apartment deal, 125 units in Liesing in Kentucky, we decided we’ve got to branch out.
We stopped last year 2018, researching self storage, mobile home parks, and we decided to invest in those assets. Since we’ve never done it ourselves—I never owned either one of those on my own—we decided we understand the strategy but that’s not enough to take $10 million from investors and go do it. We need to find people who have a great team, a great property manager, a great asset manager, a great system already, so we are investing in those great teams. We’re trying to find operators of self storage, of mobile home parks, and multifamily that we are investing with them. We are setting up two funds and people can invest in our funds. We’ll diversify their money and invest in these different operators and assets.
Jason: Fantastic. You mentioned before the show that you had some property management tips that you could maybe share with the audience.
Paul: I have a couple and I thought at one sense since the show started, actually. Are you and your audience familiar with Apartment Life?
Jason: I’m not but some of the audience might.
Paul: Okay. apartmentlife.org. The CEO is Pete Kelly. It’s an amazing organization that actually helps property managers do their work really well. I would highly recommend that you get Pete on the show. I can make an introduction. He’s a friend of mine. Basically, Pete and Apartment Life put a person on site at these different facilities. They help you recruit the person, manage the person, and basically this person helps facilitate community at large multifamily properties.
If you have 125 units like we do or 400 units, you get this onsite facilitator who becomes a community life director, if you will, for the property. They do all kinds of practical things. In addition to throwing parties, taking sick people to the hospital, helping people pick up their car at the mechanic, they also do things like deliver packages.
We had a terrible problem at our property of Amazon packages and others filling up the closets and completely overflowing into the property manager’s office. So about two months ago, we said, “Wait a minute. Why don’t we have him deliver them? He likes to meet people anyway.” It’s been great. We haven’t paid him a penny and he delivers all the Amazon packages that come to the office. It’s an alternative to us buying expensive lockers. So, apartmentlife.org, highly recommended.
Here’s my tip. I hope you like it. Maybe it’s obvious to everybody on the call. I talked to a guy the other day who has a small number of rentals. He keeps it small intentionally but he trains a lot of other people on how to manage their rentals. He has nine and he said he had an average of four or five late payments from one single family home rental per year, from 2005 I think to 2014, same tenant.
In 2014, he initiated this new idea and he not had one single late payment since. Drum roll. Here it is. Here’s what he does. He ask the tenant when they’re moving in. He’ll ask a new tenant. He’ll say, “Okay, do you plan to pay late?” Of course they could say, “No.” “Do you plan to be evicted?” “No.” “Do you want to increase your credit score?” “Yes.” “Okay, I’ve got a solution for you. I really have a high standard and I assume that you also have a high standard from my property. We’re going to ACH all of your payments out of your bank accounts, straight into our bank account.”
That’s not a completely novel idea, Jason, but here’s what was for me. He keys it right to their pay cycle. So if they are paid monthly—unlikely—he charges rent once a month, but if they’re paid weekly, he charges rent weekly. Bi-weekly, he charges them bi-weekly. He has an ACH which is Automated Clearing House, by the way. He had it automatically withdrawn out of their bank account into the corporate bank account and he’s never had a problem since in eight of his nine rentals and he’s never had any evictions since as well.
So, that’s my little tip. Maybe it’s something that you guys already know. I don’t know.
Jason: In the US, it’s pretty uncommon to do anything besides just the first of the month. I think shifting it towards when their pay cycle would make a lot of sense because we can collect the rent right after they get paid each time. They’re going to have the money. It’s far more likely the money is going to be available there than instead at the end of the month, probably burnt through it. That makes a lot of sense. In Australia, I know they do click payments either weekly or bi-weekly, every two weeks, and that’s standard. If they’re able to get people to pay rent on time, that would make sense. So yeah, I like this idea. I think that’s clever. That would be interesting to hear, so I’ll be curious to hear what some of our audience say to that.
Paul: Absolutely. I’m meeting with my property manager today at three o’clock and I’m going to propose this to him, so we’ll see how it goes with a large-scale national property manager. Whether they say, “Yeah, we already do that,” and I’ll say, “Why didn’t you tell us?” “No, we’ve never heard of that.” I’ll say, “Why not?” But anyway, either way.
I have one more tip if you want to hear it.
Jason: Yeah. Let’s do it.
Paul: Staging. I did single family flips for a decade. Once we have one house that sat for about two years without being sold, we staged it, it’s sold within weeks. We realized the power of this so we stage every home like we do now as a single family flip. Of course, we recommend staging single family rentals and all that as well.
Here is a tip I haven’t heard before. If you are guiding the tour as a property manager, try to understand that they’ve typically made an emotional decision within seconds of entering the rental. So do an extra good job of staging in the traffic path in the first 60 to 90 seconds. If you’re leading them in through the living room into the kitchen into the dining room, really do an excellent job.
Make sure, as far as the maintenance goes on those particular areas, by the time they’ve already emotionally decided, “I want to live here,” and then they see something, the plaster cracks in the bedroom or whatever, hopefully they can overlook that. Again, you don’t have to stage and make everything perfect. If you don’t have the budget for that, at least get the path of traffic correct.
Jason: That makes a lot of sense. If you know that they’re going to have a much better experience going in through the garage, or maybe coming in through the back door, maybe you’re going to change the layout. “Let’s go this way first. Let’s show you the kitchen.” That’s an interesting idea. I like it.
Paul, it’s been great having you on the show. How can people get in touch with you and anything else you like to leave before you part ways from the show here today?
Paul: It will be great for people to get in touch with me. They can go to our website, which is wellingscapital.com and you can reach out to us there. Jason, thanks for having me on the show. It’s been great.
Jason: Yeah. I appreciate you coming on. Really interesting stuff and appreciate you being here.
Paul: All right. Thanks.
Jason: All right. Those of you that are listening, maybe this might have sparked some idea that you might want to get into self storage and that there’s an opportunity there. So be on the watch for some of those deals in your market.
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Thanks so much. I’m Jason Hull and thanks for listening to the DoorGrow Show. Bye everyone.
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