Why Self-Storage Facilities Are the Next Big Thing in Real Estate with Scott Meyers

 

Scott Meyers  00:00

One of the biggest and best is if we haven’t we seek the sites that if they have additional land, they get another acre or two. And the owner decided they just ran out of steam ran out of desire. They’re 100% Full why take on a development risk or even the hassle of it? Well, we’ll add buildings, adding additional square footage to the site obviously increases the value.

 

Greg Lyons  00:17

Welcome to the passive income brothers podcast.

 

Tim Lyons  00:19

Here we take the fear out of real estate investing using real life stories of everyday successful investors. Let’s go. Welcome to another episode of the passive income brothers podcast. My name is Tim Lyons and today I’m joined by two rock stars, one of which being my brother Greg, how you doing today, buddy?

 

Greg Lyons  00:34

And that introduction never gets old someone calling me a rock star with no rhythm and no musical talent whatsoever. It makes me feel good. And also what makes me feel good is we’re going to be talking some self storage today. Well,

 

Tim Lyons  00:49

Greg, just wanted to wish you a happy birthday buddy. Today. You’re 45 And one day old. And I’ve been thinking about you and I couldn’t wait to see your handsome face on this podcast. So yeah, don’t look a day over 60 Sell feeling good. So Scott, thanks for bearing with us here. He was a little brother’s band or sometimes you can’t help but listen, we have Scott Myers today. And he’s going to talk all things self storage. So without further ado, Scott, welcome to the passive income brothers podcast.

 

Scott Meyers  01:13

Tim, Greg, good to be here. I’ve been listening to you guys. I love your stuff. And Greg, happy birthday to you your birthday plus one day. Thank you

 

Tim Lyons  01:21

love. Thank you very much. So Scott, our show is sometimes heavily skewed towards multifamily. That’s really what Greg and I focus on, although we do work with a self storage provider, and we do some industrial triple net lease stuff. But I’m really excited today because self storage is one of those things to me, at least when I didn’t understand it. And living in New York City area, I’d be driving on the highway, and I see these enormous life storage U hauls and, and I just didn’t ever think that that could be a thing, right? So I’m excited to hop in today to talk somebody who’s really lived that life. So can you kind of take the listeners through a little bit about from the where you came from? And then how did you find self storage as a niche? Yeah,

 

Scott Meyers  02:04

self storage actually found me. I mean, this is a very simple, predictable business model. So for a knucklehead like myself to be able to succeed in business. It found me started out like many folks in real estate with a single family house that then became multiple single family houses. And then we got into multifamily that is typically the next step when people are investing in real estate. And so that was the goal was always to build out the rest of the empire with with multifamily. But I just recognized really early on that I just, I really liked people, but I just kind of like my family and my friends, I really don’t like people that live in my places. And the tenant toilet business just wasn’t for me, even though we had property managers and property management companies. At the end of the day, I just, I kind of lost a little bit of love for my fellow man after they trashed my places and stole money from me over and over and over again. And so if you’re in real estate, then you like rental real estate, there’s not much else other than parking lots or vacant land to make money in, that don’t have tenants and toilets. But I began to look at self storage. And yeah, I liked what I saw. And the light bulbs went off when you recognize that when somebody doesn’t pay when a client, they’re not tenants, they don’t live there. But when a client doesn’t pay, and we get to lock them out, and then sell their stuff if they don’t pay after 60 or 90 days or so. And then either after an auction or when they just leave on their own accord. What we’re left with is a metal box on a concrete slab and we take a blower and then 30 seconds, we blow it out and we move on to the next person waiting in line. And so those reasons right, there were enough to make me switch, the more I begin to look into the industry and look at the stats and the returns and the fact that it’s very recession resistant, it actually does better during the recession versus good times. And then comparing the asset classes to multifamily, no offense, their asset classes, I was in it as well. But it’s outperformed multifamily for the past 25 years. And so it doesn’t need to be sexy for me to say, All right, I’ll go with a business model that has far superior returns and less hassle. So that’s when we made the jump. That’s

 

Greg Lyons  03:53

cool. And we say this often on the podcast that there’s a million different ways to make money in real estate. And a lot of times it’s maybe not your first foray into real estate that ends up being your niche. And for you it was in single family rentals into multifamily. And the three T’s got them. Tenants toilets and termites, right? It just Yes, yeah, it could wear you down. And it’s totally understandable. Take me through the evolution of getting into self storage, maybe your first deal, but in that light bulb moment that you said, Oh yeah, this is for me.

 

Scott Meyers  04:27

Yeah. So the first deal that we got into it was a partnership. So a gentleman in Indianapolis market in my local market here in Indianapolis, he was a broker and we started doing business with each other and we both had an interest in self storage and at that point, we bought a facility together. We both put money down we both put our signatures down on the mortgage. And once we get into that project we found that just like multifamily, I mean it’s all about noi you’re driving the NOI up meaning and driving expenses down and income up. But when you do a rent increase Cross 500 units versus 100, or 1000 units versus five hundreds and it’s a nuisance rent increase, well, all of a sudden that boosts your noi really quickly. And in self storage, we can do that in a short amount of time we can do it their monthly leases, I could do it every three months, if I wanted, I mean, we wouldn’t do that. But you have the ability to do so. And now with being able to manage our revenue and our rental rates and what software we do that we can increase depending upon the demand in the market itself. And then again, looking back to the fact that somebody doesn’t pay, we get to sell their stuff, we lock them out, and we get to sell their stuff off. And we are the judge and the jury, we recognize from an operational standpoint, and allows us to be able to focus on our business rather than being in the business on a regular basis. And we also were susceptible to the swings of the recession. But Self Storage does so much better during a recession than it does during the boom times that just in terms of cash flow, to replace an income stream, it just makes it much easier when we don’t have these peaks in these valleys. Looking at it just for myself, for myself and my wife, we didn’t have to if we’re replacing one income, we didn’t always have to go through a storm or a season in terms of what that’s going to look like and having lean years and years that are better than others. And so the light bulb moment really came in when we sold our last apartment complex. And my wife said, Hey, do you notice anything different than that’s always a loaded question when your wife asked that as well. I don’t know how to hear hear your dress. Not sure. But she said it’s quiet. You notice how quiet it is. And that was probably the biggest lightbulb moment when it came to then going full bore into self storage. And in growing and scaling that side of the business is because we didn’t even though we had the management companies in place, and we weren’t having to spend all that time working in the business, we can now work on growing and scaling the business because like you in addition to multifamily, we’re an industrial, we did have parking lots and we did have cold storage warehouses were in multiple asset classes. But then we realized just the simplicity of going through a couple of cycles and a couple of seasons with self storage that man it is no business as easy, but it is much simpler than the other asset classes we ran. And so that’s when we sold off everything else and then just went 100% into self storage.

 

Tim Lyons  07:05

Well, I love that I’m about started doing some pushups in the iOS here, because when I hear a good story, it gets me excited. Right. And just to kind of backtrack a second, this is the passive income brothers podcast, right? And I think well, when they initially stumble upon us like, well, it’s passive income real. I know, I like real estate. I’ve been following it, Zillow, and biomimetic started Scott. And what I love about your story is you said you start off small, right? And so many people that have been on this podcast and other podcasts that we listen to, they start out just like they know how to do it, right they do with the single family house concept, then they scale up from there. And so I think as far as self storage, we raise capital for a self storage fund that really does Sunbelt basically focused. It’s a value add play. And sometimes when I talk to multifamily investors like well, how do you add value to a self storage facility, and a lot of the times I just repeat some of the stuff that I’ve learned over the years, just self storage is a good place to be because of the four DS, right? You got death, dislocation, disaster, divorce, and a fifth one downsizing. And all of a sudden, you’re gonna pay $89 a month to have a I don’t know, a 10 by 10, or a 12 by 12. And they put mom’s family heirlooms in there and, and all of a sudden, if you’re paying 100 bucks a month, and your rent goes up by I don’t know, 6%, you nuisance increase. So all of a sudden, you’re gonna pay 106? Is that going to really make or break you? Is that going to force you to get a U haul truck and move your stuff back into the basement or something? And obviously, the answer is no. Yeah, the other thing, I don’t know if you could talk about this a little bit more. But the last step that I heard about self storage was that about 70% of the self storage facilities in our country, are owned by Mom and Pop say, right? Not these big institutional players that own the other 25 30%. So there’s a lot of opportunity out there, right? They’re just people that don’t have optimized operations. Can you talk a little bit about some of the opportunity that you have executed on? And then what you see going forward?

 

Scott Meyers  09:10

Yeah, so you’re 100%? Correct. We’re doing exactly the same things. Tim is the fund that you’re raising capital for as well, we have a fun, we’re getting ready to launch another one. And then we’ve been doing this with individual projects, and which is raising capital from passive investors from limited partners to go out and buy a gaggle of these things. And we’re sitting at 80%, roughly 80% of the market is mom and pop so owned by Mom and Pop players. They own one asset, maybe even a couple and they may be some local players that have a handful of facilities, but only 20% of this industry is owned by the REITs. And the opportunity lies in or the beauty in that is, is that we’re really the last asset class in this country where it’s still called the wild wild west where there are folks that are going out and they’re growing and they’re aggregating and scaling up and then selling off to the bigger players, whether it be a regional or national player or one The REITs. So the opportunity for us has always been willing to beginning it was just getting into the asset class and just growing a portfolio for ourselves. And then we recognize in order to grow, you need to syndicate, you need to begin raising private capital, if you’re going to begin to grow a portfolio in the commercial real estate business, because your own retirement funds, and cash only goes so far. And so going a cycle of maybe three, four or five years with a single facility, a single project, and then exiting Well, we recognize that there are smaller amounts of buyers, there’s always somebody that’s going to buy it. But when you have 456 facilities in a market, and you have a footprint, and it’s a turnkey, where they’re all look the same, roughly the same size, they kind of act the same software, and then the bigger player, or we can come in and gobble that up, and they can add it into their portfolio, well, it’s real simple for them to do because they do one set of due diligence. And then when they bring it in house, they’ve already got the marketing in place, if they’re in the market, the marketing machines already ready, they got district managers, they got everything in place. So they’re able to pay a little higher multiple, a little lower cap rate because their cost of acquisition, and then their cost of operation is even lower. And so at that point, that’s when we recognize that we have a huge opportunity to be able to provide these facilities to the REITs, and to be able to make a profit in the meantime. So that has been the goal, since man probably at them for the past 12 years now is focused on development and developing only the size, type and location of facilities in which the REITs would be interested in buying. And then growing a portfolio of facilities alongside of that, or in addition to that are attractive to the REITs. And the bigger players. So not the 100 unit, the smaller facilities are located in a farm field with no growth and nobody around first generation but actually the facilities that the REITs are looking to purchase. So that’s been our business model. That’s been our focus. And in terms of envision where I see this going really just more of that we’ve it’s a race right now for those of us that are syndicators that are operators developers in the industry, it’s a race to be able to scale up as quickly as possible and then sell off to the bigger player or create our own REIT in the process. So

 

Tim Lyons  12:01

yeah, I just want to stack on top a lot of times people will say, well, because it was a we live in a big city, a bigger city, right? And it’s like, well, the REITs have that right? I mean, like they can’t people investors can’t always wrap their head around middle America needing a place to put their stuff, right. We’re a consumption society, we’re consumption economy, we have too much stuff as Americans, and we never want to throw anything out. This is a great way college towns, right. I mean, how great is that four year contracts, basically, because people don’t want to move out. As far as the value add play. Actually, one more thing, the bigger players that we talked about selling to the REITs. But it’s also pension funds, it’s sure bigger pools of money, right? Because at the end of the day, people like Greg and I and Scott, we don’t mind taking on projects that we have to do a value add play to right take a property into two systems and processes, make it a little nicer add storage, what have you. Because the bigger players with the bigger checks, they do not by and large, they do not subscribed to the value add model. They want that turnkey property, they want that portfolio that’s already cash flowing, already performing, and basically done for them. Right. So that’s why there’s so much opportunity in self storage. Scott, can you just explain to the investors really quickly? Maybe for the newer investors, that’s thinking about being a limited partner in self storage, syndication? What does it mean to add value? What are some of the ways to add value to a self storage property? And what does that mean monetarily for net operating income? Can you go into a little bit of that?

 

Scott Meyers  13:33

Yeah, of course. So you’re right, everybody’s looking for yield. But nobody wants to do the heavy lifting, at least on the passive side. So for our LPs, we’re going into a project, what we’re explaining to them as these are the same types of things that anybody should be looking for when they go into a project, you only make money on any investment, when you sell typically, you hopefully make some cash flow along the way. But the bigger profit is when you sell and that means buying, right. And so for us, when we are identifying a project that wasn’t at the top of our funnel, first of all, we need to be buying it right, which means we should be buying it undervalue. So under replacement costs, we’re buying it at a cost per square foot that is less than what we could build it for. So we’re taking into account that it’s maybe a little bit older, second generation property, not too old that it’s functionally obsolete, which means it has no mostly five by fives or nothing but two by fives and the facility is built out of concrete. So we can’t move walls or anything else in narrow doors. But it has to be functional. It has to be in a location that it’s still desirable. Looking at the end strategy, the exit strategy, ultimately, somebody has to buy this so that we get that pot of money at the end. But typically, what we’re finding in terms of value add is maybe no technology. There’s still some facilities out there where they just don’t they don’t have a website. Still, they’ve been fooled. They haven’t had to found the need for one, they’ve got a banner on the back of the gate when people exit for a $25 referral fee for refer friends or family. And that’s been enough and they stay full. And there’s also no sweeter sound in my ears when I’m walking around the facility with an owner who’s a potential buyer. And they say, Well, we’ve done I’ve just A really good job around here, we’ve stayed 100%, full for the past five years have really well how did you do that? Well, we’ve never raised rates, they say, well, good on you. Because I can’t wait till we get a hold of it, we’ve raised the rates 1820 25%, because they haven’t done that, and in several years, so that’s usually the next best is that they haven’t raised rates. So there’s a huge opportunity, they’ve made friends with many of their clients. And so they allow them to continue to pay late to not pay. And the accounts receivable, just if we cure the issue they have between physical occupancy and economic occupancy, that’s another boost several $100,000 in value reducing or eliminating the payroll of a person behind the desk. By utilizing technology, we were one of the early adopters of utilizing the kiosks. And place of a manager at a facility we now use them in conjunction with and some of our facilities are unmanned. And so if you take just for instance, a 140 $1,000, a year person out of the equation, the payroll equation or the expense equation, use whatever math, you want a cap rate at a 10 cap that’s $400,000. In value, if you’re at a six cap, you’re looking at close to $600,000 in value just by implementing technology. So those are the main ways and then one of the biggest and best is if we haven’t we seek the sites that if they have additional land, they get another acre or two. And the owner decided they just ran out of steam ran out of desire, they’re 100% full, why bother cash flowing? Well, why take on a development risk or even the hassle of it? Well, we’ll add buildings immediately, of course, if there is demand in the markets, and so adding additional square footage to the site obviously increases the value over the construction cost and over the course of the year, so that it takes to lease it out. So those are the main things that we’re looking for. And then of course, it helps if it’s in a path of progress. And if it’s where the sewer lines are coming, then we know that more competition is coming, which is good. And if the reads come into the market, they’re going to be pushing rates, and all that does is raise the value of our facility. Because we all know that all boats raise when the tide is raised by other competition coming in. So I think I’ve covered most of the main ones at least. Yeah,

 

Greg Lyons  16:56

no, you definitely did. And I think for our listeners, it’s so important that wherever you do decide to invest, you got to go with experienced operators, people that know the business. So when we say what’s value add, you don’t sit there and go add more units. It’s the people that have the experience. And that’s really, really important. You mentioned competition. And a lot of times when we’re raising money for self storage, we hear from people hear from investors that say, you know, I don’t really get self storage, because I get people put their stuff in. But what happens when the brand new life storage or whatever big storage player comes in plops down right next to me. How do I overcome that? Especially if I’m invested in only one particular self storage place? That’s why we like to do funds overall, because you kind of diversifies. But can you kind of speak to what the competition metrics are? Sure, when you whether it’s back of the napkin, or things that you look at really hard to know that you have a good opportunity in self storage? Yeah,

 

Scott Meyers  17:59

Greg, I’ve answered that question hundreds of times. And I think about the first 300 was from my mom, who said, Now, what is it again, that you do and why do people pay you for that?

 

Greg Lyons  18:09

So they’re your harshest critic, sometimes they are.

 

Scott Meyers  18:12

But that is the number one question. It’s usually Hey, I see these cranes all over the city, and they’re building them across the street from each other. How can there be that much demand? And nobody’s ever asked why there’s so many Starbucks going up? Or why there’s people still coming out of medical school? And the answer is because people still need doctors and still want Starbucks. And for storage, we, as developers, we don’t go through this exercise for kicks, the days of build it, and they will come you know, back in the 70s, when this industry was in its infancy, those days are over. First of all, lenders aren’t going to give you dollars, and we need to make sure that this thing is going to work to begin with otherwise, we’re not going to be able to make our payments. And so the exercise we go through is a feasibility study. And again, as I said at the top of the show, this is a very simple, predictable business model. And we can look you can drop me anywhere in the country. And I can run a few metrics within a three mile radius of the facility to find out what the supply index is, which means here’s the population. Here’s the amount of square footage of storage in that market. And we fall in within the industry, somewhere between six and a half to seven and a half square foot per capita, meaning six and a half to seven and a half square feet of self storage per person. And that three mile radius is considered equilibrium. If we’re at 10 square feet per person, well, it may be an oversupplied market, if we’re at four, it may be under supplied, we then begin to look at the competition. And if there’s 10 square feet in the market, and everybody is at roughly 80 to 90% occupancy, then it’s probably stabilized. But if they’re all full, and they have waiting lists, then well, this market has a little more demand than others and that could be Florida with no basements it could be a high concentration of multifamily, with no storage and just a whole lot of units in one area. If they’re there at four and a half square foot per capita and everybody’s still around 70 80%. Well, it means that there’s not a lot of demand in that area. So there’s two factors. It’s the supply and X but then also Though the demand. But when we look at rental rates, that is the key, I mean, you can give me the land for free. And after I do the math and reverse engineer it, you know, after we put the building in place, and we run the model at 80% occupancy, if the rental rates aren’t high enough in the market, then we’re gonna move on, you know, we’re gonna go on to the next piece of ground. And so I guess a long way of answering your question is, it’s the map, this all has to work out, when we look at how much we’re paying for the land, how much it’s gonna cost to build it, we run the model at today’s current rental rates at 80 to 85%. occupants. And if it takes us for using an SBA loan, it’s got to begin cash flowing and breakeven in two years or less, which is also a good benchmark for us as well. But if we don’t see that we’re ever going to make that with that runway. If it’s a four or five year runway, in order to lease it up and the velocity is really slow, well, we’re gonna run out of cash before that happens, and the project probably isn’t gonna pencil out. But if everybody’s full, and rental rates are commensurate to apartment rental rates, we have a model that we follow along with that as well. And there are $1.50 a square foot or higher than, yeah, we’re probably going to secure that land right away and build it just as quickly as possible. So it is a math equation, it’s not just a guess. And if you see one facility going up across the street from another or next to another, it doesn’t mean that that guy’s an idiot. It means that, you know, it’s a market that probably only has three square foot per capita, and they’re going to piggyback off the marketing of the person right next to him. And they’re both going to be fooled before long. And they’re both going to raise rates and be happy and probably go to lunch together.

 

Tim Lyons  21:24

Yeah, when I hear that question from investors, I always tell them, look at any city or town in the US. And if you see a CVS, I can almost guarantee you, if you look across the street, or on the opposite catty corner, you’re gonna see a Walgreens, right? And there’s a reason for that, right? There’s all these metrics that developers, builders, real estate folks that we look at to see, is this a good location? What is the 135 mile radius on population growth and job growth and income and square footage? So this is why I love having people like you on the show. Because listen, at the end of the day, you’re an expert, you’ve been doing this for over a decade, right? I think he’s there, what, 12 years, you’ve been through market cycles, you’ve seen the ups and downs, you probably made mistakes, and then you’ll learn from them. Right? So when it comes to investing, Scott, can you pivot into put your investor relations hat on for a minute? Yeah, Greg, and I always talk that we think we’re early into this game. Still, there’s a lot of people out there that do not know what’s available to them. And it might sound scary, right? Multifamily self storage and medical office, whatever it might be land, I don’t know how to do it. There’s somebody out there that does two part question number one, and you put your investor relations hat on and just maybe on the high level, why people need to maybe start looking at these asset classes. And number two, can you talk about your teaching side, the method and the event do so that people can learn more about this, especially if your podcast and they said you know what that sounds like something I wanted to

 

Scott Meyers  22:54

share? Sure. Well, I think any good investment strategy, you should be looking at diversifying a bit. Once you find something that works, then I think you shouldn’t deviate too much away from that, because then you can become a little enamored with shiny object itis and or sitting on the sidelines because you’re confused and waiting for the next best thing to come along. I’ve been investing in real estate for 30 years, actually. And we’ve been in storage for 19 of those. And so we’ve been through, I’ve looked at all the asset classes, I’ve invested in almost all the asset classes, and I just landed on storage, not because it’s sexy, because it’s not, these are metal boxes on concrete slabs. But I looked at a very solid business model, and one that weathered the storms through a recession and also through inflationary periods. And so first of all, the asset class is no longer the ugly stepchild of commercial real estate. So I can say I’m biased to self storage. And I’m not but I am because I haven’t found anything else that beats it. But I was asset class agnostic when I became an investor in real estate and then just landed here. So you still need to look across the landscape. And there are certain markets and certain times in which other asset classes do better than the other. But are you a short term investor? Are you a long term investor? Do you have buckets of short term money in the buckets or long term money that is going to probably help you make your determination where to invest? When folks come to us there is no sales pitch, there is no persuasion, we just tell it like it is. And it’s our story. And it’s just that self storage found us we didn’t find self storage, we invested in all the other asset classes and we recognize that dump for us this was the best and win for passive investors that are we tell the folks that even come in and call in and talk with our Investor Relations folks. So we’ll just follow this for a little while. Take a look at what we’re doing. But also take a look at our track record. And I would call this a public service announcement for any of your investors out there that are listening and looking to invest passively. There’s a whole lot of folks that did very well and in real estate’s from 2010 Up until now, and they’ve had this huge sale with a huge wind in the back of this bull market in real estate. And there’s a whole lot of folks that did very, very well, including ourselves, but for folks that haven’t been through this prior to that 50% of that success was the market. You got to look under the hood. Learn and determine are these guys and gals really that good are they just been the benefactors of a bull market and they made some pretty good picks, I would suggest that if you’re going to invest passively into syndication or in a fun with some folks, then the folks on that team, or at least a couple other members of the team should have been through a recession or two. And then that is when I think it separates the wheat from the chaff. Speaking for ourselves, there’s four of us that are partners at the sea level within our fund. And we’ve got over 200 years of real estate, we’ve been through three recessions. And we’re still standing and not that survival means success, but in some instances, it does, especially after 2008. And really all that does is it does prove that the returns that we have our returns are north of 34%, for our investors in our funds, and that’s double the REITs returns over that same period of time. And so it allows you to just, I think, look a little further down the road, no matter who it is that you’re investing with, I would suggest that they’ve been through at least one recession before you begin to hitch your wagon to them, and determine how well they’ve done through a couple of recessions. Rather than just during the good times. I was at a passive investor event, a family office event, actually, and one of the heads of a family office said, If I were soldier, I would never follow a general unless he walked with a limp. And I thought that was sound advice. And so I think for our passive investors, you need to look to your leader, and if they got a little bit of scar tissue, and they walk with a limp, and they’re still around that somebody that you probably should listen to and feel comfortable with, if that makes sense. Oh,

 

Greg Lyons  26:26

it definitely does. And you can top experience and things on a spreadsheet numbers on a spreadsheet are great, you can have the best presentation deck in the world, when the poop hits the fan. Every once in a while you got to be able to roll up your sleeves and get it done, whatever that is in multifamily or in self storage. I know Tim mentioned it a little bit earlier about the education piece. Yeah. But like Tim, and I always say education times action, and that’s gonna lead you to success. And education has been a huge part of how we got started joining masterminds just listen to other people’s podcast, joining coaching programs, if you can just tell our listeners a little bit about your education program, and the direction that you provide.

 

Scott Meyers  27:09

Yeah, I went kind of kicking and screaming into the education business, I never wanted to be a guru. And I never wanted to be on stage or receive any glory or do it for any other reason other than it was deal flow for us. I started, I used to run the central Indiana real estate investor Association and a whole bunch of folks wanted to know about what we were doing and how we were doing. And so we started holding workshops. And then everybody wanted to take me to lunch, and pick my brain lawn and a whole lot of time to do that. And then after a couple of dozen of those. And then people started asking me to buy lunch after they picked my brain for an hour and a half, I decided, well, I think maybe I need to back away from this. But one of the agents, one of the speaking agents that books, these national speakers that go out and speak at the real estate investor associations around the country said, Hey, we need somebody to teach about self storage. And I can send you out to some of these groups. And you can monetize this, get a name for yourself, but then also tap into these other markets for deal flow. And so that’s really how it was born. And so we put together a program to teach people the best ways that we knew how to market and find facilities. Because if we were going to partner with folks who wanted them to be able to find them, where we know how to find them, where and then how to underwrite them in the best possible way. So that we had some pre vetted deals that we could take a look at. So beyond that, then we started having three day boot camps and academies to teach people how to get better at doing this. And then we offered some mentoring to do it faster, and to make sure that they didn’t make mistakes. And before long, I was really a little remiss and maybe regretful because what now we had built to 60 hour week businesses, my investing business and the education business. And I mean, you guys know what marketing looks like in order to grow an audience for anything takes a lot of marketing and that education business. And I love that I love to teach again, I was never set out to be a guru. I’m just an investor and a teacher. And to do all the marketing piece and to lead and grow, that organization just was not really my skill set. And so we scaled that back a bit, I hired somebody who to run that business for me, and I just show it for the marketing pieces, and all the systems that we have put in place. And now we’ve kind of come full circle, where we’re working with fewer people. And we do it in a mastermind environment where our self storage academies get take people from zero to 55 miles an hour. And we’ve taught more people how to get into the business than anybody on the planet, literally. But the mastermind is where I spend my time now. And that is where people go from 55 to 100. And so those are the syndicators, the folks that are scaling up their businesses. And we are sharing best business practices but sharing deal flow, and then also access to capital at this level. This is all I need to be doing 80% and 90% of my day should be matching deals up with capital. And so now that’s I’m slowly I shouldn’t say slowly we’re there. Although there are some weeks where the ebbs and flows a little bit, but most of my time is spent just doing that. But we’ve grown this education, business and all matched up against anything or anybody out there in terms of being as complete as possible to get people into the business. And we’ve also I mean like yourselves, many of our folks, they will either go through our academies or learn about the business and they may decide no I don’t think I want to take that credit risk or Elisa is gonna do well. Women don’t have to earn a 50 grand or 150 grand or a half a million to put into a project. But I got 50 grand that I can put in passively and still get some pretty decent returns probably better than when I would get in my first deal after all the mistakes and the learning opportunities. And many of our folks that have come into one of our deals passively, they learn about the business that way, because we do all the due diligence that we share with them on our portal, we do webinars, they can come visit with us and any of the meetings that we have at the facilities they can do so and they learn while they are earning. And then they go out and do their own deal after that, because now they’ve got street cred with the bank, they got equity in the deal. They’re an owner, and they’ve been through this and now they’re bankable, and they understand the business and they can talk the talk and that sometimes investing passively. First is the launching pad for people to then begin to go out and do it actively. So we’re we’re all things education and all things investing on the side of the house. Dude, I

 

Tim Lyons  30:51

love that Greg and I are huge, huge fans. We weren’t always we came from a very modest background Scott with immense, immense limiting beliefs. But we got we got so yes, that’s why we always talk about the wasn’t start as an LP or join a mentorship. But on the other hand, you don’t need a PhD every time you need to make a decision, right. So yes, Scott, this has been awesome. It’s been a masterclass on self storage investing. I really have enjoyed it so far. But we’re gonna hop into the last three questions that we ask every guest. The first one comes from a de facto mentor of ours, Robert Kiyosaki, you may have heard of him. And he says something that can turn people off if they don’t know exactly what he’s talking about. And he says something like this. He says, savers are losers and debtors are winners. What does that mean to you? Yeah.

 

Scott Meyers  31:40

So I’ve did some coaching with legacy coaching for Mr. Kiyosaki. And yeah, we’ve had this discussion many, many times. And there’s a difference between in the debate usually is that debt is bad, whether you look at that, from a biblical standpoint, or just having debt, it is a challenge on your balance sheet. But at the end of the day, if you look at large religious organizations, or investment debt, in general, no matter what you’re investing in, as long as there’s a return on it, that is the power of leverage. And in terms of investment, you can’t borrow money too long as you kind of can, but you really can’t borrow money from the banks to go buy stock, or gold or any of the other investments. Real estate is the only asset class the only investment in which you can borrow money, it appreciates. If you do things right, and you can write it off, it depreciates as well, I mean, that’s why we need to be in real estate and with leverage being the first. And if I can layer, some equity, either mine or now somebody else’s onto a project, and we can all benefit from it. Because we’ve got the recipe and we got the best cooks in the kitchen. That is how you create true wealth. And it begins with smart leverage, saving your money that takes on a whole different risk of these days, depending upon who you believe or what you read, is inflation at 6%. Is it at 4%? Is it really at 12 or the mid teens? Well, you’re saving, meaning if it’s stuck in a savings account somewhere, which is the worst place and inflation is 610 12%, you’re going backwards, your money has to be put to work. So whether that is a putting it into a passive investment, and you’re earning better than inflation, which you probably should be or unless you’re just trying to preserve your cash. Or if it’s earning a greater return that you are going to go backwards, it may or may not be happy with the age at which you have to retire or what you’re having to do in retirement.

 

Greg Lyons  33:24

It’s always tricky to get that balance of are you growing up staying the same? Or are you going backwards? And unfortunately, a lot of people are going backwards right now and just kind of in hermit mode or I’m going to wait and see what’s going on. So right answer there. Our second question or thought here is a really good one for you. Because you talk to a lot of not only investors or would be investors, you also talk with a lot of would be active real estate investors. So this one’s good to kind of lay at your feet here and say what do you tell people when they say investing in real estate is too risky? Well, I think dramatic pause I like I like

 

Scott Meyers  34:05

I think that comes with a few questions behind it. But I mean, going back to Mr. Kiyosaki working a nine to five and maxing out your 401k Well, man, I was there and the company that I worked for during the.com, Crash the.com Crash, I lost $350,000 overnight because they were cooking the books. And then at that point, then they begin laying people off. And I got out before that happened. But what’s more risky is putting my faith I have a paycheck into working for somebody else where on a whim, they’re bought or they downsize or they make some bad moves, and I’m out of a job and so there goes my way of life. And then if their stock tanks or goes away, or if they do what my company did, then there goes my retirement. The risk to me lies in putting your future in the hands of somebody else and that includes my investment dollars. Once we put pencil to paper and did the math, my wife and I was like well, here’s how much money we made last year on an hourly basis, part time in real estate and our rental real estate business. And then we looked at what our retirement looks like, because that’s how we get into real estate is to really to hedge against the stock market and what we had in our retirement accounts at that point, we just want to have a safer bet. It’s a little bit of a hedge. But then I realized that you know, what, if I hit my marks and do what we’re supposed to be doing creating value in this, and then either selling or holding on to and getting all the tax benefits? Well, nobody’s going to cook the books, because it’s me, I can come down every meeting and have every morning and have a meeting with the board know what they’re doing, because it’s me. And I can control that. And where is my investment at? Well, it’s not in them bitcasino up on Wall Street or on paper, which can go away, I can go over to any one of my facilities, I can see it, I can touch it, I can feel it. So yep, still here. It’s still right there. So I think the risk lies in not having control of what you’re doing. And just making sure that you know what you’re doing, why you’re doing it, but then putting it in the hands of somebody else. To me, it just, it almost seems the further I get away from that, the more bizarre it seems to be now than anybody would do it.

 

Tim Lyons  35:54

I love that, really speaking from your experience, and speaking from the heart on that question, that was a great answer. The last one is from another little mentor of ours, Jim Rohn. And he says something that goes like this, a formal education will make you a living and as self education can make you a fortune. What does that mean to you? Yeah,

 

Scott Meyers  36:12

Jim Rohn is just got a million of them, that dude is just gold. He’s one of my mentors as well. And well, first of all, in real estate, we’re gonna get an education one way or another, right, we could go off half cocked and investing at the market is going to teach us a lesson and it’s gonna keep very expensive. And in commercial real estate, when multifamily and self storage, it comes with lots of commas and zeros when you make that mistake and get that education, but a formal education. Again, I’ll speak from experience, I went to a pretty prestigious business school. And I can remember two professors that I actually learned anything from because I remembered what they taught me. And that was my business law professor, dude was incredible. But he along with my marketing professor, also incredible their own businesses, of course, the attorney didn’t, and my ad agency guy did as well. And that’s because both of them when they came in, and they said, here’s what you need to study, here’s what you need to know, for the test. And in 30 seconds, they were done. And then they went on and talked to us about stories of what they learned in court, what was going on in their business and everything that was happening in the real world that was applied. And so those were the only two classes that prepared me for the real world. And then they say, you don’t always have to, you should always strive to get A’s because in the real world, is the students who are learning about business, maybe working on the side, or learning how to socialize and network and building those skills to be a leader of an organization that would be able to lead people that then hire the A students who are just memorizing things to ace a test. And I don’t know about you guys, but I can point specifically to many examples of that there’s a whole lot of folks that are smarter than me and my organization that I’ve met, that are either working for me or somebody else. And I’m thankful for them, because I’m not the smartest guy in the room. But I know how to leverage those folks and put them to work in their places and put the aces in their places, and grow an organization. And because we’ve seen that happen time and time again, with many other folks that have come before me, I

 

Tim Lyons  38:00

love that. I absolutely absolutely love that. So Scott, I feel like you and I could be friends. And I could probably talk to you for the next couple of hours. But in the interest of time, if people got a lot of value from what they heard today from you, and they want to find out more about how they can invest with you, or all the good things, what’s the best way for them to read, you know, they

 

Scott Meyers  38:19

just read me a big check. And I’ll give you my home address because we love this game. And we do everything self storage. And we give away a lot of free information for folks that are wanting to learn about how to get into an actively or passively at all is at self storage investing.com. So www dot self storage investing.com All types of free resources and anything and everything about what we’re doing on the education side of the business, including our mastermind, as well as a tab for our passive investing site as well. If you are interested in partnering and coming alongside of us on some of our projects that we’re working on and more to come 2023 is going to be an incredible year for storage. I

 

Tim Lyons  38:55

love it. So that’s gonna do it for this week’s episode of the passive income brothers podcast and we look forward to serving you again next week. Thank you for listening to another episode of the passive income brothers podcast. We would be grateful for your support of our podcast by giving our show a five star rating and review and subscribing to our show on your favorite podcast platform. Don’t forget to take inspired action after listening to this show, so that you can start building out your passive income streams. Finally, head on over to cityside cap.com to connect with us and find out more information about how to get started passively investing in real estate