Simple Passive Income through Self-Storage Investing

Self-storage. It’s simple. It’s proven. For many investors, it’s the dream. 

Investing in self-storage gives you the best parts of income property investing without the hassle … life can be breezy when your tenants are boxes. 

But all investments have pros and cons. 

We invited Dave Zook … successful business owner and experienced real estate investor … to share his insights and experience in the self-storage sector.

Get ready for high yields and low drama!

In this episode of The Real Estate Guys™ show, hear from:

  • Your hassle-free host, Robert Helms
  • His hassling co-host, Russell Gray 
  • Founder and CEO of The Real Asset Investor, Dave Zook

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The skinny on self-storage

Some of the best tenants in the world are boxes. 

Self-storage is one of the coolest niches in real estate. We’re all familiar with the concept … at some point, we all have more stuff than we have space. 

What can we say … we’re sentimental people.

Maybe it’s Baby Boomers downsizing … or maybe it’s corporations that would rather store documents off-site than pay more for premium office space. 

The importance of the stuff in boxes is in the eye of the beholder … but the potential income from the boxes is golden in the eye of the investor.

Self-storage comes in many forms. Some investors go for climate-controlled self-storage units. Others specialize in space for vehicles like boats and RVs. 

No matter what route an investor takes, the self-storage model is really pretty simple. 

And there are few people who know as much about this particular business model as our good friend Dave Zook. 

Dave is a successful business owner who started in syndication and has done all kinds of different real estate deals including … you guessed it … self-storage. 

And boy does Dave have stories to tell. 

Dave first got interested in self-storage about 20 years ago. He delivered modular buildings from his family business to a dealer who had a self-storage business. 

“I would ask him questions about how this works, and he told me it was the easiest way to make money ever,” Dave says. 

Pros, cons, and strategy

When you invest in self-storage, who are your tenants?

Dave says he has seen a flow of people moving to the apartment space. 

When you move from a home to an apartment, you don’t have as much space for storage … most apartments don’t have a backyard shed. 

People feel comfortable keeping their stuff in self-storage spaces … many facilities are guarded, gated, and secure … some are even climate-controlled. Some keep their stuff in storage for a very long time. 

Dave says many people enter into self-storage planning to use it short term … but the pain from the monthly fee isn’t great enough to spur action to move the stuff out immediately. 

Some tenants move stuff in thinking it will be there for three to six months … and end up being a tenant for three to six years. 

Dave shares that another big benefit of self-storage is that tenant-landlord law is a lot different. 

When you’re dealing with boxes instead of people, everything becomes a lot easier. 

“The government isn’t as concerned about how our boxes get treated as how people get treated,” Dave says. 

But like any investment, self-storage does have its downsides

One of those is size and scale. 

Most self-storage facilities tend to be bigger. Smaller sites do exist, but they are much rarer. Dave says he typically goes after sites with 400 to500 units. 

Sometimes, Dave and his partners buy an existing facility and then expand it to add more units or add climate-controlled units to up the value and cash flow of the property. 

This strategy takes time and additional money … but it can pay off well. 

The process of taking an existing property and turning it into an attractive storage facility usually takes about a year. 

“It depends on the market and the time that it takes to get permits, but typically we can go in and 12 months later have a certificate of occupancy, and we’re in business,” Dave says. 

Making the most of the market

Are there markets that make more sense for self-storage than others?

Dave says he and his partners focus on secondary and tertiary markets. Right now, they really like the Southeast. 

“We’re in places like Tennessee, Alabama, and Florida, because that’s where the growth is going,” Dave says. 

Boosting your occupancy means boosting your income. 

Dave says that when it comes to self-storage, 100 percent occupancy isn’t a good thing … that means your rent is too low. 

If you’re in the 85 percent occupancy range, on the other hand … you’re doing really well. 

Historically, self-storage has been a very recession-resistant asset class. It handles disruption very well. 

Looking back on 2008, 2009, and 2010, self-storage as an asset class outperformed any other commercial real estate asset class. 

Dave says he feels like we are at a high point in the cycle … which means we’re due for a recession. Self-storage may be a good asset class over the next several years. 

“Think about it. If I have to move or lose my job, I don’t want to get rid of my stuff. I’ll store it for a couple of years instead,” Dave says. 

Learn more, earn more

If you think self-storage may be the asset class for you, you need to find a team. 

“I would say that 50 percent of the success of self-storage is based on your operator and your management team,” Dave says. 

When you have someone who is going to be in charge of the investment, you want to make sure that this type of investment is something they have done. 

Your operator and management team should be so dedicated to self-storage that they are unconsciously competent. 

Like any investment … relationships matter. Find someone who knows more than you do and get educated. 

There’s always more to learn … and more money to be made. 


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Five Reasons to Invest in Self-Storage in 2019

Five Reasons to Invest in Self-Storage in 2019

 

Good things do come in not-so-small packages!

They say you can’t take it with you … but we certainly do enjoy our “stuff” while we can. 

And when times are good … the amount of stuff we accumulate and store during prosperity tends to grow.

Here’s the thing … when times are rough, we tend to move (think downsize, move in with family for awhile, relocate to a more affordable area) … and, guess what? 

During rough times … we store our stuff while transitioning

People need a secure location to store their treasures. That means turning to self storage. 

Self storage properties enjoy high demand from Baby Boomers in need of extra space as they downsize AND from Millennials who would rather pay less for storage than pay rent for more living space. 

During the last decade, self storage investment returns have outpaced most other property types … which means investors should take note. 

Dave Zook and his team at The Real Asset Investor have seen the payoff of investing in self storage … and they’re sharing the top five reasons why YOU should do the same!

In this special report, learn:

✓ Why self storage is a recession resistant niche 

✓ The tax benefits of depreciation

✓ How to play a fragmented market to your advantage

✓ And more!

Dive into a space where your tenants are boxes. Discover the endless possibilities of self storage investing.

Get started by filling out the form below to access Five Reasons to Invest in Self Storage in 2019 …

Profitable Niches – Stacking Up Profits with Self-Storage

Tenants, toilets, and termites … real estate investing isn’t always pleasant.

But we have good news for you … real estate is more than just single- and multi-family properties (although we’re big fans of those investment classes too).

In our new Profitable Niches series, we’ll explore a variety of niches in detail so you can find the asset class that best fits your investing needs.

This episode explores a fascinating niche … self-storage properties. We’ll dive into the reality and myths of this tenantless niche with a multi-talented investor, Dave Zook.

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your nice host, Robert Helms
  • His niche co-host, Russell Gray
  • Real estate investor and instructor Dave Zook

Listen



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How and why to invest in self-storage properties

Dave Zook doesn’t pigeonhole himself into one asset class. He started out with multifamily and single-family homes, but has since then expanded to resort community development and ATM investing.

He also runs The Real Asset Investor, where he finds and curates real asset investment opportunities for investors who want to build wealth.

Dave’s latest venture has been self-storage units, so we sat down to discuss some need-to-know characteristics for this asset class.

First, what should investors look for in a self-storage investment?

Investors need to make sure everything pencils out. Demand for self-storage units varies drastically depending on the market and its demographics … and demand and profitability also change over time.

Some markets are overbuilt. Investors need to do a comprehensive market analysis. Investors can look at population growth, strength of economy, and the local job market.

Dave Zook says his one go-to metric to figure out whether a market is over- or underbuilt is comparing the square footage of existing storage space to the square footage needed per person in the average market.

We asked Dave whether self-storage investing has gotten too hot for investors to get in. His answer is a definite “no.” “There’s still opportunity, especially in tertiary markets, to get in,” he says.

Like all real estate investing, there’s a smart and a not-so-smart way to go about investing in self-storage. Dave says that just like in multi-family investing, a key component of a profitable investment is purchasing a property with value-add opportunity.

For Dave, the best way to go is purchasing a property in a desirable location, whether unbuilt or with B- or C-class storage buildings, and then reviving the property and adding value and square footage.

How can investors choose what type of self-storage units to invest in? After all, there are a lot of options, including business/commercial storage and air-conditioned/climate-controlled storage.

A lot depends on the geographic area in which you’re investing, says Dave. For example, you’ll find far more climate-controlled storage facilities in Florida than elsewhere in the country.

We talked with Dave about what makes self-storage investing so great. There are several pros:

  1. Tenant/landlord laws don’t apply when your tenants are boxes. This changes your risk parameters immediately.
  2. Self-storage facilities are commercial spaces, not residential. It’s a lot easier to shut down a non-performing tenant under commercial rules.
  3. Self-storage renters tend to use spaces long term. Although the average self-storage tenant intends to stay 3 to 6 months, most stay between 28 and 30 months.

Another bonus? Self-storage investments are accessible to mom-and-pop investors who come in alongside a syndicator. In fact, Dave specializes in syndicating opportunities for smaller investors … read on for details about his syndication program.

Investing the Zook way

Dave follows the 10,000-hour rule. According to Malcolm Gladwell, it takes 10,000 hours of practice to be world-class in any given field.

How, you may ask, has Dave spent 10,000 hours learning the ropes of every asset class he invests in? The answer … he hasn’t.

Dave calls himself a generalist. He dabbles in many different areas, but when it comes to down-and-dirty details, Dave relies on a team of specialists to operate investment properties.

Dave says his “shortcut” to becoming a great investor is finding a team and rallying around them. “Doing business with a great team can turn your investment experience from a nightmare to something really enjoyable,” he says.

Currently, Dave partners with Reliant Real Estate Management to operate ongoing and future self-storage investment syndication deals. These experts have a proven track record of profitable management … a must-have for Dave and his investors.

Dave’s most recent self-storage deal is quite spacious … 70,000 feet. Dave is expanding the 526-unit property to add approximately 400 more units.

Dave purchased his latest property for approximately $8 million, with $4 million down. Once construction is completed, he and his team will be at about 75 percent loan to value.

Obviously, self-storage owners need to provide a mix of unit types and sizes. Although it can be a challenge to figure out exactly what you need, Dave says he relies on historical data … and expert analysis … to predict demand and occupancy.

Most investors aren’t going to buy a 70,000-square-foot property solo. So we asked Dave what is looks like when investors come alongside him in a syndication deal.

The timeline for Dave’s deals is typically 60 days from contract to close. The first 10-15 days are spent structuring the deal, and then investors typically have 45-60 days to join in.

Investors contribute a minimum of $100,000 and must be accredited.

It can be hard to find opportunities like those Dave offers, so connection is key. The best way to find deals is to connect with people entrenched in the space you’d like to invest in.

Looking for more information on investing with Dave? Listen in to the show to get access to a complimentary self-storage report from Dave Zook himself.

For a thriving portfolio, understand asset classes

There are a lot of ways to play the real estate game. For those just getting started, the wide array of options can be confusing.

And for established investors, it can be easy to choose an asset class and stick with it!

That’s why we created the Profitable Niches series … to break down the various types of asset classes in a detailed but understandable way so YOU can do the best deals.

Dave is a great example of someone who’s taken our motto, “Education for effective action,” and put it to work.

He’s also a great example of someone who knows he might not be the smartest person in the room when it comes to a particular asset class … and acknowledges the value of building a great team to fill in the details.

Want to be more like Dave … an experienced investor who has stayed out of the weeds and developed a diverse, thriving portfolio? Keep listening to the series!

Learning more about each asset class will allow you to do a thorough zero-based analysis of your current portfolio so you know whether you would do it again … and what you need to change to build wealth and satisfaction, your way.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.

The Case for Entrepreneurship

Entrepreneurship is not for everyone. Being your own boss can be intoxicating and lucrative, but there’s a lot of work that goes into building a business.

The holy grail of being successful as a real estate investor is passive income. But to reach that goal, you have to come up with enough capital to feed your portfolio.

The typical path for an investor might be to work for someone else while saving and investing in real estate on the side, building a portfolio steadily and slowly until they reach a tipping point.

But for our guests, entrepreneurship offered an out from the rat race. Of course, it wasn’t an overnight process for either guest.

Listen in to hear us chat with two successful entrepreneurs about their paths to success … and the stumbling blocks they’ve encountered. These guests embody the maxim “Be more, do more, have more.”

In this episode of The Real Estate Guys™ show you’ll hear from:

  • Your entrepreneurial host, Robert Helms
  • His slightly eccentric co-host, Russell Gray
  • The original Shark Tank shark, Kevin Harrington
  • The Real Asset Investor, Dave Zook

Listen



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Getting his start with a creative solution

Kevin Harrington is credited with being the pioneer of long-form infomercial programming. That’s right … he invented a now-ubiquitous form of advertising.

We asked him how he got his start.

In the 80s, Kevin was watching Discovery Channel when he discovered the network went black for six hours a day. He saw an opening in the market … and started making 30-minute long-form advertisements to fill the space.

He’s a great example of someone finding a need in the market and monetizing it.

At the same time, Kevin was working to raise the profile of his own personal brand. That meant creating tons of material, appearing on talk shows, even writing books.

Eventually, Kevin got a call from Mark Burnett, the producer of Survivor, asking Kevin to be a part of Shark Tank.

Since then, Kevin’s built a global brand in marketing and investing.

Embracing change and failure to find success

We asked Kevin four questions about how he maintains success … and how newbies can find success too, despite inevitable failure.

How have your marketing techniques transformed with the profusion of modern media?

In a world with many diverse media sources, Kevin noted that television viewers are down by 50% today.

His solution is simple … “Follow the eyeballs.”

His audience is now on Facebook, Instagram, media streaming services … the list goes on.

To stay current, Kevin’s branched out into social media. He started using social media influencers and shortening ad times.

To be successful, an ad has to catch a viewer’s attention in the first five to eight seconds … much different than long-form infomercials.

It’s a different selling strategy, in different venues.

What is your business model?

Kevin told us he aims to invest in 20 projects a year, but only expects one-quarter to one-third of those to be successful.

“I fail more than I succeed,” he said. His goal is to “Fail fast, fail cheap, get the losers out of the way, and focus on the winners.”

He might lose $20,000 on an investment … but the winners bring in millions.

He finds inspiration in the quote, “Success is going from failure to failure with no loss of enthusiasm.”

What do new entrepreneurs need to focus on?

Kevin gave two great tips for budding entrepreneurs:

  • “Failure is part of your day to day.” Kevin told us that early on, “It really brought me down to put so much time, energy, and money into something that bombed.” But beginners NEED to know that failure is part of the game. Failures can pave the way for success, so dust yourself off and keep getting back on the horse.
  • “Surround yourself with a great dream team.” Kevin can do deals on the spot because he has a team of experienced lawyers, finance gurus, and mentors to back him up in every situation. Having a good team ensures you get paid the way you want to get paid. And Kevin sees too many entrepreneurs trying to do it all on their own. Success is a team effort.

How do you say no to ventures that might be good?

A key component of Kevin’s work is investing in entrepreneurs. He gets exposed to a LOT of ideas … so we asked him how he can pass up ventures that are pretty good, but not do-a-happy-dance good.

“I try to ask how I can help. I try to be involved,” Kevin said. He spends a lot of time providing advice and mentoring services to entrepreneurs who aren’t quite there yet.

“If you want to be successful and get what you want, just help enough people get what they want,” he said.

And Kevin does just that, spending equal amounts of time growing his own business and giving back to society by mentoring new entrepreneurs.

Breaking paradigms with syndication

Many people are under the impression that there’s only one path to building wealth through real estate investment … slowly building capital and buying properties one at a time until you’ve eventually accumulated enough.

Syndication breaks that paradigm, because the money you use to invest doesn’t have to be YOUR capital.

Dave Zook got started in syndication when he attended our Secrets of Successful Syndication event.

Dave was a published author and owner of several small businesses when he decided he wanted to dip his foot into syndication. He’s now raising millions of dollars each year to fund syndication deals.

For Dave, success means having his fingers in a lot of different pies. He recently invested in an office space that came onto the market at the right time, in the right place.

He’s also made a name for himself in the ATM business … a growing real asset.

Dave’s passive investors purchase the physical asset … the ATMs. Dave contracts with the land and business owners on whose property the ATMs sit. He also contracts with a management company to manage machines for investors.

ATMs offer both good cash flow and great tax benefits. And they are completely passive.

Dave’s investors get blended returns that are stable from month to month and dependable for a 7-year contract. And they get tax benefits when the assets depreciate after 5 years.

All investors have to do is sit back and watch.

Dave’s tried a lot of business ventures. He finds success in going ahead with the ones that are right for his situation and experience, and right for the market.

“Sometimes I have to pinch myself,” Dave told us. “It’s been an interesting journey.”

Dave will join us this year as faculty as Secrets of Successful Syndication … his way of giving back to a community that’s got him where he is today.

Just like Kevin, Dave’s been through highs and lows and come out the other side. He’ll share what he’s learned … and how you too can take action.

Want a preview of Dave’s wisdom? Interested in learning more about ATM investing? Listen in to get access to a special report Dave compiled just for our listeners!

Affording to lose and losing to WIN

Not everything these excellent entrepreneurs did worked.

In fact, many of their ideas failed. For Kevin, the majority of ventures STILL DO.

It’s a lesson to entrepreneurs … you need to be able to afford to lose.

Not everyone is cut out to be an entrepreneur. We can testify that entrepreneurs are wired a little differently.

They have to make opportunities where others just see dust and ashes. And that can be terrifying.

But it can also be exciting.

Whether you choose to be an entrepreneur or invest in one, entrepreneurship is what makes the world go ‘round.

Well, not literally … that’s gravity! But it does run the economy and create most jobs, and we think that’s pretty doggone important.

Until next time, go out and make some equity happen!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources to help real estate investors succeed.