BiggerPockets Podcast 138 with Michael Rogers Transcript
Josh: This is the BiggerPockets podcast, show 138.
Michael: I think it's really like any investment in a sense that the real key is buying it right.
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Josh: What's going on everybody? This is Josh Dorkin, host of the BiggerPockets podcast. Here with my co-host, the punching bag, Mr. Brandon Turner. Yo Brandon, what's up with that black eye man?
Brandon: Yeah, I was walking downtown and got in a fight with some guys over you know... No, I was up playing Ultimate Frisbee, which is like soccer and football combined with a Frisbee. I don't know, it's a great game. I played with a bunch of college aged kids around here, which is bad because I'm like the old guy. Anyway, I was like four feet in front of the guy and he took the Frisbee. And as hard as he could throw, he launched it to the other end of the field but my face was right in front of that trajectory. Frisbee nailed me in the face. I had an nice goose neck on my cheek, I guess you would say. And now I have a black eye.
Josh: So for those of you who are listening and not watching the show, at some point you should go and check out the show on YouTube once it gets up there and you get to see Brandon's fancy, new shiner. How you've been, man?
Brandon: Ha-ha. I've been good. I've been good. I went golfing last weekend with my black eye. That was awesome. Oh and I got a new dog. People know Charlie. I talk about Charlie a lot, especially on the webinars. BiggerPockets.com/webinars. Webinar. Anyway, I talk about Charlie a lot and I even show him on the webinar. I got a new one named Ruby. And Ruby is a Yorkie. We think she's a Yorkie. Anyway, long story that we don't actually know exactly. She looks like my other dog Charlie.
Josh: She's cute.
Brandon: She's cute and she's small and adorable.
Josh: You know my dog ran away two weeks ago.
Brandon: I heard that.
Josh: Yeah, I was in San Francisco for the Inman conference, Inman Connect Real Estate Conference, where I was a speaker. I spoke about podcasting on a panel in front of a room of like a thousand people. It was great. Yeah fancy. So while I'm in San Francisco, my dog gets out and she's 12 and she's old and she got scared or something. She probably was on my driveway and somebody went and picked her up and brought her to the pound. And so for like six hours, everybody's flipping out about where this dog is and we finally found her. But that's scary. I was not pleased to be away when that happened. But yeah, anyway. Things are great here and I'm just back in town.
Brandon: You were gone for like a year.
Josh: Yeah, it was like two weeks of travel. California, San Francisco. Which by the way, everybody, I still think is disgusting. We talked about this on a previous show. It is unbelievably filthy with lots of crazy, homeless people who like to do crazy things to themselves and to other people. So I wasn't loving that. But L.A. was great. And it's good to be back and excited to be doing new shows again because we haven't recorded in a few weeks.
Brandon: We have not, yeah. This is a good one to kick it off with. I learned a ton. I probably learned more in this episode than I've learned in a lot of them just because it's something I've always wanted to get into and never did. People like this. But before we get into that, why don't we go to today's quick tip? Alright, today's quick tip is - this is a short one - if you are familiar with the BiggerPockets calculators, like the Rental Property Calculator, the Flipping Calculator. We made some changes a little bit now and you can track a little bit easier, your progress on the properties. What I mean by that is you can go back and see a list of all the ones that you've analyzed. All of them from the beginning, and you could rank them like which ones had the NOI, which ones had the best purchase price. You can order them, sort them. It's just a really good way to keep track of what deals you're making, what deals that you're working on and kind of what status they're in in the process. Kind of cool, check it out. BiggerPockets.com/calc. C A L C.
Josh: Right on. Alright cool. Before we continue any further, why don't we very, very quickly talk about the show. You guys, we really appreciate all the listeners and we count on your support to help grow the show. We definitely hope that you'll take a couple of minutes to leave us ratings and reviews on places like Stitcher and iTunes and Sound Cloud, particularly iTunes. And I just want to share a recent review from iTunes, from eds8513: "The most informative real estate resource on the web. The podcasts are priceless and Brandon and Josh make it entertaining. Thank you for what you do." And big thanks to eds. That was very nice. I'm glad we didn't pick the one that said: "You guys suck and your jokes are horrible."
Brandon: Ha-ha. We'll ignore that one.
Josh: We'll ignore that. Alright. Well, why don't we move on to today's sponsor?
Brandon: Today's podcast is sponsored by PATLive, the leading provider of call center services for real estate investors. With over 15 years of experience, PATLive's professional agents have helped thousands of people just like you spend less time on the phone, and more time making money. Set up is fast, easy and flexible. PATLive can recommend the perfect call flow for your needs and create a custom solution just for you. Whether you're feeling calls from yellow letter campaigns, pre-screening buyers and sellers, or managing rental properties, PATLive can handle it all. To start a risk-free 14 day trial and get half off your first month of service, call 1-800-862-0002 or visit patlive.com/BiggerPockets.
Josh: Awesome. Awesome. Alright, guys. So let's get on today's show. Today's guest is Michael Rogers, otherwise known as Mister Rogers. Mr. Rogers, he's been a long time member of BiggerPockets, as you'll soon find out. He's been investing in single-family, duplexes, triplexes. He's done the Brrr strategy and our focus today a lot of it is going to be on self-storage because we haven't really spoken a lot about that. And of course value investing which is a very important theme for anyone and everybody. We definitely hope you'll pay attention. We cover investing at a really young age. We cover SEO, search engine optimization. So there's lots to learn for everybody. So tune on it and let's get to Michael. Alright, ladies and gentleman. He is BiggerPockets member number 5302, one of the early guys. Let's welcome Michael Rogers. Michael, good to have you on the show man.
Michael: Hey Josh. Hey Brandon. Glad to be here.
Brandon: Glad to have you. Do people ever make the joke Mister Rogers to you?
Michael: Ha-ha. Yes. Actually as a kid, I used to get a lot of that. So I'm used to it.
Brandon: Ha-ha. Okay, glad to have you in the neighborhood, Mister Rogers. Today we're talking about a number of things but specifically a little about self-storage. And we're going to get into that. I know you do more than just that so this will be a show that encompasses more about that. But I do want to pick your brain on that because from what I can tell, self-storage is pretty awesome niche to get into. And so I kind of want to find out if that's true. We'll talk about the pros and cons and all that good stuff. But before we get started, where are you located? Where are you investing and how did you get started?
Michael: Sure. Yeah, definitely I'm in self-storage a little bit and I think that'd be a good topic to cover. My background is, I'm actually in Chattanooga, Tennessee or just outside Chattanooga, Tennessee. I grew up in Cleveland, Tennessee and I live in Ooltewah, Tennessee which is all within the Chattanooga area. But I grew up in Cleveland. Had a lot of junior golf growing up. Played college golf at University of Tennessee at Chattanooga. Got a degree in accounting. And after that, I went on and worked at a regional CPA firm. Became a CPA.Worked there about four or five years and I went in and basically got a niche in internal controls auditing. Went to work for a large insurance company at Chattanooga. So about four or five years there at a Fortune 500 insurance company. Went to another health care insurance company in Chattanooga and I've been there for the last four years.
Last two years I was working part-time. I was very fortunate. I was able to go from full-time to part-time. They let me do that. And it's been excellent. My business has ramped up on the real estate side. I've been able to scale back a little bit on the job, kind of standard job. So those kind of been working together. That's something I've been really fortunate to do. I didn't actually just quit my job. I kind of have transitioned a little bit. But yeah, I guess going all the way back to college, I bought my first duplex. Built some triplexes and bought single-family homes and done a lot of investing through the years. And got about 350 self-storage units now and about 12 residential units. It's enough to keep you busy but it's in a good spot right now. I feel good about where I'm at. I'm excited about doing more of it.
Josh: That's awesome. That's really cool man. And I'm fascinated because I don't think we've talked to somebody who transitioned the way that you're transitioning. Typically, it's: "I'm going. I'm going. I'm going. Then I quit my job." It's kind of neat to hear that you were able to go and work with your employer a way to work part-time and continue. So I'd love to hear a little bit more about that. How'd you do that?
Michael: Sure. First of all, my employer has been very gracious. Has been extremely good, they've worked with me on that. So I transitioned to where I work four days a week there. So I'm Monday through Thursday there. Fridays, Saturdays and Sundays is kind of family and working on my real estate. I've got three kids and a wife so that definitely keeps me busy there as well.
Josh: Congratulations, me too.
Michael: Oh, you got three kids?
Josh: I do. It's time-consuming.
Michael: Yeah, you know when I went from two to three kids, that one got kind of crazy. I'm kind of playing Zone Defense at that point with three kids. Ha-ha. But yeah. I was able to do that. I talked to them. I'm somewhat of a specialized skill set. This is kind of boring in the sense of accounting but I do internal controls accounting with like Sarbanes Oxley--
Brandon: What? I don't even know what that is.
Michael: Yeah. It's internal controls where you're looking at financial statements. Make sure they're recorded correctly. It's somewhat specialized so I guess they needed that skill set and they were willing to let me work part-time. So it's been good. It works out well for them and it works out great for me. And they were very gracious. And I was in a position at that company. Knew the management well enough where I was able to have that conversation with them. I don't know if that would work in all companies and I think for somebody to have conversation, you need to kind of have a sense of where you're at. Where that company's at. Is that something that they'd be willing to do? Because some places, if they thought your heart's not 100% in that place, they may have the opposite reaction to that.
Brandon: Yeah. Well you know that is actually one reason why. A lot of people, they get excited about real estate and they want to quit their job. So they let their work slip, I think. I see it a lot. They're like, "Oh, My heart's not into it anymore. So I'm not going to give my employer 100%." Where I look at it from the opposite point. Like I would encourage people to give 150% or 200% during that time because then you can have those conversations because you become invaluable to your company. Rather than the guy who just didn't care anymore because he's going to get rich in real estate.
Josh: And I think it's the opposite, I think, in many ways. Any listener probably knows that the Four-Hour Work Week was the struggle for me. Ha-ha. And I think it's because of that. The book, I love most of what's in the book but there's some things about it that I really don't like. And it's outsourcing yourself, outsourcing your heart and soul to somebody else. I have a big issue with that. I want to press upon our listeners exactly what Brandon said.
If you're going to be working for an employer while you're doing your real estate, stick to your job. Do what you're supposed to be doing. Do a good job at it. There are reasons for it and you're the prime example of it. Being able to continue working. I bet you over time if you want to cut down another five hours, another ten hours, and so on and so forth - they'll let you do that. Until you're at the point where you're ready to go. That works out great for you because now you've got the income still coming in from work. You can use that to get financing for whatever you need to do. I love it. I think it's great.
Michael: Yeah. You're absolutely right. That's the thing. You make a good point. You absolutely have to. When you're at that job and when you're doing that work, you got to give it 100%. You can't come across of, "Oh, I'm rich on the sides. I don’t need to be doing this." Because that comes across and they'll get rid of you real fast if you do come across that way. So that's an excellent point.
Josh: So let's go back to your story a little bit. You mentioned you were in college and you bought a duplex. And then you talked about building a triplex and then your units. So in college, how'd you go about buying a duplex while you're still a student?
Michael: Yeah, it was my senior year. I was getting kind of close to graduation. I was fortunate. My father was actually working banking. He's a retired CPA as well, but he was in banking. So I understood a lot about banks and how they operate. And so I understood the loan to value issues and stuff. So I had a little bit of money saved up. I was able to put that towards it and they were willing to do 85% of the appraisal. So I got a good deal. Got 85% of the appraisal as opposed to 85% of cost.
So I didn't have to have a huge down payment. They've gotten a little more strict on that in the last few years about the loan to value. Loan to value can mean two things. One is: if you're financing, here's what this thing's appraised for. The bank will lend you 0.85C on every dollar. Or it may be if you're buying it, 0.85C on the dollar what you pay for. Well, that makes a big difference whether it's cost or what the appraisal is because a lot of times you get the price higher than the cost. You don't have to come up with as much money. So that's how I was able to get into that and start out with a duplex.
Josh: What does a duplex go for in that area? I don't know Tennessee that well. I'm assuming it's probably not like a $300,000 or $400,000 duplex. They're probably what? $700k or something?
Michael: Yeah. This one, this was in 2001. I think it was a duplex for $110,000 or $115,000. They're a little more now.
Brandon: Did you live in any of it? Were you house hacking it or did you just rent it out?
Michael: I just rented that one out. Later on, I bought another duplex and lived in it. I did house hack. I did do that.
Josh: That's awesome. So what would you tell? We've got high school kids and college kids who might be listening to the show. What would you tell somebody who's thinking about getting into it? Is it too soon? Is it a good idea to start that young? Did you make any mistakes because you were so young or nah?
Michael: Yeah. I would say, number one, is you can always start saving up money. You always can use having cash on the side. If you're out there and you're 16 years old or whatever, start setting aside some money. Because whether you get in real estate or you want to become an entrepreneur in any form, having that saved capital, that's good to have. Learn as much about banking as you can because that's probably where, starting out, you're going to be borrowing from local banks. I've done a lot of that and building those relationships with them. Learning about the business as much as you can. I think those are all really, really important.
Brandon: Yeah. Right on. I think that a lot of people, they think, "Someday, I want to get into real estate. Maybe ten years from now. Maybe 20 years from now." Especially the college kids right? And so they don't save the money. They don't start living that mentality. Because a lot of it is a mindset, right? Like if you have the mindset as a college kid, it doesn't matter how old you are, it doesn't matter if you're 12 years old. It's kind of largely a mindset thing. So I think that's a fantastic advice.
Michael: And I've been a big fan. My whole investing philosophy is kind of Warren Buffet. I know you've several other but people on here they kind of take that. I think his idea of value investing, buying things at a discount with a margin of safety-- am I not smiling enough or something?
Josh: That's Warren the Duck.
Michael: Oh, okay!
Josh: 50 year anniversary, Warren Buffet Duck.
Michael: Did you go there? Did you go to that?
Josh: I did not.
Brandon: Mindy did.
Josh: Mindy, who works for us, did.
Michael: Yeah, I've been to two of them. It's been a few years, but I've gone to two.
Josh: And you're talking about the Berkshire Hathaway Annual--
Michael: Sure. Yeah. I don't have any, I've got like the D shares. I don't have the big ones. But if you're an entrepreneur or you're a capitalist, that's like Disneyland. It's just so much fun to go there. There's so many people there. You get to see him talk. You do the whole experience. They're bringing all the vendors so you've got Clayton Homes, Justin Boots, Geico, everybody's there. So you get to walk through and there's such an excitement there. It literally is Disney World for entrepreneurs and capitalists. If you get a chance, I recommend people to go to that.
Josh: That's awesome. So let's go to this building a triplex. You've got these small multis and you decide, "Hey, I want to build." How do you transition from just acquiring to actually building your own properties?
Michael: Yeah, I just learned along the way. I think it was just kind of, I found a contractor and he had all the contacts but I was almost acting like the general contractor, in some sense. I was learning. Here's this sub. Here's what comes next. You start out with the foundation. You move all the walls. Your sheet rock, electrical, where do they go in? So I learned a ton and just kind of helped manage those people and I was paying them all along the way and learned that way. I think that was kind of the steps. Once you kind of get the way things flow, it's the same every time. There's variations but the basically model stays the same.
Josh: The knowledge that you gain doing that, does that help you today in what you're doing? Does it help in evaluating potential deals? How does it assist you?
Michael: Yeah, absolutely. It does because you know how much things cost. You know if there's a problem with this, here are the steps I got to take and here's the order they got to go in. You don't want to start out painting something if you're going to have to rip the wall out or change out the electrical and do all these other things. You want to make sure you hit them in the right order so you don't have to go back and re-do things. And you just get those relationships with various subcontractors. And I think you guys have talked about this a lot in your show, but getting good subs - electricians, plumbers, painters, all those guys - that's really critical if you're going to be doing this business, is being able to get those guys to show up on time. Have them charge a reasonable rate. Have them be relatively honest. You find that that's very important.
Josh: I like how relatively honest is the high bar that we've set in 2015 for contractors. Ha-ha. I mean, they don't have to completely honest but just, you know, relatively.
Michael: Yeah. I probably misspoke there, but--
Josh: I don't think you did though. Ha-ha. That's the problem.
Michael: Yeah. Mine are wonderful but I've had some. I don't know if they intentionally are that way but I think maybe they're just optimistic when they quote sometimes. And then when they get around to billing, they're more realistic. No one's going to have to paint all four walls of that room. I was there when you looked at it, why would it change? I think everybody who's been in real estate for very long, and I've been in it 15 years, has experienced that with contractors. It's just part of the trade.
Josh: Yeah. Cool man. Let's transition. I know you've got a bunch of other residential units but we really wanted to talk to you about the self-storage thing. You said you've got 350 self-storage units. Let's talk about that. How'd you get into self-storage? Why self-storage?
Michael: Yeah, like I said, I'm always an investor. So I'm looking for things that as far as you look at how much cash do you have to lay out and then what's it going to bring back in time? You know, after you pay on all your expenses, what's the revenue amount? After all the expenses, what's it going to do? Starting in about, I guess the market crashed in '08 to 2009, and 2010, I started seeing some really good deals on things. A lot of properties, they were sitting around, they've been sitting there a while. People are trying to sell it. So we were able to get a really good deal. So I came across a smaller self-storage facility had a single-family house on it and then it also had 50 something storage units. My family already had a small business down where I could collect rent from. Where I could have people call and sign up leases and so forth.
So I was able to bench off that and use that to get some additional income. So I just looked at it and said, "Okay," I don't remember the exact numbers, "Here's what the price is. It needs to be fixed up. It's not performing." All three of the self-storage facilities I bought have been facilities that weren't performing, so to speak. They were either totally vacant, they've been run down, they weren't fixed up. And I think self-storage is an excellent investment. I really do. I've blogged post about the anatomy of a self-storage property or purchase. But I think a lot of people, when they get into it, they kind of see it as being, "Hey, this is going to be so super simple." You don't have to paint the thing. You don't have any plumbing. You don't have to deal if the tenant doesn't pay. You just auction on it. It's just like Storage Wars on TV. You're going to make a ton of money because they're going to leave luxury goods in there and you can sell them for this huge amount of money.
It's not quite that simple. At the same time, if you're somebody that's good at project management, if you're good in dogging the houses, crossing the tease, and following through in these, you can do really well. Because one thing is you deal with-- let's say for a single-family house, you're in it for a thousand bucks, so you got one tenant you're dealing with. Whereas in self-storage, you've got 10 or 15 tenants you're dealing with. 10 or 15 tenants, they’re cycling in and out. They may stay a month, they may stay 12 months, they may stay 6 months. People are actually going to stay a year, two or three years. So you got a lot of that going on. So you're having to get those units turned over. You got to get new tenants in. You got to get them out. You got to get them cleaned out. You got people, they're moving all the time. Their phone numbers are changing. Their addresses are changing. You're trying to get a hold of them. You're having to auction them.
So there's a lot of logistics going on. So if you don't have systems in place to manage that, it can get overwhelming for somebody. And I think that's when people kind of throw in a towel and it kind of does a spiraling effect. When things get out of hand, things get dirty, they get messed up. That brings in the worst tenants. The good tenants don't want to be around a place that looks like crap or is not being run well. And you end up with a whole bunch of units that are full, but nobody's paying your rent. That's where, a lot of times, when I purchased these things - that's the situation that you're in. You're going in. You're mediating. Trying to identify the people. Trying to clean them out. Trying to get the people on a system, paying on the 1st of the month. And here's what happens if you don't pay by the 5th of the month, you got a late fee. On the 30th of the month, we're going to lock you out. And just kind of going through that system.
Josh: It's the same as training tenants. It's just a form of training.
Michael: Yup. Exactly. It's high-volume training tenants. You've got 340 tenants for an X investment where you have much less on a residential.
Brandon: I love that concept that you were talking about about like spiraling decline. Because it happens in every market. When I look for single-family houses even. But more so for the commercial properties. That's exactly what happens is, apartment complexes or whatever, people stop fixing it up which then causes it to decline in value which makes them stop fixing up any more because they have no money. And it just gets worse and worse. Value at investing. I love it. I've never really known anybody that's done it with self-storage to the degree that you have. So I think that's great. What does that even mean when you say fix up? Is that new garage doors on it? Is it painted roof, that kind of thing?
Michael: Yeah, the first one had issues in the sense that I think about 20 or 30 units had burned down, ten years before that. They just kind of let them languish there. If you're driving and you want to rent there and think about people that are willing to stay there. And then the people that were staying there, they may pay when they want to, they may not pay. And this [inaudible] [24:10] property that came with a house that had a tenant in it that wasn't paying either. I don't know why, but they never, ever got her to pay. She's somebody - we can get into this but - we ended up having to get her to leave.
I got her to sign a month-to-month lease and she moved in and eventually just said, "Hey, this isn't working out." She was just very crazy. She wouldn't leave. We had to actually get the sheriff out there to do the set out. I set her stuff out on the side of the road to get her to leave but she was a very difficult individual. She had been evicted ten times before. Because I bought it with her in it and I found out when I was calling up to do the eviction process and calling the sheriff's department, they're like, "Are you this person against her?" I'm like, "No." And they were through it. There was ten other landlords that had evicted her prior, and she just gotten stuck there. But that was a real experience, dealing with her.
But we did eventually took 76 days from the time I told her to leave to the time I got her to leave. But she was a mess. But like you were saying, back to the self-storage, we were going to rebuild the units, change out garage doors, redoing the walls, fixing it up, cleaning it up, laying out your gravel on the driveways, changing the roofs out, gutters, painting it. Just make it look presentable because if you're going to store your valuables there, you want somewhere that looks nice. It doesn't have to be beautiful, but it doesn't need to be stuff falling down or look really dirty. Nobody wants to put their valuables there.
Josh: Yeah. Right on. So I just want to cycle back really, really quick. You had mentioned your family was in some kind of business. You guys are collecting rents and you didn't really get into that. I hope I'm not prying, but I was just curious what kind of business were you guys in which made the transition easy for you to get into the self-storage?
Michael: Yeah, in the town we're in, they grew a small loan business so that gives you somewhere where you've got a receptionist, where they can come in and make payments and stuff and they can make calls. When people call and ask for rent, they can immediately go there and sign their lease and ask questions about what are the rates and so forth. It works out well. If you're going to start out small with self-storage, if you're not going to buy lots of units, you've got to somehow figure out a way to spread that overhead of somebody that's going to be able to answer the phones, take due leases. So you either need to buy one of them. Whether you own an insurance agency or you've got some sort of small office for appraisals or real estate or property management, whatever it is, if you've got something along those lines, you can really bench off that and start a lot better. Otherwise, you probably need to ramp up and start out with 300 to 400 units to try to have somewhere.
I know some people they do it all online. They don't have a location. And you can definitely do that. The software's gotten better. Our software we use is really good. It allows people to go online. They can find us online. Then they can go sign up online. We'll send them a contract to sign. They sign it. Send it back to us. And we can do everything online. In theory, that works great. But you really need hands and boots on the ground to be able to do it and manage it well because there's just all these one off things that happen. So that does work out really well.
Brandon: I've always thought self-storage would be fun to get into. I rented a storage unit one time, right after college, I rented one. And I remember I had to meet the lady. It was little old lady, I had to meet her out there, by the airport. She had to unlock the thing. It was just a very intensive thing for her to come and do. And there were 200 units then. And I thought, "That sounds like a not very fun thing to have to go out there and meet tenants." That's kind of what held me back. So I liked the idea of having a local business, maybe your family or you own one, that can be a central location for people to go. I think that's kind of cool.
Michael: Yeah, you can't scale if you're having to go out and meet every single tenant because you're these things a couple of day. If you're having to go out there, leave your job and go do that, there's no scalability in that. That's the thing on systems and stuff in real estate, because it's such high-volume. Anything high volume, whether it's apartments or you're renting self-storage, or whatever you're doing. If you're doing lots of volume, you've got to have systems in place where, "Hey, you do this. You do this. You do this. You do this." And if somebody's like, "Hey, I want to do this, this and this." The other way. You're like, "You know what? I think there's a place down the road that probably would fit you better, that you might want to try."
Because when you're doing that volume of people, you get people that are excellent. You get great tenants. You get good tenants and you get a certain percentage there that aren't as good. Either you get the kind that don't pay and you get the people that are really, really difficult and they're very demanding to some extent. We're kind of trying to rent-- we stay in the lower enterprise point and try to give good value on that. We tell folks that " Hey, we may not be able to do every single thing you may get at this other place or meet your absolute highest goals." And that's okay. If we can't, we may recommend you somewhere where you can get that. A lot of times, they're not finding where they can get that, but it's better than saying no to them.
Josh: Yeah. So at the end of the day, with apartments, you're screening tenants. With commercials, you're screening tenants. I used self-storage like Brandon back in college for a few summers and it was great. I walked in. I said, "I want to rent a unit." They said, "Great. Give us this money." I gave them the money. I went and I was done. I put a lock on the thing. I put my stuff in there. And then when I was done, I took my lock. I gave them my money and it was a wrap, right? That's I guess and easy tenant. But what kind of screening is necessary above and beyond kind of that conversation you're having? Is there even a screening process? I don't remember.
Michael: Yeah. You're exactly right. Residential is a much more thorough screening process. For a house or somebody's renting, I'm going to pull a credit report. I'm going to talk to their previous landlords. I'm going to get a really good idea on these people before I let them in because the process of getting them out is a lot more difficult. It's not easy to get them out in self-storage but it's more defined. So each stage is different on their eviction, while with self-storage there it's state by state. Tennessee, after 30 days you can over lock them. So you essentially put a lien on the property. You got to notify them. Send them a certified mail or a letter saying, "Hey, you haven't paid. We're going to over lock you."
And then at 60, technically, I guess you can go ahead and do the auction. We don't ever get anywhere near 60. We're probably six months, a year out of somebody before we'll auction it. And we're going to try everything we can not to auction. We'll work with them. Say, "Hey, can you make some sort of payment? Can you try something?" Because we don't want to auction it. That's not a win for us because all we're going to collect is up to what they owe us. In theory, when you do an auction to recover money of what they owe you, anything above and beyond of what they owe you goes back to them.
Josh: So when you auction somebody's goods, you know all these TV shows and stuff, when they're doing the auctions, the folks who are payment received, you get up to what you're owed and beyond that it goes to the person who's got the goods?
Michael: Yeah, we've never gone to that but in the theory that's what the lean is, isn't it? That property's being used to pay back what that person's that's taken a lien on that property and taking back has done it. And we never get more than what we're owed. It just doesn't happen. We'll get some. We might get $400 to $500 on. But for most part, they're 20, 30, maybe 100 bucks, you're going to get on for a unit. A lot of it is - I'm sure it’s something that you see on TV, that there are great cars and luxury items kept in storage - but for the most part, you're going to get a mattress. You're going to get a Christmas tree, a broken bookcase. I few of those and a lot of clothing. The people that are going to show up, the people that do thrift store sales, those are gonna be your big buyers. They're going to go in. They're going to take that stuff and they're going to put it in some sort of thrift store and sell it out like that. But you gets tons and tons of money on it.
Brandon: Interesting, yeah I like that show. I watched it a few times, that Storage Wars.
Josh: There's like 30 of them now. Ha-ha.
Brandon: There are a lot of them yeah. Ha-ha. There's so much drama and the guys are bidding. It's such a drama-filled show. You're saying that's probably not, realistically, where you're at?
Michael: No, I think that's a lot like these home flipping shows. There's some reality to that, in the sense that you can buy low, fix it up and sell it. They got to make good TV so I don't know if they plant things in there or not, or they just do a lot of editing to get the really good ones. But I don't see that.
Brandon: Yeah, because that's an interesting point, right? If 99% of them just have a mattress and a broken book shelf, that show would be terrible. So they must know what's in them before they open it.
Josh: Or they plant stuff in there. I make no accusations.
Brandon: Ha-ha. Funny. Moving on, I want to talk a little bit about what are the cons of self-storage? Why shouldn't I get into it? What are the things to look out for?
Michael: Yeah. It's really like any investment in the sense that the real key is buying it right. So making sure you don't pay too much. I bought that first one and then the second one I bought - this thing was a 5,000 square commercial building upfront and then behind it, there was one building and then they had two concrete pads built out where you could put more self-storage on. And it already had a fence around it. This was 2010 or 2011. It was out there and they wanted 600 grand for this thing. I talked to the realtor and so forth. They're like, "You know what, they're pretty, they really wanting to sell this thing.” So I came in at 200 and then at first they were like, "Eh, I'm not so sure," blah, blah, blah. And I said, "That's okay. Right now, I'm okay." And then they came back and said, "Okay, we're interested in it."
So I went in and at that point, I went in and looked at it. In the office building, the ceiling was falling down and blah, blah, blah. So when it was all said and done, I was able to get it for $180,000 and put about $20,000 and get it to work. Which is really, really good as far as cash flow wise, for that number of units and then they already had the concrete poured for two more 4,800 square foot slabs. They already had all the fencing around. The best of the set up to where you got those fix cost. And then you had that 5,000 square foot office warehouse where we turned that into climate controlled storage eventually. But we kind of started out small where we had that first one. We got that filled up. Then we built out the second one. The next year we built out the third one. The fourth year, we built out the climate controlled and the big warehouse and we just kind of took it a little bit at a time.
But I think the biggest con with self-storage or any investment is if you pay too much, or you're not making enough to pay for what the true expenses are. You guys talk about the 50% rule all the time. That's kind of true. When you first look at something, you're like, "That's crazy. That doesn't make any sense. There's not that much expense in this." But there is. There's a lot of expenses that pop up. There's a lot of one-time expenses that happen every single year that people don't think about. So that's probably the biggest thing. The second tough thing--
Josh: Hey, before you go to the second tough thing, do you mind just throwing out what some of those are? Those hidden expenses?
Michael: With the self-storage or just the--?
Josh: Yeah, self-storage.
Michael: Well, one of the things we found is the gate. The gate operators, you got those suckers. I've always got somebody out there in those three facilities working at those things. I would say every three or four months there's somebody out there. And it's not cheap. They're sitting out in the weather conditions. And if those things aren't operating, you get phone calls. People want to get their stuff. If they get stuck in there, you've got to have those working. You've got to have a good relationship with that gate person. That's always happening. You get vandalism. For whatever reason, people don't drive U-Haul. Well, I know why people don't drive U-Hauls every day, but when they get it on, they just turn idiots. They're just like bouncing and they're going to hit your buildings. They're going to hit your gutters. You got to put up these kind of idiot holes to keep them from side swapping your building.
Josh: Ha-ha. Is that the technical name?
Michael: Yeah. Ha-ha. I think they call them [inaudible] [35:53] but yeah you got to have that stuff. There's that. You're always cleaning them out. We've got a fee we charge people if they don't clean out. We're trying to collect that. Obviously it's very difficult when somebody has left to try to collect that fee. But you're always cleaning them out and you're always getting rid of stuff. There's a lot of that maintenance on those. You've got the lights are going to go out. You've got various things like that. Another thing is you're just dealing with so many people and everybody you can imagine. If you've got 10 tenants for your ten residential properties, they all have issues. People have personal issues. And then a lot of times, those become your issues unfortunately. If you've got 300 people, you got that many issues to deal with. So that are the kind of things that you have to deal with and have systems and processes in place.
Brandon: I love the emphasis you have on the systems and process. A lot of our guests recently on the podcast have been the same way. I'm a big systems guy. I know Josh is a big systems guy. We just love that concept of having things run just smoothly like an engine. I love that. Okay, so you said first tough thing. And then you said second tough thing was? Do you remember what that was?
Josh: When I cut you off. Ha-ha.
Brandon: Ha-ha. Yeah, we were just talking about the cons of it and there was having to buy correctly. Making sure your numbers are good and then understanding all those hidden expenses.
Michael: It's just dealing with the people. Most of the time the people are good, but you're getting a lot of transitory folks. It's a lot of collections. This is somewhat of a collections business to some extent. You're going to have a very large number of people that you're doing reminders. Our software's set up. The last day of the month, they day before the first, it automatically sends out an email and a text to everybody. So we make it sure everybody who signs up has an email address or a cellphone. So they get that automatic notification. on the third of the month, they get another text message saying, "Hey. By the way, this rent's past due." And on the fifth of 5PM, we're going to charge a $20 late fee, no exceptions. Because we tell people upfront, we're like, "Hey, rent's always due on or before the first. If you pay on the sixth, you're not a day past due, you're six days past due."
Brandon: Yeah, we would say the same thing.
Michael: Yep. So you got all these people come in on the sixth and like, "I'm one day past due, why is there a late fee?" And you're like, "Well, no. You're six days past due." And if somebody's got a really, really great reason - if they're in the hospital or something - we'll work with them. But for the most part, this takes care of it. And then on the fifth, we'll send emails out manually.
But having that software's really important because if you're sending out letters and stuff, and you're going to mail that crap, if you're having to call all these people all the time, that's really tough to do when you're doing volume. It's impossible to do it on any scale. So we do it. It's automatically set up to do that and then we send them out emails manually with just a click of a button after the fifth we'll send them out periodically.And then we get those people, there'll be 20 or 30 people, that are past due at that. Then we do have to start calling. But it's a lot easier to call 20 or 30 versus several hundred from the beginning.
Brandon: You know, as you're saying this, I'm looking at my own business and I'm realizing: we spend 50 bucks a month maybe on letters and stamps, right? Plus my wife's time of printing them and going to the post office, dropping them off, typing them up. Again going back to the system thing, why don't I go and send out a letter? One letter to every single tenant and demand or ask or call or whatever their cellphone number and their email address? I mean, they all have an email address. That would probably right there just cut down several hours a month of work.
Michael: Absolutely yeah. That will free up a lot of time for you and a lot of money. And our software, it's only $50 a month for this stuff. I guess you can send an email or you can even have it set up where it just automatically does it. That will save you a lot of time.
Brandon: Do you mind me asking what software that is?
Michael: I've gone blank.
Brandon: Ha-ha. I actually like the idea of the text message. Just also on the first thing, "Hey, rent's due." Automated. Yeah, I think I'm going to get to that.
Michael: We use Easy Storage Solutions. They're in Utah, several guys out there. They're really good for smaller self-storage and residential. I use them for all my residential stuff as well. I put all my tenants on that, so they're all doing that. Sorry, I didn't know the company.
Brandon: It's alright. Ha-ha. That's cool.
Josh: Hey, so you had talked about vandalism. Really really, quickly. Security issues, vandalism. Is it just people? Is it people breaking in to other people's units? Is it people just graffitiing on the property? What kind of vandalism do you deal with as a self-storage operator.
Michael: Yeah, occasionally you'll get somebody that breaks in to unit. We always tell people there are almost like three lines of defense for self-storage. One, you want to have a place that's good gate, good fence systems. Something so you just can't walk in there. Two, you want to have a really good lock. You want to have a disc lock versus a lock that's got a big old thing that I can easily get a pair of clippers around. And three, you want security cameras. That's deterrent. None of these things are going to absolutely somebody that wants to get into a storage unit. If somebody wants to get through that self-storage unit, they're going to get in. If they know something's in there, there's nothing we're going to be able to do to stop them.
But you do get that occasionally. You get people that get their stuff broken and you just have to work through it. When we get through and say, "You really need to get that good disc lock. Because a much less lock, somebody's going to break into that unit." If they're just looking for an easy target, they're going to pick the little small lock that's kind of an easy thing they can clip.
Brandon: Okay. Yeah, interesting. Well what about security deposits? When you have a tenant move in, do they pay a security deposit of anything? Or is it just first month's rent?
Michael: No, we don't actually do a security deposit. Going back to your question, on how do we [inaudible] [41:20] you know as far as getting new tenants - when we first started out, there really was no [inaudible] [41:25] If you could show up and you had the money, we would do it. We've since kind of gotten a little stricter on that. We now require that you have a valid driver's license and I think some of that's come back to be common sense that if somebody's drives up to rent a storage unit - and they can't give you a driver's license that is valid, they're already breaking the city that you're in is false, what makes you think they're gonna follow your rules and do that? If they're willing to take a chance on getting arrested or fined, they're probably not going to obey your rules either. So we've done that. We've noticed people that can only give us ID only, could not give us a driver's license - they tended to go bad more often. So that's one thing we've done to kind of try to weed out some of the bad ones.
Brandon: Okay. How do you find tenants? I know you mentioned earlier, the internet. Is that your main source? Do you advertise in the newspaper or what?
Michael: Yeah. I think the evolution of renting self-storage is going from yellow book. I think everybody was on Yellow Pages 10 or 15 years ago.
Josh: What's that?
Michael: Ha-ha. Yeah, exactly. And that was a big deal. And those guys had a monopoly. If you ever had to deal with them back then, they were going to go up 10, 15, 20% a year. Take it or leave it, that kind of deal. Since the disruptive effect of technology, they've still got a model out there but it's not quite as powerful. Or not near as powerful as it was. So search engine optimization, if you're in self-storage or you're in anything high volume, I would say if you've got a lot of apartment buildings and you're constantly meeting it, til you get a new pipeline of customers coming in - that's key. That's it now.
When somebody comes in and stops in "self-storage, Cleveland, Tennessee" which is where ours is - they've got to see Chamber Properties. And they'll see that one, two, three times on page one. They're going to see it from the Google Maps. They're going to see it just from the normal search engine optimization where they can go out and see an article about you. So you've really got to work. And that takes a little time to get that built up. But once you get it going, that's pretty much where we're getting a very, very large percentage of our stuff. Is that SEO, search engine optimization.
Brandon: So what are some tips that people can follow here that are listening? Whether they have rentals of their own or what they're doing, I buy houses website or whatever - what are some tips that they can do to get more search traffic?
Michael: I think number one you need to go out on Google Places. You need to go at Bing Places. These are things you can go on for free. You go out there and you set the information up about your business and then they're going to mail you a little postcard with a code on it. You're going to take that code. You're going to enter it in. And that's how they know that you really are located in that spot. And you're going to put all the information that you can on there. You're going to have a good website. You need to have a website that is functioning. I had to check this morning and mine's not. So I made a quick call to my web guy to say, "Hey, what's going on?" But that should be back up by the time we run this podcast.
But you got to have that. And you got to be doing a blog. Having a good blog where you're writing and stuff. And it can't just be a bunch of crap. You can't just be putting stuff out through keywords. You've got to have stuff where people actually care about it. And that's a big thing and if you listen to any of these things like Google puts out about, "Hey, how do you get ranked?" They want quality content. Same way you guys . You guys put up quality content at BiggerPockets. So somebody types in real estate investment websites, you all are going to show up. If you do that with your website, you know "how to rent self-storage", "what size storage unit". These are the kind of things people are looking for. If you put out good articles about that, Google's algorithms and robots, or whatever, they're out there calling those websites, will find that - and they'll rank you higher.
So and the function of that is also having those back links. You need to have good websites, them linking back to your website. So if you're writing articles and so forth and they're linking back. And it's got to be quality. Google's really starting to penalize for a lot of people. They just go out and put up crap comment and every website they go to or try to get these cheap back links that they'll have a negative effect on. But if you're actually putting a good quality content, you're active doing that - that helps rank you higher with those websites.
Josh: Yeah, and that's the key across the board, for anyone listening, on SEO is good quality. Period. Targeted quality content. You said self-storage, whatever it is, Tennessee. You write about storage in that area. You do the best job possible and that's going to do it. We're starting there later in. We've got a few remaining questions I'd love to tackle before we finish up. We're talking about these properties and one thing we have not talked about are the numbers. I hope you'd be willing to kind of go there with me on this. So you had mentioned, I think it was that first facility, you said you paid $180,000 and put $20,000 in. So that's $200k into this property. So what kind of rents are you-- I may be misquoting you completely and if so I'm sorry.
Michael: No. Yeah, that's right. I'm trying to think back the exact numbers. I don't have them right in front of me, but at that time I think there was probably 36 to 40 units. We were getting a couple of thousand. I would say it's probably somewhere around like a 2% rule or something, or better. I can't remember the exact numbers. But let's say, if you're going to buy something for a hundred grand, you need to be getting $2000 or more a month in gross rents. We've been able to do that. It's hard, because self-storage has gotten so popular. To try find something at 2% - really, really hard. In order to find those, I've resorted to just yellow lettering to people in that market and say, "Hey, if you're ever interested in selling or you want to have a cup of coffee and blah, blah, blah. Call me." And that's allowed me because I just bought one about two months ago. And that's how I got it. I just sent them a quick letter and was able to get it.
Brandon: Yeah I was just thinking as you were talking about this, "I think I'm going to find out all the self-storage facilities in my area and just write a letter to them." There's not that many. There's probably a dozen. Maybe two dozen.
Josh: Because you have the infrastructure to manage a self-storage facility above everything else that you do. But anyway, moving on.
Brandon: I'll figure that out.
Josh: Yeah. Hey, Michael. Occupancy. At that 2%, what kind of occupancy are you hoping for?
Michael: Yeah, it's going to fluctuate. But typically 85% or better, we'll kind of consider that somewhat full. It's going to be near 100% during the summer. Coming to fall, Christmas, wintertime - it drops down. So it's going to cycle a little bit and it'll pick back up in the spring, when people are moving and so forth. But that's kind of where you're going to see your occupancy rate. And if you're looking for that stuff, let's say somebody out there is saying, "Hey, I'm thinking about doing self-storage," I wrote down a couple of places you might want to go to. You might want to try like the SSA, Self-Storage Association. There's Inside Self-Storage. If you just Google those, you can go out there. There's kind of like blogs and information you can learn about self-storage. If that's something you're interested in doing.
Brandon: Very cool. My last question, I guess, before we go to the fire round and Josh might have one more. But I want to know what you do personally in the business related to-- are you the guy that actually goes and signs leases and shows units with people? Or do you have people that do that? What do you do, Mike? Or Michael. Do you like Mike or Michael, by the way?
Michael: Either one. Michael's fine.
Josh: You might have wanted to ask that in the beginning of the show.
Brandon: Yeah, you know. That's how I roll.
Michael: Well, yeah. I'm involved, not so much in the day-to-day stuff. I will go out and clear them out all the time on the weekends. I'm not renting them as much. We don't go out and show people that unit each time. We say, "Hey. If you want to see some pictures of it, get on the website. Check it out." You can come in the office and you can rent it there and we'll get you fixed up. So that's one of the things to kind of save yourself some time. You got to get it to where you're not having to run around and do all these different hurdles to try to get a new tenant. Otherwise, you'll just work yourself to death and not make anything for your time.
But yeah, the strategy of it, I'm an accountant so I like doing the bookkeeping and stuff. At some point, I'll probably have to outsource some of that. But I do those things. I make sure that the maintenance is getting done. I'm project managing it. So there's always things going on. Just like you guys have gotten with real estate, your properties, there's always something breaking or something going on that you're having to manage the plumbers, electricians, the mowers, everybody.
Brandon: Yeah. It gets overwhelming.
Josh: Hey so I think my last question on this. We talked about self-storage pretty much, I think, fairly exhaustively. I'm just curious about building versus buying. Is there any advantage to just building from scratch? Can you do that more cost efficiently potentially or does it just make more sense to buy something that's there?
Michael: Yeah, again, I just run the numbers on the situation. Typically, I think most of your people have seen a residential. If you can find a distressed person or something that's not at its best shape, you're going to buy it cheaper at discount than going out and buying a land, going out and pouring the concrete, building the units, putting the fence around it. Typically, you can get it quite a bit more of a discount if you find somebody that's motivated to sell.
Just like if you decided you're going to build a single-family house versus finding a motivated seller. We buy houses sites. You're probably going to be able to find it. I can't make one work where I buy one raw piece of land and build it up to make it financially work for me. Like the one I bought, I bought it at enough of a discount where it came with enough land and the pads set there where I could build onto it. It made sense to add on to that. But starting off from scratch, currently in my market, I wouldn't be able to make that with enough margin to make it safe of an investment.
Josh: Wow, that's fascinating. Alright, man. Before we go to the fire round, I've got one question. I said upfront that you were, I think, member 5000 something or other. That's pretty serious. We've been around a long time at BiggerPockets. You have as well. So with somebody who's been on the site for many, many, many years - I guess, what advice do you have for somebody else who may just be joining and how they can get the most value out of a place like BiggerPockets?
Michael: Yeah and I think you all are up to like 350,000 members. I didn't realize I was that early but I knew I had been there a while. But I told you guys offline on this, but I think Josh, you've done an excellent job. And Brandon, you too, coming in. The tone of this community you've got is great. It's legitimate. It's not "we're trying to sell you some sort of boot camp or some sort of marketing thing." And I think even the community itself is set up to where even if you're on the forums and you see somebody kind of get out on left field about something that's wacky, you'll have somebody come in and kind of shoot them down pretty quick. That's hard to find in real estate. If you type in looking for real estate investment, 10 to 1, you're going to get somebody trying to sell you something. There's probably as many people selling books on how to make money on real estate as there are people investing in real estate. So I think you guys have done a fantastic job. I would recommend anybody that's on the site to watch the podcast. Those podcasts are fantastic. It's so easy to do. You can put it on--
Josh: And this might be the best show that we've ever had, right?
Michael: Yeah. Ha-ha. Yes. Oh, I'm not going to say that.
Josh and Brandon: Ha-ha.
Michael: But you guys are doing a great job on all the shows. From watching the shows like Brian Burke and Jay Scott and all those guys. You always pick up something when you hear these people talk. Whatever the topic is you're going to find one or two little details and it's so easy. You can put it on and you can check your email or do your bookkeeping or whatever and you just kind of listen to it in the background, you'll pick something up. To me, the podcasts, are by far the greatest asset you guys do just from learning. The forums are great and meeting people and so forth, but I learn more from the podcast probably more than anything.
Brandon: Oh, thank you. I learn a lot from the podcast too. Those episodes I've learned a ton of stuff. I'm not even kidding. I'm really excited to go and look at--
Josh: Which is really funny because this is the first time we've talked to somebody and it's kind of a new thing to me where I was like, "You know, maybe we should have gotten the other guy because this guy makes me not want to do it." No, seriously. I think that's a beautiful thing. That is why this is such a powerful medium. I was really excited about self-storage and then thinking about there's a lot of day-to-day. There's a lot going on. It's far more time intensive than running a single-family property or at least it seems to me. It seems like there's the potential for a lot more headaches as well. So it's fascinating. I mean, you're not dealing with toilets but you're dealing with a lot of other stuff. Am I crazy?
Michael: No, you're right. And I don't want to give the idea that, "Hey, self-storage is not a great investment." I think it's a great investment. It's like any investment. You've got to buy it at the right price where you can afford to pay people to do the things you need to make it work. But you're right. You're dealing with a lot of people and when you've got a lot of people you're dealing with, you got more issues than just one, two, three people. But overall, it is a good investment. I want to communicate that to people. But just like any investment, buy it right. Don't pay too much.
Josh: Yeah, and I wasn't trying to dissuade people from doing it. I was just saying like personally, I'm like, "Oh, more people, more headaches, more drama." I don't like drama, or people, or headaches. Just you two.
Brandon: Ha-ha. Thank you. Thank you. My dog is barking in the background. Don't mind him. But I actually got a new dog. Another Yorkie so now I have two. Yeah, they're still getting used to each other. They wrestle all day long. Alright, let's go to the world famous fire round. But before we do, I do want to tell people - I know we did not talk about at all in this episode - but you recently have been doing, or did the Brrr strategy. The buy, rehab, rent, refinance strategy. And you have a member blog post and we're going to link to in the show notes which is at BiggerPockets.com/138. Anyway, I want people to go check that out because your pictures are amazing. Like the before and after. Especially the kitchen and the counter.
Michael: Yes. I heard everyone say, "Go out there and look at that counter. See if you can see anything that does not belong." It's something I've never, ever bought.
Brandon: Yup. That is a first for me. So people can check that out at, again, BiggerPockets.com/show138. There'll be a link to the post called "My Latest Brrr is Rehabbed and Ready to Rent". Alright, with that let's move on to the fire round.
It's Time for the Fire Round!
Brandon: Alright, today's fire round is brought to you by FreshBooks. So if you are a real estate hustler, you probably end up billing people for stuff quite often. Like late rent, contracting work, etcetera. I know that I do. Which is why I am a huge fan of FreshBooks and I recommend them all the time. FreshBooks is an incredibly easy to use invoicing software designed to get entrepreneurs get organized, save time invoicing and get paid faster. You can also use it to keep track of your employees' hours, track expenses and generate awesome reports. So bill like a boss. Try FreshBooks free for 30 days. Just got to freshbooks.com/BiggerPockets and enter BiggerPockets in the "How did you hear about us?" section when signing up.
Alright, the fire round. These questions come direct out of the BiggerPockets forums, which people should be probably jumping into at BiggerPockets.com/forums. If you have never participated in the forums, it seriously is really, really easy. Go there and you press the big green button that says "Start a Discussion" and you can ask any question in the world, as long as it's semi real estate related and not, you know, vulgar. Ha-ha. But pretty much anything you can ask. You're going to get people to jump in and answer your questions. People like Mister Rogers here.
Josh: Ha-ha. Speak from the dead.
Brandon: I couldn't resist it. Alright, the fire round. Today's fire round questions. They're all kind of related to self-storage. Some of them are. Number one, how do you figure out what price to rent a unit out at? And that could be self-storage or regular?
Michael: Yeah, self-storage I'm going to look around and I'm going to call my competitors. I'm going to look at them and see what's online and I'm going to try to price it in that market. That's where I'm going to stay. And as things start getting filled up a little bit more, I'm going to go up a little bit more. But I would say, go out there and see what your competitors are charging and you need to stay somewhere around that. We kind of stay on the lower end of where are competitors are doing, just to kind of see some run in but I think that's probably the best way.
Josh: Right on. Question number two. Do you think it's a good idea to invest in a storage facility in a different state? Do you always need to be available? So can you invest in self-storage at distance, I guess, is a better question?
Michael: You can. I have not done it. I don't think I will do it. Kind of going back to those points we talked about. This is kind of like investing in houses far away. You can do it if you've got good people and boots on the ground, a property manager there that can watch it for you. I like being close to things. I like that if there's a problem, I want to be able to get there. Not saying I'll always be the person to go do it, but if you've got a major issue, it's nice to be able to get there within 15, 20, 30 minutes as opposed to having to hop on an airplane to get there.
Josh: Yup, right on.
Brandon: Right on. Alright, number three. Once you get a property, where do you find forms for your unit renters to sign?
Michael: For like a lease?
Michael: Okay. There's several of them. I think even on BiggerPockets. Don't you all have some links out there? The leases and so forth?
Brandon: There's a form section. BiggerPockets.com/files. Or I think it's files. Files. Ha-ha.
Josh: Yeah. I think it's primarily for residential. I don't know that there's anything self-storage specific.
Michael: Oh okay. If you're doing self-storage, I would go out and you might want to rent a few self-storage units in town, or maybe some of the big ones like Public Storage or if you look at Uncle Bob's, these places. And kind of take a look at their leases and use that. Don't plagiarize it. Don't copy what they do. But get an idea of what are the things that are in there. Get an attorney involved to help accomplish something but you're not reinventing the will here. Go out and see what's working for the big players, the other players. See what they're doing and kind of say, "Hey, there are little things that I haven't thought about but really ought to put in my lease too." I'm not liable for if you have some sort of issue with it, putting those things in there. I think that's really important to look at what your competitors are doing.
Josh: Right on and I want to press upon people to go and talk to an attorney. I think it's great that there's all sorts of resources including BiggerPockets, where you can go and download a lease and look at it. But at the end of the day, if you want to get your backside covered, you bring it to an attorney and you have the attorney review it. So definitely be sure to do that.
Brandon: That said I do want to also say, that point you said about find out what the big guys are doing, don't reinvent the will - I think that's an amazing tip for any real estate right? I mean that's how I try to run my landlording business is I run it exactly like the guy who has a 5000-unit property because they figured it out. Like why am I trying to figure out something new, like, "I got this new way of landlording." You know, just do it the way that they do it because they've master it over years and years and years.
Josh: Well you have a technique so you're a guru then? Ha-ha.
Brandon: There you go. I got a new secret way to do this and I can tell you for three easy payments.
Josh: Yes, yes. Alright, last question. What are the first steps someone should take to invest in their first storage unit?
Michael: Hmm. That's a good question. I would say learn about it. I would say get out there. Talk to people that are in that business. Maybe they're not exactly in your market but reach out. Read things online. Go check out the SSA or Inside Self-storage. Those websites are out there. There is stuff out here on BiggerPockets.
Josh: BiggerPockets! Ehem. I had a cough.
Michael: Ha-ha. Yeah. But BiggerPockets, you could listen to this podcast. You could go out and learn. Don't sign up for any major expensive boot camps or anything. If you've got the personality where you like to learn and figure things out, that's typically what makes people good investors. If you're wanting to spend tens of thousands of dollars to do it the quick way, you probably don't have the work ethic to make it work anyway. So I would say learn it on your own. Try to figure it out. Talk to people. There's lots of people there who will talk to you. You'll get it organically that way.
Josh: Right on. That's great. Awesome.
Brandon: Alright, let's move on to the world famous...
Brandon: Alright, the famous four. These questions are asked of every guest and you're no different, Mister Rogers. So number one, what is your favorite real estate book?
Michael: Real estate? I came up with two if that's okay.
Brandon: Not allowed. Not allowed.
Brandon: Okay, fine.
Michael: I would say, just one, Millionaire Real Estate Investor by, I think, it's Mary Keller or somebody. Hey, that was a great one. When I first read that idea of buying a margin safety, looking at lots and lots of properties. Then you go in after you've looked at thousands and you're picking out a couple of hundred you looked at real seriously. You get down. You keep it down until you finally get that one. That's what investing is all about is looking at lots and lots of things. Figuring out what's mispriced and then swooping in and get it real quick.
And then another one, I think it's a really good resource, is Every Landlord's Legal Guide by Nolo. They put that out there. That's a good, layman's terms source. They've got some forms there, now that you mention it, on leases, standard communications to your tenants. They've got state specific laws they put down little index about what you got to do with your deposits, and what you can do in each state. Each state's a little different. But I've always found that to be a very good resource.
Brandon: I have that and it is a great resource.
Josh: Alright, favorite business book.
Michael: I would say Essays of Warren Buffet. I really like that book. That's kind of taken all of Warren Buffet's letters to shareholders over the last 50 years. And they kind of combined that into a theme. His idea of value investing is great. It's the idea that you kind of know what the intrinsic value of a property is or a stock or whatever it is, and you let the market go up and down and you use the market to your advantage. You don't have to go in and buy all the time. It's perfectly fine to let a property go by that you're not sure about. The big mistake is paying too much. The only way you're going to lose money in investing is making a bad investment. Letting one go by, you're going to be okay.
Josh: And that's very timely, given the state of the economy, both local and globally. And this show comes out in a couple of weeks but this past week is the week where the market was down 1,100 points. We were down almost 10% over a five-day period. A lot of people are flipping out but at the end of the day if you're buying for intrinsic value, then you're in a lot better position whether it be stocks or real estate.
Michael: Yeah. When the prices go down, that's when you want to take a serious look about buying things. Not when everyone's excited about them because prices are high. That's typically when you don't want to be in something. That's when the herds are looking at it and saying, "Gosh, this looks great." That's always a bad sign.
Josh: Yeah. Hey, what do you do for fun? Hobbies?
Michael: Well, like I said, I've got a wife and three kids so that keeps me extremely busy. Playing with the kids and so forth. I used to play a lot of golf. I play two or three times a year now. But the real estate, I enjoy it. It's something that I love doing. I've always found it interesting. I like talking shop with other real estate investors like you guys or friends or people I meet, kind of coming and going. And I always recommend to people check out BiggerPockets. When I met somebody, I say, "Hey, get on BiggerPockets. Go listen to this podcast. Go get involved if you're thinking about getting into real estate." Because I think it is such a good resource.
Brandon: Appreciate that. Cool. Alright, final question from me. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started in the first place?
Michael: I would just say just having that persistence and determination. Just look at them. Stay after it. Having that mindset that I'm going to do this and just keep looking at it. And it's okay if you let one slide by. Just keep looking at them. Keep your eye open and you'll eventually find something. If that's something you're really meant to do.
Josh: Right one. Alright, Michael AKA Mister Rogers, where can people find out more about you, man?
Michael: Yeah, you can go on my main website which is chandler-property.com and then if you're somebody who's getting into self-storage, you want to see the self-storage website. Just go to the self-storage page and then in there there's three separate websites for each facility that you can rent from. And you can kind of see how you rent. And my BiggerPockets profile. You can go out there and just look for me on BiggerPockets. I may not get back to you immediately that same day, but I'll try to get back to you on the next couple of days if you got a question.
Josh: Right on. And definitely do check out Michael's Brrr article. Looks like a hoarder threw up all over the kitchen and everywhere else.
Michael: And Brandon, you should give away like one of free books of yours to anybody who correctly guesses first what that is in the kitchen.
Brandon: I will, I will. Ha-ha. I will do that in the comment section of this blog post. First person to correctly guess. One of these things is not like the other will get a free copy of my book. So there you go. Ha-ha.
Josh: Wow. Right on. Alright guys. Well, listen Michael. Thank you so so much. We really appreciate it. Lots of great information. You guys can find Michael on BiggerPockets or definitely hit him up on the show notes of the podcast with any questions at BiggerPockets.com/show138. Michael thanks so much for coming on.
Michael: Alright, thanks guys.
Brandon: Thank you.
Josh: Alright guys. That was Michael Rogers on self-storage investing, SEO, value investing, Brrr and all sorts of other stuff. So big thanks to Michael for coming on. That was cool. You going to go buy some units now?
Brandon: I'm going to go buy some storage units right now. Like today. No, at least what minimum I got out of that was-- you know I said I want to go find out the storage unit, in my area, like people. What I want to do is I want to do what he did. He said he asked them if they just want to go to coffee. Like I would love to just connect to just three or four of the guys or girl that are owning storage in my area and just meet with them. I don't even know who they are. I think that's a good first step.
Josh: I think that's a great actionable step for anyone who's still listening to the show, which is, if you are not, on a regular basis, making it a habit to go out and have coffee with other investors in your area - you should do that. Stop what you're doing. When you're done listening, get out there. Find some people that are investors in your area and make sure to meet them because there's so much you can learn. A lot of people are freaked out about competitors. These people are your competitors but they're also going to be your collaborators. So get out there and meet people.
Brandon: There you go. I love it.
Josh: Yeah. Awesome. Well cool, man. It's good to be back again. Feels fresh. Feels good to be back behind the microphone.
Brandon: Yeah. Look at you. Fancy California tan and everything. Ha-ha.
Josh: All shiny and I don't even have a shiner.
Brandon: Yeah, you're not cool like me.
Josh: Yeah, well. Alright guys. Well thanks for listening. Show 138 and you can check the show notes a BiggerPockets.com/show138 and we will see you next week on the new BiggerPockets podcast. Thanks for listening. I'm Josh Dorkin, signing off.
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