Building Wealth Across Real Estate Asset Classes for Long-Term Freedom

0:00Yeah, it's it's funny. I always joke with people and tell them my my career path has been kind of two, you know, maybe not schizophrenic, but like two different specific things. So, one, you mentioned the consumer products thing that was created products and sold them to retailers like Walmart, Home Depot, Lowe's, — built those companies up and sold them all the while I was still doing real estate on the side. So, real estate products — mostly sporting goods. So, we initially had a this this is probably a conversation for a different day, but we had a manufacturing of products that we licensed from the NCAA, NASCAR, and Disney.

0:41And so, we manufactured like golf towels as an example. If you have a ever play golf, you have a golf towel with a whatever University of Georgia logo or Alabama logo, we made those towels and sold them. So, a lot of sporting goods manufactured, shipped here, and then we would go sell those to the big box retailers. And then with NASCAR, we did a line of barbecue grill accessories. — so like barbecue grill spatula and a barbecue grill lighter and things like that with NASCAR logos on them. So we sold those to all the big retailers, Walmart, Target, Home Depot, Lowe's, Bass Pro Shops, all that kind of stuff.

1:16So eventually I sold two of those companies that I'd started. But the whole time I was doing those, I was still owning and buying real estate on the side. — Got it. And then once I sold that last company, I I completely focused back on real estate, which is, you know, what I do full-time. So, you know, out of my 25 years, I guess, of, since graduating from college, 26 years. There was probably a seven-year stint there, which was primarily focused on consumer products. The rest of the time has been real estate. I've only had a worked for someone else for two years of that time and that was when the last real estate crash happened 0809 — and we were doing new construction at that time and so as the market tanked we went down with it and we're fortunate we were able to sell off all our properties and didn't

2:05Have to file bankruptcy but needed needed a job so went to work for a buddy of mine for two years and then continued to build the real estate back up on the side and jump back into that. So — Wow. — Yeah. So, you know, what you read in my bio is all accurate, but it's over the course of the last 20 years. — Yeah. — So, long time again, started with one one flip at a time. Eventually, you know, I had a couple rentals, decided I wanted to build that up, built up to 13 single family rentals, and then we had three short-term rentals.

2:39And those were all in resort areas as well. So, that's another shift that we made is I think when the short-term rental market was really taking off, you could buy a house, you know, 45 minutes away from anything that seemed like a like a travel destination, update it really nice, and people would rent it. And then it seemed like over the last year, year and a half, for us at least, the properties that we had like in a resort destination, beach, lake, you know, a tourist attraction, Orlando, something like that, those were still doing really well.

3:13But the ones that were just kind of, you know, outside of a of a city area weren't doing as well. And so we focused primarily on those resort, you know, lake lakefront properties and gated community golf courses, things like that. — So we did a few of those and then you know, our flipping business grew to we were doing a hundred houses a year for a few years. — so got really busy. This was 2018 to 22. Really busy with that.

3:45— Were you selling all those to retail buyers? — probably 50/50. Half of them we would rehab and sell to retail buyers. The other half we would sell to other investors. — Okay. — Yeah. So we really became a marketing company. We were doing all outbound marketing. So we weren't buying anything off MLS. Everything was through direct mail and pay-per-click, paper lead, bandit signs, cold calling, texting, all those different outbound marketing channels we were utilizing to find properties that we could buy offmarket. And we had nine people, you know, it wasn't just me and my wife at that time.

4:21We had built up to where we had nine people on our team. And it was great, you know, that it was it was a great time in the real estate market. Properties were selling really well and and so we grew that again continuing to build and buy rental properties for ourself along the way. So when we would find a property, we would evaluate it for all all the different avenues. We would look at it and say, "Is this something we want to keep as a rental for ourselves? Is this something we want to do a short-term rental based on where it's located and the purchase price? Is this something we want to flip ourselves?

4:52Or is this something we want to sell to another investor?" and just move it quick. You know, sometimes we would just clean it out and touch it up and then sell it. Other times we just sell it as is to another investor. — Yeah. — so that was kind of the the path that we took. And then after 2022, the market kind of slowed down as far as buying again because it became a sellers market. Interest rates went up and things slowed down. A lot of the hedge funds quit buying. So prices, you know, when hedge funds were buying, they were paying crazy high prices, which made all of the sellers think that they could get such a high price for prop for their property.

5:28And so prices continue to go up and up and up, which slowed us down a little bit. So at the end of 22, beginning of 2023, that's when I started noticing that all of the stuff that I'd done in the past, new construction as well as flipping houses was what I call transactional. And with the exception of the rental properties, the other stuff that I was doing was primarily transactional. So, if it was new construction, you find a lot, you build a house, you sell the house, now you have to go find another lot to do another deal. — Same thing with flipping houses. When you, you know, we do all this outbound marketing and and we find a property, we rehab the house and we sell it, we make good money on it.

6:05Well, now we got to go find another house. So, all of that business was transactional. And I realized I need to do more building of long-term wealth, more like rental properties where whether it's long-term, short-term, and then eventually into the self- storage, something where I can do the work up front, buy the property, but then once I buy it and have it occupied and and managed someone managing it, now it continues to pay me again and again and again for as long as I want to keep the property. So, it was about that 22 23 time frame where we started focusing more on getting, you know, rentals and and we still do flipping and still do a lot of the transactional stuff, but I'm trying to focus my long-term efforts on more wealth generating long-term long-term kind of stuff.

6:52— Got it. Got it. That makes that makes a lot of sense. And there's so many parallels between your kind of story and and realizations and and my own. You know, we flipped about 75 houses around Chicago, so nowhere near the scale that you were at. It felt like a lot of scale at the time. There's a lot of going on. — Yeah, there's a lot going on. And, you know, we kind of moved into higherend homes, too, because we thought the numbers looked more appealing and didn't realize some of the downside of of that as well.

7:24But but then same realization 2016 I was like man if I just had kept half the properties we flipped from 2011 to 2016 I'd be in a really good position right now and even better today. But so you know wanted to build up long-term wealth or long-term cash flow you know and so — got into rental properties at that point. But I I'm I'm kind of curious for you what what made you land on self storage out of you know all the other options out there as interest rates were going up.

8:02You know I've read a lot about the commercial space being really impacted heavily. Is self storage like do you feel like it's more insulated and the best option of all the commercial options out there? — Yes, I do. I I actually you asked this question a moment ago as well, but I've kind of always done things backwards for some reason. Maybe it's just cuz I'm confident because I I know construction and so that part of it doesn't scare me as much as it does a lot of people who don't have experience in construction. But I started flipping houses before I started buying rental properties and before I started selling to other investors, wholesaling or or selling to other investors.

8:39Most people who get into real estate and certainly those who scale like we did usually start with the easiest which is wholesaling and then going to rental properties at a slow small scale and then go to flipping houses. But again, I guess since I I'd done a lot of construction already, I that didn't bother me. Same thing with self- storage. So, my first self- storage deal is a ground up class A three-story you know, climate controlled self- storage facility. So, again, a lot of people when they start in self- storage, they'll go find an existing facility, a smaller facility, buy it, add some value, raise rents, and then keep it for a few years, sell it, then move up, move up, move up.

9:20I went straight for the the hardest one and the most timeconuming one right off the bat. But I think for me again once I realized that I needed to do more cash flow generating activities, more long-term wealth building and not spend all of my time and energy on the the transactional stuff. I started looking at both multif family and self storage and we actually had a a property under contract in San Antonio, Texas. We're in Atlanta as you mentioned, but we had a multif family property in San Antonio.

9:55Put down our earnest money. We're in our due diligence and it was 187 units, so it was a big project. But flew out there, met with a general contractor, walked all 187 units. And as it turned out, the seller was misleading us on all of the information they had given us. — Was this multif family or self storage? — Multi multi family. Okay, got it. Yeah. So, it was a 187 unit apartment complex. Wow. — They said it was 65% occupied. It was actually about 50% occupied. — Two of the buildings, they had had a flood.

10:27Some pipes burst and they didn't correct it. And so the whole inside of two whole buildings was completely molded in mildew. They hadn't shared that with us. So it was going to have to be torn back of the studs. There was a murder at the property the month before we came. They didn't share that information. So anyway, we bailed on that. But I was so I was looking at multif family and self- storage at the same time. And one of the things that I recognized with self- storage is most of the people who go to their self- storage facility, they go there once a month or once every few months.

11:00There's one toilet oftent times, sometimes not a toilet at all, but in in a facility like ours, we have one male and one female toilet and that's it. So you're not having to repair toilets all the time. You don't have people living there all the time. So therefore, there's not as much upkeep. You don't have water heaters to worry about. You don't have a bunch of roofs to worry about. So, I love the the model of self storage because again, there's people aren't there all day every day. You're not having to take care of toilets and issues where people call you and and when I was managing my own properties, my own single family properties, I would get a call at 10 o'clock at night on a Friday that the water heater is not working and I'm, you know, going to try to fix a water heater.

11:41And so I eventually learned hire a property manager, let them manage it, and then I don't have to take those calls. So I did that. But with self- storage, you don't have to worry about that. You don't have to deal with any of that kind of late night calls or anything. So I started looking for self- storage properties again to buy and and add value and just never could find anything that seemed to pencil. So found I actually bought these these two pieces of property that were single family homes beside each other on 4 and a half acres and I did my due diligence.

12:13I realized that they the county wanted it to go commercial. The future land use map, we're probably getting into more detail than we need to, but the future land use map showed it as a future commercial property. And so I was able to get it reszoned to for a special use permit to do self storage. And then get everything approved and and build the new self- storage facility. — Interesting. So So is that 800 I mean that that's all 800 units then in that facility? — Yeah, 865 units. Yeah. — Wow.

12:44Okay. — Three story. It's big 115,000 square feet. So it's a big threetory brick you know kind of thing that you see going up these days. Not not so much the onetory old school self storage. This looks more like a office building. — Okay. And this is in Atlanta. — It's outside of Atlanta in Lawrenceville, Georgia. About 30 minutes north of Atlanta. — Okay, cool. Wow, that's Yeah, that's massive. You know, and self storage has always interested me for the reasons that you just outlined. I think the the lower maintenance costs and headaches and all that just is so appealing.

13:18The thing that always I I had questions about, and I'm sure you've thought through this, is it feels like it's sort of like a luxury niche, you know, like I I imagine during the Great Depression there wasn't a lot of people storing extra stuff and paying, you know, for it. So it's like my my concern around self storage is do you feel like there's ever a point like if if the economy shifts and people are really like cutting back that this could be something that they cut back on or do you think it's always it's here to stay?

13:50— Yeah, historically that has not been the case. So in the last downturn I have a a report and of 21 different commercial asset classes self storage was the one that was impacted the least during the the 0809 2010 time frame — and I think now what they've determined so in self storage they go by square foot per capita demand. So as an example right now the square foot per capita in the United States is 10 square feet per person. So you need 10 10 square feet of storage.

14:22I need 10 square feet. Everybody in the United States needs 10 square feet of storage according to the demand which is very interesting. Now if you buy a 10 or if you lease a 10 x 10 unit that's 100 square feet. So that takes up for 10 of us. So it's not as not like every single person in the United States is using self storage. But based on that we look for areas where certainly the population is high enough but also where that demand is very low. So as an example in Lawrenceville where our property is our current supply was at 2.3 square feet per person — and the national average is 10 square feet per person.

15:01So we're way below what that area demands and it's a very high population. Brand new Walmart next door so you know high traffic area. So, we look at some of those things when we're doing our due diligence to say, is there a demand in this particular area? Is there high enough population? But it's gone up over the last 10 years from five square feet per person to 7 to 10, which is what it is now. And I think, you know, as over the course of the the last few years, as prices have gone up, people have decided to stay in the house that they were in.

15:33They're still acquiring stuff. You know, the the overall market has been pretty good. As far as people making money and having money to spend and but they're not moving up in houses or buying new houses because of the higher interest rates and it's a sellers market. So they have excess money and excess money and they're buying more stuff but they don't have room to store it and so they're using self- storage facilities and again a lot of times they they'll go in and pay for a self- storage facility and they'll put their stuff in there. Might not go back for 6 months or 8 months at all, you know, to even check on it.

16:07So, it has been historically it's been, you know, the the least impacted by the ups and downs of the real estate market. — the lending changed a little bit over the last couple years. Banks used to lend 80% of cost and then they dropped down to 70 and then they dropped down to 60. It started going back up. Now we're we're working with banks now who are looking at 75 80% loan to cost again but there was a there was a slowdown for about a year and a half 23 24 and now it's moving back in the right direction.

16:39So we're not we're not too concerned about it based on what we've seen historically. It's pretty resilient compared to the other commercial asset classes.