EP 257 – Score Big in Self-Storage with Terri Garner and Alia Ott Carter

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NCS 257 | Self-Storage

NCS 257 | Self-Storage

One of the key differences of self-storage to other commercial assets is that fair housing laws don’t apply to them because nobody’s living in them. There’s no need to go through the eviction, foreclosures and wait long for lead times to get your money back. Terri Garner and Alia Ott Carter have been in the self-storage market since 2009 and their key to success is being able to connect with people. Whenever they are given the opportunity to get their message out in front of many people, they do so because it is the best way to connect to people and grow their network.

I am so honored to have Terri Garner and Alia Ott-Carter join us on this episode. Alia and Terri go back a long way with me. They were actually a part of our first ever Note Mastermind. They’ve evolved over time going from note investment and private lending, fix and flip, wholesaling to settling on a commercial side and trying their niche in the self-storage market. Alia and Terri have such a big heart. You can hear it in their voices and the information that they share about the self-storage business, the hurdles, the things that really attracted to them, the popularity of it, along with where they think the market is going the next few years. I could not agree more with what they’re sharing. The self-storage market, while it’s as popular as the apartment market these days, they’re just as hot, there’s a lot of opportunities for note investors to reach out to self-storage owners or to find people that have self-storage facilities that are in trouble.

Alia and Terri talk about how they target smaller markets, not the major market that they find, the second hand markets and mom and pop owners that are operating something but don’t have the marketing to help them grow a business. That’s a huge opportunity not only for us real estate investors, but also as note investors, as you reach out and start talking to banks an estimate to show that specific asset class. Terri and Alia are two of the best people in the world, and I couldn’t say more positive things about them. They have come a long way and I’m very proud of all the success that they’ve had, and they continue the success that you’ll see over the next few years from them.

Listen to the podcast here:

Score Big in Self-Storage with Terri Garner and Alia Ott Carter

I am honored to have a couple of amazing ladies join us. We’re really excited to have these two amazing women who are doing amazing things. They have transition from the real estate game to the note game to more so being very specific, and these two ladies are now experts in the field of self-storage. We get bombarded with requests. “Do you have any apartment notes?” I’m like, “No, I don’t have any apartment notes. I wish I did. If I did, I’d buy myself.” Same thing as self-storage, but it’s really great on the cash flow aspect. Two of the original cash flow divas, Alia Ott and Terri Garner joining us from California. Good day, ladies.

Good day, Scott. This is great.

Alia, why don’t you start off first and tell us who you are and why they need to pay attention to you.

My name is Alia Ott-Carter. Terri and I have been in business together since about 2010. We’ve had a journey just like many of you have had, whether you got started in single family flips or rentals and transitioned into notes, so we have experience with all of that. We met Scott a number of years ago when we were focused on our lending business and then thought of another alternative to lending, which was buying non-performing note portfolios. Shortly after that, we transition into buy and holds of self-storage properties and we got into that business through lending on a transaction and becoming an equity partner and full-fledged business partner in that. We’ve gone on to purchase thirteen self-storage properties.

Terri, tell them a little about who you are.

I’m Terri Garner and I have been doing real estate since back in the early 2000s. We’ve been doing a lot of different things. I started out doing fix and flips and then doing single family rentals, rehabbing those, and then renting them out. When Alia and I met, we started doing private lending. We met with Scott years ago and worked with him. We’re a part of your first Mastermind group way back.

I called it the Davenport Dozen.

That was us, hanging out in a house out in Florida, getting stuff done. We even had a fund with notes and did that for several years, and then have worked our way into the niche that we’re currently in, the self-storage.

Terri, why don’t you share a little bit about how valuable and what attracts you to the self-storage side.

We love storage because one of the key differences of other commercial assets, whether it’s partner complexes or mobile home parks, is that nobody’s living in them. The fair housing laws don’t apply, so if somebody stops paying you, it’s a little different state by state because each state has its own law, but it’s literally only two to five days depending on the state and you just put a lock on their unit. You can lock them out of their gate even. You don’t have to go through eviction. You don’t have to go through foreclosure. You don’t have these long lead times to get back to your money. You lock them out. There is a little bit of a process.

You have to do some notification but you can get to an auction pretty quickly. If they don’t bring you the amount that they owe you, you can sell off their stuff and get that unit cleaned out and get it rented again. It’s very simple business. The other thing we like about it is you don’t have toilets to deal with, you don’t have things breaking on you by people living in that you have to go and fix up. When the tenants move out, you just broom sweep it. It’s just four concrete walls and a roll up door. You don’t have to do paint, you don’t have to do carpet, you don’t have to do any of that. It’s a very simplified business and a simplified model, and we love it for that reason.

NCS 257 | Self-Storage

Self-Storage: We love storage because one of the key differences of other commercial assets, whether it’s partner complexes or mobile home parks, is that nobody’s living in them.

Alia, you were mentioning 4,200 doors you were figuring out, and that’s over a dozen properties across the country, is that right?

We have thirteen properties. Two of the properties are in the same community run by the same manager, that dozen or so properties.

Without giving away any secrets, but none of those are in California though, where you call home, right?

None of those are in California. If you are proficient in the commercial real estate industry, everything is often based on cap rate, and that’s the calculation of what you’re essentially paying for your cashflow. The lower the cap rate, the more expensive the property is for the cash that comes in every month. California, New York, those have some of the lowest cap rates in the entire nation. We look towards the middle of the country, Texas, Alabama, Louisiana, Georgia.

Some of the Southern states as well and a couple up in the North, and they cashflow much better for the price that you’re paying for the property. We’re long-term hold buyers of these self-storage properties, so that becomes a key factor. We were looking to possibly flipping property, get the revenue up, and then resell it right away. We might look towards other marketplaces, but we look at the numbers on everything. If it makes sense, then we buy it.

One of the big things you look at is surrounding properties, to see what kind of their occupancy rates are. If the community is at 65%,that’s about as high as you can get it up to, right?

Yes.

I bought some self-storage notes and we got them fixed up and then sold them off. The expense ratios on self-storage is much less because you have so much less manpower, right Terri?

Our maintenance costs are very low. We have one property manager that can handle up to 500 units. If you start to get higher than that, then you might want to think about adding another property manager. We do have a part-time person as well that covers weekends, so that we can run seven days a week, but the manpower, it’s a simple business. There’s nobody living there, so it is a very simple business.

Alia, how are you finding these deals? Are you dealing direct from banks, notes, private sellers? Is it from a mixed bag? What’s your resource?

It’s been a little bit of a mixed bag, but primarily our source as of late is being fed by brokers. There’s real estate brokers in the commercial arena that specialize just in self-storage, and so those have been really key relationships build over time. We’ll go to a couple of the national conferences every year. There will be at least a dozen different brokerage firms showing up with 40 properties available for sale. Making relationships, like anything else in the whole real estate business, is key.

Terri, with the different things, is there an underlying distressed nature to those assets that you’re seeing? Do the people just lack of management skills or they just don’t have kits? What do you see?

That’s specifically what we look for. We do often get deals across our desk where they’re already at 93% occupancy and there’s not a whole lot you could do with that. You never want it to be up to 100% occupancy because that means you are charging enough for your friends, but 93%, there’s not a lot of value we can add. We’d like to buy them when they’re in 50% to 60%occupancy range where we see some key issues, whether it’s on the management side or, many times, it’s with the prior owner, but they were stifling the manager that was there. Then we have cashflow coming in on day one when we first buy it from that 50% to 60% occupancy. We still have room to add value to the property, so we can get the occupancy up. That raises the value of the overall property. Then we could go out and refinance, pay off our initial investors in whole property.

Alia, how are you financing these things? Are you using private capital? Are you doing subject to financing? Are you adjusting or a variety of the things? How are you funding?

It’s a combination. When we initially purchase a property, the first thing that we attempt to do is get the seller financing. Oftentimes, the seller will offer seller financing at market rates. That’s great when we can get that because you don’t have to deal with lag times at bank. We’ve had deals that have taken six to twelve, even eighteen months to close when you get a bank involved. The bank financing is usually very affordable as well. They’re not so concerned about the occupancy rates as they are just overall looking at the purchase price and the cashflow that’s covering their expenses.

We will typically get anywhere between 65% and 80% of the purchase price covered by either the bank or the seller, and then we’ll work with our investors to raise additional capital to close out the purchase price and closing expenses. We did that initially through our lending program at Investors In Action. Then we have transitioned on to creating a syndicated fund, which allows us to legally pool investors together and have compliance with the SEC. That’s what we use to purchase now.

Is it Jillian Sidoti who’s your attorney for that?

Yes.

How long have you been in self-storage? For six years now? Do you remember when you bought your first one?

It was 2013.

About five years. We started about 2015.

Terri, what did you do before you got into real estate? I want people to see that you can make transitions. You can do different things if you’ve got your goal.

I have a very corporate background. I was a Mechanical Engineer and did that for seven years. I got an MBA, and I was at Verizon Wireless and middle management there for eleven years, and then I couldn’t take it anymore. I couldn’t take corporate America. I had to get out. I took a leave of absence and started doing real estate at home. I wanted to make sure I liked working from home and got my feet under me before I’d cut that cord. About a year later that, I finally said, “That’s it. I’m going for it and going full blast.”

As far as the transition, you don’t need any kind of fancy education. You can take whatever background you have and take those skill sets and just transfer them. Whatever you’re good at, I was used to working with a lot of numbers and things like that, so in our business with Alia and I, that’s what I tend to do. I deal with the spreadsheets, not that Alia isn’t proficient in that. She is, but that’s where I gravitate towards. I check those same skill sets and just apply them to what we’re doing now.

NCS 257 | Self-Storage

Self-Storage: Making relationships, like anything else in the whole real estate business, is key.

Alia, why don’t you share with our note nation your background before you get into the real estate side.

Prior to jumping ship, I was working at a nonprofit organization called Network for Good. That was an organization that helped thousands of other charities raise donations online, and very proud to say I had a goal. I wanted to hit half a billion dollars raised online. We hit the $500 million mark just about a month before I left my job there. It was great. I was investing while I was working at the nonprofit organization, but I knew that I wanted to be a generous philanthropist. I didn’t want to be an employee of a nonprofit for the rest of my life. I knew that there had to be another better way. Ever since I was a kid or a teenager, I knew that real estate was the game that I wanted to leverage to create the lifestyle that I truly desired. Now, I get to be more of a philanthropist and volunteer my time because we have cashflowing properties.

It’s a beautiful thing and you’re doing a lot of those nonprofits and capital raising, and how big of a passion it is for both of you to actually do what you’re doing. As both of you have grown, your goals have changed over time. You’ve pivoted, you’ve used some of the different things you’ve learned in different aspects and pivoted. Alia, how important has building a marketing presence or developing marketing skills helped you in your pivots?

Definitely creating a presence for yourself online. I’ve found that video works really well, as far as being out there on YouTube. I get random calls once in a while from people who said, “I’ve been watching you on YouTube. I want to connect. Tell me more about the education that you offer.” We’re really not actively marketing our education so much. It’s there, and we plan to do an annual workshop every year, but we’re focused on our assets at the moment. I do have to say it is an important skill. This was something I taught the nonprofit how to do when I was teaching them to raise money online.

You have to get online. You have to build your lists. Sending emails, doing your videos, all of that is really key to making sure that people know who you are, and it’s creating what I refer to as surround sound. People don’t just buy with you or lend or invest with you the first time that they see you, unless maybe you are positioned by an authority figure. Most of the time, people have to see you. They have to connect with you multiple times. A way to do that is leveraging social media videos, the internet, email campaigns, so that people hear from you over and over again.

Terri, you want to add to that?

To also compliment that, in addition to all of the online stuff and the email marketing we do, we try to get out as much as we can to see our local real estate investment club meetings. One, not only to make connections, but two, if you have an opportunity to speak up and get up in front of people, then you get your message out there. We attract a lot of people to us that way as well. As Alia said, it’s a perfect word, that surround sound, but it’s the online combined with the in-person, the networking, meeting people and just getting out there.

You had people that were interested. You guys built rapport with your audience. You already had a good presence out there just from your past background and people had already trusted you. People knew who you were from different things. Your phone started blowing up with people calling, “Tell us more about what you’re doing.”

That just speaks to the power of get out there and do it. Don’t overthink it. Don’t try to analyze things. Just get out there and do it. Once you get started, things are going to happen. There might be mistakes, but you figure it out. You correct them. You don’t do that again the next time and you keep moving forward.“Sailing forward” is a term I’ve heard in seminars from years past. Just get out there and get moving because if you do nothing, then nothing happens.

People play inner mind games with their self. They just don’t have the confidence to do it. It’s ten times more difficult in their head than it is in real life, Alia?

Especially when it comes to raising capital, asking other people for money. I saw this with the nonprofit, then I saw it even worse with raising money for your deals. People get in their heads and they’re too afraid to ask for money, or they have to over analyze the deal and they never put in an offer. When Terri and I met, we went through something called the 60-day challenge. Every week, every day, we had to submit offers, lots and lots of offers on wholesale deals that we intended to either keep and rehab or sell the contract to another buyer.

Nothing would happen if you didn’t put an offer in. Just like note, just like anything else, self-storage, commercial properties, single family, you have to put in the offers and you have to ask for the money. I want to say one thing about raising capital that’s really key to get into your mindset is you’re not asking for money, you’re giving somebody an opportunity to earn money on their money, making their lazy dollars go to work for them, expand and multiply. If not that, you’re just taking someone’s money. If you feel like you’re taking someone’s money, then you’re probably not going to do the right thing with it. If you’re having somebody invest with you and giving them a nice rate of return, that’s a gift to the investor, and people are grateful for those opportunities.

I love it when we’re around people that understand the game, and gets it, and they understand there’s so many opportunities out there. If you had a best friend who is the Founder of Google, you would hope that they would tell you about Google so you can invest with them the earliest stages. Terri, let’s pivot back here to the self-storage market. Why don’t we talk about where do you see that market going? I’m sure you ladies are constantly looking at it because you’re in a variety of different markets. What has made that such a hot market over the last few years?

The nice thing about storage, and we can even go back and look historically to the economic downturn, is that people have a lot of stuff. Even when they were getting foreclosed on and having to move out of their house, they would put their stuff into storage as they were downsizing, to a smaller place or moving into an apartment. During that economic time, there was a little dip, but not much, not like the other asset classes that you see. Historically, it’s always done very well. Now looking forward, one of the questions we get asked a lot is, “Millennials are up and coming. They tend not to want to have a lot of stuff. Do you see that as a problem?”

Millennials also like to travel and we go after the student days. For example, when we get towards the end of the school year, we will target universities because they will put their stuff in storage. As they are mobile and they vacate their properties, they will put their stuff in the storage. We talk about this a lot at some of our industry conferences that we go to. It’s a big discussion there and we see the trends keep going and still being strong.

NCS 257 | Self-Storage

Self-Storage: People don’t just buy with you or lend or invest with you the first time that they see you. Most of the time, people have to see you.

We got a report from one of the major players who handles brokerage in the self-storage arena. One of the things that they are talking about is the future, “Where’s the future of self-storage?” I want to give an honest and maybe not so rosy picture of the outlook. We currently, in the last two to three years, have been paying more as an industry for properties in the commercial space, whether it be apartment complexes or self-storage. I talked a little bit earlier about the cap rates, the cost of buying your cashflow essentially. When interest rates start to rise, it’s not all simultaneous, but I believe in this case, it probably will be.

As the interest rates start to rise, the cost of funds to get a bank loan or get a private loan is going to increase, and so your cost of holding that property through debt is also going to increase. That’s going to affect the overall market in terms of how much people are willing to pay for those storage properties. In 2016, there was a huge spike in REITS, which is Real Estate Investment Trust going out and purchasing both portfolios. That has started to cool off a little bit. I would be very cautious about the purchase price and have a longer-term strategy. If you’re looking for cashflow, then it won’t matter as much how much you pay for that property. If your goal is to flip the property, then I would be a little bit more cautious about what you’re paying and what you think your returns are going to be on the disposition side.

I’ve talked to a lot of apartment investors too. They’re buying all these apartments up to add value, to take it from a Class C to a Class B, re-gentrified the neighborhood, or rejuvenate the property, to get refinanced out and cash themselves out in three years. There’s no guarantee that finance is going to be there in three years. We can agree to that, right?

That goes in front any asset class, not just in storage but anywhere.

The fact is that you’re working on details with owner financing and other curative financing tactics makes it a lot easier for you. Because if you’ve got a loan in place that’s got low interest rate and boost your cap rate, you’re making your profits and the cashflow and the re-gentrification of it abruptly. Have you given any thought or looked in any of the stuff about the construction? Because I think self-storage has one of the lowest construction cost to build a new property.

We’ve looked at construction. We’ve had conversations about it. The thing with construction is two-fold. One, you have your holding costs. You have land, you have your materials, you have labor, but there’s no cash flow coming in to support that. We like the ease of going into an existing property, specifically ones that have internet marketing. There’s people out there that still own these properties and are not marketing online whatsoever. We’re looking to cure a problem rather than starting ground up construction, that’s just not a skill set that applies to us at this moment in time. Maybe down the road we would acquire property that has extra land and build on that. We’ve discussed doing that with a couple of our properties, but there is definitely a risk in the construction process. Because you’re going to pay more for your initial cash that you get, whether that’s getting 100% from investors and having to pay them a whole lot more than you would a bank.

It might be that you have interim financing at a higher interest rate, so however you’re choosing to finance that, you have to be really careful. Then you don’t know how long it’s going to take you to fill up that property and get it to the point where your cash flow exceeds your debt expenses. That’s one thing I would caution people on. If you’re a proficient developer, it’s certainly a huge opportunity if you can find the right piece of land in the right area. One of the key factors with self-storage is knowing a five-mile radius market and looking at your competition and seeing how well your competition is doing within that five mile radius, because that’s where about 80% of your tenants are going to come from. You can’t just look at a major metro market and say, “I think LA or Dallas is great.” You really have to go down to the individual neighborhood and understand that micro market.

We haven’t done this specifically ourselves, but another thing that other investors are doing is repurposing, say an old warehouse or an old retail area, and turning that into storage. That way, you don’t have to go through permitting because it’s already existing in authority. You still have to worry about the lease up and getting to your cash flow coming in, but it is a little bit simpler. We see a lot of that going on in the industry.

I’ve seen some of that happen with the bigger box stores or the Walmarts that have been out.

We have to be aware too. If we buy a property, what we look for is their vacant land nearby. Are there old empty warehouses nearby that somebody could come in, turn that into storage, and be our competition? We always look at that as well within that five-mile radius. One of the creative things that some people are doing is there’s pods. They’re easy to install. Some of them are portable, some of them are permanent, not fully permanent, but you bring them in there and the intention isn’t to take them out and put them on somebody’s front yard.

A lot of people have heard of pods. U-Haul has something similar to pods where it’s a mobile unit that as a service, a truck will come take it to your driveway, you fill it up, and then they haul it off to wherever it needs to go. That’s another convenient way of being involved in storage. There’s some new innovative ways that people are leveraging storage, specifically banking on convenience, which millennials like in some of the bigger cities, things like valet service where they even store and they’ll stack the storage unit one on top of another in a warehouse. The only way to get to it is through a forklift, an employee going in there, taking that unit out and allowing you to have that unit then brought back to your home.

That’s exactly what I did when I sold my house in one on my three-year road trip. I basically put what was left over in the house after my divorce in a pod and stored it for three years. Then when I finally settled back in a spot, they showed up and dropped it all off. It’s a pretty affordable way to do things, but it’s also when you’re leveraging up. Just across, it allows you to really maximize your square footage. . Where do you see the market in the next 24 months? You see a downturn across the board with real estate. Where do you think things are going here? Is it going to be property values dropping? Are we going to see a repeat of 2008, 2009, 2010 again?

It is hard to know where we’re going. So far, we don’t see it slowing down. In fact, the storage, as an industry, has been underserved for the demand. You have seen in recent years a lot of building going on and new players coming in, and there are a couple markets that are saturated. Sacramento is one of them, Dallas is another, but in general overall there’s still an underserved population and not enough storage units to accommodate the demand. For our specific industry, we still feel very confident. The last economic downturn, even if there is a downturn, we feel like we’ll be able to survive that.

I think one of the keys is as long as your debt to income ratio, as long as you don’t have a whole lot of debt on the property, even it does go down a little bit, you can still survive that. For us, because we’re buying them at 50% occupancy and then building them up, if they start to drop a little bit, we can still cover it. What we like with our business model now, it might be different for those that built from the ground up.

NCS 257 | Self-Storage

Self-Storage: There’s still an underserved population and not enough storage units to accommodate the demand.

Alia, what are you thinking?

My crystal ball says that there’s a little bit of softening in the market, not a tremendous amount. Every real estate market is a cycle. If there’s some level of predictability to that cycle, we hit a huge downturn in 2008 as everyone knows. Normally, the cycle is between seven to ten years, so we are at essentially that ten-year mark and we’re still going pretty strong. There’s some factors, like some of the tax reform that has helped the real estate industry a little bit. I don’t think it’s going to give it a huge bump.

On the opposite side of that is rising interest rate, so one counterbalances the other. I still see a strong demand for self-storage for apartment complexes, but it’s coming down to the micro market than what people are willing to spend on the properties. As long as you’re looking at the long term buy and hold strategy, your property cash flows and you have some value add opportunities, I wouldn’t hesitate to buy a property even in this hot market.

Especially if you’re buying it at 50% occupancy and you’ve got it a lot bring her that you’ve got a little pot of gold there. You just got to un-dust and make it work. Are you guys buying on your properties? Are they in major markets? Are they around major markets? You mentioned some stuff in Texas. Are they like in Dallas, Houston, or are they in secondary communities?

They’re in secondary and tertiary markets. In Texas we have Abilene, Killeen, Harlingen, which is down near Brownsville of the South. We bought in Edinburg, which is near that area as well. We’re just outside of Shreveport, Louisiana. There really are secondary and tertiary markets. The reason why is because a lot of big public companies like self-storage, public storage, extra space, those they like to go in the primary markets, they have a little bit different business model. They buy a higher occupancy and they just want steady cash flow for their investors that they have before they’re traded on the stock exchange, so for their stockholders. We stay out of those because we don’t have the same business model that they have, so our business model works better where we can find like mom and pop type operations and those tend to be a little bit more in the secondary and the tertiary market.

They don’t have the budget, they don’t have the knowledge to reach out to things.

There’s a big surge in the storage industry in the ‘70s and ‘80s. You got a lot of these mom and pops opening and they manage it themselves. They’re the ones sitting behind the desk. They’re still advertising in the yellow pages. We have found properties, where they have no online presence and they’re spending all this money to advertise in the yellow pages. That’s such an easy problem to correct. You do away with the yellow pages and just put up a website. It’s not rocket science, it’s very simple to do.

Alia, are you taking your individual properties and rebranding it or leaving it as the same known brand? Are you handling marketing or you’re outsourcing to a third party marketing to help with these assets?

We are outsourcing our SEO. We have websites that are configured by a company who specializes in three markets. I know one of them is senior housing, the other one’s self storage and the third one is, apartments. They specialize in doing websites and SEO marketing, Google Ads, etc, for those three industries. That company is called G5.

You put them under rebranding them?

No, we are keeping the same name of the company. We’re not intending to be like a well-known brand because in order to do that you have to concentrate in one market, and because we are scattered a little bit throughout the country, a property in Killeen, Texas isn’t going to have the same memory of somebody who jumps over to Mobile, Alabama. There isn’t that strong of a need. It’s nice when you have strong branding, strong colors, really nice logo and everything, but at the end of the day, that doesn’t necessarily serve our tenant base.

We’re looking for people who want something simple, something affordable so people compete on price, people compete on offering, so like all the amenities that you have to offer. Oftentimes, we start out with a price and then we continued to improve the property. We were talking earlier about people who take a C class building and make it a B class building and re-gentrify a neighborhood. That’s what we attempt to do to our properties if needed. At the end of the day you look at the numbers and you make decisions based on your cash flow revenue model.

Do you care if the facility is a multi-story climate-controlled property or is it all about the numbers?

It’s all about the numbers. As far as climate control, we don’t seek them out and we don’t avoid them. If they have them, great. We’ll use them. You can usually get about $10 to $20 more depending on the size of it for climate-controlled unit, but if they don’t have them, that’s fine too. The ones that are desired most by the tenants are the ones that you can drive up to and park your car right in front of them, get out and open the door, and those tend not to be climate controlled. Climate controls are usually interior to a building, so those roll up ones that are out off in the distance are the ones that people like.

I’m willing to bet that your Killeen property stays near Fort Hood?

One of the niche markets that we serve well is the military. We have several properties located near a military base, and it’s nice to have a retired Air Force Captain as your business partner who knows how to say the right things and get connected to the relocation department of these military facilities.

If the tenants don’t pay, you just got to reach out to their CO.

That’s the one of the beautiful things and we have to be careful that we’re not auctioning off any military unit. If you call their Commanding Officer, they get on it right away about that missing payment, so that’s the benefit of the military.

NCS 257 | Self-Storage

Self-Storage: When you are remotely managing real estate, your property manager is key.

Terri, you being in Verizon Wireless actually helped open a Verizon Wireless branch in Killeen back years ago. It was fast, feast or famine. It was great. Whenever they moved in town, when everybody moved out, you got to lot of cancellations on your submissions back in the day, so that’s funny. A couple of things that I used to do back in the day is I used to join different self-storage memberships and that where I would get the email list and drop an email out once a month to those members and say, “Been looking to get rid of their self-storage, have been having problems and will often find some deals.” On your thirteen properties you’ve got here, are you hiring one full time and one part timer, or have you toyed around with it? I’ve heard that there’s the self-storage, are you seeing any of that?

We typically hire a full-time manager who will work a Monday through Friday shift, and then we’ll hire a second manager to get the weekend. One of the value add that we include is making sure that we have six or seven day a week coverage. A lot of these mom and pops go Monday through Friday and they’re missing everybody who wants to move on the weekend. Again, it’s part of the reason for the lower occupancy. That’s definitely one benefit there. You were asking about the kiosks? That is a trend that we’ve seen. We haven’t used those. They’re pretty expensive. The other reason that we don’t use them is we like having a body there on site. It helps with security. It’s just one more deterrent from somebody coming and doing something they shouldn’t be doing while they’re there.

We haven’t adjusted that yet. We also try to use our property manager to the fullest. They’re many times just sitting there all day. Maybe there might be a couple of people walking in, but we will have them actively go out into the community and start marketing our storage facility to the community, especially things like apartment complexes nearby will give referral fees to apartment complex manager that refers people to our storage business. Our property managers go out and start soliciting, not only apartment complex or mobile home parks in the area, doctors’ offices, real estate companies, all of that will have them target that, so we really like to use our personnel to the fullest. You can’t do that with the kiosk.

That’s a great nugget there that you shared about marketing out to professionals in the area, and they’ll going up and meet people face-to-face and handing out some flyers. While it’s not like VSCO, it’s better than just having a sign up there because you meet a lot of people in the friendly community that can use your services. What has been your biggest challenge with the self-storage industry?

Any industry that deals with having property managers and tenant is making sure you have the right property manager in place, because that person is the life force for your company and can make or break you. Overall, we’ve had some great property managers. Some, we acquired with the properties, some, we had to replace. Oftentimes, you have to go in and assess why the low occupancy. Is it marketing, is it the previous owner, or is it the manager that’s currently there? You have to discern what that might be. Make sure that they’re properly trained and supported in their day to day job and keep an eye on them.

When you are remotely managing real estate, your property manager is key. The other thing in the self-storage industry in particular is you have to be very careful when you’re auctioning other people’s items off, that you’re doing that properly. We have somebody who now oversees that entire process for every property, making sure that we’re following all the local laws, specifically notification to the tenant because it could’ve been somebody passed away, somebody is on deployment, they changed their billing information and now their credit card is not being properly charged. They maybe moved somewhere so you have to be careful when you’re auctioning stuff off.

Terri, are you ever dealing with things like, “Is the stuff on TV Storage Wars where like it is in real life?”

We’ve actually had storage wars. At the beginning, we would do live auctions. When you first buy your property, you tend to have a lot of delinquencies from the past owner weren’t paying attention to it. When we have a lot of units, it’s great to have a live auction and they’re really fun to go to. It’s a lot of fun to see that. We tend to shift more, we do auctioning online. We have a company called Storage Treasures where you take pictures, put them online, and then people bid online. You don’t have to have a whole bunch of units that are needed to be auctioned. You can just have the ones and the twos. You don’t have to pay to hire an auctioneer and all of that. Online makes it very simple and efficient and you can get it done a lot faster. Storage wars, when we have them, they’re really fun. They’re a blast.

NCS 257 | Self-Storage

Self-Storage: The other thing in the self-storage industry in particular is you have to be very careful when you’re auctioning other people’s items off, that you’re doing that properly.

A smart way of doing business and making it virtually because you get a lot more buyers, those are just local. To do it is really cool. I did not know that. What are your goals? Where do you guys see yourself in the next sixteen months? Alia, I know you are constantly goal oriented. You’re constantly working at number, and you’re reviewing what you’re want, and your goal oriented, what are your goals for the next five years?

As far as our storage properties are concerned, our goal is to refinance the properties that we currently have, and getting the cash flow maximized on every single one of our properties. We’ve taken a heavy emphasis on that this quarter in particular as we see the interest rates rising and we want to make sure that we’re able to fulfill on our business plan, which is to first bring the investors in, get the property values up, refinance the properties, cash out everybody that should be cashed out, and then long-term cash flow. We got into this with the emphasis of how we do want to retire as quickly as possible. This asset class fell in our laps just when we were lending. That’s our goal, to get these cash money as much as we can.

Terri, how about you?

In the near term when we refinanced the properties, we also want to take care of our investors. We have a syndicated fund and want to make sure everybody is happy and healthy. We make them whole and do what we say we’re going to do and so that fund has another five years to it by the time we worked through our inventory and get everybody turned around. We have a huge focus not just on the properties of getting them refinanced but also on taking care of the investors, communicating with them, to put out a quarterly newsletter, all of that so they understand what we’re doing. We make sure we take care of them.

Are both of you always in acquisition mode? I’m sure we’ll see some people who are, “I’ve got a self-storage or know somebody looking for deals. Is there a way for them to submit those into your guys?” If it makes it easier, you must be bombarded?

I want to be bombarded with great deals. We’ll always look. With any asset class, you never rest and layback on your laurels. We’re always out there looking for deals. We’re not as much in acquisition mode as we were a few years back where we were just acquiring the properties. Last year, we closed on our twelve properties and we’re like, “Twelve’s a good number, let’s stop right there.”Then we had another great deal that we couldn’t pass up and so that took us another four months in escrow and closed on that here back in January. When the deals come up, if the number’s okay, that’ll do them.

You mentioned about a class you teach once a year, twice a year. Alia, you want to talk a little about that? What goes into your classes and when is it scheduled for?

We don’t currently have it on the schedule yet, but we’re probably looking at sometime this summer. We’d like to get through tax season before we start getting that plan rolled out. That does take some time because you’ve got multiple LL fees to do that for, but our classes go into how to buy, how to fund, and how to operate and manage a self-storage facility. We have online materials for that. We have a study kit, our self-sort of success kit that can be found on our web site at InvestorsInAction.com. Once we get our live class, we’ll post that there too.

Terri, do you have Tim working for you yet?

Tim is my husband and he just retired a year and a half ago, so he’s done. He’s totally out of the corporate game. Every now and then, we’ll be like, “We need some help,” and he tends to do more on these projects.

Same thing to Andre as well, Alia. Have you got him working for you yet?

He’s busy launching his nonprofit and for-profit, so he’s got his hands full.

I want to thank both of you ladies for taking time in your busy schedule to join us here. I encourage you go to WeCloseNotes.TV, check out the video replays of our podcasts, and see Alia and Terri. I love the fact that they did a great job with InvestorsInAction.com. Pay attention to these two ladies, not only are they making a name for themselves in the last couple of years, but you’ll see some even bigger things from them over the next few years. Alia, Terri, thank you so much for joining us. Hope this has been helpful. Thank you for being here and congratulations on all your success. You two deserve it.

Thank you. Appreciate it.

Go out, make something happen. If you heard anything from what Alia and Terri said is, “Take your skills that you learn, apply them to your dreams, apply them to working forward. If you got to make a pivot, make a pivot, but don’t be afraid to send a damn email and take some action.” We’ll see you later at the top.

 

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About Terri Garner

NCS 257 | Self-StorageTerri started her professional career as a Mechanical Engineer, graduating with honors from Texas A&M University as a member of the Tau Beta Pi Engineering Honor Society. After 6 years of designing satellites for Hughes Aircraft Company, a year as a technical consultant in Europe, and 11 years as a business manager at Verizon Wireless, Terri left Corporate America in 2007 to focus on her real estate endeavors fulltime.

Involved at an early age – helping her father rehab homes as a child and purchasing her first rental property in 1996 – over the years Terri has personally been involved in more than $30 million worth of real estate, investing in 18 states around the country doing everything from rehabbing and home staging (she’s a certified Stager and Trainer), to long-term and vacation property rentals, to originating and purchasing performing and non-performing notes. She has managed projects both in state and out of state, successfully completing multiple ventures remotely.

About Alia Ott Carter

NCS 257 | Self-StorageAlia has spent the past 13 years actively investing in real estate and enjoys creating opportunities for others to generate passive income through Investors in Action lending programs. She has been involved in well over $25M worth of real estate transactions – from flipping and renting properties to private lending and fund management.

Prior to launching Investors in Action, Alia served as a Director for several corporate philanthropy programs initiated by Cisco Systems, AOL, Yahoo! and the United Nations, raising over $1 Billion online and connecting more than a Million individuals with causes they care about. Alia was inspired by the model of leveraging corporate engagement as a more sustainable way to support social enterprise.

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