Investing in Self-Storage, with Paul Moore
Why would a commercial real estate investor, author, and syndicator move away from apartments and become a self-storage investor?
Paul Moore, real estate investor and author of Storing Up Profits, demonstrates how to capitalize on America’s obsession with stuff by investing in self-storage.
So, if you want to find out what’s to love about self-storage, learn the risks and downsides of self-storage, and get the scoop on how it performed during the pandemic … tune in now!
Table of contents
Prior Interviews with Paul Moore
Paul’s Introduction to Self-Storage
After selling his company to a public firm in his 30s, Paul thought he was going to get out of the game and focus on his family. However, he quickly realized that he wasn’t fulfilling his calling, and therefore was not being the husband or father he wanted to be. On top of that, he was bored.
This spurred him to seek a way to fill his time in a purposeful way that could also help him protect his family’s wealth. What occurred to him was real estate, so he started flipping houses and lots, and finally building houses.
[4:28] “I found out something really important that everybody needs to know. If you don’t know how to tighten the doorknob on your own house, you probably shouldn’t build a house.”
Eventually, he found his place in multi-family real estate. But after a while, he felt like what he thought was the “perfect investment” was no longer perfect because he had to overpay to get it. After research and time, his team discovered self-storage investments and created a fund to invest in that space.
Paul started his work with Bigger Pockets as a blogger, sharing his wisdom on real estate. And every six months, he would ask, “Is there anything else I can do to serve you?” Because Paul was invested in their success, and helping Bigger Pockets succeed, they’d let him do videos, live shows, and write books through them.
[7:17] “Bill Gates, he did three things to become the wealthiest person in the world. Number one, he decided at a young age what he wanted to do and he stayed in that lane… Second, he… found the biggest, most influential platform in the world that would be willing to let him partner with them. And then the third step is… not obvious. He did everything in his power to make them successful. Not himself, but them.”
Why Self Storage?
One of the benefits to self-storage, as Paul shares, is the short time frame the asset operates on. When you lease commercial property to someone, those leases are often a decade or two long, which means that rent is locked in. With self-storage, leases occur on a month-to-month basis, so you can raise prices as you see fit each month.
[10:58] “The thing I like best, though, is the fragmented industry. Now self-storage has about 53,000 facilities in the US. That’s about the same as McDonald’s, Starbucks, and Subway combined.”
About 75% of these facilities are run by independent operators, and two out of every three independents own one facility. This means they’re classified as a mom and pop, and they don’t have to have a lot of knowledge to make a good profit. However, this creates opportunities for experienced investors to come in and acquire the property, and capitalize on any oversights to drive further profits.
What is Value-Add in Self Storage?
[18:06] “The first time I heard value-add and self-storage, I think I laughed out loud. I mean, where are the countertops and cabinets and flooring and bark park and lighting and, you know, new appliances? None of that. We’re talking about four pieces of sheet metal, some rivets, a floor, and a door. Yet the opportunities for self-storage value-add are amazing.”
Some ideas for value-add that Paul shares include:
- Filling vacant units
- Reining in delinquency
- Add a billboard, cell tower, filling station, or ATM
- Partner with U-Haul
- Add point-of-sale items
- Include RV and Boat storage
- Incorporate climate-controlled facilities
All of these things can increase your profits and make your business more valuable for yourself and the people using your facility.
The Risks of Self Storage
The biggest risk of self-storage, Paul shares, happens during lease-up. During Paul’s first self-storage investment, he ran into this issue. He bought a self-storage property around the same time two other national competitors moved into the area. This meant for all three companies there was a much slower lease-up period because that particular community had several good options.
Another downside to this situation was that the national competitors had more ability to undercut their prices and get business, without feeling pain from the reduced prices. These national companies also, at the time, had better management and software.
Paul also shares that there’s a risk that your seller lies to you about their numbers, which can make it difficult to perform well in the early months or years.
How to Get Started in Self-Storage
If you have a lot of capital, getting started can be as simple as making an offer. However, you don’t have to be sitting on cash to break into the self-storage business.
Paul shares many ways to get started in the industry, including:
- Working through the ranks at a storage facility
- Getting a job as a broker or lender or asset manager for the facilities
- Purchasing a really small, inexpensive facility and learning the ropes
- Join a company as a capital raiser
- Becoming a deal finder for larger companies
- Getting a paid coach or mentor, then partnering with them and others
- Invest passively in self-storage, through a syndicator or fund
Connect with Paul
To invest with Paul, you must be an Accredited Investor, but you can access the following resources, no matter your income or Net Worth:
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