A Self Storage Broker's Warning to First Time Buyers

Brokers are not the enemy, but they are the ones who will decide whether or not you see another deal from them. David, before I even tell people who you are, I want to ask you something. What is the single biggest mistake first-time buyers make when dealing with a broker for the first time?

Submitting lowball offers without any rhyme or reason.

Hmm. That's a good one. What does that actually feel like on your end when somebody lowballs you with, you know, no, you said no rhyme or reason, but I'm assuming you mean no backup, no comps, no, no logic to back that up.

So we have to deliver a story to our client, just like we have to deliver stories to buyers. So in order to really tell that story, we have to understand why the buyer came in at the price they came in at. So if they're not backing it up with Sold comparables, they're not backing it up with how the facility's currently performing. They're not backing it up with financing metrics of any sort. It makes it really difficult for us to have a compelling story for why the buyer's coming in with a lowball offer. Now, if they're able to come in information and say, hey, based on the market rates, based on where, you know, we're seeing the, the current street rates for all the facilities in a certain area, we don't think that we're going to get up to what you're projecting as far as rates. That's a reason for why, you know, an offer might come in so low. You know, if banks are coming in at, you know, for financing at call it a 7% interest rate and they're not able to get, obtain, you know, 70% LTV on a deal, they can only get 60% LTV on a deal. That also makes sense for why a deal doesn't pencil or why it's coming in so low. So we need the reason and the rationale for why that offer's coming in so low so we can we can have the story to tell our client.

All right, folks, you might want to listen to the rest of this episode then. I'm Joe Downs. Welcome to the Storage Moguls Podcast. My company's acquired over 20 self-storage facilities. We've either bought or developed over $70 million in assets across multiple storage niches with a few more under contract right now. We've got 2 pro storage facilities in development, and we've seen this business from every angle, educated hundreds of students, learned firsthand who succeeds and why. And that's actually what drove me and my partners to build storagemuggles.ai, which is, yeah, it's an AI-powered community. That's certainly part of it. But in that community, we've got the structure, the guardrails to teach people how to buy storage facilities. It's like, It's like bowling with bumper rails. Check it out, storagemobiles.ai. And by the way, that's why we started this podcast is to bring you the operators, the lenders, the brokers like David, and actual first-time buyers, people who bought real deals so you can hear their stories and learn this business from the folks living it every day. And I'm very excited about today's conversation with David, and you should be too after what you just heard already. David, who full disclosure, I have known for a few years now and know him personally. He's a, Managing Director of Self Storage at Franklin Street, one of the nation's leading self-storage brokerage companies. And he leads one of the teams there with his, with his partner Frank. He represents sellers on listings across the country, works on buyer lists of 10,000 to 15,000 active prospects. And right now he's on the front lines of a wave of COVID-era loans, I would imagine, from 2019 to 2022. At Vintage, where you had compressed cap rates coming due into a market with much higher cost of debt. We're gonna get into that. So he sees both sides of that conversation every single day as well. David, welcome to the Storage Moguls Podcast.

Thank you for having me on, Joe. Appreciate the opportunity here and, uh, looking forward to this discussion.

Always excited to talk to you, my friend. I mentioned we, I didn't even mention we used to be in a mastermind together. We're clients. Have we bought deals from you? We bought deals from you. You've sold deals for, for us.

So.

We got it coming and going here. Before we get into it, David, as you know, I do a couple true or false throughout the episode. Why? Because they're fun, but also because it's my way of, in a fun way, helping the listener learn a, you know, a little tidbit here and there about self-storage. So David, true or false? Self-storage has posted one of the lowest loan default rates of any major commercial real estate sector for over 2 decades running from 2008 through 2020. True or false?

That's 100% true.

That is true. Even though we just kind of set up a scenario that's going to be interesting to talk about. Yeah, folks, if you pull the latest CMBS delinquency comparison across property types, you will find that self-storage is one of the most resilient asset classes that lenders track, which is exactly why brokers like David still see steady deal flow even when credit gets tight everywhere else.

All right.

I always like to start with where somebody actually comes from because it usually explains everything about how they operate today. David, before you were brokering storage deals nationally, you were somebody else entirely. And I didn't even know this about you until recently. You played college baseball. Frankly, I would've thought you were in the mafia based on the videos and social media you put out where you're like interviewing what, like, I think your family, I don't know. It looked like Little Italy in the Bronx. I'm totally stereotyping right now. I'm just going by the videos I saw that you put out personally, but you played college baseball. You were competitive, team-first environment. And somewhere between that and today, you helped build Franklin Street Self Storage practice into a national platform. So what did baseball teach you that applies directly to how you run a brokerage team today?

Yeah, great, great question, Joe. You know, I didn't grow up thinking I'd end up selling self-storage properties, obviously. You know, my family in, in those videos and that series that I do, the interview series, they own and manage a lot of multifamily in the Bronx and Westchester County.

Oh, I was right. The Bronx.

Yeah. The Bronx and Westchester County.

I mean, come on.

Yeah.

You, you can't fault me here. You, you got the baseball bat thing going. You're in the Bronx. I'm thinking the Bronx Tale, the line, now you can't, now you can't leave.

No, it's a fair stereotype. But yeah, no, my, my extended family members, their, their multifamily business, I grew up watching them in the business. And, you know, growing up, I didn't think I would ever sell self-storage properties. I played college baseball, was a full scholarship baseball player at a small Division II school in Westchester County, New York at Concordia College. And like a lot of athletes, I thought that was the path. I was going to be a professional baseball player playing for the New York Yankees. You know, I probably, you know, if you were to ask me, if you were to ask me, I still think I deserve to be playing for the Yankees, but I just wasn't good enough at that time.

But— What position?

I played I played third base.

Third base? Had a good arm on you, didn't you?

Yeah, it was, it was fun. But when baseball ended, I had to figure out what was next. So I got into commercial real estate. I realized pretty quickly that this business rewards a lot of the same things that sports do. It's not about having one incredible day. It's about showing up every single day, making the calls, following up, learning from your losses, staying disciplined when nobody's watching. And I think people overestimate talent and underestimate consistency. And this is the one thing I always talk about, Joe, just like with my team, is like, you know, motivation is for amateurs, right? Consistency is where the killers live. And that's where, you know, people are going every single day and just dominating. I love that. And, you know, I think the best brokers I've met in this industry are usually the people that everyone's talking about that have The most volume, the most market share, are always in your face, always there. And it's not because they're always the smartest people in the room. They're just the ones that refuse to quit. So that's how I try to run our team. That's how I try and run our brokerage. That's how I try. And, you know, the reputation I put out to the market, we celebrate wins, obviously not too much. We don't want to get too high. We lose deals, we lose opportunities, but we don't get too low. We just keep showing up day after day. And, you know, you don't build a great brokerage because you felt motivated for 2 weeks. You build it because you did something over years and over time, uh, just consistency and just being in front of people as much as you can.

I love that. And I love the quote you threw at us as well. You know, the best baseball players, the best batting average in baseball is still a majority failure rate, like overwhelmingly failure. Right. 70% failure. I'm going with the .300 batting average in baseball is pretty damn successful. Is it not?

Yes.

Which means you're failing 70% of the time.

Correct.

So is that the mentality that you took from, from baseball to building, uh, you know, a national self-storage brokerage practice? I mean, is, is, is that the— that's gotta be right. That's gotta be the, the, The mentality you bring every day, because you bring that to the plate. You bring to the plate the knowledge that you're gonna fail more often than you succeed.

Absolutely. I mean, uh, baseball, I think, is, is the greatest sport in terms of like the transition required to get into brokerage. Because like you said, Joe, you're a Hall of Famer if you're batting .300 and you're failing 7 outta 10 times in, in, in the sport of baseball. Like you're a very successful athlete. The same thing in baseball just did you growing up and playing baseball. If you're succeeding 30% of the time, you're a star on the team. And, you know, I think getting—

Are you succeeding 30% of the time?

I would say we're probably succeeding a lot less in brokerage than 30% of the time.

Right. I, I, I was at 30%, you'd be a Hall of Famer in brokerage.

Yes. Yes. I would say we're probably succeeding about 10% of the time. For every time we do a valuation, we get one listing and those listings 50% of the time sell. So I would say for every single time we do a BOV, we're probably succeeding 5% of the time is our success rate.

I'm so glad we're talking about this because, you know, in Storage Moguls, we've got all these students and, you know, we do weekly calls and, you know, there's— you can see and sense frustration, especially when somebody's new and they're trying to find— whether they're talking to a broker or they're talking directly off-market to a seller, they're out there trying to find deals and it's easy For me to say, you just have to stay after it. You just have to keep going. You have to, but I don't know how well that's received because they look at me like, well, you're successful. You've bought this many and this, that. I'm like, wait, yeah, we did. But do you know how many times we struck out? Right. So it's so refreshing to hear you say as a broker, a seasoned broker, that your batting average in getting a listing. Is maybe 10 to 15% of the time, right? It, it's 100. If we're going batting average, it's, you're batting 100, 150, you wouldn't survive in baseball. You wouldn't make it in the minor leagues.

Well, well, Joe, to make it even worse, there's so much work that goes into that that's not being paid off. So I would say 95% of the work that we do day to day isn't even being translated into actual dollars until a deal closes. So when I show up to the office, 95% of the work that, that I put in isn't being translated into Wow.

Think about that. So I'm so glad we're talking about this because I'm hoping, and I know our Storage Moguls members listen to this, and I hope they're, they're hearing you, not just hearing you, but really hearing you, that this is work. And, you know, I always hated in sales, every no is a yes, or it's one step closer to a yes. I wanted to punch people in the face who said that to me. But, but it's true. It's, it's, it's true in that you just have to keep after it. It's not— I never liked looking at it as one, that next no, I'm closer to yes. I think you have to look at it like, I'm gonna make 10 calls today. In 10 calls, I'm going to talk to, you know, 1, 2, 3 folks maybe. And of those 3, I'm probably going to have one of them lead somewhere. And it may not be today. It might be 6 months from now. It might be a year from now. But that's, that's, I think, the mentality you have to take to this. And I'm sure the same is true in brokerage.

Absolutely.

Just trying to get listings.

Absolutely.

David, as a broker, you're, you're mostly listing deals, right? On behalf of sellers. I'm sure you don't have a lot of clients hire you to be the buyer's rep, right? Was there a specific moment though that you realized you had to serve the buyers too in a transaction, not just the sellers, even though the sellers technically are the ones that, and fiduciarily, that's where you, that's who you have to represent, but And technically they're the ones that pay you, but is, was there a moment where you realized, hey, I've got to serve the buyer here too?

Yeah, I mean, absolutely. I mean, I think whenever you're listing an opportunity, Joe, you're contractually and legally representing the seller. Your fiduciary is your seller. And I think that's a little bit of a misconception, or really the biggest misconceptions is, We're only representing the seller. We're only on their side. But practically speaking, we want great buyers. If you're serious, professional, transparent, I absolutely want to help you buy deals because hopefully we do 10 transactions together over the next decade. And at the end of the day, yes, the buyer has a fiduciary— sorry, the seller and the broker have a relationship and the broker has a fiduciary to the seller and his client, but the broker doesn't get paid unless there's a buyer out there. So the buyer, sorry, the broker needs a buyer as much as he needs a seller. So, you know, we, we're on the same side. Buyers, and then I think this is another thing where, where I think the conversation will go and we could talk about a little bit more later, but being concerned about being blacklisted, you know, not knowing what they're talking about and, and, and, and hey, am I gonna sound stupid when calling a broker, but buyers don't get blacklisted for asking questions. Like, you should be asking questions. As brokers, it's literally our job to answer the questions you have about a deal, right? The first question should be, what's the story? Why is the seller selling? Are they retiring? Are they— is there a partnership dispute? Is debt coming due? Is it just— are they lifestyle investors where they're just like, hey, I'm completely done with this investment opportunity. I've, I've had it for 15 years. It drives my wife crazy managing it. I had a tenant call me yesterday threatening me and I just don't wanna do it anymore. I'm just over the business. But buyers don't get blacklisted for asking questions or making low offers. They get blacklisted for wasting people's time, right? If, if you're calling me, Joe, and then we have dialogue for a week and you're hammering me with a bunch of questions over email, over text, over the phone, I'm answering them, and then you disappear. I'm like, what the heck happened to Joe? You know, like why he was so engaged in this process, right? If buyers constantly retrade on opportunities, if buyers tie up deal, I mean, this happened just before I got on the call. There's a buyer that's an SBA buyer. He tied up a second deal in the East Coast of Florida and he dropped it and his lender has no idea what he's doing. And, and I sent an email. I said, please don't look at our deals going forward. Like you've done this twice in the last 2 months and you've wasted our time, wasted our client's time. That's when brokers remember that when you disappear constantly, you retrade or you tie up deals with no execution. That's the stuff that gets you blacklisted. And that's the stuff that brokers remember. But reaching out, engaging, having conversation, asking questions, you know, trying to be as informed as possible for the opportunity that does not get you blacklisted.

Love it. All right, David, true or false? Self-storage cap rates compressed to record lows in 2021, then rose again. Once the Fed started hiking rates in '22 and '23.

True. That is true.

Cheap debt and heavy investor demand pushed storage cap rates to historic lows in '21. Then as rates climb, cap rates decompress, which is exactly why so many 2019 to 2022 vintage loans are underwater against today's refi environment. Which brings us to the thing nobody says out loud on one of these calls. Let me, let's name The thing everybody's actually thinking on one of these calls, but nobody says out loud. Here it is. The broker works for the seller, not me. They don't actually care about my deal. And if I say the wrong thing on this call, I'll never see another listing from them again. That's the fear. David, is that a fair read of what's going on in a first-timer's head?

I think so. You know, I don't think there's anything wrong you can actually do when talking to a broker or reaching out to a broker. I think what you can do to get blacklisted from a broker is stuff along the process, you know, later on. It's if you're asking a bunch of questions and then all of a sudden you disappear or, you know, you don't tell the broker why you're not going to submit an offer or why you're no longer interested in the deal by ghosting them. I think that, you know, that hurts them. I think You know, if you're under contract and then you're constantly making the process of trying to buy the deal very difficult, I think that hurts you as a, you know, as a buyer.

Can you, can you think of a specific buyer who got this completely wrong, like a scenario, and then one who got it right? No names needed, especially if they're, if it's our name.

Well, we, there's, there's a specific buyer right now that tied up 2 deals and he wants to go through SBA financing and he said he was prepared. to go through SBA financing and he has a lender and he's tied up 2 of our deals in the last 2 months. And during the first 2 weeks of due diligence, after we've sent him everything on 2 separate deals, his SBA lender didn't know how to underwrite the deal properly and therefore didn't call it financeable. Meanwhile, these are stabilized opportunities that are great and they've got 'em at great prices. So that's a situation there where he's tied up 2 deals of ours. He's wasted a lot of our time, wasted our clients' time putting together all the due diligence documents that takes hours and days to put together and just has failed to execute. And then, Joe, as far as another example, I mean, we're putting out 4 to 6 new listings a month as brokers. So we're having hundreds of inquiries on deals that we list. And then we do a really good job of following up with those buyer leads. Weekly. But most of the time what ends up happening is there's dialogue throughout days while that— there's throughout that process, there's daily dialogue that goes on. And with that being said, when buyers aren't following up with reasons for why they're passing on the deal, that makes it really difficult to stay engaged with them on future opportunities. Because you know that they constantly do the same thing where they reach out, they ask for a bunch of questions, you answer them, and then they just go away and they just never Can I tell you what happens in our community, Storage Moguls? Yes.

And I would love your feedback on this. So it's very natural, you know, we have these calls or we'll have a one-on-one call with a student who's got a deal and maybe it's one of your listed deals, right? And they say, look, I've gone through the underwriting. I can't I just can't get to the number. Let you guys have it listed for $2 million in this example, and all they all they can get to with all their training and the modeling they're using, and that we go over with them, and maybe they're they're at 1.7 for for argument's sake, right? And then they say, so I I just I can't I can't send that offer to the broker because it'll be offensive, and he won't they won't call me back, or they'll think I don't know what I'm doing, or but I but I just these are the calls. You're not part of. These are the calls that we field and we have. And, and so they'll, they'll go on their litany of reasons why they can't send that offer. And, and what I try to employ them to do is send the offer. And there's a number of reasons why I tell them to send it, but the response, the pushback we get is usually, yeah, but then they're going to want to ask me why. And I go, Okay, tell them. Or a better scenario is you send the offer and say, "Hey, I'd like to talk to you about this offer, David. I'm only coming in at 1.7." And the way we're coaching them, and I'd love your your comment, your feedback on this, is to say, "Look, brokers are people too, and they'll help you." So if you call them and say, "Look, my underwriting." And the assumptions I'm using in my underwriting only got me to 1.7 and you have it listed for 2. What am I missing? David, is, is that a fair approach for someone to, to, one, do you want them to send that offer? Two, is that a fair approach for them to take?

I mean, Joe, it's, we've presented offers. Yes. Submit the offer no matter what. To answer it very simply, submit the offer always.

Can you give us, can you, can we break that down? Why, why submit the offer? Why are you adamant about that?

Well, I, I've presented offers that were 20% below asking. I presented offer 30% below asking, 40% below asking, 50% off of asking. It's, it's, that's literally my job, Joe. When we start, when we get approved by the, the Real Estate Education Board, We, we have to, in, in our license, we're required to send a seller every single offer that we receive unless we're specifically told over email or, or, or if it's written, don't send me an offer below this range. That's the only time we don't send a client an offer. So it's, it's literally our job. Sellers don't hire me to decide what they should hear. They hire me to bring them the market. And if that's where the market is, that's what we're going to present to them, right? So what might be worth $2 million to me might be $3 million to you, might be $4 million to Jack, right? So the market will speak. Where buyers mess up in making an offer, and I would say, I would even call it an emotional offer versus an educated one, is they don't tell me, they don't tell me why. They say, well, that's just what I want to pay and that's it. And I need to know why, right, Joe? I need to know why. I need to know what's going on as far as occupancy, deferred maintenance, market rents, upcoming CapEx. The roofs haven't been replaced in 50 years. They haven't been replaced in 50 years. They're gonna need work. Give me something I can actually bring back to the seller. Along with that, give me some of your experience, your background. You know, if there was storage moguls, you know, tell us, you know, the mentorship program they're a part of. So You know, I need to know why that offer's coming in lower and don't be afraid to submit it cuz I have to submit it no matter what. So, you know, I like to always tell clients, you know, a good offer, sorry, a low offer with good reasoning has much better chance than the average offer with no credibility. If you're submitting an offer with good rationale and reasoning behind it, that has a better chance of getting accepted. Than an offer with no credibility, no reason you submitted it. And I just have to figure out how to try and get a deal done. Also doing deals, there's psychology behind it, Joe. You know, we've been running this issue lately with buyers submitting offers and my client will send them a counteroffer and then the buyers are like, well, we're comfortable where we submitted initially. Well, why wouldn't you tell me this is my best and final offer? There's no more room. Why wouldn't you come in a little bit less then at that point, just to have some room for negotiation? I mean, at that point, even if my client would've taken an offer at that price, just like psychologically, they just won't take it at that point cuz now they feel like they haven't won. So I always tell people, hey, don't gimme your best and final first. This is a negotiation. There is a little bit of psychology involved with these deals and some emotions involved, but at the same time, there needs to be credibility behind the offers. There needs to be a strategy and consult the broker, ask him, you know, how you should approach it. You know, oftentimes we're trying to get a deal done. If you're, you know, if you're listed at $2 million, we know there's a transaction can be done at $1.7 and you can get to $1.7, maybe come in a little bit less than $1.7, you know, come in at $1.6 and let the negotiation take off from there. So we want to be able to try and get a deal done regardless.

That's such, that's such interesting insight there. So, so the, there's an emotional component on the seller side too, even though they're coming down from the quote unquote list price of $2 million, you come in at, if your max is $1.7 million, let's just use these numbers for the example. So we don't have to, so we can use the same numbers here. But if your max on this deal is $1.7 million, maybe you come in at $1.625 million. I don't know. And you're saying if the seller was going to get down to $1.7 million, they probably need an emotional win getting you up from $1.625 million to $1.7 million. That's so interesting. It's, I mean, it, it, it's something that we do teach. It's just, it's interesting to hear it confirmed by a broker.

Absolutely.

But that makes sense. And, and you're not giving anything away. We don't know what that seller's thinking and not every seller's gonna do that. But I do understand, I do understand the philosophy and the psychology behind that. They, you're not getting the number you, you set out to hope to get when you're the seller and And I work with my broker who tells me, hey, I might be able to get $2 million for this. I'm pretty excited about $2 million, right? I should be. And then the market comes in at $625,000, $1,600,000, $1,500,000, $1,657,000. Those are the offers. All right. I probably, I think the market has spoken, right? If I'm the seller. Now I got to deal with one of these offers that's That's, you know, below where I was, my utopian, you know, high hopes offer or listing price. But even then, I'm a human being. Give me a win. That's what you're saying. Let me negotiate at least up to closer to $2 million. And if you start there and you stay there at $1.7 million, even though that might be the best number I can get, you're right. It doesn't feel like a win.

Correct.

It feels like I'm the only one that came off my number.

Yes. I always tell people, Joe, just come in a little bit less than you're anticipating. Let's see where the counteroffer's going to come in at. And oftentimes we're surprised, right? Like you go, you list a deal and we always tell our clients a range of where we think the deal will transact. We don't give 'em just a number, we give 'em a list number, and then from there we give 'em a high, middle, and low. I'm not sure how other brokerage shops do it. However, a client will always give us guidance from there. They'll say, hey, I like that list price. I'd sell at the high number, you know, and that might be 3% off the list price. So we already know going in, there's probably a little room for negotiation and we're artificially listing it a little bit higher just to kind of give us that room to negotiate. But sometimes they come in a lot lower than they initially kind of like postured, right? Like if it's a $2 million deal and we're not getting any offers on the deal, We get an offer submitted at $1.4 million, our client may counter at $1.7 million. And we're like, whoa, like where did that come from? You know, he said, I'm not selling for a dollar less than $2 million. And all of a sudden now they're coming off $300,000, you know, and there's clear motivation there.

And let me give you another reason to send it. Because one of the things, one of my taglines, in fact, I end the show with send the offer is one of the things I say because I say it every time I'm teaching students, just send the offer. Did you send the offer? If you did the work, send the offer. Another reason for that is, David, what you just said, that could be 6 months later.

Correct.

That could be, you know, all the offers came in at $1.3, $1.4, and they're not selling for less than $2 or some number close to it. And then 6 months, 9 months later, life happens. And all of a sudden, you know, all right, David, maybe I would sell. Who was your top offer? Maybe I would sell for closer to $1.5. Oh, you had one at one, you know, one four five. See if you can get them to one seven, right? So the so another reason to send the offer: if if your offer isn't in there with your name and and phone number attached to it and email, who does David have to go back to to counter? If if you never got that offer because and the the the juxtaposition, the reason we're having this conversation is. Because students will say, well, I don't want to offend the broker. I, you know, in a residential transaction, people feel like they'll be offending the homeowner if they send an offer $100,000, $200,000 less or some percentage less. Right. And the reality is this is a commercial transaction. And while I do tell people it's self-storage, it's the closest thing I've seen. It's commercial. But it's the closest thing I've seen to residential because it's their baby. There is, from a seller standpoint, there are a lot of times there is an emotional attachment. They might've built it. They probably owned it for 20, 30 years in a lot of cases. You know, they plant flowers in the flower boxes like it's the front of their house every year type of thing, right? It's literally their baby. And a lot of times I feel that. When I'm dealing with the seller. And so it can feel very emotional for them. So I get why the buyer doesn't want to offend with a lowball offer. But if you don't risk the offense with an— not a lowball offer. I don't want to put the adjective in front of the offer. I'd rather put it behind it, meaning— A legitimate offer that happens to be lower than the listing price, even if it's significantly lower. A lowball offer, I think, takes on a different connotation. That's where I've intentionally lowballed almost like a vulture to see what I can get you to take. That's not what I'm saying here. What I'm saying here is I did the work. I've got my capital stack. I have my assumptions. I know what I can and can't do with this facility if I know what I'm doing. And this is what my offer is yielding based on that. That offer is lower than the listing price, maybe by 5%, maybe by 20%. But it's lower. That's not a lowball offer to me. That's just a lower offer. And if you don't send that, then how does the broker or the seller ever know that you're in play to buy that facility at any number at all, because you didn't send an offer at all.

I mean, and Joe, we like to— we don't say lowball offer. We say market offer because it's a market offer.

That's a better way to put it. That's a better way to put it.

But what I—

for the, for the new buyer that's listening, I'm trying to make the distinction between lowball and legit, and that legit offer is market. To your point, it just happens to be lower and there's nothing wrong with that. And I want them to send the offer and that, and that, and that's why I wanted to spend so much time on this.

No, absolutely. And, and I think, Joe, it's something as simple as having a conversation with the broker as well and just giving them a call and just saying, hey David, I know this deal's listed at $2 million. We love this opportunity. We're shaking out at $1.2 million. Is it worth my time to submit the offer? You know, and, and that broker may say, you know, I may say, Joe, you're wasting your time. I already have 6 offers at $1.6 million. I already have 7 offers above $1.5 million. You know, don't even bother at that point. Then you've established credibility. You've shown that you haven't wasted their time. And at the very least, you've told 'em like where the range is at that point. Or you can even put that over email in a very nice way. Hey, where I'm shaking out is around $1.2 million. Is it worth me submitting or am I wasting your time and my time? You know, and, and I might tell you at that point, no, go ahead and submit, please. Sometimes I need those offers. I need those offers in order to anchor the client to where the market reality is. And because the market's—

To establish market.

To establish market. And because the market's changing so fast, Joe, we don't really know where the market is at times, right? I might do a valuation for a client 6 months ago when things are going really well economically. We're coming outta the holidays. The market's roaring back. We have multiple offers coming in on deals, and then all of a sudden we have the Iran war that hit. Now the time is completely different, right? We're in a completely different market than we were 6 months ago when we did the valuation. So at that time we may have been at $2 million, but now the market may have shifted so much to where maybe that deal gets done. Maybe the value on that deal's $1.75 million, but now the client still wants to, because they're anchored at $2 million. And the value we gave them 6 months ago, they still wanna list that deal and that opportunity. And we're not sure. We may say, hey, we might get $2 million, we might get a lot less. But the market's also shifted and changed significantly in the last 6 months. Buyer sentiment's also changed. The, the, you know, economically things are a little tougher. So at that point, things are changing so fast. Just submit the offer, or at the very least, give the broker a call or send 'em an email as far as where it's penciling and whether it's a waste of everybody's time or not.

I love it. So folks, you don't have to worry about getting frozen out because you submitted a quote unquote lowball offer, because it's not a lowball offer if you really did the work and you call the broker and you have a conversation and you talk through with the broker how you arrived at that number. By the way, many times what you'll learn by having the conversation with the broker, someone like David, Well, first of all, not only are you starting to build a relationship and he's starting to respect you by having that conversation, you might learn a thing or two about your assumptions and you might have missed something. And next thing you know, you go back to the drawing table and you come back up and your $1.4 offer is now $1.7.

Correct.

Because you didn't realize A, B, C, X, Y, or Z about that market that David was able to give you some insight to. So the relationship is the asset here. It's not the deal in front of you, it's the next 10 deals. And the way you can build and develop that is Is by doing honest work, submitting honest offers, and having honest conversations with brokers. That's how you're going to get ahead in this game. All right, David, true or false? A commercial real estate broker typically only gets paid if a deal actually closes. That is, I would, I would hope you would get that one right. And you did, folks. Brokers work almost entirely on commission at close. So no closing, no paycheck. That's exactly why a broker's real incentive is finding buyers who actually follow through, not just buyers. Who make noise. Okay. Let's see. Knowing the fear is one thing, right? So knowing exactly what to do though is different entirely. So I want to get tactical. David, if a first-time buyer is picking up the phone to call a broker for the first time, what do they actually need to know before the call?

Yeah. I mean, be as practical as possible, Joe. Let us know who you are. You don't need to know everything about storage, but you need to know your buying criteria.

Should I, should I be afraid? Let me just be the voice of the person.

No, no, absolutely not.

Should I hide the fact that it's my first deal?

No, no, you should be transparent. I mean, we tell, we tell clients all the time.

Why don't you, why don't you look down on me for my first deal?

Because we're dealing with a lot of first-time buyers every single day. Some, sometimes first-time buyers are the best buyers for that deal. And we wanna work with them. First-time buyers coming through your programs are some of the best people we work with all year. And, and we're happy cuz you guys are getting, they're getting the mentorship and the coaching necessary of how to get transactions, how to get deals done. I always tell buyers, when you're reaching out, tell us right away, hey, my name is David. I'm a first-time self-storage buyer. I love the industry. I'm a part of Storage Moguls with Joe Downs and Jack Pezzino. They suggested I reach out. I wanna talk to you about this deal. You know, this deal's in my backyard. I own residential properties in this area. I run a business in this area. I've been targeting Florida because I'm looking to relocate to the market. It could be several reasons, but you know, the questions you should know when reaching out to a broker or have the answers to for that matter is what markets you're looking to buy in. You know, how much equity do you have? You know, is your financing lined up? Is your first deal, your 10th deal, value-add or stabilized opportunities, timelines? Like when are you looking to get a deal done? You know, buyers that stand out to us are the ones that are prepared. And if you're coming in and you're trying to fool us and trying to act like you know everything about storage, buyers are gonna pick that up. I'm sorry, brokers are gonna pick that up almost immediately. I mean, we're trained to sift through the BS, right? And try and understand like, you know, what the story is. And it's not that sellers don't want to sell to first-time buyers. They were in those positions as well at one point. So they actually want to work with first-time buyers because they're happy to know that, hey, I'm selling my facility to somebody that's going to care for it the way that I did. So I would tell people, always be prepared. Don't try to impress the broker. Just be honest. And if it's your first deal, just tell me it's your first deal. I'd much rather help someone who's honest than someone pretending they've done 20 deals when it's gonna be completely honest from like the first 5 minutes of the conversation that you're buying your first deal no matter what.

It's gonna be, I think you meant obvious, right? You're, you're, you're gonna, you're gonna sniff that out right away.

Absolutely. It's gonna be very obvious.

Yeah.

I mean, we're talking to institutional groups, private equity. I mean, we're talking to syndicators every single day. I'm talking to operators that have 8, 12, 15 facilities. I mean, the information and the information and the, the way that they're talking to me is they're talking about their entire portfolio and performance, you know, and what they're seeing on a macro level, you know, when, when we're having conversations. So if I'm talking to a first-time buyer and they're talking about one specific deal and I'm like, oh, like, you know, I might be asking like, hey, what are you seeing out there? They might not even know what that question, what they're referencing. They're like, I don't know, blue skies. No, like, what are you seeing as far as like the industry? What are you seeing with the rest of your deals? How the performance is going? Like somebody that owns 10 deals can speak to their entire portfolio very quickly and candidly and say, hey, you know, if I own only deals in North Carolina, my Western North Carolina deals are performing very well. You know, it's because they're in smaller towns and more vacation towns. We're seeing an uptick as far as, you know, summer rentals. The deals in Eastern North Carolina aren't performing as well because, you know, maybe that time of year people aren't going there for vacation for whatever reason. So there's a lot of things happening in the conversations when we're talking to owners and operators that they're speaking to that the first-time buyer just doesn't have the knowledge and experience to speak to. So don't pretend, you know, just be yourself, be transparent, and we'll want to help you even more at that point.

I love that. And thank you for saying that because you've been doing it for so long. You're a seasoned pro. I know you talk to first-time buyers a lot, but it doesn't change their mindset. It's like I have this conversation all the time with Peter Swain on my other podcast, Successful Idiots, about the mindset, the, the mental mind block with AI. You know, people don't know how to use AI. It's like, well, just ask it. Just start having a conversation. And they get to that chat box, whether it's ChatGPT or Claude, and they go, I don't know what to say. And it's the same thing I feel like with in self-storage because, and I'm not making fun of anybody. I was once there too, but I know, and you know that it's, how do I say this without sounding condescending? It's a silly, ridiculous position to take because hopefully folks, you're hearing a guy like David is so approachable. And he's not gonna— you're not gonna call him and he's gonna laugh you off the phone and call you names and then post on, you know, LinkedIn and Facebook about what an idiot you are. No, he's actually thrilled that you called because you're another potential buyer he can work with. And if you come prepared and curious and ask questions, I mean, that's music to your ears, is it not, David?

Absolutely.

Aren't you looking forward to developing a relationship with With new buyer, whoever the next phone call is, Joe, that might not be the deal.

That might not be the deal. Right. And, and I understand like through their line of questioning and communication that, okay, they, they, this is the type of deal that they want. And then I may have another deal that comes up just like that in the next month. I'm gonna say, hey Joe, I got the perfect deal for you. Remember the one we were looking at last month?

Yeah.

This, this one's even better. I think this one fits your buy side, your buy, your buying criteria perfectly.

Yeah. And that's, so that's good. That's a good point. So is that part of the conversation you're having with them? So they're asking you questions about deal A and for whatever reason that deal A is, you know, about to go into contract or it's too big for them, or, you know, they're not really going to be in play for it for any number of reasons. You're, you're getting a feel for who they are as a buyer and what they might be interested in might work and what does check all their boxes, their buy box, right? So that you can make sure they're seeing other deals that you have that are closer to that. Is that, is that true?

Absolutely. Absolutely. Through all that communication, through the discussions, through, you know, the, the questions, I'm now starting to develop like their criteria and what they're looking for. So I'm almost being educated by the buyer as far as what they're looking for. So the one thing is like, just don't disappear. Tell me why you're passing. And the commercial real estate world is tiny. So like good communication really goes a long way. So if we're not doing a deal together, you're probably doing another deal with one of my, another self-storage broker in the business that I know very well. And they may reach out and say, hey, have you ever done a deal with Joe Downs? I do this all the time. Whenever I deal with a buyer that has 4 or 5 facilities, I want to call the broker and say, hey, have you ever done a deal with so-and-so? How would they to deal with. So, you know, in general, make sure you're having those conversations, open communication, and you, you know, we're developing your criteria through our conversations. And then it might not be that specific deal, but it might be a 10th deal that we list or the 28th deal that we list or something. The next deal that we list, you might be the right buyer for.

Love it. All right. True or false, more than $1 trillion in US commercial real estate loans Are scheduled to mature in the next 2 years. A large share of it originated during the low-rate 2019 to 2020 window.

True.

That is true. That's exactly why so many owners are being forced to sell right now instead of refinancing, which means more real opportunity in the market for buyers who are ready to move. And that opportunity, I think, shows up in places first-time Buyers don't usually think to look. So I want to shift into something first-timers almost never think to look for, David. And that's the upside that I think that's hiding in plain sight. So I'm pretty sure you see expansion opportunities across your listings, outdoor storage, boat and RV, truck parking, value-add plays that first-time buyers routinely overlook because they're only underwriting what's already there. What's an expansion opportunity? Truck parking, boat and RV, outdoor storage. You've seen a buyer completely miss on a listing.

I mean, it's, it's, it's, there's, if there's land attached to the listing and your property, that property is over 90% occupied or 85% occupied, there's probably demand for more storage in that given market. So people are always just looking at the physical real estate. And one thing I want to throw out there, this is actually Scott Levy over at Highline said this to me 3 months ago and I love it. It's don't buy spreadsheets, buy real estate, right? Like you're buying the real estate. So don't look at what the spreadsheet is saying because when you go out there on site, it could tell a completely different story than what you're seeing on paper. So when you go out there, see the facility, get a feel for the market, see what's going on, see what the facilities in the given market are renting for. How their operations are being run. It gives you a lot of info on that market. But one thing newer buyers tend to do is underwrite exactly what's sitting in front of them. And the experienced buyers underwrite what the property could become, right? Like you said it, Joe, expansion land. There could be contractor storage you could put there, outdoor storage, RV parking, boat parking, truck parking. It just overall, all of this These expansion opportunities are value-add opportunities for the deal. So sometimes the best part of it isn't the property or isn't the storage, it's the dirt sitting right next to it as far as that expansion opportunity.

Love that. David, on the debt coming due question, what does your crystal ball tell you? What are we going to see?

We're seeing a ton of debt maturities coming up and we've seen increased volume, increased interest. From the seller pool with people looking to get out. So some people are performing very well. It's time for them to sell. Some people aren't performing very well and they just want to get out. So, you know, my crystal ball tells me we're going to have a lot more opportunities in the market over the next year, 16, 18 months for deals to come due. I mean, I know a lot of owners out there are performing well, but there's also a lot of owners out there that are not performing well and they just need to get out of those deals and those opportunities.

And Do you think that'll push cap rates up?

Yes, absolutely. Because we're going to have more available inventory and there's going to be less— then that's artificially, there's going to be less buyers out there to buy those deals.

So we're going to see a flood of deals to the market.

Correct.

Is that fair to say?

Yes.

And if interest rates hold where they are, the volume of deals in the market should push cap rates up. It should become A fairly healthy buyer's market, should it not?

It's just supply and demand, Joe. I mean, you're gonna have so much supply out there available. Buyers are more discerning than ever and they're being even more selective. So you're gonna have, you know, where certain opportunities have 5, 10, 12 bidders, you may only have 1 or 2 qualified buyers for a certain opportunity and certain deal. So there's gonna be wonderful deals out there.

Folks, there's never been a better time.

Absolutely.

Never been a better time to get in the sales world. I'm so excited for the next couple years. All right. One more true or false here. True or false, David? Publicly traded self-storage REITs have historically outperformed the S&P 500 over the last 25 years.

True.

That is true. This very unglamorous, boring-sounding, big metal box industry has over the long run been one of the better performing real estate sectors in the public markets, which is exactly the point of this whole show. David, before I get to my closing question, where can our listeners find you, reach you?

Anywhere.

Get to know you anywhere.

Just on LinkedIn, David Perleschi. It's 2 L's. Instagram, uh, David Perleschi underscore CRE. You know, I'm, I'm on, uh, I'm also on Facebook. And then recently I've been on TikTok as well. So David Perleschi on TikTok as well. So, and then, and then if you want to reach me, call me directly, text me. My direct cell phone number is 914- 1-800-365-0752. And then my email is david.perleshi@franklinst.com. So it's franklinst, short for street, .com. So feel free to reach out to me if there's anything to do. If you wanna just talk storage opportunities, happy to chat anytime. If you wanna email, that's even better. I'm very responsive. I'm one of those people where my email inbox goes down to zero every day. So.

Do you really?

Every day. Yeah. I just, it's a habit. I respond to everything.

I try to, I try to keep it, well, I respond, but I try to keep mine below 30, but it's usually like I'm saving them to the, you know, stuff you got to get to.

It's the, there's no better time than now to reply.

I never see inbox zero. I wish, I wish I'm working on it.

I've got a Hermes agent that's getting me there, but I'm at 31 right now, but it'll be down to zero by the time I leave for the day.

All right. Good, good for you. And by the way, the best way to reach David is with an offer on one of his deals.

Exactly. Yeah. Full price offer. I always love those.

Full price offer will get his, he'll get his attention right away.

Yep. Absolutely.

All right. Last question. And I want you to think about just, you know, if you need a second to think about it, I'll ask the question and I'll give you the framing for it. Have you read the book Be Your Future Self Now?

I have not. No.

Have you heard of it? It's by Dr. Benjamin Hardy. He was also the co-author of Who Not How, if you've heard of that book. Anyway, the beginning of it, David, is about MrBeast. You know who MrBeast is, right? And the idea is you— MrBeast's idea is your point, or what he did, I don't even know if it was an idea, um, is you don't wait to become the person you want to be. You start acting like that person right now from where you are so that And my question's about 5 years from now. So I'll tell you my question and then I'll tell you what MrBeast did. So I want to know, who is David Perleschi 5 years from now? Where is he? What is he doing? What does his portfolio look like if he has one? And you don't have to get into specific numbers about transaction volume or anything like that, but who are you? What is life like if you got in the DeLorean And went 5 years in the future and you were looking, you know, as a third-party observer as to who you are, what you are, where you are, what do you see? And, and you can think about that while I tell you what, what MrBeast did. So you probably don't know this if you, if you didn't read the book, but he became famous because as a 17-year-old, and by the way, this is only a little over 10 years ago. He's like 27 and change now. He recorded 4 videos one night instead of studying for a test. Now, he already had a following of 8,000 people on YouTube that watched him as he was a gamer. And this night he recorded 4 videos and those 4 videos were to be released into the future. One at a 6-month interval, one at 1 year, one at 5 years, one at 10 years. And in those videos, he described who he expected to be. At those intervals. And a little bit was, I hope this, I hope that, but it was a lot of, I'm going to be doing this and I'm going to be doing that. And it was very introspective and very philosophical. It was very interesting for a 17-year-old to do. And in effect, what he did, David, was he burned the ships, right? He was Cortés in that moment because he released them publicly. So who is David Perleschi in 5 years? What is he doing? Where is he? How is, what is his life like? And what are you doing today to make sure if you got in that time machine, that's what you would see?

Yeah, no, that's, that's a great question. I mean, 5 years from now, I see a brokerage business that's become bigger than me. We have a national team. We've helped develop young brokers who are now incredibly successful in their own right. That's something I'm passionate about. Because somebody gave me opportunities early in my career and I want to do the same for others. So I love developing people. That gives me a tremendous amount of fulfillment. I also hope, you know, I've been doing this on the side a little bit, but I also hope my interview series with successful entrepreneurs continues to grow. That started as a passion project, uh, but it's become something bigger. I realized success becomes a lot more believable when you can actually see and hear the people behind it. Um, if one young person watches those interviews and thinks maybe I can do that too, then for me, it's all worth it. Uh, cause I think just nowadays, the only people that we see on, on social media or in the media in general are Jeff Bezos and Elon Musk. There's a lot of successful people kind of in that middle ground that are doing pretty darn well for themselves. And then on a personal level, I hope to have a great family, strong friendships, uh, even stronger faith and a business that I'm proud of. So at the end of the day, I don't think anyone remembers how many listings I had or how much commissions I made. Uh, they remember the people you helped build. And, uh, that's the legacy I'm chasing.

I, I love that. Where can, uh, folks find your Entrepreneurial Series?

Just on, on Instagram.

On Instagram?

Yeah. On Instagram.

Under your name?

Yeah. David Proleschi_CRE. Um, it's also, you know, I put the stuff on LinkedIn, but LinkedIn's kind of jumbled up with a lot more listings and stuff of that information. And also on TikTok as well.

That's great. I love it. Well, thank you. Folks, here's, here's the whole thing with this conversation, and it should have made it very clear. Brokers aren't the gate you have to sneak past, especially not brokers like David. They're a relationship you build the same way you'd build any other one with honesty. You heard it right out of his mouth with preparation and with patience and curiosity. I'm gonna add curiosity to that. Do that and you become the buyer who gets the call before the listing ever hits the market. Every week on Storage Moguls, we're covering—we're trying to cover the full storage vertical. I should say you're going to hear about self-storage, obviously, but we'll also get into boat and RV storage, pro storage, industrial outdoor storage, which is iOS truck parking, small bay flex, light industrial. All those episodes are coming. Please like, subscribe, and share. And here's why the sharing matters: it's not for me as much as it is for you, because when you share this episode, you're telling everyone in your network that you're in this business. And believe it or not, that signal will. go a long way, especially when you're doing your first deal or your second or third deal, and you might need to raise some money from friends and family or whoever. They're going to see that you've been in this business for a long time. So like I said, is it help me if you share the episode? Of course it helps us, but it helps you even more. And we did all the work. Folks, there's a seller out there right now who's ready. So stop watching, start moving, drive for dollars. Send the LOI. We'll see you next week.