Day 1: Why Self Storage is the Most Overlooked Investment in Real Estate (And How to Get In)

Holy disaster. We're going to take it in stride. All right. Well, welcome to day 1 of the Storage 100 series. I am Joe Downs with the Storage Mastermind, and this was quite a start. Not quite the kickoff I was looking for here, but I am fired up. Hopefully you are too. And, you know, apologies that there's, there's no slides to go along with this, but I'll, you know, do my best and I'll describe what's on the slides that for whatever reason Through technology we can't get you to see. But in this series, I'm going to attempt to answer the most important question, which is why self-storage is the investment you cannot ignore as we wrap up the 2025 and head into 2026. This isn't just about finding a good investment though. It's about finding a real resilient, high-margin business. So I'm going to cut through the hype and look at the hard data right now. I'm going to show you why self-storage outperforms almost every other commercial real estate asset class. I think of this session as like a wake-up call. If you've been on the fence about commercial real estate, this is the moment to pay attention. I'm going to cover this unique market window, the superior profitability of this asset class, and how you can get started without needing millions of dollars. So, but before we go any further, You might have asked yourself, why are we doing this and why are we doing it so poorly without slides tonight? No, seriously, I'm doing this because we're building something called the Storage Mastermind, and it's been a community of, you know, really well-educated, capable storage investors who actually know what they're doing. And Storage 100 is going to be the foundation. It's going to give you the language, the skills, the confidence, everything you need so that when you're ready to level up, you're not just starting from scratch. Like, I was a student once. I know what it feels like to, to really want this but not know how to get started. So I would consider this a pretty good roadmap. So this is my gift to you, Storage 100. All right, let's dive in and take a look into specifically why is 2026, in my opinion, the perfect time to act. And first, let's look at the unique market opportunity we're facing right now. So Self-storage is just a fantastic long-term investment. Why is 2026 the specific year you need to get involved? Because it comes down to this unique market window I was just talking about that's been created by this economy. So high interest rates have slammed the brakes on new construction over the last— new, yeah, new construction over the last 2 years. New supply is down by over 60% in many markets. And what that means is demand is starting to outpace supply again. On top of that, we kind of came through a stagnant period the last two years because of that. Nobody was moving, and storage, if it has one Achilles heel, it's we are tied to the real estate market from a transaction standpoint—not not values transactions. So when people aren't moving, we tend to take a little bit of a slowdown. So on top of the lack of supply creating, you know, or creating an environment where demand is outpacing supply. We are also— you're buying the last year or the trailing 12 months is what we buy in self-storage. We look at the P&L in the last 12 months. They're all on sale because they're down. Right. So all of our, all of our P&Ls are mostly the P&Ls across the board are down the last 2 years. So in the last year, if we look at that, You're really buying an asset class with wind at its back that's on sale. And then here's the real kicker. 60 to 70% of all facilities are still owned by mom-and-pop operators. These are owners that are ready to retire soon and a lot of times aren't using modern technology. So for the most part, they're motivated sellers. And if they aren't, they will be soon. The other day I read an article Forbes might have been a month ago. Basically said over the next 10 years, 2.4 million cash-flowing businesses are going to change hands. And that's because the owners of them are all 65-plus years old. Well, that literally describes self-storage. It's— and it essentially describes the market that, that my company looks at and that we look at and we teach people to look at. And I'm going to talk to you about Over the next 100+ days. And that's facilities that are under 30,000 square feet. So this is going to give educated, educated investors like yourself a chance to acquire underperforming assets. We need to acquire these assets now before the next bull run starts and prices shoot up. And this window is not going to last forever. Self-storage is always good, don't get me wrong, but this is a special and unique buying opportunity. So what makes this asset class so resilient? Even when the economy gets a little shaky? Well, let's jump into that. So in this, this, this part that makes self-storage truly unique and recession resistant, and I don't mean it when I say recession, recession resistant, it's a tongue twister. I don't mean it just survives a downturn. I mean demand actually increases during hardship. So self-storage has this like dual driver advantage is the way to say it, right? In good times, people accumulate stuff and need storage, you know, just in general, but also for, you know, for boats, RVs, businesses, toys, right? In bad times, people downsize and they go through life transitions, sometimes divorce or a job loss, right? But they still need storage for their belongings. Small businesses that are struggling will give up expensive warehouse space during those times, probably move to cheaper, less expensive self-storage units, smaller units. Whether the economy is booming or busting, people need self-storage. And this stability is why self-storage REITs barely saw a dip during the 2008 crisis or the COVID-19 pandemic. In fact, during the pandemic, we saw occupancy shoot up. So it's the definition of resilient, of a resilient investment. All right, let's talk about how this resilience translates into cold hard cash. So the stability we discussed translates directly into superior profitability just by looking at the numbers, which I know you're not looking at. So self— but self-storage consistently delivers operating margins between 50% and 65%. Now, when you compare that to a similar but different asset class like multifamily apartments, for example, their profit margins are usually in the 40 to 50% range. So there's a 10 to 15% distinct advantage there, and that goes right into your pocket as profit. Now, why are the margins so much better in self-storage? Well, it's pretty simple and mostly has to do with lower operating costs and minimal maintenance. You have minimal labor costs. Many facilities run with remote or part-time management. You're renting an empty box, so there's no clogged toilets, no broken HVAC units, and no appliance repairs at 2 o'clock in the morning. The simple, low overhead business model is an engine behind these incredible margins. It's literally a cash flow machine once you get it humming. But you might be thinking, all right, well, that sounds— that's— that all sounds too good to be true. And also, I don't have millions of dollars to start buying commercial real estate in these cash flow machines you speak of. Well, fair enough, but hold that thought while I introduce you to a game changer. And that game changer is the SBA. This biggest myth in commercial real estate is that you need a massive pile of cash to get started. Self-storage is a business that sits on commercial real estate, right? I'm going to say it again. Self-storage is a business that sits on commercial real estate. SBA stands for Small Business Administration. Focus on the B word there— business. Because we're a business, SBA financing completely shatters that myth for self-storage. With the SBA 7 loan program, you can purchase a facility With as little as 10% down. Conventional commercial loans often require 25% to 30% down. So that makes a move to self-storage way more accessible. Not only is the down payment lower, but some of the terms are much better as well with an SBA loan. Maybe not the rate. It depends on the market cycle we're in right now. The rate is not as favorable as conventional. 15 years ago, they were almost identical or, you know, off by a hair. But when you look at the other, some of the other terms, you can get up to a 25-year amortization, which means your monthly payments are lower and your cash flow potentially stronger. Look at it this way. If you find a million-dollar facility in self-storage, you only need, if you use an SBA 7 loan, you only need $100,000 as a down payment, not $250,000 or $300,000. That's how you leverage the power of debt to build wealth quickly. And this accessibility combined with high margins is why self-storage is such a powerful investment. All right, let's look at how technology makes running this business incredibly simple and saves a buck along the way. The key message here is that modern self-storage runs on technology, not labor. You're renting literally empty metal Boxes. That means there's no plumbing, no HVAC unless we're in a climate control facility, but this is certainly not per unit. No emergency calls like I mentioned at 2 AM like you get with apartments. Technology is your staff, not people. We have automated gate access, online rentals, and automated billing means tenants can rent a unit and pay their bill 24/7 without you lifting a finger. In fact, in our facilities, When we're done with them, you can find a unit from your phone, rent from your phone, pay the insurance on your phone, pay the, uh, we set you up for autopay on your, um, right there from your phone. You do it all and pay insurance right there on your phone. So, um, it's just, it's highly tech-enabled. We have minimal labor, which translates to maximum margins, which is why you can run facilities with minimal staff and all, and often part-time or even remotely. Yeah. You're building a system that works for you. And this efficiency is what drives those incredible 50 to 60%, 50 to 65% operating margins that we discussed earlier. But the revenue opportunities don't stop once the tenant is in the unit. So let's take a look at how some of the smarter operators out there generate even more profit. So operational simplicity is great, but we want to maximize every dollar and unit Rentals are just this, uh, and unit rentals, excuse me, are just the starting point. Smart operators generate an extra 15, maybe 20, up to 25% of the revenue from ancillary services. And we— I've seen the gamut of them, but here's a few to just to name a few: tenant insurance, retail sales, late fees. What— so let me break those down for you. Tenant insurance, this is total pure profit. You offer a protection plan. Might cost the, the, uh, customer $8 to $15 a month. And you're keeping as part of that roughly 60% of that. It's just pure profit. Like I just said a minute ago, when someone rents a unit on, on, from their phone, rents one of our units, that it's not even an option. They can, they can, they can come in and evidence, uh, insurance later, uh, and we can cancel it for them. But just, it's just another $8, you know, $10, call it $10, which means that 60%, you It's another $6 of just pure profit just tacked onto the rental income. So it's a high margin, low effort revenue stream. Retail sales, also easy money. So if you, and definitely if you have a facility where you have someone working there, you have a, you know, one employee maybe, that's where you're going to, you're going to have profit centers for selling locks, boxes, packing supplies. These are all sold at 100 to 200% markup. Because every tenant needs a lock, and this is an easy win. And then late fees and admin charges, administrative charges—these are very standard in the industry, and they add up quickly, providing more stability to your cash flow. So these multiple revenue streams allow you to increase your overall profitability without having to raise the base rent dramatically. It's all about maximizing the value of every single customer, right? And this financial stability and operational simplicity. is what makes it easier to scale if that's what you're looking to do. All right. So now that we've established that self-storage is profitable, and I think you can agree with me, and relatively simple operation, let's take a look at the long-term scalability. If this is the direction you'd want to head in, then this is where you can go from owning a job to owning a portfolio. So really more like owning a side hustle to owning a portfolio. So to do that, you first have to master the playbook. You need a good 12 to 18 months, I would think, with your first facility to master the operations and document your processes, right? Then once you have a proven playbook, you use that same software, the same marketing, the same management systems for facility number 2, 3, and 4. Basically, you systematize everything. You're not reinventing the wheel here. And then lastly, You want to leverage your equity by simply using the built-up equity and cash flow from the first deal to fund the next one. And if you stick around through this series, and I promise you we will not have operational or we will not have technical issues, if you stick around through the series, you're going to pick up a few more tricks along these lines as well that I promise you will blow your mind. This is the true path to wealth creation, in my opinion, in commercial real estate. In self-storage, you can build a system that can be replicated across multiple properties, which will allow you to scale faster than any, almost any other asset class. All right. Next, we're going to make this all concrete by looking at a real-world deal example on the massive cash-on-cash returns you can expect. I'm going to talk you through it, obviously, since you can't see any slides. But, you know, look, we've talked about theory to this point and the margins. That's all nice. But now let me make it real for you. So this is how you translate SBA financing and operational simplicity into massive returns. All right. So the slide I would love to be showing you is a real-world example of a million-dollar facility. And the key to the key here is the leverage. So by using an SBA loan, your out-of-pocket is only $100,000, you know, versus the example I was talking about before with You know, $250,000 to $300,000. All right. And that's an incredibly accessible entry point, I think, in my opinion, for commercial real estate. So even at a modest 80% occupancy, which is not stabilized historically, it's right there, but we would call that not stabilized today. So it's, it's, it's okay. It's not great. This, this facility The, the example facility I have on the slide generates $125,000 in net operating income, or NOI as we call it. And I'm going to cover all this through this series. Um, so do the math. So that's $44,700 in annual cash flow after my, my gross revenue, and I, and I take out my expenses. So I have $44,000 in annual cash flow. On a $100,000 investment. Oh, by the way, it's after debt service. So $44,700 of net positive cash flow on this $100,000 investment. I put $100,000, really $150,000 into the deal, right? So I'm going to— I need to— $100,000 was my down payment. I'm going to say $150,000, $50,000 between closing costs and maybe some CapEx and some operating reserves. That's a fair number to use for, for a real-world example like this. So $44,700 divided by $150,000, that's a 29.8% cash-on-cash return. That's, that's really like 3 years. You've got your cash back, right? 2.5 years. That's before you implement any value-add strategies, right? This is the power. This is the power of self-storage. And I'm going to teach you how to find and analyze deals just like this. All right, let's look through. Let's look at a plan for how we're going to get there. So the 29, call it 30% return is what we're aiming for. Look, let me level with you. 30% is really good. You can find those deals. We're finding a lot of deals that are probably more in the you know high teens to twenties. Have definitely bought and and are finding. You know, 30% deals out there. It's not. It's that's not a pipe dream. It's not a unicorn. It's is it? You know, is it 10 out of 10 deals? No, but 20, 25. Yeah. All right. So we're gonna. I'm gonna give you this the roadmap that how we're gonna hit that. So over the next 100 days, we're gonna build your complete self storage knowledge from the ground up. We're gonna start with the foundation. I'm gonna make sure you understand the market. And the metrics that matter. You're going to need to know the rules of the game, so to speak, before you play. So then we're going to move into sourcing, evaluating deals. I'm going to teach you how to find opportunities before they ever hit the major listing sites or brokers and how to avoid costly mistakes with due diligence. Can't overstate that enough. And then finally, we're going to cover underwriting and financing. Which is where we're going to teach you the financial analysis, creative strategies to minimize your cash outlay. And just like the SBA example we just saw. And then, by the way, this isn't just a series of videos. It's a structured curriculum that I came up with that's designed to take you from literally zero knowledge of self-storage. If that's where you're starting out, that's totally fine. To, you know, a fairly confident investor who's going to want to be part of our our Storage Mastermind community. All right, so that's my commitment to you over the next 100— actually, it's 106 days. It feels like 1,000 days after the start we had tonight, but I'm kidding. We're gonna be fine. We're gonna get through this thing. So, all right, and if you— I was hoping to do some Q&A tonight. I'll find out in a second if I can do that, but Before you click off, just give me another minute. I want to explain why each of these actions makes strategic sense for you, not just for me. So I'm going to ask you to hit the like button. You shouldn't because it was a horrible start, but I'm kidding. You should do it for me. That's the level with you. That one's for me. This is day 1 of a 106-day marathon and it didn't start well. But every like is dopamine fuel for the next 105 days. So plus it tells me more importantly, in all seriousness, that the content's actually landing with you. So I, you know, I make sure I'm staying on point there. So that's great. Second, go to the Storage Mastermind YouTube channel, click on the live tab and click the notify me button for each of the next 8 lives. You'll that way you'll get a notification at the scheduled time, and these are going to be roughly every two weeks. And I promise you they'll be smooth as can be for the next one. But roughly every two weeks, I'm going to be that's how long a section of the business I'm going to cover. So I'm going to recap it at the end of two weeks with another live. I'll go on for the recap what we just talked about, sum it up, open it up for Q&A. And then I'll start to— I'll, um, I don't want to say tease, but I'll, I'll, um, I'll let you know what, uh, we're about to cover in the next 2 weeks. Um, there's probably a better way to say that, but you get what I'm saying. Um, and then also while you're there, subscribe to the channel. Um, that's— this is an easy win. And by the way, that one's for you. So when you subscribe to the channel, you'll obviously get notified for, um, Not just the lives, but the, for instance, tomorrow's daily episode drop, right? So I'm dropping shorter, you know, 10 to 20 minute videos every day for the next 106 days when I'm not doing a live. So that's every day going forward. So might be belt and suspenders, but I would do it because you can see how technology can let you down sometimes, right? So Definitely subscribe so you also get the reminders for the live Q&As. And by the way, some of those live Q&As, I'm going to have guests on with me and we're going to be doing some deep dives, so you're not going to want to miss them. And then lastly, the share button. Uh, this is the tallest order for sure. Personally, I usually only share things that I think are funny or really interesting, uh, or that move me in some way. I'm like, I stay away from any third rail politics, anything like that, right? Um, and But I actually think this is pretty good content, save for the first 7 minutes. But hear me out on this, 'cause this is a strategic play for you that will actually work wonders for you. So, and I don't care if you're watching this and you're already in the business or you're already, you know, a student or you're, you know, this is day one, you don't know a thing about self-storage. Start doing this now and do it every time you watch a video. And this is the strategic part. When you share this, you're actually positioning yourself as the storage expert in your social network or LinkedIn network or whatever network. I would share everywhere. And again, it sounds, it sounds self-serving and obviously we'll benefit from it, but so will the community that you're going to be a part of. Right. But, but back to you. And this is really the important part. Fast forward 6 months from now, you find a deal, you need capital partners, let's say. Do you want people thinking you just started in the business yesterday or 6 months from now? Do you want them remembering that? Wow, you must, you know, Bob or Joe Downs, he must really know this space. He didn't start in it yesterday. He's been sharing self-storage videos for, God, seems like years, right? So it's, it's, it's actually a really strategic play for you. And then during the series, later in the series, I actually have another strategic play for you exactly about how, how sharing these videos is another benefit to you. All right. And look, sharing is— it's literally planting the seeds for future, future dealmaking. Trust me, I did it. It makes total sense. People send me deals all the time now. And I didn't even share— I didn't have 106 series video to share. Like, that's an amazing amount of things to share. I would just share stuff here and there, and I still got an amazing amount of, of play in my network out of it. So, and credibility. So trust me, it's planting seeds for future dealmaking. All right. Tomorrow we are going to dive into day 2. Everyone's talking about self-storage, but most are getting it wrong. And it's gonna be cool. It's gonna be fun. We're gonna bust some myths and set the record straight. Thank you for watching. I've probably profusely apologized about 25 times. You're probably tired of hearing me now, but I'm not gonna say it. Thank you for watching. Thanks for sticking in there with me. Like for me, subscribe for you, share with your network. You and they will thank you later. Good night, everybody.