Joe Downs argues the 3-mile radius rule for self-storage markets is outdated and costs investors deals. Use 10-15 minute drive-time polygons instead to find real competition. Most deals close between the 7th and 12th outreach touch, not the first few.
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All right, welcome to day 18 of the Storage 100. I am Joe Downs with the Storage Mastermind, and we are diving deeper into section 2 today. We're going to start with the sacred cow, or one of the sacred cows of self-storage, the 3-mile radius, often lumped together with the 1 and the 5. In fact, I, I'm guilty of always talking about the 1, 3, and 5. 1 isn't quite as useful as As you might think, 5 can be. We certainly always look at the 3 and 5, but the 3 is really the standard, right? The 3-mile rule is industry standard. And everyone uses it to define their market, but it's a lazy shortcut that costs you money and deals sometimes if you don't really understand what you're looking for inside that 3 miles. Most will just draw a simple circle on a map, and I'm guilty of starting that way too. But that's just the start. It's just to get a look, right? Continuing to only use that way is a relic of its time when we know we have real data and we've got tools to help us really understand who our customer is, what our competitive market is, and where our customer lives. So, you need to stop trusting it blindly because it's a guideline, not a law. Together, we are evolving past this in the industry, and unfortunately, not everybody's on board yet. So, if you want to be able to find true off-market opportunities, need to embrace it. Markets change and your analysis needs to change with it. So let's look at exactly where this rule breaks down and how you can fix it. Biggest mistake we see investors make is giving up on a deal before the owner's ready to sell because most investors quit before the second touch. But the reality of that is that the deal happens between the 7th and 12th touch. I harp on this a lot when we're teaching. You have to be relentless and consistent You have to build relationships. This isn't about a one-and-done direct mail. It's about a sustained campaign that builds over trust and time. And, and another failure point is bad data. Sending letters to the facility address instead of the owner's home address is just burning money. You got to invest in accurate owner data to ensure your message lands on the right desk. Finally, stop with the corporate speak. You got to lose the dear sir, madam. We're a private equity group. You know, nonsense. Be a human being. Write a personal letter that connects. If you're going to write a letter, you got to connect with the owner somehow. If you want to find those hidden off-market deals, you got to stop acting like a robot. And that's where the 3-mile rule really fails us, when we act like a robot. So, that's a couple examples right there where people are just doing it the old way, right? And we've changed all those other ones and it makes sense. So, the same with the 3-mile rule. All right. Miles don't matter anymore. It's real estate analysis. Minutes matter. So, the 3-mile radius, it's just lazy. It's a lazy way to analyze the market because it completely ignores the reality of the traffic and the geography. The old way assumes your customers will fly like crows to your facilities and just ignore rivers, highways, train tracks, right? Bridges. That gives you a false confidence, actually, in your market size. The pros today use a 10 to 15-minute drive time. We use polygons. This accounts for traffic patterns and it respects physical barriers. If a customer can't get to your facility in 10 minutes, they're not your customer. So, stop drawing circles on a map and start drawing isochrones. This is the new standard that if you want to play ball, you got to adapt. You got to adopt, I should say, and understand your market and define your real customer base. So, once you've defined your market, Then you can use the drive time analysis to map out the competition. And most people get this wrong as well, and it costs them a lot of time, a lot of money, and a lot of frustration because you're fighting ghosts. So you got to stop looking at a statistic— I'm sorry, a static radius— and start thinking about drive time. Drive time is the only metric that matters when we're considering geography. So start with a simple Google search. That'll just give you a raw list of everyone claiming to be in the market. But that list could be misleading if you just, if you just look at what's in your 3-mile radius. So now you try, you apply the drive time filter, use a tool that's available. So technological tools available, you draw a 10-minute polygon around your site, 10-minute drive time polygon. That shape of that, and it's going to look weird, but it's all that matters, right? Ignoring, ignore Anyone outside of that 10-minute polygon that— remember, it's a 10-minute drive time, drive time in your location. Some, some distances might seem twice as far, and that's okay. If I can get there in 10 minutes, you're a potential customer. If they're outside of the 10 minutes, including the competition, they're not your competition. They're just a name on a map. So focus on the facilities inside whatever that shape ends up being. This is how you're going to define your true competitive set, and this is how you stop overpaying for deals. So now that you know who your competition is, we can look at what you need to do next. So you've drawn your polygon, now your battlefield's mapped out. So next thing to do is get to work and execute a plan. And you can't just listen to this podcast and nod your head, you actually have to take action. So if you want to separate yourself from the tire kickers, this is what you got to do. So first step, Pick a, pick a potential facility. It doesn't matter where it is. It could be something you're curious about, something you drove by, something you found on LoopNet. Put it into Google Maps, put the address into Google Maps, um, map all the containers within a 10-minute drive time. You can put in a little search box, storage near me, and then you can pull out your, uh, the rollers that are on the Google Maps and just map it, draw the polygon, map the drive time. Um, not about the 3-mile radius. Oh, that's the first thing I look at. Just to get a feel. Then you mapped it with the polygon. All we care about is 10 minutes of windshield time. Finally, count all the units or square footage in that polygon to gauge your total supply. And you can estimate this just from the aerial. And then this will give you the true picture of what your real competitive market is. It's not— don't just read reports, do the actual work. This is how you're going to build confidence and crush a deal. You got to learn long division before you pick up a calculator. All right, and we're gonna go even deeper into this market analysis tomorrow. All right, so now you got the tools to define your market like a pro, and I'm sure this is the moment where you're gonna decide, right? Are you a spectator or a player? Right? I hope you're a player. Hit the like button if you just realize that quote unquote competition isn't who you thought it was. Subscribe so you don't miss the next episode where we're gonna talk about reading phys. A feasibility study without being an expert. That's going to be a cool one. And some of you probably don't even know what a feasibility study is. So I'm going to introduce that to you and then show you how to read it. And then finally, share this with someone who's still using a ruler and a map to draw a 3-mile circle as their radius. They will thank you later.
