Day 25 - Boat & RV 100: LIVE RECAP: Section 2 — Finding & Evaluating Deals

Let's, uh, let's do that right now. Whoops, should have had the chat open, I would have seen that. All right, as you can tell by now, we're doing the recap of day 25. Um, I'm just gonna skip right to the rant I wanted to tell you all that I was telling you in the beginning. You probably couldn't hear me though, I just probably look like a talking moron. Cool. Here's the deal. I've gotten some emails from people about, and I've been talking to different people. Is this real? How could I do this? Is this possible? You know, I hear self storage is great, but I I don't I don't know how. I I don't know what to do. I don't know where to start. Um, gosh, it's a million dollars, 500 grand, it's a lot of money. Sure, it's definitely a lot of money. Um, but there's every deal we, we teach at Storage Moguls, every deal we've been talking about, everything I've been going through, we're doing because we've touched it. Every framework we share came from something real, not a textbook, not a seminar from 5 years ago. And our community is made up of people like you. So if you're a husband and wife, believe it or guess what, we've got couples all over our community that buy storage together. Uh, we call them couplepreneurs. We've got individuals that have daytime jobs that buy storage, some because they want to get out of their daytime job. Some are doctors that don't want to leave their daytime job. They love it. and they make a lot of money and they just want to invest in real estate and they want to know how and they don't want single families, right? So we call them solopreneurs. Then we got people like myself. I was an entrepreneur. I was someone that found self-storage like, I'm going to make a business out of this. And I have. But we're all people who are actively evaluating acquisitions right now and the deals, and this is the key, I've done— in fact, I've got one under contract for $6.5 million right now. I'm doing a development that's, uh, a $14 million, um, development that'll be worth $22 million when I'm done. It's a pro storage deal. You're not— we're not there yet here for you folks. We're— we got to get through boat and RV first. Um, but most of the deals that I see people having success with that we teach, they're under $2 million. Or under 3, but a lot are under 2. And the deals, when I come across folks in the industry, whether it's at industry event or they're people that coach and teach alongside me, or the people that we've taught to buy deals or in the mastermind I'm a part of, when you ask them, tell me about your first deal or the best deal you ever did or whatever, They're— I swear, they're always under $800 grand, and most of the time they're around $400, sometimes less, sometimes a little more. Um, that's why that dollar range, when I say $400,000 to $2 million, I'm being so specific there. That's not— and that's not willy-nilly. That is the range where we are finding we're able to— we and our— and our students that we teach and coach are able to find and have the most success. There's an old saying, if you want to beat Tiger Woods at something, you can, just don't play him in golf. Tiger's been in the news lately, maybe I shouldn't use that reference anymore, but you get the point. I— our Tiger Woods are the institutions. They, they got different names. A lot of the names you've never heard of, some you know. I don't, I don't want to try to beat them at their game. You know what they can't beat us at? Our game. That's that under $2 million. They, they can't compete with us. They can't do what we do there. They can't do what we can teach you to do there. So that's why I said I'm giving you that range, because I'm trying to communicate to you that these deals are attainable, they're financeable, they're digestible, they're real, the kinds of deals that actually get done. And as long as I've been in this game I'm telling you, those are the deals I hear about when I ask people about what was the first deal or your best deal. Oh, I bought it for $400 grand. What's it worth now? $800. That's not 10 years later, it's 3 years later. Um, case in point, we're launching Storage Moguls Podcast in 2 weeks as well, right about the time actually the Storage Moguls community and platform goes live. In the very first episode, we just recorded the other day Um, is with Kristen Blunk talking about her first 2 deals that she and her husband Rod bought, both under or right around $400K. I think one was $300K and change, one was maybe $415K or something like that. Both are worth more than twice that right now. And I could give you example after example of first-time buyers and that very similar story. That's why I've been harping on the $400K to $2 million range. I'm going to continue to because it's real. The deals are real, people are real, and you'll be hearing more and more about them each week on the Storage Moguls Podcast, along with great information from industry pros that help you get your deals done, and also from insights from brokers about how to find them or how to finance them from one of the top SBA lenders in the country. All on the Storage Moguls podcast. And who knows, maybe I'll be interviewing one of you very soon about your first deal. And here's the other thing I, I got from somebody. Um, it was kind of a snarky comment about Storage Moguls and one of those like, who do you think you are? Not that we haven't done anything. We think what we've accomplished is fairly decent, but that's not the point. The point is, the word mogul, it means something very specific here, and I chose it for a reason. It's a— it, by definition, it actually means a sophisticated operator of inanimate assets. Inanimate, whatever, kind of abstract, right? Substitute that for storage, right? Starting with self-storage, but not limiting ourselves to it. Of course, our members who become moguls will be able to identify opportunities in all verticals and niches of storage simply by understanding what the market needs or doesn't need. That's what we teach. That's what we coach. That's what we're after. That's what our community is striving to learn and understand. And they are. It doesn't mean media icons on the covers of magazines, not that kind of mogul. That's not what we're after or, or what we're creating. We're creating a community of people, real people They might warrant magazine covers, but they won't care about them because they're too busy building wealth in storage to care. Our moguls will be people who learn to master the full art, from finding the deal to running it, and knows that acquiring and optimizing is a very different thing from buying or just buying. And that difference is usually measured in tens of thousands to hundreds of thousands of dollars per deal, not in magazine covers or the equivalent of industry participation trophies. So if you want a community that's actually in the field with you, storagemoguls.ai is the right home for you. It's launching soon, so make sure you register soon. All right, I am going to get into the recap here since, uh, first 18 minutes I had no audio. I will be quick about it though, I promise. Uh, day 12 through 18 was all about sourcing and site evaluation. Remember, the best RV deals are never listed. County assessor records, dealer conversations, marina operators, RV park operators are the real sourcing channels. Online marketplaces, deals are already shopped. Find them there. Um, day 13, your takeaway: 30 minutes with the boat and RV dealer tells you which facilities have waiting lists, which operators are aging out, and where the overflow customers are going. That's free intelligence that most investors never collect. Days 14 and 15, The 2 physical filters before you run any financial analysis. Um, remember, take your tape measure when you go. He's going to measure those drive aisles, 50 to 60 feet for Class A folks. And street to the gate code, gate pad, PIN pad, whatever, uh, you need 70 feet. 70 feet from the street to the PIN pad, code pad. Why can't I say the right name? Uh, you need that for staging, otherwise you're not going to have fifth wheels or trucks in there. So you're not sure, well, measure it, but also drive the approach as a tenant would to see and evaluate, you know, does this seem right to you if you're driving a, a, a fifth wheel? Um, day 16, cold calling works in this vertical because these owners have rarely been approached professionally. Um, relationship call first, no price discussion until much later. Remember, follow-up cadence of 90 days. Uh, day 17, we talked about seasonal occupancy isn't a problem, it's the asset. 70% July means vehicles are in use, it's perfectly normal. Build the monthly model, not the annual average. Get the 24 months of data. Remember, I like 36 months, but you need at least 24. Uh, day 18. Remember the 100 spaces? 10 vacancies is 10% of your occupancy and 25% NOI drop. So the space count math drives the operating standard. Every tenant is, is important here. Uh, day 19 through 24, we covered valuation, due diligence, and the offer. On day 19, remember those cap rates in boat and RV is a range, 5.5% to 10.5%, depending on what you're buying. If you got thin comps, it means your, your NOI narrative is going to do the work for you. So don't forget the 4 layers. You got your in-place, your stabilized, your enhanced, your downside NOI scenarios. Day 20, check your zoning before you underwrite. A phone call, 30 minutes. Do you have permitted use, conditional use? Is a variance required, or was it required, or is it prohibited? Get the code section in writing. Don't forget about that conditional use, and don't and don't forget you get to live with it. If there is one, it's now yours. You inherit it. If you're looking at something near waterways, it's phenomenal. It's where the demand is, but it's also where the environmental complexity concentrates. So remember our our word salad of acronyms: FEMA, NWI, EPA, Echo, County GIS. The good news is they're all free, so make sure you do them first. The screen, screen out for your Phase 1, and then, um, you're gonna need to do a Phase 1 on every single near waterway deal no matter what. And then day 22, um, we had the 21-item due diligence checklist. We had 7 site inspection items, 7 financial records, 7 legal and regulatory. Know your walk criteria before you spend money on due diligence. Day 23, uh, we talked about the prepper pro forma. Uses a monthly model, not annual averages, plus your 4 NOI layers, don't forget, and a sensitivity table with 3 scenarios. And don't forget to annotate the seasonal pattern so your lender understands the asset. Day 24, the LOI. We added 7 boat and RV-specific contingencies on top of the standard structure. Um, drive aisle measurements, Remember, 24-month data requirement. It's all— this is all going in your LOI. Drywall measurements, 24-month data requirement, environmental contingency, zoning and writing, waiting list transfer if there is one, amenity condition representation, and vehicle law— vehicle lien law confirmation. You want it all in the LOI, definitely in the contract. And don't forget about the seller financing terms we covered and transition period clause. And but folks, if you're just catching— joining us for the first time, go back and watch those videos. It's really important. All right, for you numbers folks out there, remember these were the big 6, 6 numbers from Section 2. If you've been with this series, these should be solid for you. 30 minutes with the right dealer is worth 3 months of desktop market research. That's the sourcing shortcut nobody uses. 24 months Monthly data— I almost changed it to 36. 24 months minimum. It's the minimum for building a credible seasonal pro forma. Annual summaries hide the cycle. Uh, 21 items on the complete due diligence checklist: 7 site, 7 financial, 7 legal. Can't forget that. Pleasure 4 layers in every pro forma: in place, stabilized, enhanced, downside. One document tells a complete story. And then 7 boat and RV specific additions to the standard LOI. The clauses that don't exist in self-storage template and that protect you from the specific ways this asset is different. It is a little different. We're not launching rockets here. It's not hard, just different. And most importantly, 45 to 60 days— 60 days for due diligence period on boat and RV deal. Remember, self-storage, 30 to 45. You want 45 to 60 in boat and RV. Because it's a little more complex. Not hard, more complex. All right, now the floor is open and now you can hear me, so drop your questions in the chat if you have them and I'll work them into the email questions since I, I did get quite a few from the last line. If you have sourcing questions, if you're struggling to find deals in your target market, Tell me what you've tried. We'll work through the sourcing channels that apply to your specific geography. If you have evaluation questions, if you visit a facility and something doesn't add up, rent roll looks off, dry aisles were surprising, environmental screen flags something, bring it. If it's too involved though, just email me. You can get me at joe@storagemuggles.ai, joe@storagemuggles.ai, and we'll get them answered for you in one of these Either on a one-off basis, um, if it warrants that, or on one of these. And that's, um, that's exactly the kind of real-world scenario this session is built for. And that's what our community is being built to do— be a place to drop your questions and get help from our community. Same holds true for LOI questions. If you're at the offer stage and unsure about how to structure a specific contingency or whether seller financing is realistic for the deal you're looking at, this is the time. Or again, to involve, just email me Joe@storage-muggles.ai. Joe@storage-muggles.ai. Let me, uh, get into some questions here. Give me one second. And all right, got the chat up. All right. How should we adjust cap rate assumption? Oh, here, let me throw it up on the screen. There we go. How should we adjust cap rate assumptions when underwriting outdoor boat and RV storage that has zoning uncertainty or environmental flags? Well, Dallas, it's a good question. I'm assuming that you've done the homework already, and that's why you're you're asking the question that way. So let's let me break it down maybe by examples. So zoning uncertainty. I'm hesitating because I'm like thinking what zoning uncertainty means. Zoning uncertainty. I don't, I don't want you to have zoning uncertainty. So if we've, if we've called the county, we shouldn't have any. It should be very, very black and white. Now, does that mean you might have conditional use issues you have to deal with? And maybe what you mean is Yeah, there's conditional use, and the current seller is currently violating them, for instance, and telling you, ah, it's okay, don't worry about it. They never—they've never said anything to me. Yeah, that's not good. That—that's no bueno. Um, I understand where the seller's coming from, and you should too, and you should acknowledge that with the seller. But you should ask them if they understand where you're coming from, because anytime an asset changes hand, the, the county, municipality, whoever gets involved, and they're going to potentially have a say in what's happening at your facility when they dust off the old zoning paperwork. And, and, uh, you know, how many— by the way, how many zoning and code officers ago was the conditional use in place, right? Um, so here's the real world, and then there's the, sure, but that's not what I'm buying. I'm buying something that says you can't do that. So it's a business decision, but it's one I, I would make. It's a case I would make with the seller. Um, first of all, if you have a lender involved and the lender If particularly if there's income coming from something that is in violation of a conditional use, the lender is not— is going to discount it anyway. And that's actually maybe my answer. That might be your, your, your, uh, counter is, look, I'm financing this, the lender, um, isn't going to count this $10,000 of income for whatever reason is the conditional use, uh, so we need to adjust the income by that. So it's not even adjusting the cap rate so much, Dallas. It's, it's adjusting the income in that scenario, which will have an effect on the purchase price and the cap rate, obviously. Um, for environmental— and by the way, if they're seller financed, they say, oh, I'll seller finance it to you, okay, but I would have that, um, I would make sure my attorney has that as a condition of my loan. Hey, if they come back and say I can't do this Then we're adjusting things based on that. Um, for environmental, there shouldn't be any uncertainty. That— I mean, I, I just talked, uh, I just recapped it, and go back and watch those days. Folks, we don't go into deals uncertain about environmental. We— it's one of the, one of the things that we want to be very certain about. Environmental, look, You buy a deal in a market, you made a mistake, or you overpaid for something, you made a mistake, you'll probably be fine depending on how big the mistake is. But what seems like a small mistake, you'll probably be fine. Environmental is not something you want to mess around with. The— those mistakes, what seems like— what seemed like they could be small mistakes can be astronomical mistakes. That's not something you want to not be certain about. So I hope that answers the question for you, Dallas. Um, all right, we're, uh, I just had a list of questions up. Here we go. Um, been watching since day 12. I found a facility on LoopNet that looks interesting, but you said deals don't live there. Should I even bother looking at it? Um, well, look, it's not worthless. It tells you— it might tell you what's, what's overpriced and already shopped, um, but the real deals are sourced before they ever hit a listing. So use LoopNet to understand the market, not to find your deal. Now look, look, can you find a deal there? Yeah, that's not what I'm— I'm not saying you can't. I'm saying it's not my go-to. If, if you see something that's intriguing, run it out. But I'm running that out with one foot out the door, meaning as soon as something doesn't look right, I'm done. Um, it's, it's rare that a seller who hasn't been talking to brokers or hasn't been talking to people Just goes to loop, especially in the boat and RV space. I just—it's just very rare. So it's not a hard no; it's just a—it's a—it's a hairy eyeball. All right, Joe, I sent this in live. Of course, I called three boat and RV dealers in my county this week. Like you said, day thirteen. Two of them told me. They have customers asking about storage all the time and nowhere to send them. What do I do with that information? Well, um, 2 of— wait, let me read that again. I called 3 and 2 of them. Okay, well, it's 2. 3 is a good amount in the market, so let's, let's say that's most of the market then. So that, that's pretty good market validation signal potentially right there. 2 dealers with unmet demand in the same county is probably a buy box that's checking itself. Now, next step— if you should know this, but next step— pull the registration to spaces ratio and see if the supply gap confirms what they're telling you on the ground. Um, so look at all the facilities, um, count the spaces and find out how many vehicles you have in the county. And, or in the trade area, go like 10 miles out. And if that supply and demand supports what they're telling you, I'd be, uh, I'd be looking, or I'd be, I'd be talking to those owners who are looking for raw land. Not raw land— well, raw land, but, uh, light industrial land, not next to neighborhoods, residential. You'll never get approved. Um, when I visited a facility— is the third question— when I visited a facility last week, I forgot to bring a tape measure. What's the minimum drive aisle width I should be looking at, looking for, and can I estimate it by eye? Um, I was a caddy, so I can walk things off. Um, a full stride is, uh, for most people is going to be right around 3 feet. You know, not not stepping as far as you can step, but you know a healthy step forward is about three feet. So you could pace it off, count how many yards it is, multiply by three. So you can. And by the way, folks, if you're doing desktop work first, there's a tool on Google Maps. Just right-click. There's a drop-down menu that comes up. The bottom one says measure distance. Select that, click on one side of a building or space, click on the across the aisle, tell you right there. Easy peasy lemon squeezy. Um, but the first part of the question, minimum drive-out, well, it depends on what, what class of facility you're looking at. So Class A, uh, 50 feet minimum. You could— you can estimate it by eye if you know standard parking space is about 9 feet too. But, um, just walk it off. Um, if you— yeah, I would just walk it off. There's no better— if you forget a tape measure, walk it off. If you are looking on desktop first, measure first before you go and then confirm with a tape measure or walk it off. Um, I found a facility with it with 24 months of rent roll data. Nice. But summer occupancy looks really soft around 65%. Seller says it always comes back in the fall. Should I trust that? Yeah, I mean, 65% is not crazy to me. Um, but seller says it always comes back in the fall is not your data. So ask for the October, November numbers from the last 2 years— September, October, November. last 2 years as well. If the fall occupancy is consistently 88, 90 plus, then sounds like the seasonal pattern's stable to me. Uh, soft summer is explainable too. Fall is soft too. The story doesn't add up. So, um, I hope that answers your question. Um, let's see, any more questions? I'm trying to look at the chat too here. All right. Only one or two more in the— I had an email here. All right, Joe, what's the one thing you look at first when you walk a boat and RV facility for the first time? If you— I don't remember what day it was, um, but easy answer is drive aisles. Everything else you can fix pretty much— surface condition, amenities, signage, even the gate system. But if the drive aisles won't accommodate a 40-foot Class A Uh, vehicle, then you've got a structural ceiling on your tenant mix and your rent ceiling. Um, it's no-brainer, drive-by house. I hope you understand that. If you don't, I went in depth in it and I forget which day it was. Um, if you can accommodate a fifth wheel, you can accommodate anything. If you can't accommodate a fifth wheel, you can't If you can't accommodate a 40-foot Class A vehicle, forget the fifth wheel. If you can't accommodate the 40-footer, you can't be Class A. You could be a really, really nice Class B, but you can't be Class A. And you're— you have a ceiling on your, on your rents. I mean, look, you might find the exception to this is going to be you've cornered the market Next to a marina, and the marina is on a lake, and a lake, you only have boats so big, right? Or, or this— that particular lake only can accommodate a certain size boat. Okay, maybe you're gonna be pushing Class A rents in that very specific scenario, but in general You're limiting your— if your drive aisles limit your revenue. Does that make sense? I hope it does. Go back and watch that video if it doesn't. Oh, the question from— watching here. How sensitive are lenders to seasonal income fluctuations? You know, it depends on the lender. If they've financed boat and RV before, then they're gonna be very comfortable. They should expect it. If they haven't, I, I don't know. It depends on them. I've seen where they are. What— that's why I went into such depth about don't, don't just show it. Show it and annotate it. Tell them why. Make sure that pro forma is structured in such a way that they can't miss the, the, the explanation. Don't bury it somewhere and hope they find it. If it's 65%, like that question was above, in, in the summer, and you're worried the lender is going to be concerned about it, make sure it's jumping off the page at them that This is normal. The boats are in the water and the RVs are at the campgrounds. They should go, ah, that makes sense, and then point them towards the annual numbers and the debt service and why it all makes sense. But remember, I also talked about, hey, make sure they— if your debt service isn't being covered in those summer months based on that, that you have extra reserves to cover it because it will be covered again in the fall. Um, all right, we've got one more. I've, um, never written an LOI before. How do I submit one without looking like I don't know what I'm doing? Huh, you're going to use an attorney or a commercial real estate agent for the, for the first one. The LOI— and they'll have, um, samples. The LOI mechanics matter less than the terms inside it. Uh, what matters is you've included the due diligence contingencies we covered on day 24. Remember the drive aisle inspection, environmental contingency for near waterway sites, seasonal occupancy history minimum 24 months. Um, on that seasonal occupancy history, ask for 36, and the waiting list transfer clause. I forget anything. They all need to go in there. Um, and of course, storagemongols.ai has it. Couldn't help it, couldn't help myself. Um, all right, let us close this thing out here. I want to tell you what's coming next, but before I do, um, All right, yeah, so the recap of the recap, I guess. 13 episodes, that's what we build here in section 2. Sourcing the best boat and RV deals, um, they're off-market folks, by far the best, and these are the easiest people to approach. You also have the county assessor research, dealer conversations, marina and RV park relationships. Have fun with it, go build some relationships, make some friends. Um, build your prospect list, make the calls, maintain the cadence. Um, for evaluation, physical filters first. Drive aisles, drive aisles, drive aisles, and site access before you open the rent roll. Drive aisles, drive aisles, drive aisles, site access— can they get in? If you have the drive aisle width for a fifth wheel, that's That's wonderful. Can they get into your facility without getting rear-ended? That's important. Uh, seasonal modal, uh, seasonal model for, uh, from 24 months of monthly data. Gotta have it. Gotta be seasonal. Gotta be monthly. 21-item due diligence checklists. Written comp argument when transaction comps don't exist. Remember, this is all— go back and watch these videos. Uh, watch them twice. This is all about immersive. That's why storagemoguls.ai is so important. It's going to be a game changer really in all education and real estate. It's because we're, we're gonna— you're gonna be able to immerse yourself in the multiple modes of consuming this information, not just videos. You'll see when you get in there. Um, the offer LOI with 7 standard elements and the 9 boat and RV— is it 7 or 9? I can't remember what I said— boat and RV specific editions. Whatever it is, it's in there. Seller financing as a tool, not a fallback. And then transition period clause to capture the operational knowledge that no document holds. Remember, don't, don't sleep on that episode, especially when you're buying it. That's important advice right there. I hope you take it. All right folks, Section 3 starts tomorrow, day 26. The lender education problem, which is One of our questions tonight: Most banks have never underwritten a boat and RV deal. Section three is how you change that. So I think was that Dallas who asked that question? You're gonna you're gonna enjoy this next section. All right, folks, please like this video if you if something from section two, a sourcing channel, a due diligence item, an LOI clause gave you something concrete you can use in your next deal. Subscribe so you don't miss section three. You got to ring the bell to subscribe. Um, financing section is where most investors get stuck in this vertical, so I'm hoping I'm gonna unstick that for you over the next, uh, I think probably 2 weeks. And I made a point last night, uh, I think last night or one of these nights, uh, share this with your whole network. You have to share this with everybody. Remember, I'm doing the work for you. All you have to do is share it. Why share it? You might want investors someday. You're— be nice if they knew you've been up to this for a long time. You sharing for 3, 4, 6 months is them thinking you've been doing this for years. Give you another reason: lenders. Don't think lenders don't look up your social when you make a loan application. If they see you've been sharing boat and RV videos and liking them and Subscribe to this and doing that, then you're going to put that in. I'm a member of Storage Moguls. When you're, um, in your profile, when you go to your loan application, when you build up the, the borrower part— we covered it, or we will cover it, sorry— um, they're gonna be looking to see what you've been doing. Share away. This is for you. Yeah, sure, it helps, it helps me grow, but I did the hard part. All you got to do is share. All right, 25 episodes down. 2 full sections to complete are complete. You now know the landscape, you know how to find and evaluate. Tomorrow we're going to talk about— we're going to start talking about how to close them. I hope you enjoyed tonight despite my, um, not being audible for the first 18 minutes. Um, that's all right. For those of you watching the recap, we're gonna cut that out anyway. Shouldn't even said that, you know. I don't mind, I don't care, I'm an open book. Um, hope you enjoyed it. Thank you for participating. Thank you for the questions in advance and tonight, and we will see you tomorrow, and I'll see you live.