Day 8: Do You Need Experience to Buy a Self Storage Facility? (The Honest Answer)

All right. Welcome back to day 8 of the Storage 100 series. I am Joe Downs with the Self Storage Mastermind, and today we are tackling the biggest question that holds new investors back. Can you invest in self-storage without prior experience? Short answer is absolutely yes, but there's a catch. You don't have to have owned a facility before, but you do need to understand the requirements. So I'm going to break down for you what lenders actually look for and how you can build a team that replaces your lack of experience. This is all about building confidence while staying realistic about the commitment. All right. So let's dive into the biggest misconception that keeps people on the sidelines. The idea that you need years of real estate experience is what I call the experience myth. It stops thousands of smart, qualified people from even trying to enter the self-storage space. And the reality is that experience is not the requirement. The right team is the requirement. Lenders are much more concerned with your financial stability and your business acumen than your past storage deals. It's nice that they see past storage deals, but they really are looking at you as the person and what your financial wherewithal is. So they want to see that you have good credit, sufficient cash reserves, and a solid plan for success. Your job as the first-time investor is to be the CEO who assembles the winning team. So let's get specific about what the gatekeepers and the lenders actually prioritize. So we just talked about how lenders don't require storage experience. So what they do actually, or what do they actually care about? They focus on 3 core areas and none of them are, did you own a facility before? First is your credit. 680 is preferred, but you need at least a 640 credit score to even be in the game. Second is liquidity, which means cash reserves to cover your down payment and operating reserves. We've covered this already. We'll go in more depth later, but we covered this at a high level. Yeah. You should plan for 10% down plus 6 months of operating capital in the bank. Finally, they need to see a strong business plan, which means solid underwriting and realistic projections. This plan proves you've done your homework and it proves you know how to build that experienced team. Speaking of that team, let's take a look at the key players you need to recruit to make your first deal happen. So since you don't have the experience, you kind of need to buy it by assembling the right team around you. So these are 4 potential key people That are the ones that replace your lack of experience in the eyes of the lender. Not any of them is unbelievably critical. Like, for instance, the experienced broker. I'll cover that, but it's nice to have them. So an experienced broker who knows the market, who maybe found the deal for you and guides you on your pricing strategy, would be a nice member of your team. But, you know, not critical. You can find an off-market deal. It's really the next 3 I think that are most important. So a great property manager is essential, whether you hire one or use a third-party firm to handle the day-to-day operations. They can also help you in your due diligence as well. A mentor or coach is really the most invaluable for reviewing your deals and helping you avoid costly mistakes that first-timers often make. Plus, they can help put together the rest of the team for you. And then finally, you're absolutely going to need a sharp real estate attorney who's going to review your— not only your purchase and sale contract, but maybe even your contracts with your tenants. And protect your interests during the closing period as well through the closing and title, et cetera. So having these 3 or 4 on your side is the ultimate proof that you are ready to invest. But even with a great team, you need to be realistic about the time commitment. So let's look at the learning curve here. So it's important to set realistic expectations about finding your first deal, right? I don't know if I've said this yet, but this is not a get-rich-quick scheme, right? We are in the crockpot business, not the microwave business. So learning curve is real, but it's not insurmountable. I mean, a guy like me can do it, you can do it. But it takes time to go from zero knowledge to closing your first facility, right? So you gotta allow the first 3 to 6 months, it's mostly about education, learning the fundamentals, underwriting, and financing options. After that, you'll spend another 3 to 6 months in the deal search phase. So analyzing markets, touring facilities, submitting offers. Total time from starting your education to closing your first deal is realistically 6 to 12 months. But that timeline is crucial because it manages your expectations and keeps you from getting discouraged. It's okay, it takes a while. It took me a while too. Now that we've covered that reality of the time commitment, let's look at the unique advantages for you as a first-time investor. And let me tell you, before we even go to that, I gotta tell you, it's so worth it because the skills that you learn to develop over that time, kind of like in a previous episode where I talked about Self-storage being what brought us here, but not what necessarily keeps us around or keeps us motivated or keeps us interested. I love self-storage, don't get me wrong, but it's the knowledge that I've gained, the ability to pivot with a piece of dirt that's, you know, probably zoned industrial that makes this so exciting. So, all right, back to the first-timer. I can still remember being a first-timer, so that's why I want to impassion you with don't worry about 6 to 12 months. That's normal. Focus on the next 6 to 12 years. That's what's going to be incredible. All right. So, we just talked about the learning curve and I want you to shift. I want to shift your mindset now because being new can be looked at as a disadvantage or it could be an asset, right? You have a fresh perspective. You haven't been doing things the same way for 20 years and being asked to do them differently now. So, you naturally question the status quo and finding innovative solutions, right? You would just, you probably look at the— I know I did look at things like, why are we doing it that way? Yeah. Have any bad habits to unlearn. You can adopt modern technology and best practices from day one, skipping all the legacy processes that slow down older operators. And you're hungry and motivated, right? So you're willing to put in the work, ask the hard questions, and seek out the knowledge the experienced operators often overlook because they think they know it all. And believe me, I'm in a storage mastermind, and from time to time you see that. Fortunately, mostly we don't in our mastermind because that's why people are there, to realize, hey, there's, there's more for us to learn. I'm learning every day. Um, This lower ego means higher learning. You're more likely to seek out mentorship and build those crucial relationships that you actually will help you get your first deal done, just like our mastermind. So don't let the learning curve intimidate you. Use your beginner status as leverage. I actually cover that in some of the courses I teach with sourcing your first deal. We'll probably talk about it later in this series as well. But this leads to the bigger question: are you actually ready to start? So we've established that being new is an advantage, but that doesn't mean you should jump in blindly. This framework helps you honestly assess your readiness. If you're ready to start now and you need a few things locked down, you know, maybe like your credit score isn't ready yet, right? So, you know, and that's going to be critical for financing. So do you have your capital, your 10% down, plus at least 6 months of operating reserves saved up? So don't forget that. Reserve cushion is important. You got to be willing to assemble a team of professionals and you can't do this alone. So finally, that commitment, right? You got to commit to a 6 to 12 month timeline and dedicate to 10 to 20 hours a week to do that process well, right? I see people dedicate 5 hours a week and I don't think it's enough. I really think it's that 10 to 15, ideally up to 20. It's a part-time job for a little while. So, are you ready? That's the commitment. Right? Then if you need more time, it's okay. Maybe your credit report, credit score needs repair, or you're still building up capital reserves. Maybe you can't commit to the time right now, right? Use the next 3 to 6 months to learn and prepare, not just look at deals. Let's get yourself ready so that when you do find a deal, you're ready, right? It's better to wait 6 months and be ready than to rush into something and make a costly mistake or just waste your time, right? So speaking of mistakes, by the way, let's look at the most common ones first-timers make. We just looked at the readiness framework. Now the pitfalls. So you can learn so much by avoiding the mistakes others have already made. Biggest mistake is skipping the education phase. People jump straight to deal hunting without understanding underwriting. It's a little tongue twister there. Operations or market dynamics. You need to invest the 3 to 6 months in structured learning so you can, or before you even think about making an offer. Education is literally your least expensive insurance policy. Another huge error is underestimating your capital needs. People only plan for the down payment and forget about closing costs, reserves, first-year operating capital. You should budget for 15 to 20% down plus 6 to 12 months for operating reserves. And that buffer's gonna, you know, that'll be something that'll keep you in the game. And finally, I see people try to do it alone. Trying to learn everything on their own is slow and expensive. Trying to do it all alone, leverage, You need to leverage experienced brokers, managers, mentors. Build your team before you start looking at deals, right? Your team is your greatest asset. And I would say I can encapsulate a lot of this into maybe one wrapper of one biggest mistake, and that's people fall in love with their first deal. And because it's not a deal, it's a lead, and they fall in love with it because someone's talking to them about buying it or selling it. So be careful. And that's what that's what your mentor. will help you avoid. So take, take this slide very seriously and heed these, these— I'll call them warnings. I don't want them to be negative, but if you're really serious about this business, set yourself up this way. All right. All right. Now that we know the mistakes to avoid, let's look at your immediate action steps. So covered the advantages of being new and the mistakes to avoid. Now it's time to put it into action. First step is an honest self-assessment. Look at your credit score, your capital, your time availability, and your commitment level. Be realistic about where you stand right now. If you're ready to commit to that 3 to 6 month structured education period, don't look at deals yet. I mean, you can, you can start looking at 'em, but let's start getting ourselves ready. Let's do the blocking and tackling to get ourselves in position. Focus on the learning, the fundamentals. If you need more time, create a 6 to 12 month plan. This plan should detail how you will improve your credit, build your capital, or clear your schedule. Don't just wish for it, plan for it. All right. This series is all about helping first-timer, first-time investors like you. All right. So if this content has been helpful, please like this video. It tells YouTube that the information is valuable. Subscribe to get all 100 days of self-storage education, and it'll remind you about the lives, which will be roughly every 2 weeks. And if you share this with someone else who is starting their self-storage journey, They might want to start it with you. So share it. You never know. You would be surprised at how many people are having these same thoughts. So share it. Inspire someone. It could be your partner. And they will thank you later.