The Retirement Plan Your Parents Got Wrong

Hey, Kristen, how are you this evening?

I'm doing good, Joe. It's good to see you. How about yourself?

Well, ah, still, uh, still a little jet lag from the, uh, from our trip.

You had a big event last week. A couple of them.

2 of them, right? Did you forget you were with me in one?

I'm trying to.

Sure you are. Did you miss me last week? Last Monday night?

I plead the Fifth, Joe. This is not the time or place to ask that.

It's the lesser of 2 evils for you every Monday.

Yes.

Was, was, was Rod the lesser evil?

Uh, that day, yes.

Yes, that day.

It goes back and forth.

I'm sure you're excited to finish today with me.

Let there be no doubt.

Um, should we give it a minute, or you want to get right into it?

I say go for it.

All right, well, I'm, uh, I'm actually really excited about tonight's show. Um, It's gonna be a little bit about you again.

Oh, we're gonna have to change the topic soon.

We, we know how much you love talking about yourself. Uh, but what I want to share with everybody tonight is a little bit about your story, but because what you guys were able to do— and I know what you guys talked about last week was a great show, um, loved watching it. Sorry, I couldn't be there. But tonight I want to get into the formula, the reason, the tool that you use. Because I think what folks need to know is, so back in 2008, Chris and Rod did everything they were ever told to do, right? I think between you, you have 2 master's degrees, good jobs. You had the steady 401 contributions going in. into the mutual funds. And then 2008, that's what you look like. And then market crashes. And then when you look back, right, 4 years of consistent contribution still left them exactly where they started. Not behind by a little, but behind by a lot. And that's not a story about the stock market having a bad year. Yeah, we all know that that was a big event. Sure. That was the plan though, working exactly the way it was designed to work. That happens in the stock market through many cycles, right? So if you follow that plan, it's often not enough. And we're going to talk about that tonight too. The rules of the game has changed. So tonight, again, why, uh, why the plan that Kristen and Rob were handed stopped working before they even started, and what Kristen and Rod actually did about it and built instead. So welcome to Monday Night Storage Moguls. I'm Joe Downs. With me is Kristen Blunk. Uh, quick recap again, if you missed last week's show and want to rewatch it, you can find it on the Storage Moguls channel on YouTube. Rod Blunk, Kristen's husband, was actually sitting in for me. So, uh, a few more, few more muscles, a little less hair, just a, just a little less though.

A louder voice.

And a louder voice. Um, and I know you guys, you know, talked through your first 2 deals, which I'm sure was great for people to learn about. Um, Stowaway and TNT Storage, um, in Kentucky. I think you, uh, combined, you guys had about $145,000 out of pocket. You've got $145,000 a year coming back in in NOI. You've created over a million in equity between the 2. And that happened. That all happened, um, but that's not tonight's story. It's the proof sitting behind everything we're about to say tonight, but it's not tonight's story. Tonight's story is about the formula that allowed them to do just that. So go ahead, Kristen.

No, go ahead.

Uh, but I want to zoom out for a second though, because this isn't really a Kristen and Rod story. Um, you heard it. We'll reference it as an example, but it's not really just their story. This story is 3 generations old, and I think, uh, almost everybody watching this is somewhere inside of it in some way, shape, or form. I, I'm 53 as of yesterday. Our grandparents—

Happy birthday, Joe!

Thank you, thank you, thank you.

You get to— you got to celebrate on a red-eye home.

I did, um, and I, and I just couldn't sleep. I was so excited. That's what I'm telling myself. Um, uh, if you think about our— when I say our grandparents' generation, I mean mine, because I don't know how old you are when you're listening to this. Um, they had the agricultural, early industrial economy. Um, then there was the post-war boom. Um, largely, uh, had people what used to call the— they, they would call it the 3-legged stool, right? This is what my, my parents me about, right? You had, uh, every employer— not every, but a lot of employers with the good jobs had the pension, right? Social Security, and then whatever else personal savings, uh, you added on top of that. Um, people mostly work for one company, sometimes their entire career, and that was actually the goal. It was a badge of honor. You get the gold watch and the— and obviously the pension. Um, that company, by the way, Though that carried some risk that people, that people didn't realize it was built in there. And unfortunately, a lot of people found that out the hard way. But they promised you a check for life, and it was their job to make the math work, not yours. And that's why people never left. Uh, I remember when I was in my early job days, it was, it was taboo to job hop. I mean, it would— they would say people were looking for people with, you know, you worked at one company, but meant you were a stable employee and worked there for many years, sometimes your whole career. Right back in 1980, the stats were like 4 out of 10 private sector workers had an actual pension. And of the people who had any retirement plan through work at all, the pension was the normal one. The 401, that came later. So Kristen, yeah, that's, that's— we're roughly the same age. I don't, you know, You know, roughly, you know, within within ten years.

I'm younger than you.

Wink wink. I was giving you the opportunity. What happened? When did this change?

Yeah. Well, Joe, I think you know I'm not an economist. I am not the smartest person in the room, but the economy definitely itself changed, and the manufacturing and the agri. Agriculture gave way to services, and then we had the IT revolution. And the jobs— we— people just stopped working for one company for life. It just didn't happen that way. I know our parents' generation, that was that way for the longest time. Um, and the companies stopped wanting to carry that pension risk on their books. And I didn't realize this until several years back, but Congress actually passed a law in 1974 Was that the year you were born? No, you were '73.

Yep.

That regulated pensions more tightly, which sound— anything they do, it always sounds good, and it sounded like it was more protection. It partly was, but the truth be told, it wasn't. The ex— the pensions were extremely expensive to run, and it gave the employers a reason to look for a way out when they passed this law. And so a few years later, there was a provision buried in the tax code, and it originally was designed to let executives defer their bonus. I don't know if everybody knows this or not, but that's why it was designed. And it got reinterpreted by, by benefit consultants as something regular employees could use as well. And so that's what we know now as the 401. And so I don't know if you remember this, but I do. That's when they started pushing the 401s, the '80s and the '90s. I started working, I started working my career in the early '90s. Companies didn't actually— they didn't add this alongside the pensions. They used it to replace the pensions. And no one sat our parents down. No one sat me down at an early age and said and told me that this thing's not actually actuarially designed to guarantee you an income like the pensions were. It was sold to us as the new normal. And something that we thought we had more control over. And I don't know about you, but I would rather have control over my own money than a company or a government. At least that's what I thought at the time, right? So the 401 was exciting to me because I thought I had that control, but I didn't.

And they— what they were also doing was shifting the risk from the company to the employee.

100%.

Yeah. And then into the, into the markets under the guise of— and look, 2 schools of thought on that. I, I, I would rather have control, frankly, but it was also good for the company to shift the, uh, shift the risk. Um, so that's— look, that's a great, great point. Um, I love the research you did on that as well. Um, but where does that though leave People today, where does that leave the Kristen and the Rods today?

Well, it depends. Well, by the time we got there, we realized there was no pension to fall back on. It was all 401 or nothing. So we decided we were going to put our money in the 401. We were going to max it out. We were going to max out the company contribution allowance. Didn't think twice about it. We thought we were doing everything right. But I realized that we couldn't pick our funds. We could kind of give them a sliding scale of, oh, I want to lean more conservative or more moderate or more risky, but we didn't have the control to pick what we invested in. That was their job, and it was limited too. Um, so we also realized that Social Security might not be there for us too. They've been talking about that for a while, that I don't know when it— it's probably bankrupt already, right? Um, are we gonna get it by the time we become age? I'm getting to that age closer and closer, so I'm thinking maybe. I don't know how long it's gonna last though. Um, but you know, it was a hot mess, and there was too many deep state piggy banks that got in the way on every turn. And there was a more reasonable chance for us to keep paying into it Right. And believing that we were going to see it, but actually never seeing it.

Yeah, well, that's, it's a good point. I mean, I mean, wait, they were— you were told to follow the, the green line. Remember all the commercials? Trust, you know, this, that. I think Fidelity says follow the green line, max this, do that, right? Um, and at the end of the day, it's just, it, it's one giant charade. Uh, but here's the part that actually worries me the most. Is if this happened to you or to us, right? Not just to you, to us, our generation. What does the generation after us actually have, right? We saw the transition. We were at the beginning of the 401. What's the next generation have? A lot of them aren't even being offered 401s at work now, right?

Right.

Their economy's looking like gig work or contract work, right? There's no employer plan. Um, and, you know, so what— like, Kristen, you have 3 daughters in their— well, one's still in school, right? But, uh, in their 20s. I think they're all in their 20s, right? What, what kind of conversations are you having with them?

And not the same kind of conversations that my parents had with me. Um, that's a great question, and I don't really have an answer for that tonight. I don't think anybody does. We can help guide in other avenues and not just trusting one income stream coming in, right? But what we do have is what we actually did about it for ourselves that we're going to share with you because we did not have that pension coming. My daughters more than likely aren't going to have that pension coming. So how do we set them up or help them set themselves up for success down the road so that they don't have to rely on the 401 that might get wiped out when the market downturns? So that, well, there's really minimal pensions out there unless you're working for the government. or, you know, for the school system. There's other pensions, but they're all dwindling. So I don't know, I, I just, I don't have a really good answer for them. But what, what I can tell you is that no one ever really sat me down and discussed it with me. It was, it was the narrative of my generation. You probably feel that way too, Joe. Um, it, we were— it was assumed that we were all going to go to a good college, we were going to get good grades, we were going to get a good job and the system was going to work for us. Honestly, that's what I truly believed. And that was the path that my husband and I followed. And I know we're not the only ones. So when you do go get your first job or your jobs thereafter, you are sitting down with the HR and they're handing you the 401 forms and you sign them because supposedly you think that's what responsible people do because that's what we've been led to believe. And to some extent it is, it's a tax-deferred device and If the employer is matching up to a certain percentage, you should certainly take advantage of that. What you shouldn't do is rely 100% that that is going to be there when you need it. So, like I said, we did all of that. We thought we were following in the right steps and years of doing it, and we were constantly reassured. Yes, you're on the right track. You're on the right track. I mean, I can't tell you how many times we sat with our financial advisor, and he showed us the trend and where we would be if we kept putting this money in. But That's where we are. And so I, I felt like it still left us behind, and it really was exposed with the crash in 2008. And that's what made me realize that there's something else out there, something more that I needed to control, or something more that I needed to have control, another avenue of income coming in. And that's when Rod and I pushed ourselves or got into the residential real estate grind. Which we loved. Um, and we did that for a long time and we made a lot of good money. But truthfully, after reflecting and after going through some life changes, we realized that we weren't building a system that worked without us. We still had to be in it every day.

So yeah, and, and you didn't even go straight from, um, you know, your 401, your W-2, 401 world right into storage. As you said, you were— you went you know, 401 into about 6 years of, of residential real estate. And I know you were doing what, 450 transactions a year?

No, not a year. It was 450 transactions total during those 6 years.

Total? Oh, 6 years. Yeah, that's— that would be a lot.

80 transactions a year or more, right?

Right. Which, that's a lot. That's busy. What was the— what were those 6 years like?

Well, that's a good adjective. It was busy. It was constantly busy. You know, like you said, we had done over 450 deals. That included fix and flips, wholesaling, buy and holds, private money lending. Whatever was in front of us, we, we would take down. And it was enjoyable. We, we loved the grind. At least we thought we did. Um, it was a lot of activity, truly. Our lives were crazy and busy. My phone was always ringing off the hook, all hours of the day. It doesn't But what I realized is that activity wasn't the same as freedom. Even though we were making good money and we were making a lot of money at that time, we— if, if I were to actually break down the hours and the hours that I was working and compare it to the amount of money we were bringing in, it probably was minimal, honestly, for an hourly rate, if, if you know what I mean. Um, but we were working all the time and we still weren't building anything that couldn't run without us. And that's what really made me start thinking that, are we doing this right still? I thought we were.

So you essentially went through 2 versions of different systems, right? Um, the W-2, 401, kind of the one we grew up with, get a good job, you know, feed the 401. Um, I, I don't know, 2 kids in a, in a car or whatever. I guess we didn't really have that, but you know what I mean? Like the vanilla, this is, this is what you do, this is how you get ahead in life. That didn't work. Then you flip over to, or you, uh, kind of a hybrid of, because Rod still had a job, right? But yeah, uh, but then you flip over to, all right, you're on it, you, you've got another system which is the resi system, which is By the way, I commend everybody that goes there. I did too, first, because that's kind of the first realization that you got to do something, or you've had the first realization, I should say, that you need to do something else. And, and we gravitate towards residential real estate because— and I always say why— because we've all— we live in it, we've probably all rented at some point, we, um, we are— we're all experts because of Zillow. There's TV shows that, you know, how many of them show you how to flip a house? And is that— so that's the first place we go, which again, pat on the back, pat myself on the back, I did it first too. Um, because it's demonstrating we're taking that, that step to get out of the old system, right? Um, but that one didn't really do what you wanted it to do at the end of the day, right? So neither one actually gave you what you wanted. So it's kind of maybe a 2-point question here, but you knew you were never getting a pension. But what was the moment? I know I want you to share what the moments were, the 2 moments you had where you knew you had to build your own version of something else. So one being when you went into real estate from your W-2, and the second Storage.

You're gonna take me there? You're gonna take me down this path?

Just, just quickly, just quickly. You don't have to give a—

Uh, Rod and I were faced with some life circumstances. Many of you know. If you don't, uh, he was diagnosed— no, not that. You don't need to go there.

That's the second one. That was your second decision. I want to know—

That's what you asked, what got me into storage.

The two—

you—

the— no, no, the two decisions. Your first decision was leaving W-2 for residential real estate.

Yes.

So that was your first step. I just—

what was—

what, what was the trigger for that decision?

Oh, the 2008 crash. And I looked at my statements 4 years later and saw where I was and realized something had to be changed.

Okay, so I just wanted to point that out. So you, you've kind of lived Both of these cycles here. I have too, but for very different reasons. So you had the W-2, you had the 401, right? 2008 happens, your retirement's decimated.

Yep.

Rod has to keep his job. You said we're trying something else.

I did. We stayed the course for 4 years though. We thought we were young. We continue to put money back into the 401. It would come back. So on and so forth. Okay. 2012, I had that revelation. Yes, we had to do something different.

Okay. Then you do— commendable— you build a machine, right? Yep. You're, you're kicking butt, working hard, 10, 10 hours a day, I think you said.

At least.

Right. And then you had another trigger point.

Yes.

I don't want to be insensitive and to say— and to ask you to tell us quickly, but could you sum it up for us? Yeah.

Uh, Rod was diagnosed with stage 4 cancer, and he became extremely ill very quickly, couldn't work, and he needed 24-hour care, and I was his caretaker. So that meant there was no income coming in. And with residential real estate, you have to be in the middle of it grinding. Otherwise it doesn't, it doesn't work for you. And so I realized that we needed to change. We needed to create assets or a business where income would come in whether we showed up or not on a daily basis. And so that's what led me into storage.

And that is not just— so the way you said that, which is 100% true, is part of the reason why we love this asset class. But before we get into the numbers of why we actually love these things, storage facilities, I want to separate some of the math from it because I know, I almost want you to say that differently because yes, it provided everything. What else does it provide or allow you, Rod, to do? You were just bragging about it the other day.

That's why I'm trying to tease you. My time. It gives us back our time. And for Rod and I, we can be gone for weeks like we are, we are going to be tomorrow, starting tomorrow, right? Um, I will get very few calls, if any at all. There's no check-ins. The Facilities don't know we're gone. The people don't know we're there. We've got the systems in place. Um, and that wasn't true for a single day in residential real estate. If I didn't show up in residential real estate, or if I was out of pocket, I can guarantee you it happens all the time. You can ask anybody in residential real estate. There is something breaking somewhere, guaranteed, and there's a crisis going on that you have to fix. And that just doesn't happen with storage. Is that— was that what you wanted me to get out of it? Like, is that what I answered?

It's, it's, it's exactly right. Because when you and I— when we were in LA and there was a couple—

I was mad that you made me be there working all that time.

And there was a, there was a couple that was talking to us at the conference, and, and you so eloquently put it that way. And that's what I was trying to tease that back out of you so it didn't Because that's your story, and you were passionately talking about how awesome that was and talking about the trip you're about to go on. So that's why I wanted you to share it.

Well, thank you.

Yes, it's a business, it's cash flows. You could do all— you know, you can clean your house all day long now if you want. That's not the fun, sexy part of this. The fun, sexy part of this is you get to just disappear, and you know, while you're on vacation, the, the cash register is, is, is Is cha-chinging every night, every week, every month, right? And and that's that's an example of the actual difference between owning an asset and owning a job that happens to pay you. So Kristen, how are you able to do all this? Walk us through. What like for for someone watching or listening right now who doesn't understand how you can just disappear for two weeks? What what is What's a normal month like or week like? Or, you know, how you do— I guess by month. What is the month— what is your month structured like managing 2 of your own storage facilities?

Yes, so with just the 2 managing, um, it's about 15 calls a month, maybe less. And that's because we've set the systems up and everything is automated, so I don't have to be there. And I— those calls, I can promise you, I don't They don't come until after my morning coffee, after my walking the dog, after me going to the gym and getting ready to start my day. All of this is done after and on my time. And I— if you compare that to 30 or 40 calls a day when I was in residential, I mean, it goes from contractors texting me and calling me regarding what's going on at the job sites and they need decisions now. It's sellers renegotiating and it's me negotiating to buy deals and It's closings falling apart. That happens. And it's not— the storage doesn't need my attention like that. There's just not the urgency that there is in residential. And that is the attention that I am looking to design. It has to fit inside my life instead of it being my life.

And residential was being my life and storage fits So here's a real question, and I want you to actually sit with it instead of answering it out loud. For the folks listening and watching, if nobody had ever handed you the plan, because there was no plan, no pension, what if we wake up and we very well could wake up one day with— well, pensions are pretty much done unless you work for a government, uh, or some sort of governmental agency, right? Um, or I guess nonprofit, but I don't want to belabor the point. Uh, but we can wake up at a time where there are, there are very few 401s because there's no companies, right? What if, what if you wake up tomorrow and you're all on your own? You're a solopreneur. Voluntary or involuntary, right? So there is no plan. So what would you do if you were building your own version of retirement from scratch right now today? What would it actually look like? Well, I think a lot of folks are starting to look at real estate because if done right, it's a hard asset with cash flow. Tax advantages through depreciation and growth through either income growth or asset appreciation, depending on the type of real estate it is. So let's put a real number on the plan that didn't work here, Kristen. What actually happened to those— how many years was 401 and mutual fund contributions through 2008?

How many years? I started working in the early '90s.

So over 20, 22, 24, depending on when you started working. Yeah, right.

Yeah.

What happened to that?

Well, I— this is not shocking because it happened to a lot of people, but, uh, after years of consistent contributions and believing in the system When the market crashed, we lost a ton of money, just like many other people probably on this call or people who aren't even on this call. It didn't just affect us; it affected a lot of people. I kept saying in my mind we were fortunate because Rod and I and the girls—we had a young family. We were young at the time, and we still thought that we believed in the system still, and we thought that it would come back. And so we decided to stay the course. We both still continued our jobs. We still contributing greatly to our 401s and our mutual funds and investing the way that we thought we should. And the truth is, I honestly thought that market would, would come back quickly and that we would be fine. And the compounding interest and all of our contributions would get us back on track to where we thought we wanted to be or where we did want to be. And so I knew I didn't want to look at the statements coming in every month. And so it took me 4 years, Joe, and I'm not lying. You know what? You know how much of a control freak I am. It took me 4 years to actually open up our statements and our financial statements because I knew our economy hadn't yet recovered. And I thought maybe we'd be on the positive side by now because Keep in mind, we still contributed for those last 4 years that I wasn't looking at those statements. But when I opened them up, I was shocked because we weren't where we were before we lost everything. We had still contributed for 4 more years. And what's even worse is I started paying attention to the fees that I was paying the broker because they were making money hand over foot and I was losing. And that was absolutely shocking. And I thought, this is broken. There's no way I'm going to— we're going to get to where we want to get to by going down this path. We have no control, you know.

Even dollar-cost averaging didn't work, it sounds like.

Yeah.

Yeah. Um, I mean, well, you, you said it yourself a minute ago, and that's, I think, what's why you said you went looking for something else, right, the first time. So, um, What did, uh, walk us through that same amount of money— or not, actually, it's probably a lot less money— what did that actually do in storage for you? Because it was 4 years where you didn't look at statements. Yeah. What did you do in storage in 4 years, or less than 4 years? Start with StowAway.

Yeah, we will. So let's go through that because those numbers, those numbers are eye-opening, right? And these are just 2 deals that got us started, and it just rinse and repeat, rinse and repeat, rinse and repeat. You know the deal, right? So our first facility that we got, we purchased for $320,000, and you can't even buy— we live in the DC area, Maryland. Um, you can't buy a house for $320,000, can't fix and flip a house for $320,000. We put $64,000 down, so 20% of, um, the value. We bought— it wasn't a distressed facility, it just wasn't managed correctly, and the rents were 37% under market. So day one, we raised the rents. We didn't raise them the whole 37%. We did it gradually because we didn't want a mass evacuation out of our facility. We filled the vacancies and we systematized it and we ran it like a business instead of leaving money on the table. When we bought it, It— we were fortunate enough. A lot of times when you're buying facilities, it's not cash flowing day one. You have to create the value and then it starts cash flowing. Well, this, um, it was still cash flowing even though it wasn't run the way that it should be run. We were cash flowing about $2,000 a month, uh, day one, and creating the value probably within— and it didn't take long. It was probably 9 months until we could get everybody up to the market rates and increase and increase the rates so that we're competitive with the market. And once we got up to that, it started generating about $4,000 or $5,000 in cash flow a month. It's not, that is not life-changing, right? But it certainly is nice to have that consistent income coming in on a monthly basis. And the facility we bought at $320,000 and within a year we could have sold that thing for $750,000. So we more than doubled the value of that facility. We held on to it because the cash flow was pretty good, um, and that's why we got into it.

So I don't know, some folks might say creating $400,000 of equity in a couple of years is life-changing, but yeah, I won't speak for, for them.

I guess, I guess I should have said it differently.

Uh, we know what you meant. Um, yeah, I think what you meant was the cash flow isn't life-saving, life-changing, but look at the value you created, right? Uh, because certainly you could sell that and buy something bigger with more cash flow, right? So, um, folks, that I promised in the beginning of the show that we would, we would show you The simple— I think it's simple, but it's, it's a formula that is eye-opening if you don't understand how it works. Um, and I told you we'd show it, so, so here it is. And it's a real simple one. All right, it's, it's value equals NOI divided by cap rate. Yeah.

Um, so Well, Stowaway throws off about $50,000 in that example of NOI, right, which is net operating income. And we divide that by 6.5% cap rate, and you land right about the $750,000 valuation. And honestly, that facility would sell for greater than a 6.5% cap rate. But, um, but that's really the formula, and it's really simple, Joe.

So how does she do it? How, how does this, this work at the end of the day? So let's, let's, let's break it down. And it's the way Kristen created this value, right, so quickly and continues to, is by following this, this formula. Because all it really is— let's break it down to $1, and then, and then I'm— I should talk to you through these examples here. $1 change in NOI, $1 increase in NOI at a 6.5% cap rate— and don't focus on the cap rate right now, that, that can change by asset class and market. We're, we're using her stowaway storage facility as the example here, and that would trade at a 6.5% cap rate. So $1 increase NOI at a 6.5% cap rate is an increase or a creation of value of $185. It kind of— we were going to call it a secret formula, but it's like, nah, it sounds cheesy. But it, it's a magical formula if you think about it. $1 can become $185, right? So, and, and how do you raise your NOI by a dollar? Well, you can raise under-market rents, you can increase your occupancy, you can also cut expenses, right? And there's multiple ways to do it. And I'm going to say that again because it's basically the— tonight's whole episode in one sentence. $1 of NOI is worth about $185 in value at that cap rate. And that's the actual difference From a 401k. There, the value moves because of the market on somebody else's timeline. Here, it moves because a decision Kristen makes at her facility. She raises the rent, she fills a unit, she cuts an expense, and she does it on a timeline she controls. If, if Kristen If you're looking at the slide, I'll explain it to you. If Kristen raises the rent by $8 a month on all 66 units— wouldn't exactly, but if she did— in fact, some might be a little more, some might be a little less, but it might average $8. That $8 a month, after we take out expenses, would yield around $5 per month more in NOI. And if you multiply that by 66, that's $330 of new monthly NOI just by raising the rent.

Yeah.

Annualize that, that's almost $4,000. And again, remember that $1 became $1.85? Now that $4,000 at a 6.5% cap rate is almost $61,000 in value Because Kristen made a decision that she knew she could make. Yeah. And you can't do that in your 401.

Joe, I love what you said on, on the timeline that I control. I mean, obviously there are some other factors, outside factors, um, that I can't control, but the majority of this is something I can control. And that same kind of money that went into our 401 and came out behind after 4 years, and that could happen again because I can't control it, right? We put— we made a conscious decision to put that into storage. And as you saw by this example, we were more than able to double the value in just a few years. And actually, I think I said this before, that value was created within the first year, honestly. Um, plus, not just the value creation, it's the monthly cash flow. It's cash flowing this entire time. And that's the closest thing to a pension that we could could build ourselves. And I said, you know, the magic word is rinse and repeat. You do it once, you figure it out, you rinse and repeat, and you rinse and repeat, and you rinse and repeat, right? And you just keep building and building.

Yeah, and that is— that's exactly it. Like, a 401 is a bet that the market goes up more than it goes down, but it's on someone else's timeline. Uh, and by the way, you were young in 2008 when you said, right? I—

You were younger.

I didn't say that. I was also young. My point is I had a lot of clients who were not.

Yeah, they got hit.

It ruined them. They were a year away from retirement or had just retired. And it ruined them, right? So that's why I say it's someone else's timeline. This is a bet Kristen and Rod took, a bet on that, that they could find undermanaged storage buildings.

Mm-hmm.

Poorly managed, or I hate saying poorly managed. Uh, old school managed storage facilities, and they bet that with new technology and, you know, mentorship and understanding how to manage these things better and more like businesses than hobbies, they took a bet on themselves that they could run it better than someone who built it, ran it 20 or 30 years ago. And that's not the same kind of bet, and they definitely don't carry the same kind of risk. So Kristen, tell us, um, about your second facility, because that one has a little detail in it that I still am trying to emulate. I have not found yet.

I haven't found it again either, but I'll take the first— I'll take it. Uh, so that one was $430,000. Purchase price. Again, I can't buy a single-family home and flip it, uh, for that amount of money. It was 20% down, as just like the last, um, equity piece. Has 117 units. Out of— when we were in our due diligence, I found out that 40 of those 117 units were occupied, but they were not paying customers. They hadn't paid in months. And it was interesting Because the owner didn't have systems in place. He was old school. Uh, he was busy driving a bus and he was fixing lawn mowers, and people had to either come to his office or chase him down, and he was never in his office to pay them. And so he just didn't, and that's why he wanted out. It was just too much for him. So we closed, and I called on every one of those tenants, and I was shocked because they were all so All but a couple paid, paid their past due rents. And they were so grateful that I reached out to them and collected their money. And that I told them there was going to be monthly invoices coming their way every month. So they knew what was due and when, and yes, they could pay by credit card or automatic checks, whatever. They were elated. Right. And so I was not expecting when we closed on that facility to collect $14,000 in back rent. We never underwrote for that. I was prepared to actually have to auction all of those and stabilize the facility, but I didn't even have to do that. It was amazing.

It truly is. And I know, folks, you heard Kristen say she hasn't found that unique detail again, and neither have I. It's not the norm, but think about that. The fact that there are facility owners out there that that don't even bother to collect the rent. I mean, it's sure it's not that part is a little abnormal. Not not having the auto pay, not having the ability for your tenant. I mean, these tenants were trying to pay the guy, right? Clearly, by by paying Kristen back rent, they're they're demonstrating that look, we just want to we just want to pay and store our stuff here. And he made it hard for them. This— these are the types of examples we run into out there. But that's not a story about being lucky. That's a story that's going to repeat itself over and over with different names in different places, with different Rods and Kristens around the country. And the so-called lucky buyers of these facilities are the ones who just did what it took to, to learn how to find, evaluate, and buy a self-storage facility.

Yeah, so combined on both of these deals, under $200,000 out of pocket. For us, over $2 million in value today and $145,000 in combined cash flow. And these are just 2 small facilities, right? So rinse and repeat and continue to grow. And I chose to continue to manage these 2 facilities and not outsource them to a third-party management because it doesn't, it doesn't take much of my time at all. And it doesn't interfere with the life that I have or that I want to create for myself. Yeah.

Yeah, yeah, 15 hours a month is, is not a, not a ton of time, I would say.

Now, the Bowling Green would be property managed because that gets way too many calls.

So, but you had the app. We— you— we, because we own it together, have the option to outsource that, and that's exactly what happened. Um, all right, so this is normally, uh, where, uh, Kirsten, part of the show where we would— we'd like to talk about a residential horror story. Um, but tonight I thought we'd switch it up here because I think the real horror story isn't a bad tenant, it's the plan itself. So take us back to 2012. What was actually in your head when you were opening those statements?

So I, I talked about it briefly a little bit ago, but I had been avoiding those statements, like I said, and I didn't open the envelopes. When I finally did, I stared at the number and it was so disappointing that I'm like, people are creating wealth for themselves. That's exactly what went through my head. People create wealth. This can't be that hard. I don't think I can create the wealth that I want to create doing what I'm doing, continuing to work in my W-2 job and continuing to invest in my 401. So that's when I started dismantling everything that I thought I thought that I thought I thought was right and started just diving into books that opened my eyes, um, and be like, oh gosh, that's how they do it. There's other ways, right? It's just educating yourself. And once I started getting those ideas in my head about how about going to do this and there are other ways that we can do this, um, we went all in and we really, we educated ourselves. And dove deep into residential real estate very quickly and hit the ground running. And that's what I did. That's what I was feeling. The whole it was exciting. It was scary.

But we did it. Yeah. But here's the thing though. You guys didn't. You didn't do anything wrong. You did everything by the book, which was. Quote unquote the right way, right? Advanced degrees, you had the steady jobs, you had the 401 contributions. But as we mentioned, the plan didn't hold up its end of the bargain. And I'm— we can contend because the rules of the game change. That's if they were ever really set up for us to get ahead that way anyway, right? There's a reason 60, 67%, I think I read recently, 67% of working folks still live paycheck to paycheck. It's literally renting.

Probably more than that these days, honestly. But it's crazy. And that's the whole point people miss, Joe. And I don't think it's about them or me or you being bad with the money and why we are— why we were where we were. It's my belief it's the plan was never actually designed around for us to have control over the outcome, right? It's designed around you trusting a system. And hoping that the timing works out in your favor. And I'm going to say ours didn't, but it actually did because I was young. I was young at the time. If I was just hitting retirement age in 2008, it would have been very different for us, right? I had enough time to have my eyes opened and realize that, oh, there's other paths, there's other ways. So I'm grateful for that. I'm glad I— I mean, we learned the hard way. It took me a while. Like I said, 2008, we still stayed the course for 4 more years. Um, but I'm grateful that we started exploring and stepping out. And it's not hard, but it's uncomfortable, right? Anytime you make a change, it's uncomfortable. Um, but it's not hard. It's just repeatable actions over and over and over again to get it there.

Exactly. And folks, if you're listening, you have your own version of that, um, you know, a plan that did exactly what it's supposed to do and still left you You know, behind where you thought you'd be. That's what we want to hear for the show. So send it to us, info@storagemuggles.ai, info@storagemuggles.ai. We'll put the best one on the show every week. Send us your residential horror stories, the plans that didn't work. We'll— we won't— we won't dox you. We'll keep you, you know, your name private, but, uh, we want to hear the story. Um, so, Kristen, what do you have to say to the doubters, or maybe even those that are just a little curious or unsure if they're actually falling behind? Like, how do you know? What's the gut check that'll tell you?

What would I say? Well, if I were in their shoes, I would pull up my 401 statement. I know the market's been pretty, pretty solid lately, but I would open it and I would look at it. I would look at what you've contributed versus what it's actually worth today. Not just the balance, but the real, real return, right? Because you're just looking at the total balance, but but you're really not looking about what you contributed, what your employer contributed, what the inflation was, what the fees are. You have to take all of that into account because that is the honest starting point. And you can't fix something unless you, unless you've actually looked at it and truly understand it. And I think a lot of us don't. We just look at that total number and don't really realize the growth that's come from the market itself or the growth that's just come from the money that was yours to begin with that you've put in there. Right? So I also understand that— I think everybody should understand that we have very little control over that money and that the market can shift significantly in a day. We've seen it, right? And here's the part that people always gloss over. I did. And 401 isn't a tax-free investment. It is a tax-deferred investment. And I think we all know what that means. You're going to pay taxes on it. Um, it's— you're not paying it on immediately, but when you go to take that income out, you are going to pay ordinary income tax on every single dollar that you eventually pull out of that plan. And if you touch it before age 59 and a half, there's a penalty on top of that. And real estate plays by a completely different set of rules. And there's depreciation that lets you shelter a chunk of your rental income every year on paper. And even when the property is going up in value, they still use tax— they still use depreciation for tax purposes. And when you sell, there's avenues like 1031 exchanges that let you roll the proceeds into the next property, deferring the tax bill, and you can do it over and over and over again. And it's legal and it's designed that way on purpose and it's written in the tax code. And, and it's just telling us that these rules in real estate and in businesses and owning businesses are very, very different than having a W-2 job and investing in a 401 plan. I would highly recommend you talk to your CPA and your attorney about all of this because that's not who we are, but just know there are different rules. For these asset classes than there are for the 401s.

Yes, good, good disclaimer. We are just giving you our lived experiences here. Yeah, um, but if you do that, you open up those statements, and if you go through that exercise and you look at everything else and you consider that when that income does come out, as Kristen just said, it is fully taxable. And by the way, that can put you in a higher tax bracket because at some point you will be forced to to what's called required minimum distributions, and you have no control over that or what the tax brackets will be in the future and what tax bracket that puts you in with everything else you have going on. So, um, just a little bit less control with it. Uh, better than nothing. Not saying you shouldn't, just—

It's one tool. It's one tool, Joe. It shouldn't be the one and only. tool, right?

I just, I just like people to, to go into things eyes wide open. But in either case, if you do all that, that number bothers you the way it bothered Kristen, it's not a reason to panic. Um, definitely don't do anything drastic, but it is a reason to go learn what, what the other door actually looks like before you decide to do anything. The door that Kristen walked through, uh, the door that I've walked through, uh, the door that a lot of folks, husband and wife, uh, uh, Trying to think who else we have. 2 brothers. We've got father-daughter teams. I don't think we have a mother-son team yet. We definitely have father-son, father-daughter. But these are some of the folks we've seen in education.

That gives you an opportunity, Joe, to be the first with your daughter.

That's right.

Yeah.

I'll have to do it. Lead the way. Lead the way. I love it. It just, those are the people that we're seeing walk through those doors. Um, and, and, and certainly a lot of, a lot of— I don't know if I said husband and wife, but there's certainly a lot of folks, you know, that, that kind of see themselves in Rod and Kristen, who did everything right. And, you know, life throws one curveball at you after another. And, um, and fortunately, they, um, they kept walking through or kept looking for the right, right door to walk through and certainly found it. Um, anything you want to add to that, Kristen?

I just— to full transparency, you— I think a lot of people get in their own way. You don't need 30 years of real estate experience to start this, really. You just need to ask the right questions and surround yourself by the right people, and you can get there for sure.

That's, that's a great point. Most of the students that we, um, have educated and mentored and helped and, and are working with have no— came into it with no real estate experience.

Um, and you learn by— I don't— you're probably like me, I learn a great deal by doing. Not just reading. So I learn a lot more by doing it.

Um, before we close it out tonight, we, we do want to hear from you. We're not, we're not jumping off. Uh, open for Q&A. Um, so if you got questions, drop them in the chat, uh, and we'll certainly take them live. While, uh, if you're thinking of questions while you're doing that, let's— I wanna, I wanna let people know what is available, what's coming up here. Kristen, we're doing a little workshop, uh, a 1-day workshop in, uh, White Marsh, Maryland. You want to run through, uh, what we're going to be doing that day for folks and, and how they can get involved?

Yeah, it's going to be an amazing day. Um, we're going to have a lot of education. We are going to talk about how to find real opportunities, how to underwrite the deal, how to finance the deal, how to negotiate and close, how to operate the asset. And how to build your network. And most importantly, we are going to take you to a self-storage facility that we own in White Marsh, Maryland, and do a site walkthrough with you all and teach you what to look for. And just, you're going to learn a great deal, uh, here, and I'm excited. I'm excited to do it. We definitely have limited capacity, so if you're interested, I would register now. It's $349 for the all-day workshop. We provide From the meeting room to the actual facility and back, we've got lunch and we've got some cocktails and hors d'oeuvres after that. It's gonna be a fantastic day. I'm super excited. And I don't know, Joe. Do you have? Can you put up a link or register registration link or QR code?

Um, I don't know that I can.

It's well, I'll say it out loud, but we should probably find a way to put it up. It's go storage go dot. storagemoguls.ai/whitemarshmaryland. I'll put it in the chat. And Nikki says happy birthday, by the way. She's listening to us.

Oh, thanks, Nikki.

Um, and Gina did too.

Kristen is, uh, I think you've, you've— that was a great summary of the day, but you, you missed one kind of important one.

Of course I did. That's the— I'm leaving it for you, Joe.

That's the ability to meet and greet and see the Rodfather in action. Yeah, the Rodfather of site visits, uh, self-storage facility site visits. Um, he will be there walking us through the, uh, White Marsh self-storage facility. Um, and that is, that is going to be something, folks. You're not going to want to miss it.

Yeah, he's very knowledgeable and full of energy when it comes to that. I see the QR codes up, so if you have any interest in registering, it's October 16th. That's the day, right? October 16th.

Yep, we do have the QR code up. Lovely. All right, uh, I'll leave that up on the screen for a few minutes. Um, Gina, do we have any questions from the chat?

She, uh, Dallas says no questions, just wanted to say thank you for the clear and honest conversation about self-storage and 401s. He really appreciates the transparency. Um, Warriors to Wealth says happy belated birthday. Gina enjoyed the show.

Um, yeah, I think no specific questions, but All right, well, let me ask you one, Kristen.

Well, please, you put me on the spot all night long, Joe. Do I get a break?

Uh, right after this one. Um, no, seriously, it's the, it's the question that I think I get the most. Maybe you get the most. Um, and it's this: I don't have the extra money right now on top of whatever's already going into my 401. What do you say to that?

I say there's no time like now to start educating yourself and figuring out ways to learn so that you can grow that income. But we also— the networking's key because there's people out there, um, that have money but don't have time to find a deal, right? So I just— don't limit yourself. Don't put yourself in a box. There's, there's so much opportunity out there. Um, that if you don't have money, there's other ways to get involved and, and to learn and grow and be a part of it.

Yeah. And folks, we're not telling you to, to go run out and quit your job right now.

No, no, not at all.

If that is the goal, that's wonderful. Then join storagemobils.ai, start going through the Ascension Ladder, learning how to find facilities. Um, we could help put the whole whole thing together for you. And we're also not saying one facility's going to get you out of your job. That would largely depend on that facility and your job, but it certainly puts you on the path, which is why one of our favorite sayings around Storage Mongols is, you're only one storage facility away. And what that means is different for everyone. Away from what? Well, it's away from my next one. It's away from 2 or 3, which is you know, going to be what gets me out of my job, or I'll put my kid through college, or whatever it is. Um, it's just— but you got to get started. And, and when you have none, you're only— you're, you're only— you're only just one storage facility away.

You are. And I don't want people to use it as a crutch either, because there are ways. Where there's— where there's a will, there's a way.

Yep. So stop assuming the plan you were handed is the only plan. Because most of us know there's nobody coming to guarantee anything for us the way some of our grandparents got pensions guaranteed for them. So come see what the other options actually look like. Join storagemoguls.ai. It's free. It's real people who've done this before and there's no catch. Or come see us in White Marsh, Maryland. It's going to be a heck of a day. We're going to show you that this is attainable. You can do this, uh, and we'd love to see you there. The seating is limited though. Uh, folks, if you've got a story like Kristen's, a plan that did everything it was supposed to and it still left you behind, send it to us again at info@storagemoguls.ai. info@storagemoguls.ai. For Kristen Blunk, I'm Joe Downs. Thanks for joining us. We will see you next Monday on Monday Night Storage Mogul Show.

Bye. Thank you, everyone. Thanks for joining. And Joe, it's always a pleasure.

Good night, everybody.