Why Storage Investing Deals Die During Due Diligence

You found the deal, you negotiated the price, you're feeling great. And then one clause, one clause you never even read closely. It costs you 6 figures or the whole deal. Who's actually protecting you between the handshake and the closing table? Today we're talking to the guy I call before I sign anything. I'm Joe Downs. Welcome to the Storage Moguls Podcast. My company's acquired over 20 storage facilities, over $70 million in assets across multiple storage niches, with a few more under contract right now and 2 pro storage facilities in development. I've seen this business from every angle, educated hundreds of buyers, and learned firsthand who succeeds and why. And that's what drove us to build StorageMoguls.ai, an AI-powered community with the tools, the structure, and the guardrails to teach people how to buy storage facilities. We do one thing better than anyone. We take people from zero self-storage facilities to one, because that first deal is the hardest one you'll ever do, and it's the only one that changes everything. Check it out at StorageMoguls.ai. And by the way, that's exactly why I launched this podcast, to bring you the operators, The lenders, the vendors, the real people who, who bought deals, who were involved in your deals, the people that do this every day so you can hear their stories and learn this business from the folks who do this every single day. Now folks, I know it sounds crazy to be excited about an attorney as a guest, but this one actually comes with a nickname and a bat signal. So buckle up. Jason Mandel is a real estate attorney at RCCB Law. He's the guy my own team calls at every stage of every deal, from LOI all the way through to close, and sometimes after the close. He's seen every mistake a first-time buyer makes or tries to, because he's the one who cleans it up or prevents them. Before we get into it, Jason, welcome to the show, by the way.

Hi, Joe. Thanks for having me.

You're gonna have to explain the bat signal later, but before we get into it, True or false, self-storage has one of the lowest loan default rates of any commercial real estate asset class.

I'm gonna say that's absolutely true, Joe.

That would be correct, Jason. Collect $200 and, and immediately pass go. Uh, self-storage has consistently posted some of the lowest default rates in commercial real estate through multiple downturns. And it's a big reason the banks like the asset class because once they understood it, which took a little while, you'd argue, you could argue, now they love it. All right, let's start with the number that gets everyone's attention. Jason, one missed clause can cost the buyer tens of thousands of dollars, maybe even up to hundreds of thousands of dollars. So I want you to walk us through that because this isn't an abstract legal theory. It's real money, real deals, real people who thought they were being careful. So what's the single, if you can think of 'em, what's the single most expensive mistake you've seen a first-time buyer make because they used the wrong attorney?

Well, that's a very interesting question. You know, people use the wrong attorney all the time. I always say the biggest mistake you could make is thinking you could just use your brother-in-law. You know, everyone has a brother-in-law that's an attorney. You know, but who knows what they really do every day? You know, the thing is, that brother-in-law attorney, when I'm dealing with them on the other side of a real estate transaction, I'm sometimes waiting for them to get back from a DUI hearing, you know, doing something completely different, not related to real estate. This is what I do all day, every day. So I see a lot of things, you know, that people do and don't do on the other side. And it's very interesting. You know, the first thing we do, or one of the very first things we do when we get involved in a transaction, You know, we're doing deals all over the country, but even when I'm doing deals in, in my backyard— I'm in Philadelphia— even when I'm doing deals in, you know, in the Philadelphia area, the first thing we do is research, or at least re-research and confirm, what I call the local transfer requirements. So that could be sometimes nothing. Sometimes you file a deed, you pay the transfer tax, you know, they'll accept your filing, the property's been transferred, no problem. But sometimes you need to go through more of a process. And what I'm getting at here, because I am going to answer your question, believe it or not, what I'm getting at here is sometimes the local transfer requirements require an inspection. You'll have people from the township going through the building and checking any number of things. And a lot of attorneys, and sometimes there are deals where there are attorneys not involved and the brokers don't focus on this at all, don't even say anything in the agreement of sale about that process. So the The first thing that I always do is I try to get my arms around that process and the jurisdiction that we're dealing with. And depending if I'm the buyer or the seller, I'm drafting the agreement in such a way to contemplate something's going to be found in this inspection and it's not going to be good. Who's going to be dealing with it? Who's going to be paying for it? I know this is a self-storage podcast, but the best example I have of this is in a bigger context, just to give you the idea of the scope. I one time was involved in the sale of a hotel out in the Philadelphia suburbs, a very big hotel right off the turnpike, several hundred rooms. We researched the local transfer requirements, and just to do the inspection, not even forget what the township actually finds, but just to do the inspection, the township charged a per-room charge that was something like a few hundred dollars per room, and there were several hundred rooms that needed to be checked. So even just to do the inspection, it was going to be like $8,000 or $9,000. So the first question is, who pays that $8,000 or $9,000? Is that a buyer issue? Is that a seller issue? If I'm the buyer, I say, hey seller, you can't sell this hotel without going through this inspection process. You are definitely responsible for those inspection costs. But 9 times out of 10, I have to tell you, I draft agreements of sale, and unless I put a provision in on this, it's not in there. So I see people all the time kind of after the fact who have not contemplated this kind of thing. And by the way, when I'm talking about $8,000 or $9,000 for the inspection cost, you know, when the township goes in, they're going to find things that need to be fixed. So we're really talking about cure costs and how much that could be. So those numbers can get big really quickly. So when I'm a buyer, I make sure to the extent possible, the seller's on the hook for all the costs involved and all the repair costs involved. And then obviously, if I'm a seller, I'm going to say, look, I'm not going to agree upfront to be responsible for a blank check. If it ends up being we need to put however many hundreds of thousands of dollars into the property to satisfy this inspection, I'm going to want some kind of out from a seller's perspective as well. But this is the kind of thing that I see missed all the time, I have to tell you.

Yeah. By the way, thank you for answering that like a true attorney who bills by the hour.

Oh, you want the short answer?

Okay. No, you were in the zone. It's what you're used to. Um, so that's interesting. I didn't expect you to go there, but you're so right. So there's also the— wow, what would we call that? That there's— I didn't even think about the— it's not the form or the function of how the transaction's going down, but it's, it's, it's the rules by which we were playing the game. You're saying the brother-in-law's gonna miss the— Um, yeah, I'll pick on my brother-in-law who's a, in a He's defense counsel for John Deere, right? So you can imagine the gruesome stuff he deals with. But that's not real estate, and that's certainly not knowing the intricacies of how even the transaction can go down. I thought you were going to go somewhere like, and I'll just take, I'll take you there. You know, the nuances of, you know, because we're buying storage facilities, sometimes they're, a lot of times they're older, they're in the South, let's say, and you're in, you know, Georgia. Georgia, where the rules and regs of the township were kind of more handshakes and nods, especially the more rural you get, right? So, and then later you've got these, the townships, they set up their rules and their zoning, you know, variance rules, et cetera. And, you know, you've got a nonconforming building built on a site, or you've got storage built in a, it's nonconforming from a zoning standpoint, but it's grandfathered, right? Um, you know, we've seen, and you've certainly talked students out of it, or at least, at least educated them, but we see this all the time. We actually just, uh, we're working on a deal right now that this is, uh, somewhat in play. And, uh, you know, you're buying these, folks out there are buying these facilities blindly because they might have their brother-in-law Who is a defense counsel, like I said, for John Deere, like my brother-in-law, if I were to use him, who wouldn't— he's not going to be an expert at what's conforming, non-conforming. What do we need from the township to make sure if we can expand or if we do anything or if anything changes that we're going to be covered, right? You don't, you don't get that from, from the, the, you know, the generic, the do-it-all, the family attorney. What a lot of the ones that our students come to us with, I always say, who are you using? Oh, so-and-so is, uh, he's, he's all— we've always used him for everything.

Yeah.

That might be the problem. We're gonna wanna specialize one here.

Jack of all trades, master of none.

Yeah. So folks, if you're— I want, I want you to, I wanna take this part seriously. It matters who you use from a real estate legal standpoint. You really want an attorney ideally that's done self-storage transactions because what Jason and I have said so far could probably apply to any deal, but You even get into nuances inside of self-storage with holdbacks and prorations, and, you know, there's just a number of things. So you definitely, you're definitely going to want to use an attorney who specializes in real estate at the bare minimum. Ideally, they've done self-storage transactions before.

I mean, I don't want to cut you off, but we've done exactly that where, you know, self-storage specific has come into play with regard to, let's say, a zoning analysis and a setback analysis. What if a portable— what if a portable unit is not set back? Can you just, you know, move it 5 feet? Or, you know, it's a— it's, you know, sometimes what's a structure, what's not a structure? Are you violating a setback or are you not violating a setback? So it's the kind of thing that we, you know, that we approach all the time.

Uh, by the way, been there, dealt with that. Um, the $900,000— there's a $900,000 saving example. We had to walk away from the deal that your team caught That I don't think my brother-in-law would've caught having to do with the flood zone and FEMA. I don't know what they call it. What they changed the flood maps, right? Months before we actually went under contract, nobody knew, but it was caught in the title and survey. So, you know, these are some of the mistakes that people make and you think, oh, well, I hire someone like Jason, it's gonna cost me $15,000, $20,000, $25,000 to close this deal. I don't know, I'm making up numbers here. My brother-in-law will do it for $10,000. But if I, if I use my brother-in-law on the deal up in Ithaca, I would currently own a $1.5 million self-storage facility that's worth $600 grand.

Yeah.

Right. So it's, it's not just tens of thousands or a couple thousand dollars here or there. The mistake that you don't know you're making potentially could very easily be into the hundreds or multiple hundreds of thousands of dollars.

You know, I have to say, it's a tough spot sometimes. And I, you know, I feel for the clients oftentimes when they come with a small transaction. Just because something's a small transaction doesn't mean you still don't need to do the things to protect yourself. You know, for example, do I really need to get a survey? I hear that all the time. Do I really need a survey? And sometimes the bank's not requiring the survey. You know, the bank, if it's a small enough deal, they might not necessarily require it. But if we didn't get a survey, an ALTA survey on your Ithaca deal, that's how we found out about the change of the FEMA maps and the exact designation that this property was now located in a flood zone. And when we explained that to the seller and they had no interest in having flood insurance on the property and no interest in recognizing that 100%, you're going to need to have flood insurance on the property, and here's how it's going to cut into your bottom line. That's something that maybe would not have been revealed if we would've said, you know what, small deal, let's not really do our diligence. So judgment calls are made every day, and I feel for people who obviously are not looking to spend money that they think that they don't need to spend. But there's only a certain level of protection that you get by spending the money upfront rather than Buying the property, and now you, you know, now you own the property, and, you know, how much bigger, how much bigger of a problem is it now? You know, penny saved, pound foolish.

Yep, penny wise and dollar foolish would be the American way to say that. Um, yes, and, you know, it's Fourth of July week, so let's, let's keep it over on this side of the pond. Um, but folks, that's, that's the whole point of today's conversation. The money you think you're saving on legal fees is usually the most expensive money You'll ever save. So you, you can save a couple dollars on legal, but it might cost you a lot. And, and more often than not, it costs you more. You're gambling. Uh, Jason, a signed letter of intent is completely non-binding, so it can't create real problems for a buyer. Is that true or false? A signed letter of intent is completely non-binding.

I mean, when— if I'm the attorney, you know, I'm gonna have to caveat that, and I'm gonna say it is usually completely non-binding, but oftentimes—

So if you have to check true or false, which box are you checking?

I would say false.

That is correct. Most LOIs carry at least a few binding provisions: exclusivity, confidentiality, sometimes earnest money at risk.

That's exactly where I was going. You know, For the most part, false. Depends who drafted the letter of intent, but the letter of intent that I would draft, I would make sure that there are some binding provisions. Most importantly, I try to have the seller take the property off the market. You don't want them negotiating with buyer number 2, 3, and 4 when you're trying to enter into a deal with them. So hopefully there will be binding provisions in there.

All right, excellent. And well done. You're 2 for 2.

All right.

Who is Jason Mandel? I want people to understand who you are and why I trust you with every deal I do. So let's talk about how we got here. And this— sure, this is the ideal time to talk about your nickname and, and, uh, the Bat Signal.

Absolutely. Well, um, who is Jason Mandel? Well, I live in Philadelphia, grew up in the Philadelphia area my whole life, um, went to, uh, Rutgers undergrad and Rutgers Law School. Interestingly, out of law school, even in law school, I was not a transactional attorney upfront. I did not know that I was going to be getting into real estate transactions. I could give you a diatribe about law school, but at least back when I went 25 years ago, they really only taught you how to be a litigator. Everything that you do in law school is based on case law. You're studying precedent, case law. You know, you really needed to go out of your way to really be exposed to transactional work, was my experience.

So what did you— if you could take us back 20— so 25 years you've been out, so 29-ish, or how long is law school, 2 years?

3 years.

3 years, 28 years ago, what did you— what kind of attorney did you think you would become?

I think I probably thought I was gonna be a litigator because I didn't know any better. You know, my father has been a solo practitioner in South Jersey for 50 years, just retired recently. So he was my role model, and I obviously was always very interested in what he did, but I didn't know exactly where I was gonna take it. But you don't really have a lot of time to find out because, you know, you find that you're a few months into your first year of law school and you're interviewing for jobs for your first summer. And then you're in your second year of law school and you're interviewing for jobs for your second summer. And then you're in your third year of law school, maybe sometimes even before your third year of law school, and you're interviewing for jobs for when you get out. It all happens It happens very quickly. And the first job that I got for my first summer clerkship between my first and second year of law school happened to be a litigation job on the defense side, insurance defense litigation. So I'm building my resume now. I'm an insurance defense attorney my first summer. So now I'm interviewing for my second summer and I basically get the same job, but on the other side of the table. I'm in litigation, but on the plaintiff's side, working there my second summer. So now I have 2 law firms on my, on my, you know, you know, 2 jobs where I've been a litigator. I am a litigator now. I didn't even know it. I didn't feel like I made that decision, but I am a litigator. So then my, you know, when I interview for the job, you know, in my 3rd year of law school for what I'm going to do right when I graduate, I again was doing defense litigation and I could do defense litigation. That was fine. I mean, I could, you know, I felt like I was doing a good job. I think they were very happy with me. But about a year in, I was kind of like, you know what, I feel like I became a litigator and I never decided to do that. I feel like I just— it just happened. And, you know, a lot of people love to be on their feet, love to make the argument, love to take the deposition, you know, want to be, you know, making the grand presentation in front of the judge and the jury. And I felt like I could do it, but I didn't feel like I necessarily got the same charge out of it that a lot of people were getting. At least to the point where I wanted to make sure before I got, you know, too pigeonholed that I was, that I was actually making a decision for myself. And I was able to take a job to move law firms and work for a small firm that I basically got the job with my litigation experience, but also then had the opportunity to expose myself to the transactional world. I basically was 50/50 at a small firm doing both types of work, which Was interesting. I did that for about a year and a half, and about a year and a half in, as I'm continuing my litigation job on one side, but also learning real estate transactions, I could basically tell you all the reasons why it's almost impossible to do both of those jobs at a high level. You can't necessarily be sitting for 2 hours in discovery court when you're in the middle of a real estate transaction that's about to close in 2 days. The 2 things don't fit together. The firm I was with was very happy with me, and they basically, when I, when I expressed my concern about doing both types of work, they put it to me and they said, well, which direction do you see yourself going? And I said, I see myself, you know, in the transactional world, commercial real estate. You know, I want to build on what I've done the last year and a half, you know, you know, doing this and do that full-time. And they gave me the go-ahead to just go in that direction. They, before me, they had hired people really to do 50/50. And then after me, after I kind of, you know, said I'm going one way, they basically then from that point on either hired transactional or litigation. They didn't attempt to do the 50/50 split after that. But I kind of, you know, just went with that. And, you know, when I talk about maybe not getting the thrill all the time that some people get about making the argument, taking the deposition, that kind of thing, I get a little bit of that momentum when I'm leading up to a real estate closing. I mean, when you're— Joe and I, we've been through it together. When you're getting ready for a deal and it's closing in 2 days, it's all hands on deck and you do whatever you need to do. And it's not always fun, but there's a certain amount of adrenaline and momentum involved in that. And that's more exciting to me than somehow— basically how it worked in the litigation world. So I never looked back.

All right. Well, so you were a litigator turned transactional attorney. And you didn't even know you wanted to be a real estate transactional attorney, it sounds like.

I did not.

I did not. What did you start on? What kind of deals?

The types of real estate deals? A lot of multifamily, a lot of hotel, industrial, you know, really a good mix.

Okay. And of late, storage.

I've been doing a lot of storage of late. I still do a lot of industrial and multifamily. I've been lucky that I do, you know, less commercial office than some, you know, commercial office has had a rough few years. So happy to say that that's been a smaller part of my portfolio, but I've definitely had some exposure there through the years.

All right. Yeah, that's good little insight into who you are. I appreciate that. All right, Jason, true or false? The due diligence clock typically doesn't start running until the buyer confirms that they're ready.

Well, I'm gonna say that's true because when I'm representing you, I make sure that's what the contract says.

I don't like the way this is— this— I don't like the way this is worded, they're ready, but go ahead because you're right.

If, if, uh, you know, depending on who's drafting your agreement, depending on what the agreement says, the normal default setting would be Due diligence starts when you sign the PSA, when you sign the agreement. But that doesn't really help you too much because if you don't have the materials to start doing your investigation, you don't want your clock to start ticking. So I do everything I can to make sure that your clock doesn't start ticking until you sign a certificate saying you've received everything you need to start that clock.

And by the way, that's another point of note as to why you don't use your brother-in-law who's not a real estate attorney, because a lot of contracts are written In fact, we've, we've seen them and we've got sellers that get upset by our contracts sometimes, but we've seen them where due diligence starts when on the effective date. And fortunately we use you and, um, our due diligence starts when we have a completed due diligence checklist. Every document that the seller agreed to deliver to us is in hand. And then we send them their certificate of, I don't know what it's called. Completion due diligence something that says, yes, we agree. The clock has now started.

How about due diligence commencement certificate? Does that work?

Whatever. Is that— I don't know what you call it. I'm not an attorney.

All right.

But folks, seriously, that's, that's an important point there. Our due diligence at our company starts when, when the seller has provided everything to us that they agreed to provide to us. It doesn't start the day we sign the agreement. All right. Um, I wanna slow down here because this is the part that keeps people on the sidelines. The fear isn't, I'll overpay for a lawyer. The real fear I think is I'm going to get taken advantage of in a deal I don't fully understand. I think this is a fear that a lot of people have. So let's walk the deal timeline as a fear map, especially coming off that true or false, because I think that that's part of it as well. Where a buy— so, um, back up a second. Deal timeline here is a fear map where a buyer's exposed at every stage and, and what having the right attorney actually protects against. So like, what's a clause first-timers don't even know to ask for but regret not having?

As an example, a clause in a PSA that they don't even know all the time that they want. And I would even bring this back to the LOI stage, and I touched on it earlier, was let's make sure that the seller's taking the property off the market. Let's make sure that they're not entering into a backup agreement with, you know, with another buyer in case the agreement with you falls through. I would love for that to be in the letter of intent. Usually I'm successful at getting that, but 100%, once we sign the PSA, I want to make sure that they're not negotiating with another— with buyer number 2 in the background. You know, someone might say, oh, I don't care if there's buyer number 2 out there because, you know, I have this under agreement. I'm going to perform under the agreement. And they're never going to get to buyer number 2, so it doesn't matter. The reality of the situation is, as you're going through the process, there's going to be accommodations that are sometimes needed on either side. There are going to be issues that are going to come up. If you identify $50,000 of issues by the end of the due diligence period, and you want to talk to the seller about, hey, I need a credit for this, I need a reduction on that, I need you to fix the other, You have no leverage if they've entered into an agreement or they're still in discussions and marketing to other people, because sometimes the seller regrets having signed the agreement of sale. They regret— they're just looking for any opportunity for that agreement to terminate. So if that were the case, then the seller would really not be in a position to want to accommodate you at all. If anything, They would kind of put you in a position where you have no choice but to terminate, then they go to buyer number 2. So, you know, that's a big one.

Didn't we just deal with this yesterday? Didn't I see an email from a seller about— he threatened to just list it?

What was that? That did happen. That did happen. And that is something that we are going to have to— something that we're gonna have to deal with. I think, you know, sometimes the seller doesn't know what's in the agreement, but it is in the agreement that he is not entitled to be listing it You know, and, you know, selling it to somebody else.

And if you're listening, you're probably wondering like, why don't you know, Joe? Well, because I have a great attorney, Jason, here who handles that for me. I don't, I saw the email, I read it and I was like, I don't know what this, what's this seller think is thinking here. You're under contract, buddy. You can't just go, you can't just go list it because you don't like the fact that we exercised an option in an agreement that you signed. All right. What about, so we covered due diligence. Exclusive. Uh, we covered exclusivity. How about, um, controlling timelines or financing and inspection contingencies? What, what sort of things have you seen pop up, uh, with those that, you know, thank God, either thank God we had the right clauses in place, or have you seen them where you're like, man, it's a shame you didn't, you know, simply could have had this in place and we wouldn't be having this conversation?

Yeah, well, I mean, we touched on one of them already, which is let's not start eating into your due diligence time clock before you're even ready to start doing your investigation. So usually if you, you know, you can gain a few days in the process we already talked about by not starting the clock until you acknowledge that, you know, you've received all the materials you need to study from the seller. So that helps up front. You know, there's— just so everyone's clear on what we're talking about, During the due diligence period, that's usually when you have the ability to terminate for any or no reason and get your deposit back. Your money that you might— the upfront money that you've put up when you sign the agreement is usually not considered to be hard until the end of the due diligence period. And then there's sometimes other contingency periods. So there's the due diligence period where— and these terms are not always exact. Sometimes people call it the inspection period, diligence period, contingency period. It's used different ways. But when I say due diligence period, period. For me, that's just the general study for you to— where you have the right to terminate for any or no reason. Let's say that is 45 days. Well, sometimes you have a separate period. Maybe, you know, hey, I'm generally going to get comfortable with 95% of everything within 45 days, but I know that I'm not going to be 100% clear with, you know, committed financing within 45 days. So sometimes you might have A 60-day financing contingency period. If you can get the seller to agree to it, obviously the seller wants your money to be hard sooner than later, so hard to get them to wait 60 days. So I'm not saying that's an easy thing, but maybe you got them comfortable because you've signed off on everything else within 30 or 45 days, and the only thing left that you can terminate for would be for a, you know, a financing issue. So Sometimes you can get a little bit more time that way. And sometimes we can build in, whether it's with regard to the due diligence period or a different contingency period or with the closing period, you might say, oh, I have 45 days for due diligence and then 30 days to close. But maybe you could extend those periods. Maybe there are built-in options. Hey, if I'm almost all the way there and I'm willing to put up more deposit money, And I'll fund more deposit money. Can I get another 15 days of due diligence? Or if I'm willing to put up more deposit money, am I able to extend that closing period from 30 days to 45 days? And when the seller sees you're serious and they see that you're coming out of pocket and they see that you're doing all of your diligence and you're crossing off these, checking off these boxes, oftentimes the seller's going to be willing to cooperate with you, especially when once we're in it, working with Joe and his team, the sellers The sellers see what they do. The sellers see these are serious people. These people are doing the work. They're doing the diligence. They're asking the questions. Yeah, let's give them an additional 15 days for an additional $5,000, $10,000 deposit. And I oftentimes feel like a seller is going to be receptive to that. But sometimes the seller will say, no way, no how. They want it closed as soon as possible and they're not going to extend at all. Is that consistent with your experience, Joe?

Yeah. And, you know, as you're talking, I'm thinking every example you're giving, we've lived through in one deal or another. And I, I'm just sitting here thinking, how do I explain to the listeners that, you know, having you as an attorney isn't just someone producing legal documents. These are all conversations we have. Through the process, even leading up to— not lead it well, leading up to and negotiating through the purchase and sale agreement. I actually feel like most of the work that I do in the transaction is all the way up to the execution of the purchase sale agreement. Because after that, there's not much I can do. It's just the chips fall where they fall. Sure, there's negotiating maybe. Maybe there's retrading if things pop up that, you know, weren't obvious, um, out of the gates. Um, but you're just managing the transaction after that. Most of the negotiation is done. And it's all of these things like the time periods and, and this and holdback and, um, who's paying, you know, like you said, regarding for the hotel, even, you know, who's paying for title insurance and who's negotiating that and who's doing that all has to be laid out in the purchase sale agreement. I feel like that's the, of the, all the mountains you climb.

Yeah.

When you're in a transaction, that's the biggest mountain is getting that thing executed so that the rest of the transaction can unfold, hopefully the way it's supposed to, but not, no guarantees. And what I want the listener to understand is I'm not directing my attorney what to do. We are collaborating and I'm getting advice from Jason on what to do. And it's not advice in a vacuum that, like Jason alluded to earlier, there's, There's a lot of levers and dials in play here, and you know there's some give and takes. And sometimes the seller really wants that, and you're trying to appease the seller just enough to get what you want over here, which might be a longer due diligence period, or because of some issue that popped up. Maybe there's a questionable environmental issue. Who knows? So I guess what I'm trying to say is it's there's there isn't this that's my attorney, and I pay him, and I don't want to talk to him. Um, more than I have to because I know he's billing me by the hour. It's not, it's not that kind of relationship, folks. It's, it's more like he's on our team. And, uh, yes, there's a bill at the end of it, but hopefully you're getting a sense for how much is involved in a transaction, large or small, $500,000 transaction or $6 million transaction.

Mm-hmm.

You can have all of the same things involved and they can be, especially if you're new, overwhelming, but they don't need to be when you have an attorney like Jason. So, you know, that's, that's what I want everyone to walk away from this segment, which is, you know, the right attorney is not a cost center. It's, it's arguably inexpensive insurance against things, really bad things that could go wrong. So you don't, you don't save pennies to risk 6 figures in deals, folks, especially when you're signing personally for these loans. All right, Jason, true or false? Title insurance on a typical storage facility deal usually costs more than the attorney's entire fee for the transaction.

True. I'm going to say false.

That is correct. Although I'll bet you it's close.

Well, it depends if you're in Pennsylvania. Pennsylvania is one of the most expensive title insurance states.

I was going to say it probably depends on where you are.

Yeah.

All right, Jason, I want to walk through a deal for a first-timer. I'm going to throw out the jargon. I want you to explain it in plain English so that people can understand, you know, these are all the things we're going to deal with in a deal, but they may not know what they actually mean or why they're relevant or important.

Sure.

All right. So I'm going to, I'm going to give you the jargon. You tell us in plain English what it means. So title versus survey versus zoning. How does each one fit and how are they different?

Sure. So when we say we're going to review title, and part of, you know, part of what we've done up front is we've engaged a title insurance company. The title insurance company both searches the records, you know, to find out all the documents that are of record against the property and that impact the property. They ultimately will issue title insurance at the closing that says, you know, you own the property, you know, you are the new owner. They're the ones that are going to record the deed. And they also typically serve as the closing agent. So they're the company that handles all the funds going in and out and recording all the documents. So they serve a larger role than just insuring. But ultimately, some people feel like, and I've seen this in residential situations all the time where people are like, oh, I have my title, here it is. The title insurance company gave me my title report and my title commitment. Well, the title commitment is only as good as what it's covering and what it's not covering, because the biggest part of the title commitment that you receive is what's called the B-2 exceptions, Schedule B-2 exceptions. This isn't something that everyone needs to deal with and everyone needs to know, but this is stuff that the attorneys better know, because anything that's on a B-2 exception, anything that's recorded that's identified there is something that you do not have insurance for. So, you know, you basically— are you getting title insurance or are you not? Well, you're not getting 100% coverage if you have 50 things identified on Schedule B-2. So a lot of what we do is we, you know, review all those things, and if there are things that rightfully should be recorded against the property, we explain it to the clients and explain what the repercussions are, and it's not a problem. But sometimes there are things on there that we can get rid of, and the more we can get rid of, When we have a basis to get rid of it and a reason for getting rid of it, the more we can get rid of, the more insurance you're going to have. But in plain speak, the types of things that would be recorded would be maybe you're buying a property that has shared access with the neighbor. There'd be a document of record, a shared access agreement. Maybe there's shared parking. And then when you find out, oh, I'm sharing access with somebody, I'm sharing a parking lot with somebody. Who's responsible for the maintenance of that parking lot? How's that going to be paid for? Am I stepping into a problem? Is my current seller that I'm going to step into their shoes, are they in default? Do they owe money to the neighbor under that agreement? These are all things that we would review the agreement and we would talk about those types of issues and we would make decisions. This would all happen during due diligence. We would make decisions. Hey, are we comfortable as it is? Or do we need to at least ask questions of the seller? Do we need the seller to get something from the neighbor? We would do something, what's called an estoppel certificate, that you can get from the neighbor where the neighbor will say, this agreement's in full force and effect. Nobody owes anybody any money. Everything's all good to go. And then you feel good about walking into, stepping into the seller's shoes. I was just going to say, another typical thing you would see of record is what's called a CCR, covenant conditions and restrictions. And if you don't know what's in that CCR, you don't know for— yeah, you know, the word restrictions are in there— what you're maybe allowed to do or not allowed to do on that property. Maybe this— maybe the owner of that property from 50 years ago decided that they were going to, you know, sell the property, but they want to make sure the property is never used as X, or, you know, or not used in, you know, in one way or the other. I'm dealing with one right now where we identified a CCR for It's vacant land that is going to be an operating storage business, but of record it says that the property is only going to be used for residential purposes. So if you didn't review title and you didn't review that CCR, you would never know that you're now operating a business on a property that only can be used for residential purposes. So we're in the process right now of dealing with that and getting that amended and getting that put in such a way that the CCRs work for us. There's a lot of other really innocuous things like utility easements. The utility companies have the right to go on the property. They're going to have rights that are of record. There's going to be things like that. I'm not going to say we need to make an issue of every last thing, but you need to at least know what's there and know how to deal with them once you find them.

All right. You kind of covered title. That was the next one here. I'll just cover it briefly. It's confirming the seller owns it, right? And it's free of liens and any Fair enough. Is that— you okay? You feel uneasy with that?

Well, liens and any claims, and then all of the things that I just was getting into, all those other things that could be of record.

All right. Survey and zoning. So I don't know if you want to take them one at a time there. So survey, what is the survey and generally what does it do? What does it tell us? Why is it important?

Yeah. So the type of survey that you're looking for in a commercial real estate transaction is what's called an ALTA survey. And the ALTA survey goes hand in hand with title because title is ensuring that you own a property with a legal description. But the legal description basically says this number of feet in this direction, this number of degrees of a turn, it describes a boundary. Well, that ties to the survey. The survey is what actually draws that out where you can see all the boundaries. And that's how you get your legal description is based on, you know, the surveyor is the one that prepares it. And so you could see how the property is described. You could see whether there are any encroachments, you know, anything that goes over the boundary. Maybe you have a building that goes over the boundary from your property onto the neighboring property, or maybe the neighboring property somehow is an encroachment over your boundary line. Some of this you can't see until you actually get a survey. That actually draws it out. And that will tie into when I was describing before, maybe there's an access agreement, maybe there's a shared parking easement. Well, sometimes those documents that are of record, the surveyor will be able to plot on the survey, hey, here's where someone else has the right to go onto your property because you have shared access, or here's where that parking area is, and here's where other people can access, and here's where people cannot access. And also what we'll get into, and this ties into your next question I know is about zoning. This ties into zoning because when you're looking in the zoning code, depending on how your property is zoned, it might be required that you can't have your property— and I'm just making these numbers up, but you can't be more than 25 feet. There needs to be at least 25 feet between the boundary of the property and the front of the property. There needs to be at least 50 feet between the side of the property and the boundary of the property. These are various setbacks that you need to make sure are not being violated by people building in the wrong places. So you have no way of knowing whether you're satisfying those setback requirements or not unless you see it on a survey where the surveyor will literally draw out, here's 25 feet and here's where your building is. And then you're able to identify whether you're in compliance with zoning or not. So reviewing zoning requires things to be plotted on a survey and you review them hand in hand.

Okay. Any other due diligence that, that, you know, you guys coordinate, like environmental phase 1, estoppels, leases, entity financing costs, reviewing loan docs? You want to just touch on those topics?

Absolutely.

So the reason I'm asking all of this is because these— I'm trying to point out, because we have a, we have a lot of students, and no matter how much we tell them on on podcasts like this or on the weekly calls we do inside of our community for, you know, and we talk about how important it is to use the right attorney. They still come to us with Cousin Joe and Brother-in-Law Bob and whatever. And, and I just, and I can't, look, I'm not an attorney, so I can't, I can't rattle off everything you just rattled off. I just, I look at them and frankly, I'm tired of them. It's like, look, Look, you just have to trust us because like Cousin Joe's not reviewing the loan docs from the lender to make sure they're legit.

Yeah.

Or wonderful, you got this, you got the seller to seller finance and carry the note for you. Who's writing the loan docs? They're looking for you to do it. Is my brother-in-law who's defense counsel for John Deere doing it? I don't think so.

Right.

That's not gonna be his forte.

Right. No, I totally agree, and I appreciate all that. And by the way, when you have the right person involved in your transaction, someone might be like, oh, I just paid this amount of money to my attorney, but they don't realize that the attorney is the one that is making sure that the right person is paying the transfer tax, and the right person is paying for the title insurance, and the right person is paying this closing cost or the other. If you don't know the right question to ask or the right position to take, and you let everything be paid by the buyer, which happens all the time, maybe you save some money on the attorney's fees, but then you just paid it to the title company and the government and all these other people who maybe were not entitled to your money. So, I mean, I don't want this to sound the wrong way, but I can't tell you how many times I've earned my fee just by identifying one cost that was in the wrong category. Just because we're really thorough and really, you know, we make sure that it was in the right category in the PSA, and then we make sure that it carries through to the actual settlement statement and the right people end up paying for it. And, you know, that happens all the time.

And importantly, we do the same thing, by the way, when we're talking students out of deals or helping them renegotiate portions of the deal. You've done it with us. You've been involved in it. You've seen us do it. We've well earned our fee and your fee back many times. You've earned portions or all of your fee back. We see it all the time. And, and I try to explain to people that the, the dollars you think you are saving, first of all, they're built into the underwriting anyway. So we built into our underwriting pro forma, the cost of legal, or roughly what it's going to cost to make sure we end up in a great deal, a deal structured the right way, a deal not A deal without, um, hidden future time bombs and landmines. All right. Why are we then taking that structure that what we built in, throwing it out the window, and then going to get somebody who isn't going to make sure there are no future landmines or future time bombs in these deals, or immediate, like you just said, you know, a lot of times these, these things are earned before we close. They're earned back. Um, Jason, what, what 3 questions should a first-timer ask before hiring a transaction attorney?

I mean, I think it really goes into some of the stuff we've already talked about, just really making sure that this person isn't, you know, getting back from a DUI hearing in order to then cover the real estate transaction, that this is something that they do every day. You know, it's the, it's the kind of thing where, you know, The right people who do this every day know what we should be looking at, what we should be negotiating. Not only will people miss issues left and right, but then they also will do the opposite. They'll end up trying to negotiate things and trying to get into issues and create issues that really are not issues in real estate transactions. So it kind of cuts both ways. It's not the things that you miss, it's the stuff that you waste your time on. So really making sure that this is something that somebody does every day and not just something that they dabble in as part of the other 15 things that they do, I mean, I really think is crucial.

For me, it's real simple. Ask how many commercial real estate transactions have they done, and even better if they've been self-storage closings, because It doesn't matter whether they're a good lawyer or a good litigator or how well you know them. Experience in this asset class is the filter and that's it. To me, that's the whole test.

Yeah. And honestly, it's not really just the things that we do and know what to do upfront and know how to deal with it in the PSA. And we always want to take this position. We always want to take that position. That's one thing. But I think, and I hope this is what you've seen through the years, Joe, as we've been doing this together, it's the things that we just need to figure out what to do. Sometimes an issue will come up and I've dealt with this kind of thing before. I maybe, I have an idea how we can get around this or over this. And it's not always something that I've necessarily done exactly the same thing, but based on doing similar things and similar transactions through the years, it makes you think a different way. about, how do we get past this issue? How can we get creative in this scenario? Really building upon the experience and all the deals that we've done together really helps us figure out how to tackle the unknowns as they come up, and they invariably do.

Jason, self-storage REITs have outperformed the S&P 500 over the past 20 years. True or false? Self-storage REITs have outperformed the S&P 500. True or false?

I'm gonna go with true.

That is true. Public Storage, Extra Space have both been standout long-term performance, which is a good reminder that this is not a fringe asset class. It's an institutional one.

Am I still 100% on the true and false, or am I—

I would hope so.

You're my attorney.

Before we wrap here, uh, the working part of the conversation, give me, give me the one thing. Boil it down to this single highest leverage takeaway? Like what, what's one piece of advice you could give a first-timer, someone who's thinking about the space, looking at the space, or they're, they're, they're already dabbling? What, what should they do or what shouldn't they do?

Well, I'm gonna dabble into your space a little bit first and then I'll get into my space. And when I say your space, I'm, you know, what I mean by that is Make sure the fundamentals make sense. Make sure the market and the fundamentals are really strong. And I know that's more your area than mine. So that has to be the A number one starting point. But then once you're in it, there's a certain amount of trust your gut. There's a certain amount of pay attention to the red flags that are going to come up. Sometimes a deal that makes sense ends up not making sense when things come up and you dig a little bit deeper and you find certain things out. And some people find themselves in it and they're like, okay, well, this deal made sense. I made sure of that upfront, but now this has changed and that has changed. I'm so far in and I'm just going to do the deal, is not always the best answer. So I would say, as things come up, Pay attention to the red flags, you know, pay attention to your gut if things aren't feeling right or they don't feel as good as they did when you started the process. And sometimes the best decision you make is not moving forward with the deal. So I'm not trying to scare anybody away from doing their first deal, don't get the wrong idea. Um, but I'm just trying to say, once you've just, you know, made a decision to do it, you have to keep on paying attention throughout the entire process and continue to check that box. And make sure that it makes sense before you go all the way. Does that make sense to you, Joe?

It certainly does. And I want to ask you this. When is the right time to bring you into the transaction? When do you bring your attorney into a transaction?

If you are comfortable handling your own letter of intent, then it would be right after you've signed the letter of intent and you present it to me right away, and I can help you get from letter of intent to PSA pretty quickly. If you are a first-timer and you are not as comfortable with the letter of intent, I can help you at that stage as well. You know, and, you know, I prefer to be involved sooner than later, you know, because sometimes you can head off an issue earlier than later. And even though the letter of intent is for the most part non-binding, It's still a bit of a framework and the roadmap that you're starting with. And if you could say, hey, this has been an issue for me from day one, it's even in the letter of intent, it gives you a better leg to stand on.

So run the numbers, trust your gut, and get the attorney involved either before or after the LOI, whatever you're comfortable with.

Correct.

I like it.

But also, I would say at least a few days before you think you need to get the attorney involved, because the attorney needs to No, no, just, just in that even if it's not from a legal work standpoint, if it's from a, hey, you're going to want me to start working on this PSA right away, let me make sure that I engage you as a client. I run conflicts. I make sure that there's no reason why I can't be involved in the transaction. Give me a day or two to work through that before I start diving into your deal.

All right. I was going to bust your balls a little bit there about making sure you had all your bases covered, but that, that was actually a very valid point because you do have to run You do have to run conflicts. Okay. All right. Your last true or false. Most real estate deals fall apart during due diligence than at any other stage of the transaction. Is that true or false?

I'm gonna go with true.

Unfortunately, as painful as that is, it is true. Although there are times that it just makes sense. Uh, like the example of the $900,000, uh, Yeah. Uh, big miss. Big, uh, what would I call that? The $900,000 mistake we avoided. Yeah.

Um, but I will say it's better for it to fall apart during due diligence than if it fell apart after due diligence.

Well, that's, that's what I mean. Sometimes, sometimes that's good. Um, financing is the one that gets all the attention, but due diligence is, is where the deals actually die. Um, and, and to that point we were just both making. Sometimes they should die there.

Yeah.

Um, but that— but all of that is to say, that's why having the right attorney quarterbacking that stage matters more than people think. So folks, do not do this alone. Um, all right, Jason, closing question here, and, uh, I want you to actually think about this one before you answer. So there's a book called Be Your Future Self Now. Have you heard of it?

I've not.

Okay. It's written by Dr. Benjamin Hardy. Um, and it's actually about MrBeast. Have you heard of him?

I have.

Okay. It's not about him. The book is about becoming, establishing who you, who you want to be and then becoming that person today. But he uses in the beginning of the book MrBeast, because what MrBeast did, the way he became famous was he sent a series of 4 videos. I'll just tell you quickly. into the future, 6 months, uh, 1 year, 5 years, and 10 years. And he recorded them all one night and then set them to be published at those time intervals. Really what he was doing that night, he was only 17 years old, brilliant. He was doing what Cortés did. He burned the ships. He basically said to the world, this is who I'm gonna be on this date. And therefore he went out, he set out from that moment, that night, as a 17-year-old to, to go make sure he became those things, right? He started acting like he was that person. So 5 years from now, where's Jason Mendel? What are you doing? Not what do you hope to be doing? Who are you? What are you? Examples for, you know, a lot of times I have storage folks on here, so I talk about how, how big is your portfolio 5 years from now? You're an attorney, maybe. Do you have your own firm? You might not wanna answer that publicly, but, um, where— who is Jason Mandel in 5 years and what are you doing today to make sure you become that version of Jason Mandel in 5 years?

Wow. So is it too late for me to become a professional tennis player and travel the world on the tennis tour, or it's not too late?

You know, I host a podcast called Successful Idiots where I talk I, I talk about how we were lied to our whole lives about if you dream it, if you set out to do it, you can become anything. You could do anything. It was a bold-faced lie that parents told kids, right? It was, that's a one in a gazillion, right? But the dawn of AI, it, you now can, if you can dream it, it can now happen with the exception of Physical things like I wanted to play in the NFL.

Yeah.

Or, or play on the PGA Tour. That's probably not happening. I don't think you're gonna be on the professional, uh, tennis tour.

Yeah.

In 5 years, Jason.

I, I think it's fair to say I just don't have any talent, although as much as I love it, or I'd be at Wimbledon right now. Literally, it's going on right now.

And AI is not gonna help you, so.

No, probably not.

So you're gonna, you need, you don't have to be an attorney though.

Well, I am an attorney and I do see myself continuing to be an attorney for 5 years, in the next 5 years. You know, I'm going to go back before I go forward. And what I mean by that is, you know, there's a progression when you're an attorney and when you're a young attorney, when people are handing you the work, you are really just in it for the billable hour. You're in it for, you know, I'm going to get this done for this nameless, faceless client that I might not have ever had a conversation with, I'm going to do this research, I'm going to work on this brief, I'm going to draft this document, and I might not even know who the client is. And I'm just doing this work and I'm just doing what I need to do. And it's valuable. It's valuable to the firm and it's valuable to you, but it's something that is more of a concern when you're a younger attorney working on that billable hour. And for me, when I've gotten to the point where I have this gray hair, things have evolved. I was gratified earlier, Joe, when you referred to me as being part of the team, because that is my goal. That is what I am trying to accomplish in my practice. And that's where I'm going, in that for me, it's about the relationship that I'm building with clients. And it's not about just doing the assignment that day and just moving on to the next. It's about what we're building together as Bellrose. You know, as I meet new clients, what I'm building together with those other clients and helping them achieve their goals. It's the relationship building I feel like has been going well for me, and I really want to make more of a focus, you know, over the next 5 years, being very much more concerned about, about the relationships I'm building and about the things that I am achieving with clients, you know, rather than you know, working for the nameless, faceless client and billing the hour that day. So, you know, I don't know whether that fully answers your question, but I feel like it's— for me, it's part of the evolution that I've been trying to go through as an attorney for what makes me tick. And being the relationship and being part of that team that we've talked about is what makes me tick and what makes me want to, want to do this job, you know, in 5 years and into the future.

All right. Well, I have good news and bad news for you. The good news is The bad news is that that is not how you answer the question. The good news is you're in good company because everyone has struggled to answer this question. So I'll answer it for you based on what you told me. I appreciate it. In 5 years, you expect to be doing less transactional work and more collaborative work With junior attorneys dotting I's and crossing T's of legal documents, and you doing more strategic work with your growing, uh, ever so growing customer base of clients with hotels and storage and multifamily, or, or all storage, who knows? Uh, so 5 years from now, that's where you expect to be. And today what you're doing is making sure, like for instance, we have a weekly call. Together, where that makes you part of our team. So you're, you're doing things today that will lead to you becoming more of that strategic legal advisor, almost of counsel, in 5 years for multiple firms, rather than doing the grunt work that you alluded to when you were younger. I think that's how you answer the question.

I think I'll go with it. Let's go with that summary. I appreciate it.

We completely skipped over your nickname and your bat signal, but I gotta go. So I will put— I will get to our producers the graphic of the bat signal, which has your nickname in it. And if you want, I will have them put your email and phone number in there as well so that people can reach you. But why don't you go ahead and tell us how everybody can reach you anyway?

No, that would be great. I'd appreciate that. And hey, whoever contacts me, I'll tell them the whole story about the Bat Signal, and you know you'll have to wait till then. But but the name of my firm is Royer Cooper Cohen Bronfeld. I'm in Philadelphia. My email address is jmandel jmandel at rccblaw.com jmandel at rccblaw.com, and my phone number is six one zero.

All right. Wonderful. Um, then we will put the— with that graphic in the show notes so, uh, everyone can, can enjoy seeing it there. And then of course now they're gonna have the Bat Signal. There you go. Um, folks, if there's one thing to take away from today, I hope you got it. The right attorney doesn't slow your deal down. They're the reason you get to keep it. It's inexpensive insurance. It's not negotiable. Every week on Storage Moguls, we're covering the full storage verticals. Uh, I'll be bringing you self-storage, boat and RV storage, pro storage, industrial outdoor storage, truck parking, small bay flex. We'll be talking about all of it through the course of these episodes. Please like, subscribe, and share. Share this episode. I know you're like, what? I'm not sharing an episode about an attorney. But it's really important. Share it with the people that use their brother-in-laws or their cousins or their next-door neighbors The family attorneys, they need to hear this. There's, there's, you can save them tens of thousands to hundreds of thousands of dollars. Trust me. Um, and by the way, sharing is not just caring, it's showing everybody in your network that you're in this business. So when you share this episode, you're telling everybody, uh, and believe it or not, there'll be, the more you share these things, I was saying this as I was doing the Storage 100 on YouTube, I'm doing all the work here. All you have to do is share it.

It.

And it, and it looks like this is the business you're in to everyone in your network, and you're going to want people in your network to know you're in this business. So trust me, it goes a long way. Um, go to storagemoguls.ai if you have not been there yet. We cover all of these topics there. There's a free tier. You can, you can get tons of information. Um, we'd love to see you there, folks. That's also where you can get Get your execution plan, because this isn't a bet. What we teach is it's an execution plan. So stop watching, start moving. Drive for Dollars. Send the LOI. We'll see you next week.