Your First Rental Will Own You Long Before It Pays You

The listing photo never shows the 2 AM call. It never shows the plumbing emergency, the tenant who stopped answering, the lease clause that turns out not to mean what you thought it meant. Tonight, what actually happens after you sign and why your first rental can end up owning you long before it ever pays you back. Like you, we've worked the W-2s, we tried residential and learned it the hard way. So here's the question: how do people like us replace that W-2 income without buying ourselves another W-2? That's the question we're going to tackle every Monday night. I'm Joe Downs, with me is Kristen Blunk. Welcome to the Monday Night Storage Muggle Show. Whether you're watching on YouTube or listening on the podcast, we're just glad you joined us, and hopefully you will be as well. Here's a recap, a quick recap I should say, for anyone just finding us. Last week we talked about the plan most of us got handed, that 401, no pension, and why that plan left many of us, including Chris and Rod, behind after 2008, the same way it left most of the country behind. And the part I actually want people to remember is the math, not just the story. Value equals NOI divided by the cap rate. A 401 moves because of the market or somebody else's timeline. A storage facility moves because of a decision you make. You raise a rent, you fill a unit on a timeline you control, and that's the whole difference in one sentence. So if you missed it, it's up on the channel. Go watch it after this one. Tonight is a different problem, same idea. It's not you though, it's the mechanism. Uh, quick credential before we get into tonight. Between the two of us, we've probably been through 25+ years combined of over 500 transactions— fix and flips, wholesaling. Now that I think about it, Kristen, probably 30 years. Fix and flips, wholesaling, buy and hold, private lending, short-term rentals. We've closed real storage deals with real numbers. Uh, between the two of us, over $75+ million in assets, uh, which some of which you've heard on the show. Tonight's story though is the residential side of that, the part before we got into storage, when we were still learning what we didn't know.

And I just want to be clear about something up front. This isn't us saying residential is a bad decision. It was the decision that everyone told us to make, and quite honestly, it was the one that Rod and I felt the most comfortable doing. It was the mechanism underneath it that, that is what we actually want to show you tonight, and using one of our own deals like we had talked in the past, and how it went sideways as, as it could go. So yeah.

So, Kirsten, before we, before we get into tonight's story, uh, I want to ask you something. When you look back at your very first rental What's the one thing you wish— I'm sure there's a lot of things, but if you can, right, you know, rise one to the top— what's the one thing that you wish somebody had told you before you ever signed on that dotted line?

Honestly, and I know I've said it many times, um, on the show probably, uh, and before the show, Somebody, I'm sure, pointed me in this direction at the very beginning of my journey, but it didn't hit home, quite honestly, the way it should have. And that's that a great property management company is key, and having someone actually on the grounds matters more than anything else. And that's a lesson that cost me a lot. Our first residential real estate property was in Indiana, and we're from Maryland, so it was already out of state. It's not a property that we could just go and drive by and go in and inspect on our own. It had a Section 8 tenant in it already when we bought it, and everyone in our residential circle loved Section 8 because it was guaranteed rent, it was government-backed. And well, that's not what it was like for us. And no one told us that Section 8 varies by each area, and where we were investing in, that version of Section 8 was not the version that our, our investor friends were talking about, and it cost us.

Yeah, I, I dabbled, I think, one time in Section 8, and I— in Philadelphia— and I learned pretty quickly that it was not what it was cracked up to be. Not saying that people didn't have the system down and probably know the inspectors and, you know, know what, what they care about, what they don't care about, but to break into that was, was super hard.

And I—

it looked amazing on paper. And then as soon as I got in there, I was like, oh no, no, no, I don't want any parts of this. Now you said something interesting there. You said, um, you bought it with the tenant already in the house, which I think is one of those things that looks good on paper, and you kind of just alluded to that. Um, you obviously never saw the inside of the house first.

No, big mistake. Uh, and this was one of our first rental properties that we had purchased. It looked phenomenal on paper. And the numbers, you know, we bought in Indiana because it was tax-friendly, the acquisition costs were a lot less. We bought it sight unseen because the numbers looked so good. We had no idea what the property actually looked like inside. We thought we found a great deal. We thought since it's Section 8, obviously they're subject to the inspections by the Section 8 people, so the house has got to be in decent shape. At least we thought. And we thought we had a property management company that we put in place, and we thought that they had our best interest in mind. And so we believed that that tenant was going to stay long-term and that we were going to keep receiving that monthly check coming in. But that was not the case. That tenant, after we purchased that property, left within a couple of months.

And It's not lost on me, Kristen, and anyone who's watched the show knows by now that we— and we, because we've talked about this, that your first storage facility was not in Maryland. It was in Kentucky, which I believe is a border state to Indiana. So one might ask you, what are you doing? You've already, you've already been burned once with a property in another state. that you did not see the inside of. What gave you the comfort to buy another real estate, or another, you know, real estate investment, another asset in a different asset class obviously, but another piece of real estate again, not in Maryland, not nearby? What— I mean, it's not crazy for me to ask you that question.

Yes, I know a lot of successful investors say you have to invest in your own backyard, and there's some truth to that, but you can be a very successful investor outside of your own backyard too, as long as you have your systems and your people in place. And that's what we learned. We continued, even though this one residential property we sold at a loss, we continued to invest in other states and were successful at it. So I just became better at inspecting what I expect. Is that the phrase I'm trying to look for?

That is the correct phrase. But in addition to that, I would point out You, well, you did go see this asset, but it, it almost, and we, I should say, I almost said we don't care what the inside looks like. We do. I shouldn't say that. It's, we, we do want to open up a unit or 2 when we're there, but we don't typically, well, not, I shouldn't say don't typically, we never see the inside of every unit. So for me, it's, it's, um, what's interesting, and maybe, and, and what I'm trying to get to the part is why we love the Sassafras, why we love storage, is you don't, you don't really— the interior is— I'm struggling to say this— the interior is less important, right? Even if there's an issue with the interior. They're typically metal boxes, folks. There's not a lot that can happen on the inside. The one facility we had where we kind of wanted to see the insides of as many as we could, and, um, and was a little bit of a maintenance issue as a unit, um, became vacant— and when I say little, I mean little bit of a maintenance issue— was they were drywall. This was like an old-school cinder block build with it was framed, and the, in the interior walls weren't metal, they were drywall. And it wasn't the walls that mattered, actually, it was the ceiling. They had taped and seamed the ceiling, and over time and in with humidity, because they didn't paint them, because why would you, the, the taping would peel down, right? So just be dangling, you know, like a, almost like one of those— you ever see like the fly, you know, the, the fly trap things that, you know, kind of grow? It was just dangling there. And so We had to deal with that every unit that turned over. But again, tiny, tiny little maintenance. It was not a big deal. So to me, that's just one of the reasons we love this asset class. Before we get into how the story actually unfolds, um, it's in the part we never skip, why we love this asset class. Can you do me a favor, Kristen? Separate, separate the asset class from the math for us.

Well, for me, it's It's still the same thing every week. I can be gone for weeks at a time like I am now, and the facilities don't—

Wait, what do you mean you're gone? Where are you?

You're interrupting my vacation.

It looks like you're in your home office. What do you mean you're on vacation?

No, I'm not. In fact, I was on the beach today taking, taking your calls, wasn't I? I sent you a picture, didn't I?

While, while, while people were paying their rent?

Yes. Well, yeah, they're paying the rent through the systems. No one's calling me to pay their rent. They're not calling me about a toilet. They're not calling me about a home that's 11 states away. It's—

Sure, but it's, but it's October 5th and the rent is due by today, right?

Yeah, well, most of them are on automatic pay.

Which is exactly—

And it's not urgent. They could send me a text, can you run my credit card? Yes. So when I get back to the house, or I can do it from my phone, it's just not the same level as a residential property.

Yeah, which is exactly the setup here for what, what happens next. So here's the real question. So sit with this one instead of answering it out loud. If you already own a rental, folks, or you're thinking about buying your first one, what does it actually cost you every time the phone rings at a bad hour, a weekend while you're out to dinner, a weeknight while you're having dinner with your family? What does it cost you? Not in dollars. in your attention, in, uh, and the version of your evening that gets interrupted, in the— even if you don't respond. Because I've had this— I've— I don't directly manage my Airbnbs anymore, but when I did, which was a little bit like managing a residential, um, you know, a full-time, year-round residential unit, gosh, that, that anguish you get. When you see the text and you're like, I can't answer it because I'm trying to be present in the moment here and there, but you know it's affecting you because you're thinking about it. And maybe you're even like looking at your Apple Watch to see what it said. Like, if you're me, that's what you're doing. Like, I can't, I can't just completely— because I need to know the severity of the situation, right? I still want to ignore it, but I need to know the severity of the situation. So what is— I want you watching, listening, whenever, live or later, I want you to think about that. Think about that, the anguish of that moment. And if you own residential real estate, you know what I'm talking about. There's no way you haven't experienced this. And folks, if you don't yet, I want you to think about what it's like I don't want that to necessarily stop you from doing anything, but I want you going in eyes wide open. What— Kristen, what is it? What's that version for you?

Well, I want us to hold on to that thought, Joe, because that's exactly what happened to our Indiana property. And that's, that's what we're going to be answering a little bit further down on this show, I believe. So let's hold on to that.

I'm sure you had a few of those moments. All right, folks, we are not walking a brand new, uh, storage deal tonight. You've already— we kind of covered Stowaway and TNT the last couple weeks. We looked at a couple different angles. Um, I want you to remember the, the quick numbers, the math on that though. Um, remember, Kirsten and Rob put $64,000 down, $145,000 a year in combined cash flow today, over a million in equity built. Um, Actually, you should put more than that— $160,000, $170,000 something down, right, for the 145-year combined cash flow. I kind of forgot about one down payment there. Um, but that's the destination side of tonight's conversation, right? So, um, Kristen, why does that work?

Well, it's the reason the math is even possible. It's what you're about to hear. And because storage doesn't come with the mechanism that ate our first rental alive, and so this is what we're going to go through and Explain as, as we continue on.

All right, so, so let's get into, um, I— to me is my favorite segment because I love hearing people's horror stories. Um, let's get into a real residential horror story. Unfortunately, it's yours. Um, because I love to know that. So, so let's, let's talk about the Indiana story. What, what actually happened? Um, I don't know if you want to start before the tenant left or after the tenant left, or you— it's your, it's your life. If you're okay with reliving it, tell us what happened.

You're gonna force me to relive it, and that's okay.

That's, that's what we do here on the show.

Well, Joe, it turned into a cycle that we could not get out of, and the first tenant left after the first couple of months, which we weren't expecting. We got hit with a $19,000 rehab bill just to get the place back to rental grade.

The first tenant?

The first tenant that we never saw The inside.

When you say first tenant, it leads me to believe there's a second.

There's more.

Oh my goodness. Okay.

Did you hear me say it's a cycle that we couldn't get out of? Okay. I'm not lying. I don't know what— I don't know what was going on with this property.

Now it's becoming real. Go ahead.

So the condition of the home was significantly worse than what we had ever anticipated. And I want you to remember, and I just said this a minute ago, that this tenant was supposed to be monitored by the Section 8 guidelines and rules. They were supposed to have property inspections too so that they— we were being ensured that they were holding up their end of the bargain, and that didn't happen. So they moved out. It took about 4 months with zero rent coming in to get a second tenant in the door. And so do— if, if you want to do the math with me, we're already out, right? We bought the property, we had to pay $19,000 of rehab. We've had 4 months, probably 6 months total without any rent in it. So we, we were not starting off good at all. A lot of lessons were being learned. Um, so in total, over the 6-month period, we collected 2 months of that rent, but that first month went to the property management company because they always take first month's rent to pay for their placements. Um, and that's just what we had to do to be able to rent it again, and that's what we did.

Well, hold up though, isn't part of Section 8, um, that they inspect the property like once a year, or is it once a quarter? I don't— it's been a— I, I dabbled 20-plus years ago and haven't never looked at it again.

Yes.

Isn't there a—

I don't know, you tell me, what's, what's the So I don't know about other states because this was our one and only Section 8 experience.

It's federal, should be the same everywhere.

It should be, but, but there's certain— the way it got handed to me is certain states are good at it, or certain cities are good.

Good. Certain states do it, certain states don't, is what I'm hearing. So what— but what, what are they supposed to inspect once a year, twice a year, once a quarter? What's the I don't—

this was a long time ago. I think it was once a year, so— but don't hold me to that. I'm gonna have to— I'm gonna have to look. Um, but we did not get another Section 8 tenant in after that. We went— our property management company, um, found other tenants to bring them in, and so they were not Section 8. So we stopped that Section 8 program.

Okay, so then what happened? You brought in a non-Section 8.

And we bought in a non-Section 8, and this one paid first month's rent and they didn't pay anything else again. They— we— it took us 9 months to get them out of the property.

So wait a second, they paid the first month's rent, so the property manager got paid? Or the— not property manager, the—

The property manager. They were—

they were the leasing agent.

Yeah.

The leasing agent was also the property manager?

Yes.

So they put no eyes on it?

No.

Wait, were they the ones that were supposed to inspect?

No.

Okay.

They were not.

So they had no eyes on it. Nobody from Section 8 has eyes on it.

Right.

They put a tenant in, they got paid, they don't care after that anyway, right? They got paid.

Yeah, yeah, they got paid.

Were they supposed— they were supposed to clip a piece of the rent, so they do care.

Right? Yeah. Yes, they get— well, no, I still had to pay them. My property management fees were still my property management fees regardless of whether I got paid or not.

What?

Yeah.

How does that work?

It did because I— they would have to go out and service and do calls and do things like that for me at that property and maintenance it, and I would get charged for it.

I'm in disbelief.

They do charge me 10% of the income in addition to all of the service calls that go out.

Oh, okay. So they weren't getting this— they weren't getting the 10%, but they were charging you every time they went out to knock on the door to say pay the rent?

Yes. And every time they mowed the grass, and every time they—

Uh, oh yeah.

I'm not—

I'm not shocked because even, you know, I, I buy distressed debt too, and even With that, I've ended up with utility bills, um, liens from utility companies on the property. They're like, guess who has to pay it off? You know, incredible what, what the system, the mechanism allows people to do. And when they know how to game the system, it's insane.

So that's what happened with these people. They knew how to game the system. They knew exactly what they were doing.

All right, so how long— you let them stay for how long without paying?

9 months until we were able to get them out.

So you spent money to get them out, obviously.

Yes.

And then what did you— did you actually go to visit this property ever?

Never, never sell that property.

All right, so what, what was the situation after the second tenant was out?

Well, the pictures that came back to me from the property management company that had done so well, they destroyed it on the way out. They cut the pipes, they stole the garage doors, they cut the wires. The house was in shambles, and it, it wasn't neglect at that point. It was completely deliberate, which they're pissed that I kicked them out after letting them live there for 9 months free of rent.

Um, you didn't give them a whole year?

How rude of me. We had to spend over $35,000 just to get the house back to rental grade. Rental grade, mind you.

You're already in $19,000. Yes, I know. Plus $35,000?

Yes, yes. These are for 2 tenants. 2 tenants.

What was this house worth?

I was getting ready to say, we're getting close to the purchase price of this house that we've spent in rehabs.

So— Holy shit, you guys are terrible real estate investors.

No, no, just this one.

I kid.

This one was the gift that kept on giving. But after we put that $35,000 into it, we decided it was time to sell it, that this house wasn't going to be our house. We had other properties that were working much better for us. And for whatever reason, we— maybe it was the area that we bought in that we just weren't attracting the tenants that we wanted to attract in that property. And so we sold it for a loss.

So, wow. Um, I— that's, that's my favorite segment, but I feel horrible for that being my favorite segment right now.

But we took the loss, we took the lessons, and we got out, right? And the lesson to us wasn't don't do real estate. It was that I need to be a better owner, I need to hire better people, I need to have better systems, and We need to execute a little bit more effectively and efficiently. And we learned the hard way for sure. Um, like I said, you have to inspect what you expect, and we obviously did not with our first rental. Yeah.

Look, um, I hope nobody watching or listening has as horrible a story as that, although I suspect—

I'm sure there are. There are. Yes.

Yeah, I've had my own doozies. I don't know about if they've been that bad, but we've had—we've certainly had some doozies. My last doozy actually ended up getting me a beach house, so I'm not complaining too much about it. But cost us money, but it got us to sell the house. I got my wife to sell the house anyway. So folks, look, if you—if you haven't invested in residential real estate and you're thinking about it. Because, you know, you're looking for that, that thing, that, that opportunity, that way to get out of your job or, or build generational wealth or, um, or, or if you're a tired landlord, right, then I don't, I don't have to ask you to suspend disbelief. I mean, the folks that have never done that, I might ask you to just believe us. Um, those of you that have been in, have walked our shoes, I don't need to ask you to believe us. You, you know exactly what we're talking about. Um, but here's what I'm asking you to do. Don't believe us just yet. Just hear us out. Same goal as the Indiana house, same real estate here. Storage, it's just a mech— it just comes with a mechanism that, that doesn't come with that 9-month fight built into it. Um, case in point, Kristen, what happens when someone stops paying For their storage unit?

It's a lot easier, Joe. You still have to know how to manage your property or manage your property management company or your boots on ground. Um, storage is just like residential, but it doesn't go the same way. We are on a much shorter timeline, and we're not even in the same universe when it comes to residential properties, rental properties versus storage. And in most states, a tenant who stops paying can be auctioned in 45 days. There's some states that are less than that. There's some states that are more than that. That's significantly less than 9 months, right? And depending on what states, residential real estate properties, it could take longer than 9 months. It just depends on— and keep in mind, Indiana was a— is a residential real estate friendly and owner-friendly state compared to something.

I thought it was, and that's bad.

Yeah. Um, and honestly, the day after the auction, you're not going to spend $19,000, $35,000 prepping that unit to get ready for another someone to rent that storage unit again. It— the auction winner comes and cleans out all the stuff He leaves it empty and then you or your boots on ground or your property management company comes in, blows it out, greases the wheels and preps it for rental. And the next day it, it's back on the market with a paying tenant in it. It's fantastic.

And in fact, I, I did a whole, um, one of my Storage 100 days is dedicated to this. Um, I mean days, it's a 10 to 15 minute video, but, uh, it was released, I think, um, day 88. I looked it up for this show and, and I talk about that in there. It's literally, you broom sweep it, maybe. That's if it wasn't done for you. Um, but we actually teach that exact legal process. Not state by state, can't do that. Um, and in fact, on that video, I think I might have just erred on the side of caution because I think one of the states is 60 days when you add something else into it. But folks, most states are, are less than 45. California has a— California can be done in 45, but it could also take longer just because it's got some weird notification things. But Most states, I think all the states we're in, and when I say most, I mean like more than 45. There might be 5 that are a little different.

Yeah.

Are pretty much that 45-day process that we're, we're talking about. So yeah, day 88, I think it's called the auction process, how to handle delinquencies, and I walk you through the real mechanics start to finish. So, um, so in fact, let me, uh, Kristen, let's, let's, uh Let's get into it.

Okay.

Um, so here's, here's what I'm asking you to do. Not, not believe us, like I said. Um, just, just hear us out. Every residential horror story, including the one Kristen just told, comes down to one thing. It's the law. The law protects whoever's living in the property, and that takes time, sometimes close to a year. So, and you know what the shame of it is? It— and I— there's nothing wrong with protecting people's rights to where they're living, whether they own or where they rent. I, I don't have an issue with that. The issue I have in general is it doesn't protect the person that has to pay the mortgage in the rental situation, and that's not fair. And especially when it's months, sometimes close to a year. So what actually happened, Kristen? I know you just talked about it. Let's actually walk through the timeline. Um, what happens when, when the asset is a storage unit instead of a house? Let me, um, let me throw up this slide for you.

So, you know, there's a notice, there's a court filing, there's a hearing date, and then there's a sheriff. And then there's that— for me, it was the 9 months of waiting from start to finish, right? But the mortgage payment that I still had to pay, um, and zero rent was coming in that entire time. And most of these people know exactly how the systems work, and they used every bit of it. And that's not— like I said before, and Joe just reiterated it— that's not how it is in storage, right?

No, that, that's, that's the mechanism. That's the— you know, I do a webinar, and even when I speak at REIAs, I my things, my presentations, uh, one of the things I say is the rules, the rules of the game have changed, right? And in this case, the tenant knew it. Yeah. And that's one of the exact examples that I mean when I say the rules of the game have changed. When the, the books we all read were written by the author/investors that— I'm trying to think of a name of— but all those residential real estate books When those guys wrote this, they were playing a different game. Residential law is built around protecting someone's right to their primary residence now, and it, and it should be, again, to some degree. But the law should also care about whose mortgage credit and maybe life savings is on the line as well.

Yeah.

And it doesn't, and it doesn't in far too many places. The pendulum to protect the tenant has swung too far, and in some cases it just keeps going. Like in the Great Northeast, New York is that insane now. Regarding the old rules, the, the author/investors played by, that's sort of what I mean when I say that storage is a different game, and it's even a different game than the gurus understand anymore as well.

Mm-hmm.

So, Kristen, in storage, the, um, when someone stops paying in a storage unit, what actually happens?

Well, like I said just a few moments ago, you still have to know how to manage a property management company. That part doesn't go away in storage, but it's, it's not as involved, or it's not— I don't know how to say this the right way, but there's just not the same amount of stress or duress in storage as there is in residential. So, but the turn and the timeline aren't even— like I said before, they're not even in the same universe. We said 9 months for me to get my tenant out, 45 days for me to get my storage tenant out. There's— and there's no eviction process either. I just have to file the lien process, which is the notifications and making sure I'm notifying them that the property's in lien status on certain days, and that's it. And I just lock out— I give them a late fee, I lock them out of the unit, I send lien notices by certified or verified mail depending on what your state requires, and then I cut the lock when it's ready to go to auction, take 7 to 10 pictures, put it up on an online auction site, and then the bidding starts and the, the winner comes and cleans out the property within 72 hours.

All right, so Because no one's living there, ideally, because they're not allowed to be.

So no, they definitely are not allowed to be, and that's a different situation. You call the police and get them out.

That's another episode, which I've had.

I can share that story too, right?

But because no one's living there, there's no court date. Yep, there's no sheriff, right? There's no— it's— we're talking weeks, not seasons of the year. Right. So tie this back to the formula from last week then. Why does the timeline actually matter to what the facility's worth?

Well, we said this last week. The value equals the NOI, which is the net operating income, divided by the cap rate. Every month the unit sits empty, every dollar spent fighting a tenant who won't pay is NOI that you're not going to be collecting. And at a 6.5 cap, every dollar of the NOI is worth about $185 in value. So a 9-month fight isn't just 9 months of lost rent, it's value coming straight out of your asset.

And that is a typo on the slide, and I apologize for that, but Kristen said it correctly. $1 of NOI at a 6.5 cap is $185. We're missing the 8 there in asset value. And it's not that storage tenants are better people than residential tenants, it's that the system underneath storage doesn't let a non-paying tenant hold your asset hostage.

Yeah.

For the better part of a year. And the auction, it's last resort. Not— it's not the business model. In fact, we don't even— I mean, I don't know about your facility, and all the facilities I own, I don't know that we actually make money on the auction. We don't care. It's nice to get repaid. We really just want the unit vacant so we can rent it again to someone at a street rate. Uh, and we actually teach this exact process inside of our free Storage 100 series. Again, day 88, the auction process. It's not like TV. Uh, walks you through the real mechanics start to finish— the notices, the photos, the online versus the live auctions, and where the money actually goes. Um, so if tonight's the first time you heard the 45 days versus 9 months, you should go watch that one. Um, Kristen, anything you want people to hold on to before we move on from the auction process?

Well, I guess if any part of my Indiana story sounded familiar to anyone out there, that's exactly the mechanism that we're saying doesn't have to be the only path. And that's one of the reasons— not the only, you know my story, Joe— um, but that's one of the reasons why we shifted storage.

Oh, all right. So if you already own a rental, and, you know, you're not gonna— you're not about to sell tomorrow, what's the one thing, Kristen, that you should actually do this week?

For your own rental? Yeah. I would say if you haven't already, find your boots on ground. Um, find your property manager, find good contractors, people locally who, who you can trust, who actually answer your phone and check on the place. And if you don't have that person, I would recommend finding them immediately, not when a crisis starts, because then you're going to take anybody's help at that point in time just to, just to service the house or do whatever you need to do. So I would say build your team.

Yeah. And, and I'm gonna jump in here and just say that that's great advice if you already have a property, you're in it.

Yeah.

You know, you shouldn't fire sale it. You should make smart, logical decisions. But before you buy that next one, or before you buy your first one, this is exactly the moment to ask yourself which mechanism of, or which game You're actually buying into and playing, not just which property, because they all have different rules. Which game do you want to be playing with your money? Think about that. Think about that long and hard. Um, quick spotlight, by the way, before we open the floor here, for anyone who wants to take a deeper dive, if, if, uh, you know, further than this Monday night conversation, further than the Storage 100, although I highly suggest you You watch them. We are running a live in-person workshop on Friday, October 16th, so it's less than 2 weeks away, at the Hilton Garden Inn in White Marsh, Maryland. You might ask, why might White Marsh, Maryland? Well, well, Kristen, I'll let you tell what, what might they experience if they join us at that workshop.

Well, I'm excited, Joe. I'm looking forward to it. It's going to be a full day. We're going to talk about deal sourcing. We're going to talk about underwriting, financing, negotiating and closing, and then management. And it, it, we're not just going to be up talking to you about this. We were actually going to take everyone on a bus to our facility our team owns.

Field trip.

And you are actually going to see the self-storage facility and we are going to take you through it and hands-on experience, um, so that you can see it through our eyes and what we're looking at as owners. Um, and then we're going to take that back and we're going to expand on it back in the classroom, and it's going to be a great experience. And then there's lunch and there's hors d'oeuvres and there's some cocktails.

And we'll have a banker there as well. And you know what I love about this particular— because White Marsh, Maryland is not typically like a destination that people want to go to. Not that there's anything wrong with White Marsh, Maryland. Um, but what I love about—

It's close to Baltimore, Joe. Everybody wants to go to Baltimore.

Who doesn't love Baltimore? What What I love about this is, um, not just that I— that my company owns the facility we're gonna tour, um, which is a great deal.

Yeah.

No, honestly, what's great about this particular facility— there's nothing to the eye, there's nothing that fantastic about it other— outside of the dinosaur that's out front that I love, the Triceratops that, that we— that came with the facility. Um, no, what's great about this is it's your classic Yeah, like it has everything, Kristen. It's, it's the, it's the metal buildings. There's an office. We actually have a manager sometimes there, so he's going to be there. This is one of those old school ones where it was built with an apartment above it where the manager used to live. We don't— that's not the scenario we have now. We have a different scenario there, and we'll talk to you, we'll walk you through that. But you know what else we have? We've got— it's, it's about 50% storage and 50% boat and RV. So in one facility, we get to almost show you everything. The only thing we don't think we have there is climate control. But in one facility, we get to show you so much. And it's not brand new, it's not 4 stories, it doesn't, you know, it's not one of these beautiful pristine Taj Mahal storage type of places. It's like, you know, your run-of-the-mill. This is the stuff that we're going to teach you how to buy, right? Uh, and that, that to me is awesome. Like, we're not, we're not running you through— it's not a highlight reel. We're not taking you to where best, most perfect brand new built facility. This thing is like, this is what you're going to be out there looking for if, if, if and when we teach you how to buy these things. So, uh, folks, we're capping it at around 30 people. There's— and on purpose because we want this to be intimate. Um, so there's— the way we're doing this too is because we've, we've found that storage works great in pairs, whether it's husband and wife, or, you know, we've taught 2 brothers, we've taught Uh, father-son, father-daughter. We've got, we've got the whole patriarch or the whole family trees in pairs here, and multiple people, not just 2. Um, but the point is we are selling roughly 15 tickets, so about 30 people. Totally fine if you come by yourself, that just means we get to sell one more ticket. But we are going to cap it around 30 or so people, uh, because we want it to be, we want to be useful, not a room of, you know, 50, 75, 300 people just watching slides. So if that sounds like where you, you're at, Kristen, how can they join us?

So they can go to— and if I'm gonna try to get the QR code up there too, um, so they can scan that and log in, or they can go to go.storagemoguls.ai/webinars. White Marsh, Maryland. I'll put it in the chat. I'll put the landing page in the chat so people can see where they could register. And I will also see if I can get the QR code up for everyone.

Only because I think it matters, it's a forward slash.

For— oh yeah, forward slash. You're right.

Thank you. Somebody did the backslash like it's something else. But yeah, it's go.storagemoguls.ai/white And again, hopefully we get that QR code up there. Um, all right, so before we close it out, uh, questions. We'd like to hear from you. If you got a question, drop in the chat, uh, and we will take them live. I think we already do have a question, Kristen, and since I'm reading it, it's going to be for you.

I want to read it though.

And actually, I think this is a better— I think, I think you should answer. So First-time owner buying a storage facility. That's not— it doesn't specify, but I'm assuming we're gonna, we're gonna steer you towards storage. Um, buying a storage facility 3 to 6 hours away or just out of state, what systems need to be in place before closing so the property does not become dependent on the owner being nearby? And that's why I think you're perfect. to answer that question because you actually manage yours from out of state.

Yep, the ones we manage from out of state, the systems we put in place— and keep in mind, it took me a while to get out of my own way. I thought I had to buy in my own backyard, and then people further along their journey than I was showed me how to actually do it. So that's a great question. Um, and one is, if you are going to manage the property yourself You need to find a boots-on-ground guy there, a local guy who can actually go to the facility and turn the units, be your eyes, your ears, your help. The ones that we manage, our boots-on-ground guy goes once or twice a week, and we give him a list of all the tasks that he needs to do. And we interviewed him before we actually bought the facility, so we already had that set up, and we met him there and we showed him and gave him SOPs on what we expect him to do. If you are going to use a third-party management company, then you are going to— before you purchase your facility, in your due diligence phase, you are going to interview several property management companies who specialize in storage, and you are going to choose and select which one you feel is going to work best for you and your situation. And they will also help you with the transition piece. So there's always a transition from the old owner to the new owner, and the property management company will assist with that. And if not, there's also other services out there that help with transitions if you're going to own and operate it as well. And then thirdly would be your property management software. So I would interview several property management software firms and decide which one works best for you. And those are really the 3 things to get your systems in place before you take ownership.

Perfect answer to that question. And here's another one, again for you, Kristen. If the auction sells for more than the tenant owes, who keeps the difference?

Well, not, not us normally.

Why not?

Well, because we are entitled to recap what they owed us, and then you need to make every attempt to get in touch with that unit owner. Or if there's liens on it, the the the leftover money goes to the people who have liens on it, or goes back to the unit owner if you can reach them. I have had a situation. Where— and then you can't count that as income. If you can't reach them, you can't count. And it depends on the state. For instance, you can't count that as income unless you've attempted for the last 6 months to try to reach them and give that, give that money back to them, or a year depending on the state, and then you can count that as income. But technically, that money is not yours.

All right, I couldn't get the, uh, QR code, but I got the Link up on the screen here.

Um, thank you for doing that. I was trying to do that as you were asking me all these questions. I can't multitask, Joe.

Good thing one of us can. Um, all right, Kristen— I kid. Um, can you auction a unit belonging to someone? Oh, this is a really good question for you.

Can you auction a unit belonging to someone That's another great question, Joe, and you have to be careful here. The rules are a little bit different when they're in the military and they're actively service members. They have federal protection under the Service Members Civil Relief Act, and in general, you need a court order before you can enforce the lien on their unit, which is not the case if they are not in the military. So always, if your facility is near a base or any kind of military installations or military buildings, then you should always check. And I always ask that question when people—

I was gonna say, is that part of the check-in process? Do you verify whether they're military or not?

Okay. Yes. And we give military discounts too, so I need to verify, um, that they are in the military, and I want to see the military ID, and then we give them the discounts. And then I also know that they're in the military and that the rules apply differently to them when it comes to, um, auctioning off their units. I do find that they're very good tenants though. Okay, because we do— we're by, we're by a military base.

Um, what about the auction itself? Do you have to be like physically there when it's like— you— I'm sure everyone watching and listening is like, because we get that question all the time. Try not to get us sued by Storage Wars, but Do you—

it's kind of like the whole, uh, fix and flip, flip this out.

Any of the, any of the 25 shows on HGTV on how to—

all the glamour and the glitz. My favorite was, was one in California and only put $100,000 in.

$100,000. I saw, I saw an episode where they flipped the house for $12,000. I was like, that's crazy. That's amazing.

I— you asked me if we have to physically be there for the auction?

Yeah.

No, you don't have to. I don't, um, since I'm not there locally, we, we don't physically auction them off. We do them on an online process. So I actually like it because when a unit is ready to be auctioned, I just go through the process and put it online. Typically, if you were doing it physically, you would probably wait till you had Several auctions or several units to auction, and then you would get the auctioneer there. So I like this. It turns your units over a lot quicker, and it's and it's easy. And there's a lot of people, believe it or not, that are buying these storage units online.

All right. Let me see if there's. I'll ask it. Isn't auctioning off someone's stuff kind of harsh?

I feel bad only for a minute. I mean, I do feel bad, uh, and I try very hard to prevent that from happening, um, but it's a business and we entered into an agreement and they are to pay in order to use that space. And I do give leniency, but I do follow the rules. And if they, if they are in contact with me If they're legit and they're people that are always good pays, and I know that something came up and they're going to pay me 2 weeks or whatever, I work with them. Um, that's just me personally. If you know them— if you don't know them, then they're not responding, then it gets auctioned.

Get it. And yeah, I mean, it— I feel bad too, but what are you gonna do? Um, I almost didn't ask the question because I don't want people to feel bad. It is what it is. Um, all right, so folks, if, uh, we cut or made the invitation for October 16th tonight, it's right there on the screen. Um, that's your invitation. Click on it, sign up, bring a partner. For $349, you're gonna have all-day immersive experience. We're gonna walk the facility. You're really gonna learn about how this— how it works. What happens behind the scenes, and then we're also going to show you how we can teach you how to do it.

Joe, before you, before you continue, can I ask you a question? It's in the chat. Uh, what is your favorite part of storage ownership? Joe, back on you.

You're flipping the script here. I don't like it. Um, my answer is not going to be a great one for most people. Um, my, well, favorite part of ownership or favorite part of doing what we do. My favorite part of doing what we do is actually teaching people how to buy these things. Like, I get more excited when somebody's closing on their first deal than when we buy another deal at Bellrose. Um, what's my favorite part is, um, is it— by the way, seeing the freedom it provides, you know, of our students to be— you know, I hate calling them students, but they're, you know, partners, investors. Um, so I love that. But the actual It's— I know I'm dancing around the actual question. It's, it's the same thing everybody else loves, I guess, which is the freedom, um, the ability to manage in both good markets and down markets that asset. You're not stuck in it, in it. You're not the, um, playing, playing the— or yeah, playing the game where the rules are on my side is, um, I love. I, I, I detest residential real estate for that reason. I say that as an investor in it, but I'm not the one managing it. Um, and I don't think we individual mom-and-pop style investors— we're buying 1 and 2 and 3 or 4 at a time— have a chance. I think you have to be a much bigger player in the game to really make money. Um, so I love what that storage allows us to compete like, like the old days of residential. Um, against the institutions. I love that we're able to operate in our smaller space, that $400,000 to $2 million, where we can actually do what the, what the big boys can't. Um, and all of that is to say, and this is— you asked me the personal question, I'm giving a personal answer. All of that is to say, for me, it's chasing the deal. I love the deal. Like, my— if you looked at— if you had like monitors on me and watched the dopamine, if there was a dopamine monitor, I don't, you know, I don't think it exists, but if there was, It's— mine goes up like this as we, as we get near going under contract, and then as soon as we sign the contract, it probably starts to tail off. But that's just me. I'm just— I love the fact that I have a skill that I've acquired that we share and teach others that allows me to go out and look for this deal or that deal. And, and not just self-storage. Like, I love that we're building Pro Storage now. I love that I love looking at a boat and RV deal, whether it's building it or buying it. I love— I'm so intrigued by Small Bay Flex, where, um, it's like Pro Storage, but they're actually working out of it. I think, I think there's a huge future in that. I, I'm intrigued by the AI entering the space and the technology that, that's the wrapper around all this. I love, um— I was something else. I had something brilliant in my head and I just forgot it. Um, I, I love, um, I love teaching it. I love showing people how to do it. Um, but, but most importantly, I think, I think it's that skill that I've acquired that allows me to do so many different things in this space. Oh, I know it was— I love the fact that we are leaning into the paradigm shift that's happening, both with that's being created by AI and by Amazon and Walmart and how we consume our goods. And everything is delivered to our house now, and that affects the source storage space directly and indirectly. And pretty soon it's gonna be affecting the storage space because we're gonna have how many solopreneurs out there who are running their own businesses and their own lives? They're gonna be working out of small bay flex, or they're gonna need pro storage and storage facilities because they're working out of their house. So I love where this is headed. That's what I love about storage, not just the, uh, you know, 100-unit facility and, you know, Kristen on the beach and That's wonderful. That's amazing. Kristen hates it when I bother her because she loves her life now, even though she's part of Storage Moguls and doesn't have a choice anymore. But, and I say all that in fun, but I, for me, I'm probably never gonna sit still or that still anyway. Um, don't get me wrong, I love to play golf, but I couldn't play it 7 days a week. So for me, it's, it's given me new life, new liberty, a new lease on, you know, powers, these new powers, and you combine it with AI, and now I can go out there and do, you know, this deal or that deal, or, or, you know, have fun trying to figure out what the next deal is. So I don't know if I answered your question or not there, but I think I did. That's what I love about storage. I love everything north, south, east, west, and in the middle about self-storage because it leads to so many awesome things and gives me so many opportunities. And, and Lets me meet so many cool people and create new friends and first students. And then, you know, they become investors as well, or partners, or, you know, whatever. We're not investors or partners. They're just people in our community and are, you know, in our soon-to-be masterminds, but part of our community and people we meet up with and they share ideas. And that's what I love about storage. Was that too long?

No, I think we're gonna stick to me answering the questions right here. You asked. Great. You were passionate. Like I couldn't stop you. It was wonderful.

I was on a roll. I was channeling my inner Rodfather.

I felt it. I think we all did. That's funny. And to add, you you caught me off guard. I sold my property in Indiana, I think in 2013, and so I didn't know what the Section Eight laws are. But my good old friend Chat, and I'm not sure if it's right or not, but just. Just so we can close that loop, Joe, they inspect, they do initial inspection or before the tenant moves in, and then depending on the areas, periodic inspections generally at every 2 years or every 3 years under the current rules. So my tenant was in there for 7 or 8 years when I bought that property.

Absolutely insane.

And then any additional inspections, if there's complaints, like if the tenant complains about a problem or the landlord's not doing what they're supposed to be doing, then they can have any additional inspections. But I wanted to close that loop because I didn't have that answer for you. You put me on the spot.

Love it. Folks, if you have your own version of Kristen's story, please—

There are a lot of people that do, by the way.

Please send it to Kristen. Now, what's the email address where they can send it?

I think it's info at storage moguls dot com. I thought it was.

I didn't want to make a mistake. So info at storage moguls dot ai. Info at storage moguls dot ai.

Dallas just said the Rodfather lives vicariously through Joe tonight. Yeah, Rod would be proud.

What do you? What do you meet the Rodfather, Dallas? If you've got your own version of that story, send it to us. We would love to talk about it. We will only reveal what you want us to. reveal, you know, meaning your name or whatever, whatever you want us to, to, to say or not say, we will abide by. But we'd love to share that story. We'd love to hear how you overcame it, what you're doing now, etc. Uh, folks, for Kristen Blunk, I'm Joe Downs. This has been Monday Night Storage Mogul Show. Thank you for joining us. We'll see you next Monday.

Thank you.