Don’t Fight the Market: Self-Storage Investing Lessons From AJ Osborne

AJ Osborne (00:00)
I look at it and I have a very simple philosophy. The best operator in the world can be in a market that is oversupplied and it turns against them and they can fail. The worst operator and the dumbest person in the world can be in a market that is undersupplied and they can succeed. And this idea that you can outsmart the market—it doesn’t work. You need to be in a place where you can have room for error, and the market will be there to support and help you as you grow and learn. Don’t fight the market. Let the market fight for you.

Scott Bursey (02:06)
Welcome back to the Real Estate Pros Podcast, powered by Investor Fuel. I’m your host, Scott Bursey. And today we are talking to a true heavyweight in the space, AJ Osborne of Cedar Creek Capital. With two decades of experience dominating the self-storage landscape as an owner, operator, and developer, AJ isn’t just surviving in this market—he’s setting the pace. If you’re ready to scale and need that high-octane fuel to drive your operations forward, you’re in the right place. AJ, welcome to the show.

AJ Osborne (02:36)
Thanks for having me on, man. I appreciate it.

Scott Bursey (02:38)
It’s just awesome having you on. And please tell us a little bit about yourself and Cedar Creek Capital.

AJ Osborne (02:43)
Yeah, so I’m a self-storage guy. Like I own, operate—that’s all I do in the real estate world. We do development. We do value-add. I’ve been doing this since the early 2000s, prior to the Great Recession, and we are a true operator in every sense of the word. We do all our own operations, we have our own team, employees, we do everything from revenue management, we own our tech stack, architects, construction management. And I love this business. I love self-storage. It is so unique. I’m a total nerd about it, I’m not gonna lie.

Scott Bursey (03:18)
That’s awesome. And what really caught my attention about you is the way you’ve been able to scale from the ground up to managing over five hundred units and two hundred thousand square feet, all the while refusing to compromise on the operational excellence that makes Cedar Creek Capital a powerhouse. It’s an incredible trajectory, and I know our listeners are going to get a ton of value out of hearing how you made that leap.

AJ Osborne (03:43)
Yeah, we actually have three million net rentable square feet and we have over thirteen thousand doors.

Scott Bursey (03:49)
That’s amazing. AJ, in a market flooded with institutional capital, how do you maintain your edge as an operator rather than just an owner?

AJ Osborne (03:58)
Yeah, self-storage is very unique. I say it’s a business, not just an asset. I wrote two books on this. It’s very unique, and for us, we’ve spent the last 15 years taking a very different approach. Where most real estate people focus purely on the real estate, we focused a lot on the internal operations and the business of storage. So we spent a lot of money and time building out our tech infrastructure way back when, and really doing vertical integration in a real way—meaning not just our operations, but even the outside, like the tech stack we own internally. And we’ve built it layer upon layer over the years, tested, re-ran, and really refined it through the Great Recession and beyond. And that has put us in a position where we’re very unique in the industry.

So we’re the only ones that have a tech stack like we do outside the REITs, where we can see it all. We have proprietary technology as well as outside technology. And that—you know, we didn’t know the future, couldn’t see it—but when AI came around, that just put that on like steroids. And it put us in a really unique position, which has been awesome and a lot of fun.

Scott Bursey (06:07)
I love seeing how you leverage that operational speed to win. Let’s shift gears here now. What’s the biggest operational friction point you’ve had to overcome in your recent development projects, and how did you patch it?

AJ Osborne (06:21)
So operationally, things have changed in the real estate world in the last five years. Self-storage went through its largest contraction ever, greater than the great financial crisis. Rates dropped significantly more, and the way that operators operated in the space changed dramatically—how they got new tenants in, how they did rate increases, and that friction was really big over the last four years. The REITs set the stage and they started being very, very aggressive. We had to adapt quickly, and we did this in really two ways.

The first way was on our talent in-house. We needed to level up, and I’ve spent years trying to cultivate and get the best people and best talent into the firm. Utilizing our tech for fill-up and revenue management was a huge deal. Now, on the development side, development in most real estate asset classes has just been slaughtered due to that risk approach of high costs with lower performance, both in occupancy and rents. So for us, we took an approach which paid off really big where we were very specific about the markets. I needed an edge to be developing in those markets. It couldn’t just be, “This is a great market,” nothing like that. We had to have an edge to get in.

We’re talking conversions of old buildings in supply-constrained markets—high-growth markets that were constrained—and specifically targeting our units to customers to drive yield. A lot of that comes from our data and research, and then overlaying our ability to fill up that facility and drive rates had a great effect. Even in a time where rents and occupancies were down huge in storage, our developments that were over 500,000 net rentable square feet stabilized in the first year. So we were able to really break that mold. And while we stabilized in occupancy, we were also pushing rates. So it was both of those things combined. But that friction was big over the last five years and lots of operators have struggled.

Scott Bursey (08:31)
It’s really about driving that yield, isn’t it? It’s great to see that you view those hurdles not as dead ends, AJ, but as opportunities to harden your systems for the long haul.

AJ Osborne (08:42)
That’s correct. It definitely is. And you know, this is the thing about real estate: the hardest times are the biggest opportunities. We saw this after 2008. We really leveled up and we went in hard when everybody else was running away, and that paid off in dividends. We approach it through a normal business analysis. We do a business plan, we look at our markets, and I call our units products and I call our tenants customers. That’s how we approached it. And that approach pays off in the long term, where we don’t look at the market as New Year’s Day, necessarily, or as our friend. Like, we don’t think the invisible hand just makes properties and rents worth more. No, we look at the operations and the yield we can get from that.

Scott Bursey (09:25)
Interested to know, AJ, in this economic climate, are you seeing more upside in ground-up development or in acquisition and value-add plays?

AJ Osborne (09:35)
Right now, acquisition and value-add plays, even though we’re doing ground-up. The great thing about ground-up is there are opportunities because supply has been hammered, but it’s very specific. 90% of the markets that you could do ground-up five years ago, it doesn’t work anymore. High costs, lower occupancy, and lower rents have just killed that spread. But where it does work, it’s an amazing opportunity because that pipeline of supply has just shattered and been dropping, and it’s going to be for a long time. That means we will have constrained supply. So when you can find development opportunities, they’re really good for the long term.

And we love those opportunities because we’re not a developer that develops and flips, or anything like that—we develop to own and operate. So while there are great development opportunities, we’re seeing a lot of opportunity from developers that developed and are now losing their facilities. 50% to 60% of my acquisitions in the last 12 months have been that—fill-up, unstabilized facilities where developers that were not operators expected to get their CO, sell it at a four cap, and then interest rates went up three or four times. Now instead of having that equity, the bank is looking at them saying, “Your DSCR—your debt service coverage ratio—doesn’t work. You actually got to come up with money.” They’re losing those properties. We’re coming in and buying them at 40% of replacement cost.

So that has been a huge opportunity. Also, sellers—mom-and-pops that weren’t operating well—that need to exit. They’re retiring, there’s been a death, something like that. They’re exiting in a market where cap rates went from four to eight and they have to sell. So we can buy not only at a good price, but in properties that have upward upside in the fundamentals and revenue.

Scott Bursey (11:56)
It’s really a classic debate. I’m curious, how are you currently balancing that risk-reward profile?

AJ Osborne (12:03)
You know, it’s hard. When I say we have lots of opportunities, what I really mean is quality of opportunities. So it’s not like in 2008—which this is not 2008, nothing even close—but in 2008, pretty much everything was an opportunity just because the basis was so low. Today, that’s not true. Any property that comes out, people are like, “I can’t find any opportunities.” Well, you’re looking at the listing price. I haven’t seen anything that’s traded at a listing price; it’s well below listing price. So we make deals, we don’t find them. And so we have to go through lots of deals to find the good ones.

But the good ones—the quality is unmatched in anything we’ve seen since 2015 or 16. So that’s really where we’re looking at it. That risk to reward is on what I call money on the table. It’s not market-given; it’s what we can do to improve today at today’s rates and occupancy in those markets that are more supply-constrained but have growth rates. The risk is oversupplied markets and not getting a good basis. Those two things are scary in today’s environment.

Scott Bursey (13:08)
Most certainly are. Thank you for that massive injection of fuel right there. And AJ, curious—with construction costs and interest rates fluctuating, how are you hedging your risk on new builds right now?

AJ Osborne (13:21)
Yeah, one of the biggest things we look at with new builds is we have to have long-term fill-ups, and we always have. We’ve never underwritten for anything stabilized under three years. We’re not taking in market acceleration of rents; we’re taking baseline rents for what they are today in under-supplied markets. We’re giving ourselves plenty of time to fill up, with cash on hand. We take a long-term view and we are sensitive about rates and locking in rates for the long term. I cannot control the market. I don’t know what the market is going to do—I don’t pretend that I do. So these underlying triggers that can trigger a point where the market dictates the value, like interest rates or a sale, I have to have those things locked in and I have to give myself time to let the market be crazy, because I can’t control it. So as long as I can give myself time for the markets to be crazy, go up and down, then I can make my decisions based upon what I’m doing and take advantage of the market, not allow the market to take advantage of me.

Scott Bursey (14:21)
That’s a huge distinction. You can only control what you can control. When you’re evaluating a new site, what’s the canary-in-the-coal-mine metric that tells you to walk away immediately?

AJ Osborne (15:16)
A lot of people would look at rates. I actually don’t see that because the reason why is you can measure street rates, but street rates have become discount rates. So what really matters is in-place rates. I’m looking toward new supply and changes in the fundamental supply-demand layout of that site. Anything that has new supply coming up, you should be terrified, right? And if you’re not a real veteran operator, you shouldn’t touch anything in which you have lots of new supply coming out.

Your own development, I would weight as a percentage of the market. So if you’re developing in a market and in your three to five-mile radius, you’re changing that market square footage by 30% because you’re increasing it, most people have no idea whether that market can really absorb a 30% increase in supply. So we need to be able to measure that demand—that excess demand—and make sure we can’t move the needle that much. It needs to be a small amount. I’m looking for rates that have stabilized and occupancies that have stabilized, and I’m underwriting to today’s rates, today’s environments, not an expectation of tomorrow’s.

Scott Bursey (16:23)
You just gave our listeners the blueprint to add some serious horsepower to their game right there. AJ, you’ve spent two decades in the trenches of self-storage. If a listener has their first capital stack ready and is staring down their first deal, but they’re terrified of the operational grind, what’s the one piece of advice you can give them to stop analyzing and start executing?

AJ Osborne (16:47)
I look at it and I have a very simple philosophy. The best operator in the world can be in a market that is oversupplied and it turns against them, and they can fail. The worst operator and the dumbest person in the world can be in a market that is undersupplied, and they can succeed. And this idea that you can outsmart the market—it doesn’t work. You need to be in a place where you can have room for error, and the market will be there to support and help you as you grow and learn. Don’t fight the market. Let the market fight for you.

And if you do that, then you can learn, fail, and grow while you’re operating, and it’s not contingent on you being successful necessarily or failing. The degree to which you succeed—that’s what matters. But we do not want to say it has to be perfect to succeed. I don’t care how good of an operator you are. And if you’re not a good operator and you’re terrified by it, you need to surround yourself with people and knowledge that have been in the game so you can leverage technology, people, and operations that are there to help you on your journey and path. And then you need to go into a market that will help you succeed, not one that you have to fight against.

Scott Bursey (18:04)
You never want to be the smartest person in the room. That’s dangerous.

AJ Osborne (18:08)
Never. Very. It’s even more dangerous when you think you are.

Scott Bursey (18:10)
Yes, yes. And you’ve given our listeners such a huge amount of value today. It’s been a clinic thus far. What additional advice can you leave with us today?

AJ Osborne (18:24)
Real estate is not an individual sport. That’s what I love about it. You don’t have to be the smartest or the best; you just have to be able to allocate and leverage knowledge, resources, networks, people, and tools. It’s out there for you; you have to leverage it. So you can make up for all your weaknesses through other people, help, networks, assistance, third parties, and everything else. That’s what I love about real estate—it’s not an individual sport. And if you win, everybody wins. And that is the best thing ever. Leverage it. It’s the number one mistake that people make—they go into it alone. They’re not utilizing all the endless resources out there.

When I got started, there was nothing. We didn’t have social media, there weren’t books, and we had to learn through failure. But we knew we needed help, so we started and joined the largest association in our industry. We went out and I got smart people to say, “What is wrong here? What am I missing? What am I doing wrong? I want you to eat this up. I want you to destroy it. Show me all the weaknesses.” Then I find those weaknesses and I go find the people that can solve them, figure them out, and tell me the real danger—not solely dependent on me.

Scott Bursey (19:38)
Getting past that analysis paralysis is exactly where the real work and the real reward begins.

AJ Osborne (19:44)
Absolutely. And you can never know enough; it’s not available. At the end of the day, you have to realize that if you’re waiting for the perfect property, it doesn’t exist. There are trade-offs, there are pros and cons. And at the end of the day, you will never know everything. You will never have enough tools, enough money, or enough resources to get to a point where you can start to get rid of risk. It is about managing risk, not removing it. And that distinction is very important.

Scott Bursey (20:11)
AJ, this has been an absolute masterclass. If our listeners want to follow your journey or collaborate with you, what’s the best way for them to reach you?

AJ Osborne (20:20)
So I give away a lot of information. It’s one of our core tenets because we need it and we believe all boats rise. I have the largest podcast in our industry, I wrote the two bestselling books, and you can follow me online at AJ Osborne. You can go check out the Self Storage Income Podcast, you can go follow me on Instagram, or go to Self Storage Income. Anything you want to know—it’s out there on YouTube or anything else.

Scott Bursey (20:44)
AJ, thank you so much for joining us here today.

AJ Osborne (20:46)
Happy to be here. Thanks.

Scott Bursey (20:48)
And to our listeners, we appreciate you. If you got value from today’s episode, please subscribe. We’ll be filling your tanks with a lineup of elite guests, just like AJ, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.