How He Bought a Self-Storage Facility With 12 Months of No Payments

Mitch Stoakes (00:00)
looking at the numbers, it was at sixty three percent occupancy, you know, there were

Lots, lots of units that were well below market rent there. So it was it look looking at it, it it just wasn’t making a lot of money, you know, and and then with self-storage being overbuilt and overdeveloped, especially in in our market, it was it was tough to try and figure out how we can make the numbers work. And I ended up, you know, throwing out an offer, you know, a land contract or you know, in in Michigan we call it land contract.

Michelle Kesil (02:04)
everybody, welcome to the Real Estate Pros Podcast. I’m your host, Michelle Kesil. Today I’m joined by someone I’m looking forward to chatting with, Mitchell Stoakes, who is a commercial real estate broker and self-storage investor. So excited to have you here today, Mitchell.

Mitch Stoakes (02:21)
Yeah, thanks for having me.

Michelle Kesil (02:22)
Course, let’s dive in. First off, for those new to your work, can you share what your main focus is?

Mitch Stoakes (02:29)
Yeah, being a commercial real estate broker is definitely the the I guess the main job there. you know, obviously the self-storage facility eventually we j we just closed on that. So that’ll eventually be more ⁓ you know, self sustaining and self operating. But yeah, being a commercial real estate broker in in the mid Michigan market is definitely the main focus.

Michelle Kesil (02:50)
And how did you get into real estate?

Mitch Stoakes (02:52)
it’s it’s actually funny. So I I started a lot of businesses when I was in high school and I was learning more about investing and I wanted to invest in real estate, but I didn’t know how. So I thought, you know, let me be a real estate agent and learn how to do how to buy real estate with other people’s money and other people’s transactions first. And then starting out on the residential side, realized the transaction was very

emotional and I wasn’t a huge fan of that. So then you know, I I moved over to the commercial side and and the the transactional process is it’s it’s still a little bit of emotion because it’s you can never pull the emotion out of anything, but it’s a lot more logical thinking. And I preferred that way more than the residential side. So I’m I’m really liking liking it at least on on this here.

Michelle Kesil (03:41)
Yeah, and what is the way that you support and work with investors?

Mitch Stoakes (03:47)
Yeah. I think one, it it was it was really important for me to honestly become an investor myself to to understand, you know, w what’s the actual feeling that you have during the transaction and what’s everything that you should be looking at. And two, you know, I’m I I’m I’m in it every single day talking with investors. You know, I’m I’m a part of the local rental property group. So, you know, I talk with our lobbyists a lot and and

understanding the city’s, you know, new ordinances and everything that’s going on and and kind of having a lot of different conversations on a daily basis allows me to actually understand, you know, should be should we be being, you know, optimistic in this market, you know, on our vacancy, or do we really need to, you know, buckle down and be conservative for for a property like, you know, wherever it is or whatever class it is. So

having all those conversations every single day really, really help out.

Michelle Kesil (04:47)
Definitely. And what do you feel are the main keys that have allowed your business to grow and run successfully?

Mitch Stoakes (05:43)
That’s a that’s a great question actually. I think you know, just consistency of of showing up every single day and and doing what you knew you need to do every single day and and with the storage facility. you know, the the owner that we bought it from, he he was out of state and and it was hard for him to take phone calls. There there’s you know nothing wrong with that. And I think that’s why I realized he had to he had to sell it and I think just

Just being present and showing up every day and and and having conversations with other people in the area, you know, is is very, very crucial in in especially in any business, honestly.

Michelle Kesil (06:22)
And what have been some of the biggest challenges that you’ve faced and overcome?

Mitch Stoakes (06:27)
Yeah. I mean, one, you know, being my age, I’m decently young. you know, I’d when I first started in real estate, I was eighteen. So I didn’t have the beard at the time and I had I had a baby face that didn’t help. But you know, be being a young person, you know, some some people may have doubts of that, but I think even when when you’re young and you’re doing it, you know, you can always prove yourself by showing results and also you know

showing your knowledge of of the industry and the space. if you’re if you’re young and you dive into something, you know, the best way to actually get into it is just learn and understand everything that you can. And then you can actually talk, you know, knowledgeable about something and then people respect that.

Michelle Kesil (07:10)
Yeah, absolutely. What was the most yeah, can you share about like your self-storage project and like how you got there?

Mitch Stoakes (07:21)
Yeah, yeah. So I actually had a a friend of mine reach out to me and and try and get some information on it. And so I I got the information, he ended up passing on the deal. And I kinda s I sat on it for a few weeks actually, you know, trying to think in my head like how can I make this work? ‘Cause

looking at the numbers, it was at sixty three percent occupancy, you know, there were

Lots, lots of units that were well below market rent there. So it was it look looking at it, it it just wasn’t making a lot of money, you know, and and then with self-storage being overbuilt and overdeveloped, especially in in our market, it was it was tough to try and figure out how we can make the numbers work. And I ended up, you know, throwing out an offer, you know, a land contract or you know, in in Michigan we call it land contract.

It’s very similar to seller finance. so I threw out an offer and we kind of messed around with the terms a little bit and ended up, you know, on a you know, 30-year am, which most commercial is done on a 20-year amortization schedule. but we did we did a 30-year am at six percent interest and actually we did 12 months of of zero, you know, principal or interest payments and and no interest accrues. So

With it being at sixty-three percent occupancy, we have a lot of time to, you know, to grow that occupancy and increase the the net operating income. So then when we do have to start paying debt, you know, in in a year from now, then we’ll be we’ll be very well off by that point. And then that’ll also help us to, you know, stack some some cash for a little bit, and then grow some reserves as well. And then maybe do some projects that you know we want to do by

by building another, you know, facility or you know, possibly putting we we have it’s all dirt now, but if we could put asphalt down there, if that’ll, you know, allow us to maybe increase our rents or, you know, we just we gotta listen to what the tenants are wanting at that time, but it’ll give us the the freedom and the flexibility to to be able to do some of those projects.

Michelle Kesil (10:02)
Yeah, absolutely. What would you say you’re most focused on, solving or scaling to next?

Mitch Stoakes (10:08)
⁓ you know, I think once we can get this this facility to you know, up to kind of that ninety percent occupancy is is our s our sweet spot where we’re gonna try and hover around where we still have some available units and then but we’re we’re charging a little bit more on rent. But from from that point forward, you know, depending on how the how that goes, you know, scaling I think would just be acquiring more properties. You know, I I’ve

great partners in this. I ended up raising the money for the down payment. So I have great partners that, you know, if if everything goes well, they really want to keep, you know, keep buying deals, keep investing. where, you know, and and how that looks is we’re we’re not exactly sure. We we do really like self-storage and it’s it’s I guess close in the fact that

To to multifamily, in the fact that you have a lot of units, you have a lot of tenants. If if one person moves out, you know, you’re not your profits not gone. But in in mid-Michigan, depending on which which court you’re in, you can be waiting six months for an eviction and for self-storage, you know, you’re you’re five days late. I can lock your unit. And then within 30 days, we’re doing an auction, and then your unit is is already back on the market.

So you know, for management wise, self-storage is very attractive because of that. So it’s, you know, I I think if if everything goes well, we would love to keep buying self-storage.

Michelle Kesil (11:43)
Yeah, absolutely. And is on the commercial brokerage side of your business, are you also working mostly with investors or who are your typical clients there?

Mitch Stoakes (12:00)
yeah, I I work with a mix of investors and business owners, you know, business owners looking to add another location or relocate their business. and then investors, you know, we’d we work with a a good mix of both here in the the mid-Michigan or Lansing market. so it it really depends, you know, it it kind of ebbs and flows right now. I think it’s more more businesses that we’re we’re working with because with rates where they are right now and

You know, and right now with investors, it’s tough because the you know, we sellers’ expectations are really high. You know, in in commercial we run a lot of our stuff based off cap rates. And some out of state buyers are coming in because, you know, they can buy properties in in California or Florida or Texas at a, you know, five cap, five and a half cap, but in in Michigan, they can buy things at a

eight, nine, you know, a 10 cap. And so sometimes sellers think that they can get that that high price, but yet, you know, buyers are still right here. So they throw it on the market and try and hope for, you know, an out of state buyer or someone, a non-educated buyer to come in and purchase something at a at an inflated price. So it’s it’s become a little bit difficult for investors in this market and also with some of the economic factors that are going on.

currently. So I think a lot of the people that we’ve been working with recently have been more business owners that are just relocating their business or expanding or downsizing as well.

Michelle Kesil (13:36)
Yeah, absolutely. And what are you most looking forward to when it comes to real estate and investing as a whole?

Mitch Stoakes (13:45)
⁓ Yeah, I think there’s there’s some interesting bills that are gonna be coming down on the federal side, at least you know, for for helping out you know, affordable housing and and being in the the multifamily space, I think that’ll allow for some more development to to take place. so that that part will be pretty exciting as well. And then in in Lansing, we’re we’re getting

lot of development actually coming in or I shouldn’t say coming in coming from you know our own investors and developers that are here locally in the area. So it’s I I’d really like to think it’s it’s a growing market. I mean we’re getting our first skyscraper in the last like 50 years. So that’ll be a a change to our skyline will be really, really cool. so I I think as as you know

construction gets a little bit cheaper and and the the government starts to help out with that, and then then we can get more apartments that’ll help the housing shortage and and cause for more development and and you know a population growth is definitely needed here in Lansing. So I think I’m pretty I don’t want to say bullish on Lansing, but I’m pr I’m getting to the point where I’m actually pretty optimistic about the the market here.

Michelle Kesil (15:44)
Yeah, absolutely. And what advice would you give to someone that’s looking to get into real estate?

Mitch Stoakes (15:52)
Yeah. So whenever I talk with a a new investor, mainly the first conversation is just to sit down, you know, what what do you what do you want out of out of investing in real estate? Is it is it cash flow? You know, are you going for equity growth? You know, what what’s what’s your you know three year, five year goal? And then since commercial is is such a wide range of real estate, you can look at, you know.

a bunch of different types of deals. I mean, you know, you have your your true triple net deals where you’d pretty much buy it and forget it and get, you know, mailbox money every single month. And you know, you you have your your value add deals where where you got to really stick your teeth into it. But if if you can if you can increase the value on the property and and raise the NY and you can exit, I mean you you can make some, you know, good money fast, but you have to be able to

understand and and and have the time and and know how to do that. So I think you know for an investor, we always just sit down, understand what’s your goals, what are you trying to get out of it. And and also, you know, a lot of these people online will say it’s passive, but it’s it’s not very passive. You have to do work to your properties. I mean, it’s it’s constantly working on it. So understanding, you know, what what are you what are you wanting out of?

out of your investment and and what time can you commit to it. So I’d understand if if I were talking to another investor, even if I’m, you know, not brokering their deal or anything like that, I would just understand, you know, what’s your goal? What do you want out of it? And then if you want to go the commercial route, understand a little bit about each you know asset class when it comes to retail, industrial, multifamily, self-storage, development and and understand, you know, what

What do you what do want you know, f from each one and see which one fits fits your buy box there?

Michelle Kesil (17:51)
Yeah, absolutely. That makes a lot of sense. Thank you so much for sharing.

Well, before we begin to wrap up here, if someone wants to reach out, connect, and learn more about everything you’re up to, where can people find you?

Mitch Stoakes (18:06)
Yeah. Yeah. If you go you can go to woodworthlansing.com or you can just call our office or my cell. My cell’s (517)897-1352. or you can just send me an email, [email protected]

Michelle Kesil (18:19)
Perfect. Appreciate your time and your story. Thank you for being here.

Mitch Stoakes (18:22)
Yeah, thank you.

Michelle Kesil (18:23)
Of course. And for the listeners tuning in, if you got value, make sure you’ve subscribed. We’ve got more conversations with operators like Mitch who are building real businesses. And we’ll see you on the next episode.