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Show Summary
In this conversation, Thaddeus Campbell emphasizes the importance of networking and learning from experienced individuals in the self-storage industry. He shares insights on the complexities of self-storage investments and the value of starting small while gaining knowledge from established professionals.
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Investor Fuel Show Transcript:
Thaddeus Campbell (00:00)
the reality is, to your point, Dylan, there might be two bathrooms and 150,000 square feet of rentable self-storage space.When a tenant moves out, you need a leaf blower to clean out the steel box that they rented from you, right? You don’t need to hire a crew to go in and replace drywall and replace carpet. You literally leaf blow out the unit and you rent it again. There are not the tenant protection laws that you have in residential because it’s not a living space for somebody, right? It’s a rental unit.
Dylan Silver (02:03)
Hey folks, welcome back to the show. Today’s guest is based in New Jersey and is in the ground up construction storage facility space. Please welcome Thaddeus Campbell. Thaddeus, welcome to the show.Thaddeus Campbell (02:18)
And Dylan, really glad to be here. Thanks for having me. I’m looking forward to chatting.Dylan Silver (02:22)
Absolutely. I always like to start off at the top of these shows by asking guests how they got into the real estate space.Thaddeus Campbell (02:32)
I love it. was a martial artist for most of my adult life. I owned a Tiger Solman’s gym here in New Jersey where I live and loved it. Got injured, unfortunately, and a ⁓ bad head injury. I couldn’t train for like three years. Ended up giving away my school to a student of mine and had to figure something else out. And it’s tough when you do something you really love. You know, want to make sure you get back into something that you have that same passion for. And I discovered real estate in 2016, 2017.Got into fix and flips in 2019. bought my first flip home, flipped a bunch of houses and ironically failed my way into self storage. I had a couple of projects that went sideways and had to scramble quite frankly, started doing residential wholesaling. I was cold calling dead leads for a residential wholesaler. And it turned out that the guys who owned that residential wholesaling company had transitioned into the self storage space.
I did really well cold calling dead leaves and they brought me into their self storage side of things. And that was August of 2021 and had been doing storage ever since and grateful. Sometimes the biggest failures actually turn out to be the best opportunities, which has been great.
Dylan Silver (03:39)
youWell, listen, I’m a Texas licensed realtor and ⁓ no longer live in Texas. I actually live outside of the country, but it’s not easy to do fix and flip in Texas. So I can imagine it would not be easy in ⁓ New Jersey. I’m sure there’s a little bit more, more hoops to jump through. I want to ask you about going from a martial arts background to real estate. I think one of the interesting things about real estate, I almost consider it to be like a great equalizer is
you could have really an identity wrapped up in a career, in a calling, and then just like that, it can be gone, right? And you have to pivot. One of the interesting things about real estate is there’s no one set background, one set ⁓ skill set, or even an area of the country where people come from and start a really fulfilling and lucrative real estate career.
When you were involved in the martial arts world, did you envision at any point in time that you were gonna have a real estate portfolio and be involved in real estate at all, or was this something that really came from, hey, I need to figure out what to do?
Thaddeus Campbell (05:44)
That’s a great question. actually owned a Tiger Schoenman franchise. There’s like 50 different locations. And it was some of the instructors, some of the other school owners and I, obviously we were all a certain amount of entrepreneurial. Some of us more than others. Some guys owned a school just cause they love, eat, breathe, drink, sleep, arts. Others of us were entrepreneurs and we wanted to own our own business. And while we love martial arts, we would talk about other aspects of.of creating revenue. course, real estate’s always a nice asset class to get into if you’re trying to create other streams of revenue. So it’s always something we talked about. On the flip side of it, Dylan, when I was running a martial arts school, it was an 80 to 100 hour a week job. I was working six, seven days a week. I was eight in the morning going to my own training, four o’clock to 10 o’clock at night teaching classes, all the other things I had to do outside of classes to keep the school operating. So
the time to really go out and reasonably invest in real estate just didn’t really exist. But it was something that I was always interested in. was always fascinated by numbers. I’m fascinated by relationships with people. And so real estate was always a draw to me because underwriting something, even if it’s a back of the napkin analysis of a fix and flip, when you put it into a spreadsheet, that’s always something that was fascinating to me. And then of course, even in a simple fix and flip,
Dylan Silver (06:43)
youRight.
Thaddeus Campbell (07:04)
You’re going to have eight, 10, 12 people that are involved in some capacity in that project. You’re not going to do a hundred percent of it yourself. Certainly not at any type of scale, which is always what I was setting out to do.Dylan Silver (07:06)
youWhen you got into the fix and flip space, did you have mentors? Why did you choose fix and flip instead of per se, hey, I’m gonna be a realtor, hey, I’m gonna do wholesale, hey, let me see if I can get into commercial, right, or flex use commercial.
Thaddeus Campbell (07:29)
⁓That’s so funny. Probably like a lot of guys that got into fix and flip. I blame it on Stan Merrill and his Fortune Builders Academy. heard a commercial on sports radio one day for a free three hour seminar and went down the rabbit hole and was at a three day weekend event and ultimately had a mentor who had been a part of that organization that I went out and hired as a coach and learned a ton from. ⁓
And Cole Hatter, shout out to Cole Hatter, he’s a great guy, ⁓ but learned a ton, but still made the mistakes that a new person makes. And in hindsight, so grateful for those mistakes because they taught me a lot and have helped me really thrive as I transitioned into commercial real estate instead of residential real estate.
Dylan Silver (08:18)
The self storage space is interesting. ⁓ In a lot of ways, looking at it from the outside, looking in kind of a thousand foot view, these are land plays, because you have to find vacant land, or you have to find some kind of maybe a distressed asset that you can rehab to some degree and improve. But also, again, coming from my Texas background, you have folks who are looking for maybe some,less intensive ways to be involved in real estate, but that’s still active. For instance, when you have Airbnb’s, you have to have changeovers, you have cleaning crew coming in and out. Also too, when you have midterm or longterm rentals, you have the potential issue for squatters and this type of thing, less so with midterm than with longterm. With storage facilities, from my understanding, this is kind of not as big of an issue, because if someone doesn’t pick up their stuff or if they don’t pay their bill, their unit can…
be sold off, but people don’t have kind of the emotional attachment to their storage unit that they do like their primary residence.
Thaddeus Campbell (09:24)
When I met my first national-based developer, Bill Leitner, back in 2021, and he said to me, know, he had a daughter going to Princeton studying economics at the time, and he was like, she always busts me for being in storage. It’s so boring. And he was like, until you see the NOI, until you see the spreadsheet at the end of the month, andthe reality is, to your point, Dylan, there might be two bathrooms and 150,000 square feet of rentable self-storage space.
When a tenant moves out, you need a leaf blower to clean out the steel box that they rented from you, right? You don’t need to hire a crew to go in and replace drywall and replace carpet. You literally leaf blow out the unit and you rent it again. There are not the tenant protection laws that you have in residential because it’s not a living space for somebody, right? It’s a rental unit.
So if somebody fails to pay their bill in a self storage facility, 30 days go by, there’s a lock on that door and we’re…
auctioning off that unit after we follow the appropriate steps. We follow the law in terms of disclosure and trying to contact that customer and give them an opportunity to pay, but we don’t have to deal with a lot of the headaches. And the flip side of that is I can build a self storage facility for about 50 cents on the dollar of what it costs me to build multifamily residential. Here’s the killer of this space. And I’ll finish with this. The rents per square foot are almost exactly the same.
Dylan Silver (11:16)
Yeah, I-I am not shocked to hear that, I’m also, I would say, shocked that more people aren’t involved. I think we’re seeing more people get involved. I’d say in the new construction space in general, again, coming from the Texas perspective, there’s been a lot of people who have…
seen how difficult fix and flip can be in the last couple of years and have pivoted from fix and flip to ground up construction. I don’t know how common it is from fix and flip to new build ⁓ storage facilities. That’s probably a bit more of a niche. ⁓
Conversion if you will but I do think it’s interesting, you know when you talk about emotional attachment when you talk about all the issues that can come up Squatters damage to the facility. It does seem like hey, this is really a no-brainer But I also think that there may be people who are thinking well, this is a really large undertaking It’s not just like me owning one home. I’ve got all these units
When folks are getting into this space, do people typically self-manage these storage facilities? Do they hire this out? What do they do to keep up with the day to day?
Thaddeus Campbell (12:34)
So to your point, I would urge anybody that’s interested in getting involved in self storage is get to know some people that are already there. This is not a thing, even if you buy a low end class C existing self storage facility, you’re talking about a multimillion dollar investment that has the potential to really go sideways for you. So you wanna know some people and you wanna talk to some people that can give you some experience and some benefit of their experience.I didn’t go into self storage and start building $15 million ground up developments on my own. Quite the opposite. I was a small piece of a big company getting to learn from the ground up and getting to, because there’s a lot of work in a $15 million ground up development project. There’s more than enough pie for everyone to eat. ⁓ Go and learn.
Like go find somebody who’s doing it, find an aspect of it that’s intriguing to you. And just, started drinking from a fire hose, quite frankly, would not suggest to anybody that you go out and try and master the whole process. Even now with S3 Partners, the company that I work with, the boss of S3 Partners built 315 self-storage facilities in a 30 year career. He’s not running the whole show. He’s got people running different pieces of the puzzle.
He has his areas that he’s an absolute expert in. He understands the whole process and knows how to oversee it, but he’s not running the day to day on a lot of it. You have to have really good people. So I would urge anyone that wants to transition out of fix and flip and get it, no matter what form of commercial real estate it is, you’re talking about massive projects. So get around some people who have a track record, who you trust and you align with and who you believe in and learn from them for sure.
Dylan Silver (14:17)
I wanna ask you about the deal process when it comes to a storage facility. I’m familiar with wholesale, I’m familiar with maybe a single ⁓ infill lot and new construction. I’m familiar with fix and flip. It typically involves finding distress or finding a vacant lot or finding fire damage and either doing a flip or ground up construction. But when you’re looking at storage facility deals, I’m imagining you’ve gotta find…vacant land that is zoned appropriately. You’ve gotta find investors who are interested or you’ve gotta have the capital yourself. You’ve also gotta have, hey, are we gonna manage this or are we gonna own this? Is someone else gonna come in? What’s the exit strategy here? Walk me through, if you will, the deal flow of a storage facility.
Thaddeus Campbell (15:43)
I love it. So many different options here, right? We’ve got primary markets, secondary markets, tertiary markets. If it’s a raw land play, if you’re doing ground up development, you’ve got different things you’re looking for in those three different types of markets. If you’re buying an existing facility as a value add, you might be looking at the same thing you would say in a rental, right? In a multifamily rental, I’m looking for a tired landlord. I might be looking for a tired landlord in storage, somebody who’s retiring. So I might buy an existing facility.You mentioned we’re doing a Kmart conversion in North Augusta, South Carolina right now. We’re taking an old Kmart and we’re turning it into a storage and boat and RV facility. So you’ve got a lot of different paths from the beginning that you can go down. There are so many pieces of the puzzle that you need. I need a civil engineer. I need to go get an alte survey of the site.
Dylan Silver (16:14)
youThaddeus Campbell (16:31)
I’ve got to do ground testing, a geotech study to see what kind of ground I have underneath if I’m gonna do any type of extra building. I gotta get a phase one environmental done on that site. I gotta get a structural engineer to go make sure the existing building is good or if I’m building a new building to put together plans of it. I need an MEP, right? A mechanical electrical plumbing engineer to put that whole plan together. I need a security guy to come in.Dylan Silver (16:56)
youThaddeus Campbell (16:57)
We’re very fortunate in Self Storageis that we have some really good nationally based third party management companies, Extra Space, CubeSmart, Storage Asset Management, Storage Mart. There’s a bunch of different companies we can go to and they’ll come in and they’ll operate our facility for us. They’ll charge us a percentage of total proceeds for the building and then we’ll pay their staffing costs and the marketing costs as well.
Dylan Silver (17:05)
youyou
Thaddeus Campbell (17:22)
but they’re really, really good at it. So I can concentrate on one area or two areas that it might be really good at. Maybe I’m really good at raising the money. Maybe I’m really good at the finding the land piece of it and I make my money that way. Maybe I’m really good at the project management side of it, of making sure everything stays on point because there’s 70 pieces of this puzzle that I have to put together. And if the concrete guy doesn’t show up on time one day, well, I gotta make sure the steel guy knows that.And the guy digging the trenches for the security cables knows that. So there’s a lot of pieces to that puzzle that go together. And then of course, I have to have relationships with brokers. I have to have relationships with private equity companies. There is a tremendous amount of Wall Street money, Blackstone, BlackRock, Carlisle, Crow Holdings, these massive, massive real estate companies that are huge private equity pieces. All of them have a very big interest in self storage.
Dylan Silver (18:14)
youThaddeus Campbell (18:19)
Some of the biggest names you know,Dylan Silver (18:19)
youThaddeus Campbell (18:20)
wealth wise, Stan Cronke, who built SoFi Stadium, very big in self storage. Bill Gates is big in self storage. Shoot, the Sovereign Wealth Fund of Singapore has a big, big chunk in storage. So you’re seeing a lot of money come into it you have to develop those relationships as well because getting a $15 million project funded.Dylan Silver (18:23)
youyou
you
Thaddeus Campbell (18:39)
you better havesome access to capital, whether it’s traditional banking, whether it’s private equity, whether you’re raising friends and family money like someone might do on a fix and flip, but instead of raising 60 or $100,000, you’re raising three or 4 million.
Dylan Silver (18:45)
youFrom the time you hire the first engineer, assign the contract, to the time that a project, let’s talk about ground up, is built. Is that 18 months? Is it a year? Is it two years? What’s a typical timeframe?
Thaddeus Campbell (19:05)
For me to get from finding a piece of dirt to having an actually a CEO on a project is every bit of two years at a minimum. More like usually two and a half to three years, depending on the challenge of the environment. Like we’re in New Jersey, it might take me a year to get my entitlements. There’s actually some laws that help us in New Jersey. They force the timeline.I’m looking at a project in Maryland. I’m going to be every bit of 18 months just to get my entitlements, just to get this, the county and the city to say, Hey, you can build this year to get my construction drawings and my permits done. Then I’m another 12 to 14 months to get the building built. Now I got my lease up. This is not multifamily where I can start pre-leasing. This is not, you know, commercial office or big box industrial where I can have an agreement the day the thing opens and rent it out.
Dylan Silver (19:45)
Yeah.Thaddeus Campbell (19:54)
I’m renting to individuals and they don’t want to rent before they know the space is there. So in storage, we’re giving 36 to 42 months in a pro forma to get to economic occupancy on one of these buildings. So I could be five, six years that I’m underwriting in my pro forma from the time I start spending due diligence money until I think I’m going to have a ⁓ full economic occupancy and an ROI that I can go to a bank and either refi.or if I’m going to an end buyer and trying to sell the thing for profit every bit of five years.
Dylan Silver (20:26)
There’s so many other questions that I have about the storage facility space and I’m sure our audience may have questions of their own. If folks are in the New Jersey area or the greater Tri-State area, where can they go to reach out to you or to get in contact with you?Thaddeus Campbell (20:42)
Go to, I’m all over LinkedIn. So if you go to Thaddeus Campbell on LinkedIn, I’m pretty easy to find Thaddeus at S3 dot partners. Note there’s no dot com there. It’s Thaddeus at S the letter three, the number dot partners. You can email me anytime. My email address and my phone number on my LinkedIn profile. Don’t be afraid to reach out. I work nationally. So if you’re in Texas, ironically, the number one highest square foot per capita of storage in the country.Storage very very big down there not so much in the northeast where we have a lot of basement storage is less prevalent up here There’s not as much of it as there is down along the south where you know, Florida where they’re building on on water essentially everywhere So there’s no basements but anywhere you are if you’re interested in knowing more about this space Happy to have a conversation and and as I said, I strongly urge anyone who wants to get involved in this type of space There are mistakes
There are people that go out and they buy a piece of dirt or they buy an existing facility and it’s just in a market that there’s not an upside to that project, that it’s oversaturated, the rates aren’t right, and you want somebody that knows what they’re looking at that can save you a lot of time and energy and ultimately money with a five-minute look at a project.
Dylan Silver (21:56)
Thaddeus, thank you so much for coming on the show here today.Thaddeus Campbell (22:00)
Dylan, it’s been an absolute pleasure. Really appreciate you having me.
