Self-Storage Investing Explained: Seller Financing, Mom & Pop Deals & Cash Flow Strategy

Margot Kennedy (00:00)
Right. So one of the things that is helpful to understand is that self-storage in the United States, for the most part, is super local and most facilities are small. People want to drive less than five, 10 minutes to their stuff. And we we we get our stuff, we love our stuff, we’re never letting go of our stuff. So these facilities began springing up because someone had extra land and decided, hey.

Freddie Steen (02:01)
Hey everyone, welcome to Investor Fuel Podcast by Real Estate Pros. I’m your host, Freddie, and today I’m joined by someone I’ve been looking forward to chatting with for quite some time. These are two ladies from wiicre, an amazing real estate company that has a niche in the space. I’m joined by Margot and Christy of wiicre, and they’ve been making serious moves, particularly in the self-storage.

Asset class. So Margot and Christy, I’m glad to have you here. And I think our listeners are really going to take something away from how you’re approaching the self-storage asset class, your experience with in the multifamily world, your experience in capital raising and going to investors. Let’s dive in. So, first off, for people who may not be familiar with your world, give us the short version.

What’s your main focus these days and what markets are you operating in? Christy?

Margot Kennedy (03:06)
Yes. So we are within the self-storage industry and we currently have a portfolio of just over 1200 doors. We are spread across the United States. We own in Mississippi, Alabama, South Carolina, Washington State, and we’re currently buying just over 300 units in Texas. So the way that we operate, we do not have to be market specific. We are

Deal specific, return specific, investor specific.

Freddie Steen (03:36)
I love it. I love it. Margot, what caught my attention about wiicre was the way that you’ve been able to help persons that may have been in self-storage asset class, that were not seeing distribution, that needed to get out of their deals, and also how you’ve managed multiple markets while still keeping your margin strong. That’s not easy, especially in this climate. What’s been the key, Marg, to keeping that machine running smoothly?

Margot Kennedy (04:05)
Well, we have a very specific buy box, a very specific formula that we buy our deals with and how we run and manage them. And I think because we’ve got that so well dialed in, you know, we’re really successful. We don’t we don’t have a whole lot of surprises. you know, we have a relatively narrow buy box. generally it’s the three to six million dollar range. We do have a little bit of a different thing going on now, but

That’s been our buy box. And we do seek out you know, the the the great thing about self-storage is so many people in self-storage, it’s owner operators and they’re boomers who are ready to retire. So we find them and we give them an opportunity to get out of their business, to retire and have income by having doing seller financing. And, you know, their income can be pretty close to what they’re making without working.

So we just have a really good formula.

Freddie Steen (05:50)
Not every operator, Christy, I know, has a moment where things got real. Maybe a deal that went sideways or a time that had to you had to pivot fast. Margot or Christy, you mind sharing one of those moments for each of you?

Margot Kennedy (06:05)
I am happy to share this moment because this just happened for us. And honestly, when you look at operators, when you look at GPs, when you look at partnerships, it’s this is when the tire meets the road. And we have an extremely solid partnership. I can’t tell you how lucky I am and how lucky Marg is for us to have each other. So a few Tuesdays ago, about a month ago, we have a property in

Jackson, Mississippi. And we last year we converted a retail facility into climate control storage. We had 54 units of climate control. It had just about filled up. So I’m that’s incredible. In one year, we took it from, you know, building concept to lease step. And someone came to town, rented a unit in our facility, and had an argument and decided I’m gonna

Burn it all down. And so she did. And so the whole thing went up in flames. it took two days to get the fire out, and we lost one entire sector of that business. We lost all of our climate control units. Did it cause a pivot? It’s not so much a pivot, but it is a an emotional roller coaster when you lose one of your babies like that and that quickly. So it

Provided a new challenge for us, but it highlighted our dedication to the business, our good business decisions and having an incredible property management company, knowing that insurance is one of the best things you can have. And we have a great insurance policy, and our insurer is working with us. We will rebuild it’s the process is moving very quickly, and that will be a pivotal moment for us because that is a tremendous challenge.

But we proved the market. We were in the process of getting ready to put it on the market. It was a three year business plan and you know, we were we’re less than two and a half years in and we were planning to put it on the market and it the and that happened, but we are getting it back on track and it’s going to turn out even better. Yeah, yeah.

Freddie Steen (08:23)
Wow, Christy, that’s the kind of stuff people don’t talk about enough. I mean, honestly, it’s what separates the folks who just dabble from the ones who stay in the game long term. What are you most focused on solving or scaling next, Marg? What’s the next goal, real goal for you?

Margot Kennedy (08:40)
Well, our goal is to purchase four to six facilities a year. And, you know, like we said, we we have great deal flow. That part is not a challenge, but you know, pulling the money together for every deal and do especially doing that many in one year, that is the challenge. But, you know, we continue to make connections and these groups that we’re part of

You know, we’re part of groups that are very helpful with that and people that actually have money and bring money. So, you know, we’re gonna we’re gonna do it and keep doing it.

Freddie Steen (09:14)
That’s big. That’s big, especially when you’ve already got such a footprint footprint in what you’re doing in the space in that particular niche asset class. The next move can either compound things or create chaos, depending on how you play it. Now, I know a lot of people listening are either earlier in their journey or looking to level up. And I think they benefit from hearing this.

When it comes to building relationships and growing your network, what makes and what made the biggest difference for you? Christy.

Margot Kennedy (10:26)
Y your association is your net worth. Being in the right rooms, being in the right circles, attending conferences. And it’s rarely about what’s being said on stage. It’s what’s happening at the table you’re sitting at and in the the the passageways, right? Marg and I are became partners. We found each other through Ari Mentor. And

It has been without that association, I would not have my partner. You know, we I we would not be as successful as we are. And so I would say find solid relationships and that is going to help you tremendously because you’re always learning, always strive to be, you know, one of the dumbest people in the room and ears open, always.

Freddie Steen (11:19)
Margot, would you like to add to that?

Margot Kennedy (11:20)
Well, I I agree completely. You know, there’s so many smart people out there. There’s so much information and so much you can learn. And, you know, we both seek new information and knowledge all the time. And we also enjoy sharing it. So we’ve done some self-storage classes. we’re getting ready to do another one. And, you know, we consider self storage to be such a great opportunity, and there’s plenty out there for all of us, and we want to help other people be successful.

And we believe that by strengthening that kind of a network, you know, we’re going to be more successful as well. And we want people to learn from the pitfalls that we found. And we’re as Margot said, we believe in abundance. There is plenty out there for everybody and we are happy to share our knowledge.

Freddie Steen (12:06)
Steve, could you tell us just a bit about something that you spoke to me about that I found very interesting? And that is that percentage, it’s so high that 70% of this asset class is still mom and pop owned. How are you all using seller financing structure? How has that worked for your business and how has it helped it to grow? And then what is your commentary on this asset class? 70%.

Being mom and pop owned.

Margot Kennedy (13:17)
Right. So one of the things that is helpful to understand is that self-storage in the United States, for the most part, is super local and most facilities are small. People want to drive less than five, 10 minutes to their stuff. And we we we get our stuff, we love our stuff, we’re never letting go of our stuff. So these facilities began springing up because someone had extra land and decided, hey.

I want to just, you know, build something. The the last facility we closed in South Carolina, they they wanted to have billboards, but the the city said, no, you can’t just have billboards along this highway, this major highway. You need to have an actual business. So 30 years ago, they built their first building for self-storage. And then they quickly realized they’re making way more money on storage than they are on these billboards. And that’s how a lot of these businesses operate.

So we were able to do seller financing on that facility because the sellers had no idea how to run storage. They were tired of running storage. They were making money hand over fists. They were tired of that. And that’s what’s happening with a lot of facilities. Another facility we’re buying right now, the sellers, they’re in their late 70s, early 80s. They just want to go travel. As Margtion, there’s a lot of boomers who, especially when COVID came around and all of the

Renting is now happening online, where Google Maps plays an important role, and they don’t even have a Google business page. They don’t even have websites. That allows us to come in, professionalize the business, bring what multifamily has, because multifamily at this point, so many properties have changed hands over the past 15 years. They’ve changed hands two, three times. And the up then that’s why the margins are much thinner, because you have people like us.

Who have already made the improvements, brought it up, and taken care of that opportunity. In self-storage, there is still that opportunity remaining. So we come in within six months, we’re able to do all of our capex, we have all of our bids, so we don’t have the price fluctuations that multifamily has. That creates a tremendous opportunity for us. We can get everything done very quickly, our prices don’t change, and that allows us to then just

manage the property and move on to the next deal very quickly. And that’s why we can look at buying four properties a year because it’s six months, you know, and that can overlap. It’s really three months, but we have up to six months to do all of our capbacks. So the opportunities are abound and and those boomers are now realizing they need to sell and their children don’t want the properties. They need to sell. So we provide them with about 70% of the income that they were getting.

A lot of tax benefits, you know, they’re delaying their capital gains. And if they play it right, you know, the capital gain is never paid because then the asset is the the income stream is then passed on to the next generation. So it’s actually a really great succession plan for business owners to sell, have the income, just past the sick the the income stream and not pass the problem of knowing how to manage a business.

Freddie Steen (16:34)
Right.

Perfect. And our audience loves keys when in talking about succession. Listen, I appreciate your time, your story, the wiicre story, and the wiicre’s perspective from both you and Margot. we need more people in this space who are doing it the right way. So thanks again for being here.

Margot Kennedy (16:57)
Thank you for having us. Yeah.

Freddie Steen (16:58)
And for those of you tuning in, if you got value from this, make sure you’re subscribed. We’ve got more conversations coming with operators just like Margot and Christy Christy at wiicre Investors, who are out there building real businesses. We’ll see you on the next episode.