The Self-Storage Opportunity Window Is Closing: Why Vacant Retail Could Be Gone in 4–5 Years

David Pelusio Sr. (00:00)
Upstate New York seems very warm. We’re doing very well in Upstate New York. I think Ohio’s gonna be strong. Northeast and Kentucky getting down into the Midwest is gonna be really nice, too. So what is development? That’s good, too, because a lot of these shopping centers and malls are just sitting there vacant. So

it’s time to make a move. I think the window is about four or five years, and then that—those—that inventory will be gone.

Joseph Crooms (01:55)
Hey everyone, my name is Joseph Crooms, your podcast host. I want to welcome you to Investor Fuel Real Estate Pros Podcast. Today we have David Pelusio Sr.

He is here talking about some things that he’s doing sort of in real estate. He has a lot of experience, so we’re gonna dive right into it. Hey, Dave, tell everybody hello.

David Pelusio Sr. (02:19)
Hello, everybody. Nice to be here.

Joseph Crooms (02:21)
All right, great, great. Dave is here. So, Dave, I’m about to pop this off by asking you a question. Ready? Tell me the name of your business and why did you get into it?

David Pelusio Sr. (02:31)
Right now, the main focus is STOR-IT, S-T-O-R dash I-T. It’s a climate-controlled drive-through mini-storage conversion of a large box. But—and the needs are great. The opportunity is great, because you can buy right.

Joseph Crooms (02:46)
How are you going to leverage this new real estate of storage instead of putting people or flipping homes? How are you going to leverage it with your prior real estate experience?

David Pelusio Sr. (02:57)
Well, we’ve done minis before. We own—we’ve had them for thirty years. We built them forty years ago. So we’ve got experience in the—in that space. And we’ve got the top management companies who are gonna run them. They were rated number six in the country last year. We’re just developing them and separating the outparcels ’cause they’re a gem. They’re worth more separated than they are together. If the plaza has an outparcel, like a land lease or a fast food or an urgent care, that’s—that’s always a plus. That helps to—

with the cash flow as when you’re developing and converting the minis in the back building, the big building. And then you separate it and you sell off separately. The assets are worth more separate than they are together.

Joseph Crooms (03:35)
What’s the size of these minis?

David Pelusio Sr. (03:37)
It—we’d like to be a hundred thousand square foot building, if not bigger. We will take seventy-five thousand square foot; sixty is tough, because the buyers for these are the big boys and they want—and they want big units, a lot of units. Their model used to be forty-five thousand square foot years ago when they started thirty years ago. Now their model’s a hundred plus.

Joseph Crooms (03:57)
How long have you been—how long have you been in this new venture?

David Pelusio Sr. (04:00)
Well, like I said, we started mini-storages forty-five years ago down in Florida. We built a thousand units down there, and then they were sold off to an individual who—U-Haul wound up buying them eventually. They’ve been managed and run by U-Haul for the last forty years. We have one in Rochester, New York, for thirty years that we still own. So—but the full-blown business, that’s all I do. I started about a year and a half ago with the full-blown, just coming out of retirement,

developing the least resistant commercial real estate that I could think of versus developing a multifamily project or another shopping center. I’m looking to take advantage of buying the properties right.

Joseph Crooms (04:42)
What is your book of business like now? Has—you’ve been a year in it. And what is your volume like?

David Pelusio Sr. (04:47)
Well, we’ve got the first volume we did ten million with the—we bought it for eight and we’re selling them for ten point one. The second one is gonna be at least fifteen million by the end of the year. So we could hit twenty-five million this year. I think we’ll hit seventy-five to a hundred million next year,

only because you just—you just times three, times four, which is—it’s a lot of work, but then again, the pieces are all in place to do it. We have everybody available. I’ve got a team that took me a year and a half to assemble that’s ready to rock and roll.

Joseph Crooms (06:10)
Talk about your team. Tell me what type of people did you have to get on board.

David Pelusio Sr. (06:13)
Well, we’ve got myself for fifty-five years. You got my son, who’s been with me, and he’s twenty-five, thirty years, believe it or not. I’ve got a controller that’s been working for me forever. She started off, I guess, forty years ago as well. I have a couple virtual assistants that do all the online pitch decks and data rooms. I have an analyst who’s—

who can do the underwriting as far as the market: Is the market good enough for the—for more minis? Construction costs, construction supervision—we’ve got all that. We’ve got the SEC attorneys, we have the SEC accountants, the architect has traveled with us as well. He’s amazing; he’s very good on codes and zoning. And then we have an engineering firm that has been around for a—for a long time.

And I call that the silver platter. That’s the—and I have the management company, who was rated number six last year and they manage three hundred facilities. Once we’re done, we just give them the keys and they rock and roll and fill it. I call the silver platter back up and explain what that is. Everybody’s on the platter, we just take the platter and move it on down the road to the next one.

Joseph Crooms (07:20)
Gotcha. Dave, let me ask you this. Do you have a construction company that actually does this, or how do you handle that?

David Pelusio Sr. (07:27)
Well, the majority of the work is done by a company called—

Nokē is the lock system, and Janus—Janus International makes all the doors and all the walls and ceilings and everything. Lighting system, lock system, security system. They come in and they just retrofit the big building once we got it and it’s open for them to come in. And they put it together like, I call it like LEGOs, and they’re done in sixty days. And you’re open after they arrive with the material. It’s very fast.

Then we’ll have local contractors to do maybe if there’s any site work that’s gotta be done on separating the outparcels or any little electrical, moving a couple fixtures, because usually we have plenty of lights, but you might have to readjust them or sprinkler system readjust—nothing major. The biggest part of the construction is actually the storage units themselves. Our investors love it because they’re in and out in—

it says a year to two, but this last one we just did in ninety days or a hundred and twenty days, they’re gonna make a nice chunk because we sold it. We flipped it; we didn’t have to build it. I’ve got two offers coming in on the other one that I’m—and they don’t want me to build it. I wanna build it, but we’ve got such beautiful spots and some good data behind us. People wanna buy

faster than I can build them.

Joseph Crooms (08:47)
Your buyers, who are they? You said some major players. Do they own the—when you break out the minis, let me ask this question first. How much footage is each mini? And how many minis may be in a facility?

David Pelusio Sr. (09:00)
Well, the first one we were doing that we flipped was seven hundred and thirteen units. They’re gonna make it bigger because they want bigger. They’re a national company that owns over 220 units. So they’re gonna put a thousand units in there between the parking lot and the building itself. The other one, you can’t do anything in the parking lot—zoning won’t allow you—so everything has to be inside. That would be four hundred and thirty-two units.

So that brings you down from the big buyer who has Devon Self Storage or, for lack of a better name, U-Haul or Public Storage or any of those big space companies—they want the bigger units. So then the next tier is these guys that are underneath all of them, and there’s plenty of them. And there are a lot of them; some of them are public companies.

Their policies, they wanna be able to take five hundred units or so or less and manage that, and that’s their business plan. So there’s plenty of buyers out there. Buyers are not the problem. It’s finding the sites and making sure you buy it right. And then once that happens, we can just move the silver platter down the road and we go.

Joseph Crooms (10:07)
What markets are you operating in now, David?

David Pelusio Sr. (10:09)
Northeast, and we’re looking to go in the Midwest and a little bit down south. Florida’s

very expensive. I don’t think we’ll be able to get it in Florida. I can’t buy it right. I’m not doing it. There’s so many other places to build. You can build it anywhere. It could be in Utah. It doesn’t matter. As long as it meets the criteria—the five or six criteria that we live by, and you don’t vary from that. Stick to it. So I don’t have to make the property work.

Property has to make me work.

Joseph Crooms (10:34)
Dave, what are the core values? What are those five or six core values that—

David Pelusio Sr. (10:38)
Is traffic count. The national average, we want it to be fifty percent. So the national average where you have too many minis is eight point nine person per square foot. If we get the one we’re doing now, we’re at two point two—that’s unheard of. But if we have to be at five, six, that’s a good buy, cause now when we put our hundred or a thousand units in or whatever, we wind up

bringing it up to like six-two and we’re still way below the national average, and we still have buyers for it at that point. The other criteria is, like I said, traffic count, housing, income, the need for which we explained, and the feasibility that we can get the right price. Makes sure you’re in a market where you can charge enough.

You can usually charge a little more because it’s climate-controlled drive-thru. They’re comfortable. They’re not out there freezing or sweating, unloading their stuff. Plus a lot of these big facilities have loading docks, and most of your mini-storages don’t. They’re built on the ground with a million doors up and down. We’re not doing that. We have a different product, and it seems to be working very well throughout the whole country.

Joseph Crooms (11:34)
Dave, how do you—what’s the difficulty in marketing your company? Do you, or do you have one?

David Pelusio Sr. (11:42)
No,

not really. Well, no, as long as we have the right investors involved, we plan on rolling over through 1031 exchanges or we pay off and they’re happy. But the hardest part for me, like I said to you, is me getting the investors. It’s not my forte. So we had to learn all that and we’ve done very good at it. We’ve got a great core of investors. We’re very happy, always looking for more. But

that’s the only challenge. Rest of it is knowledge. We’ve got it. Let’s move.

Joseph Crooms (12:12)
So let me try to make questions a little clearer. How do you find these spaces?

David Pelusio Sr. (12:17)
I go back the old way. I don’t drive down the road and look straight. I look to the right and look to the left, and my wife yells at me.

Joseph Crooms (12:25)
Bye.

David Pelusio Sr. (12:26)
If you’re gonna sit there and wait for a Realtor to bring you the deal, you’re gonna get a bad deal in a lot of cases, because everybody’s already looked at it. It’s always priced too high, it’s not zoned right, it’s all kinds of issues. So I like to find—

And, but I do have Realtors that do find them for me, obviously. They do a very good job, the ones I do have, because they know the criteria and they just don’t waste their time or mine. Get in the car and go look, the old-fashioned way. Get off, get out from a dead desk and stop pushing those computers. I’m seventy-two years old. I’m the old-fashioned way. Let’s go. Roll up your sleeves and go find a piece.

Joseph Crooms (13:02)
But Dave, you’re talking about, you’re in Utah, you can go all over. Do you have eyes and ears out there?

David Pelusio Sr. (13:08)
He’s searching nationwide right now. He finds them. And we zone in, check out those five criteria, and then if it’s good, I get in the plane and I’ll go look. You stay there for a week, go up and down the road, find it. You might want to just be right out of the market, right off the main strip a little bit, but you gotta find it.

If it fits the criteria, it works well.

Joseph Crooms (13:28)
Understand. Listen, we’re coming down to the wire, but I got some interesting questions. So how long do you keep these properties once you fix them?

David Pelusio Sr. (13:37)
Well, the business plan is a year and a half. You flip it. It’s up for sale day one and there’s different prices: as-is, as we built, C of O, three months in. And every time you wait, the price just goes up because we got more revenue. We try to blow up below the market—it’s a six-and-a-half cap. They’re getting five and a half for these, seven cap. They’ll work just fine and make a lot of money, move on to the next.

Don’t leave—so they gotta leave some meat on their bones for everybody to make some money.

Joseph Crooms (14:02)
I got you. Dave, you talked about the parking lot. How would they utilize the parking lot besides for just parking?

David Pelusio Sr. (14:09)
In one case we’re doing it, we’re getting more of an extra outparcel. So we can have less parking lot, which then the outparcel is worth anywhere from—depending on the tenant, the land lease could be a million and a half bucks. So that’s great. In the big facility, if there’s a lot of room in the back, it’s like two, three acres’ worth in the back, you can plop the old-fashioned minis back there. They got portables where they’re already made and

bolt them to the concrete, bolt them to the asphalt, and you’re open for business, if this zoning allows you to do that. Some don’t. So it varies.

Joseph Crooms (14:43)
This sounds very interesting, Dave. Thank you for sharing all this to our listeners. So what brought you back into the business?

David Pelusio Sr. (14:51)
I was bored, and

my grandkids.

Joseph Crooms (14:55)
And that mind is just constantly going, huh?

David Pelusio Sr. (14:58)
It doesn’t stop. I’m a deal junkie.

Joseph Crooms (15:01)
All right, Dave, we’re getting down to the why, but I do have a question that I think our listeners are really gonna benefit from. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

David Pelusio Sr. (15:13)
Networking—just meeting people and being honest. Hey, lawyers and bankers make you sign documents. My word and my handshake mean more to me than my signature. So we be honest, and network, find people, talk to people, get involved with groups.

Joseph Crooms (15:27)
And Dave, sort of second part of this question, how have you maintained the relationships for so long? Have you gone back to some of them and asked them for help to identify the type of properties that you’re looking for?

David Pelusio Sr. (15:41)
I don’t know. The older you get, the more people you know. But then again, I’m dealing now with their sons and daughters. A lot of my friends have definitely retired or have passed. So it’s funny, like I’m dealing with the insurance guy—well, I’m dealing with his son. So the relationships that I have, I have to recreate at my age. But my son being as young as he is, he has got a lot of the new ones, which are great, so.

Joseph Crooms (16:07)
And so, and do they help you—I mean, and this is my last question, I guess. So you’re out there looking, have some of your past relationships said, “Hey Dave, I think I may see something happening”?

David Pelusio Sr. (16:21)
Yeah. Yeah. Yeah. Plus, I call them all the time. “You got anything for me? I’m looking for this.” I call them. You gotta be aggressive. You can’t wait for them. I’ll make six, seven phone calls every once in a while to the top brokers in town and say, “What’s going on? Don’t forget me.”

Joseph Crooms (16:36)
Gotcha. What’s a hot market right now for storage?

David Pelusio Sr. (16:39)
Upstate New York seems very warm. We’re doing very well in Upstate New York. I think Ohio’s gonna be strong. Northeast and Kentucky getting down into the Midwest is gonna be really nice, too. So what is development? That’s good, too, because a lot of these shopping centers and malls are just sitting there vacant. So

it’s time to make a move. I think the window is about four or five years, and then that—those—that inventory will be gone.

Joseph Crooms (16:22)
Understood. Well, what you’re talking about is you can’t fake building relationships. You really shared the story to our listeners. Before I wrap up, if someone wanted to reach out, be eyes for you as well, maybe collaborate or learn more about what you’re doing, what’s the best way to reach you, David?

David Pelusio Sr. (17:22)
You can do David Pelusio—that’s P-E-L-U-S-I-O—at DavidPelusio.com. We have a website which is DavidRealEstateHomes.com. That’ll tell you ninety percent of what I’ve done in my life and how to get ahold of us. My phone numbers, everything’s there.

Joseph Crooms (17:39)
Okay. And Dave, give us the email and the website one more time, just for those looking for a pen.

David Pelusio Sr. (17:44)
DavidPelusio at DavidPelusio.com. DavidRealEstateHomes.com.

Joseph Crooms (17:49)
Dave, this was so good. I know our listening audience appreciates your story, what you’re doing, your new real estate niche. I know what you’re saying. We need more people in spaces who are doing it the right way. And thanks again for being here, David.

David Pelusio Sr. (18:07)
Okay, thank you so much. I appreciate it.

Joseph Crooms (18:09)
And for those of you tuning in, I know you got some value. Make sure you subscribe. We got more conversations coming from operators, just like David Pelusio Sr., who’s out there building real business, really developing communities and helping businesspeople. So we’re gonna see you at the next episode. But I’m gonna let Dave say—David, tell everyone you’ll talk to them soon.

David Pelusio Sr. (18:31)
Yeah, thank you so much. Would love to talk to you all.