Ever wondered about the untapped potential of self-storage and multifamily investments in the realm of real estate? Join us in an enlightening episode of Exit Strategies Radio Show, where Michael Margarella, Principal at Next Play Investments, shares the keys to scaling success through the strategic synergy of self-storage and multifamily properties.
Gain profound insights into the intricacies of self-storage and multifamily investments as Michael navigates the shift from single-family properties achieving remarkable success and unveiling the strategic decisions that propelled him from residential real estate to the expansive world of larger-scale ventures, especially in the face of unexpected challenges like the COVID-19 pandemic.
Learn the strategies that drove this transition, focusing on higher returns and faster growth in the commercial space. He unveils the misconception that self-storage is passive, emphasizing the active involvement required. Furthermore, it discusses self-storage as a recession-resistant investment, backed by increased demand during economic downturns.
Ready to scale up your real estate investments for unparalleled financial empowerment? Tune in to gain invaluable insights from Michael Margarella as he delves into the scalability, resilience, and transformative potential of asset classes like self-storage and multifamily properties. Don't miss this opportunity to fortify your understanding of how these investments serve as pillars of stability and growth in the dynamic real estate landscape.
Key Takeaways:
00:06:51 Transitioning from single-family to commercial real estate.
00:10:42 Self-storage is not passive.
00:17:42 Self-storage is an inflation-resistant investment.
00:19:15 Invest in storage buildings.
00:24:07 Speed of implementation is crucial.
Connect with Michael@:
Email Address: mm@nextplayinvestments.com
Website: https://www.nextplayinvestments.com/
Linkedin: https://www.linkedin.com/in/margarella
Connect with Corwyn@:
Contact Number: 843-619-3005
Instagram: https://www.instagram.com/exitstrategiesradioshow/
Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
Email @: corwyn@corwynmelette.com
Shoutout to our Sponsor: ROBYN COLLINS
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CORWYN:
Good morning, good morning and great morning guys. Welcome to another fabulous episode of Exit Strategies Radio Show. Hey guys, I am your host, Corwyn J Melette, broker and owner of Exit Realty Lowcountry Group in beautiful, North Charleston, South Carolina. Hey, if it’s your first time listening to the show, guys, as I always say you are most certainly in for a treat because I’m mission here on Exit Strategies Radio Show is very simple. That is to empower our community. So that is you! Do financial literacy and real estate education guys. We’re legacy building, that is what we do. So guys, look, ya’ll done with us on this ride. And I’m loving every time I bump into you all in the streets. I’m astonished by the number of people that tune in and listen. But moreover, I’m appreciative of the feedback that you give me, which is, Hey, we love what you’re doing. We love the show. We love the content. So guys, we have continued, we’ve been climbing to the highest heights, we have been reaching further and further to get and bring on amazing guests. And today is no different we have with us today than Michael Margarella. So Michael, hey, he’s the principal when I was thinking about school now. He’s a principal with mixed play investments. Michael, how are you doing today?
MICHAEL:
I’m doing well, Corwyn. Thanks for having me. I’m excited to be here.
CORWYN:
You’re welcome. Thank you so much for taking time out of your busy schedule to be here. So Michael, let’s dive in my man, you are the principal. I like that I may have to give you that coined that phrase for you. But you are pressable with next play investments. So if you don’t mind, give our listeners high level. What does that mean? who you are? And what do you do?
MICHAEL:
Absolutely. So Next Play Investment is a private equity firm, that sources investor capital and places it into commercial real estate deals, specifically self storage and multifamily. And I started at a much smaller scale years ago in the residential space doing mainly residential one to four rentals. And I just wanted to scale a little faster and a little quicker. And I had a lot of folks who were interested in partnering with me and varying degrees. And as you know, Corwyn, sometimes it’s a little difficult to form a partnership on just one rental property. So start to think a little bigger and transitioned into the commercial world. And that’s when I found it. Next play investments and again, targeting commercial properties.
CORWYN:
You touched on a few things there, which is scaling. We’ve talked on this show we’ve had guests on, we’ve really talked about how to scale up oftentimes people think, well, I got into to this, I’m here. And as this were supposed to stay well saw, okay, well, I’m here, but I want to be here. So how do I level up? So you scaled up by changing some things? So if you don’t mind me asking, Michael, what gave you the bulk about real estate? In general, what tickles your fancy to say, Okay, this is what I want to do.
MICHAEL:
It was really taking my future into my own hands. I mean, growing up, I think a lot of us are systemized, to go to high school, go to college, get a W two job and just work until you’re 65 and retire. And for many people, that’s great. But I wanted something that I had a bit more control over something to help me diversify in the event that something happened. And I mean, COVID is a great example of this, right? I mean, there were a lot of folks who weren’t so fortunate during COVID with their career paths, and a lot of jobs that got eliminated or furloughed for a period of time. So just having that backbone and that passive income. That’s what really spurred me to take action. And I’d say it was really fueled during COVID, because we just saw so many things that we just didn’t think were possible. So I use that as an accelerant.
CORWYN:
Okay, so instead of being defeated by the situation, you were motivated, encouraged by it. Like okay, well, look, you know what, I don’t want to participate in the economy, if you will, from this side, where I have these limitations. I want to free myself up from being negatively impacted by this by doing something completely different. That is very bold.
MICHAEL:
I’m a big proponent, by the way, of Warren Buffett, be greedy when others are fearful and fearful when others are greedy and COVID was a scary time. And I remember one of my colleagues said to me, probably right around summer 2020 that he was looking at a rental property. I think it was just a single family residence and he told me he was glad he didn’t purchase it earlier in spring 2020. And I remember thinking to myself, Man, I wish I did purchase it because now I’d have some extra passive income here and summer 2020. And then, as the months went on, I think we all learn that we wish we would upon everything we could have in 2018 2019 and 2020. Yeah,
CORWYN:
yeah, exactly. You know, hindsight, they say is always 2020, obviously. So if you’re looking in the rearview, you always can see that a little bit clearer than you can what’s down, quote, unquote, down the road, because you can remember what you saw behind you. So you said you kind of cascades. So your entry into real estate investing started around? What single family houses?
MICHAEL:
Yeah, that’s right, doing the whole BRRR strategy, doing some residential fix and flips a lot of the stuff that you learn on bigger pockets. And it’s just really valuable insight.
CORWYN:
So, and the trigger for you, again, going through what we went through, but how long did it quote unquote, take you to begin to level scale, and start looking at more commercial opportunities? Because you guys focus, if you don’t mind, let’s drop make sure we get this in. But your group you focus on and what areas?
MICHAEL:
Yeah, so currently, we focus on self storage and multifamily. But like I said, That’s not how we started, we started in the single family one to four space. And I think we were just looking at return on time, I think return on investments are a really valuable metric. But we started to look at return on time and how much time it was taking us to source a single family residence or something in the one to four space, how much that yielded for us, and kind of just putting that into a metric. And I just wasn’t pleased with the velocity of that. And I think it was a tough time, right around 2019 through 2022. Or so I mean, the market was really hot, and there was a lot of demand. So it was tough to find good deals, and I just wasn’t pleased with the speed of where that was going. So wanted to transition into something bigger, where if you just did a few deals, that’s still worth your while, if you do 160 unit apartment deal, or 30,000 square foot Self Storage deal. That’s a big deal. And that’s something that’s going to sustain you.
CORWYN:
One of the things that as conversations that we’ve had previously on this show has circled around when you’re getting into, let’s say, you know, self storage, and things such as that is that you’re now trading your tenant for their stuff, which gives you typically get rid of toilets. And all you got to do was keep contents, which is a whole lot less difficult to manage, because now you’re not making repairs constantly, at least knock on wood that you shouldn’t be, but you’re not making repairs and dealing with quote unquote, the tenant issue is very simple. You house their stuff they pay you to house their stuff. If they don’t pay you to house your stuff, then that’s a whole nother process. And we ain’t gonna talk about that necessarily, here. But nonetheless, it’s a lot easier of a process, if you will, than it is to manage the people that come along with the toilets that you have. When you have residential. Correct?
MICHAEL:
Oh, I think you hit the nail on the head there. I think in a lot of ways, it’s a simpler business. It’s really four walls and a roof. You don’t have any living tenants, except for once in a while. And then that’s a whole nother story. But generally speaking, as you said, people are just storing personal property. And there’s a lot of benefits to that even during COVID when there were residential eviction moratoriums, or there were no such things and self storage, and there really aren’t evictions in self storage, it’s more so auctions. So there’s a lot of things that are simpler about the Self Storage world. But at the same time, there’s a lot more nuance to some of it. And the position that we’ve taken with self storage is that it’s a business, it’s not just a piece of real estate. And we wanted to run it like a business from day one. So we’re vertically integrated in that we self manage our own storage properties. And so that also makes it adds a layer of complexity there, because it’s a bit different than the residential or even the multifamily space where you have a property manager, and for the most part, you’re chatting with the property manager weekly or monthly. And reviewing reports, this was a little different, because we’re basically building out our own call center. We’re doing a lot of our own advertisements, and just getting a lot of the stuff that needs to be done on the more detailed level ourselves. So I’d say self storage is a lot simpler in a lot of ways, but it’s a little more complex in some ways to that
CORWYN:
Makes perfect sense. So let’s start at the end and kind of backup because, again, it’s more complex. So for our listeners, Michael, what are some of the pitfalls that you’ve ran into? You come around the corner, you got some momentum you you win this race, and you come around the corner, like, oh, wait a minute, what was that? So give us some of that. So that our listeners kind of get full context,
MICHAEL:
I’d say specific to the Self Storage side, it’s really building that business. When we acquired our first self storage facility, we had a long term goal in mind. And a lot of the vendors and the technology that we chose to use were things that we wanted to use in the future. But I don’t think we fully comprehended just how much of a business this was as opposed to just real estate. So I think advice for the listeners, especially in self storage is that it is not a passive asset class. If you’re interested in self storage, you either need to have a really good property manager or really good partner, or maybe you should just be passive investor, meaning more like a limited partner in the syndication or something like that. Because self storage itself is just not passive.
CORWYN:
That’s interesting. Thank you for that.
CORWYN:
For our listeners, guys named Michael. Let’s define active and passive. For our listeners, they should notice I’ve been listening to him long enough. If y’all don’t know this and look and we see each other in the street, we might have to go to blow. But an active investment versus a passive investment. Michael, go
MICHAEL:
I’d say in its simplest terms, and an active investor is somebody like myself who’s operating a deal, who is sourcing deals, managing it, whether it’s through a property management company or asset managing a property manager, and passive partner is is in the security space, perhaps a limited partner, somebody who basically just gets mailbox money, and they get a return on investment in exchange for contributing capital to a deal.
CORWYN:
Okay, all right. And that right there listeners is where this thing here, where the line comes in, as though if you’ve got a full time job, it is difficult to be an active investor, it’s not impossible, don’t get me wrong. But in that the investor is when they’re not on their main job. They’re over here at their property, trying to take care of cutting the grass and paying bills and doing all the minutia. Whereas a passive investor in that same scenario, big went home, they would the family, they will kick by watching a football game or whatever game basketball game, whatever it is, but it kicked back watching the game. And they just go check the mail about once a month looking at bank account, and the money is there from the proceeds, if you will from the property, guys, you get to choose which one you want to be. So just make sure that as you listen, that you take out the key points to make the decision that is best for you. So came around the corner, and boom, you found out this thing required a lot more work and a lot more hands on than what you would have suspected otherwise. Now I ask this question, Michael is a very open ended and may be a loaded question. But are there any regrets in anything that you’ve done in this space so far?
MICHAEL:
I’d say maybe in the beginning, we may have brought on a property manager, let’s say for the first facility or two just to get more of an inside look as to how the day-to-day management goes. But we learned the hard way it was more of a sink-or-swim way. And we took a lot of positives out of that. And we learned what not to do in a lot of senses. And we learned what we should do in other senses. There’s really no such thing as failure. It’s just what you learn from the lesson there. And that’s kind of what we took away from it. And that’s how we grew. And, and that trails back to the point that you made about active versus passive, right? And there’s no right way to do it. I mean, I’m a passive investor and in a few deals myself. So even if there are some of your listeners who are interested in being active investors one day, there’s nothing wrong with being a passive investor first, and just seeing how things are done. And that helped me a lot is seeing how active investors structured their deals, how they underwrote the deal with how they dealt with investor relations, and what they did when things got tough, what was their communication like and things like that. So I think all of those things are learning experiences, as long as you could take something from them. You could regard that as a success.
CORWYN:
That’s fair. So it’s about learning for hear you say, because you learned yourself through the missteps, if you will, going forward, not taking a falling back and quote unquote, having to regroup but we’ll work ourselves through this and then we’ll get to that next level.
MICHAEL:
And you have to do that, right? Because most of the time when your phone rings, it’s usually bad news, right? Nobody’s calling you to tell you, hey, you know, we paid our rent on time or we got caught out. I mean, it’s always something right. So you just have to figure out what the best strategy is to move forward.
CORWYN:
I can appreciate that. You know, sometimes we look at a phone you’d be like, ah, and it’s typically the late night, early morning, or the weekend phone call. Never called to a business hour right? They call it a night early. More on the weekend hoping to get your voicemail so they can leave it on your voicemail is up and I get it. So, Michael, you guys have kind of scaled this thing up also to the level where you’re partnering, working with, essentially crowdfunding, if I’m not mistaken. But you know, I definitely want clarity on that for our listeners. But you’re pulling people together to now make these investments. Is that about right?
MICHAEL:
That’s correct. And that was part of the reason we moved over into the commercial space, it’s just because a lot of folks started to see what we were doing. And they were interested in partnering with us and various degrees. And, like I said, it’s just a little more difficult sometimes to do that on a one-off scale for slightly smaller properties. So now that we’re into these larger properties, it gives us more opportunity to bring on investors and partners and folks who want an alternative to the stock market, especially nowadays, and for the last couple of years now, folks are just looking for a somewhat safe place to park their money. And so we’ve tried to provide that to a lot of our investors. And we’ve been pretty fortunate in that. We’ve provided some good results for our investors. And that’s led to some additional friends and families of those folks coming in and wanting to join.
CORWYN:
What’s interesting. And I know that you you know this differently than how I’m going to explain it. But how I’m going to explain it, I’m hopeful will bridge the gap for some of our listeners, because we’ve gotten to a place now it used to be that we were minimalist, we didn’t want any baggage, everything and they said smaller spaces, and no storage and all that stuff. But the reality is now as people mentally we hold on to everything, I’ve noticed now, a trend. I talk about this in conversation, I’ve spoken about this, but I’ve noticed a trend now with funerals. Now were giving out, they’re making these spreads, essentially blankets with the person’s name and your host name with a name, that picture here, birth, the dash all that stuff in there. And it’s a keepsake. And I said this, I said you know what, and you’ll appreciate this because the be blunt, it keeps you in business. But the reality is, is that there is a very, very, very small chance that anyone else will ever throw that thing away. If there was a spouse that survived, they’ll keep it, the children will keep it, the children’s children may even keep it and it may go on forever. Now, that don’t mean they’re gonna keep it in their house. But they’re gonna keep it which means they gotta have some way to store it. Just those kinds of things. If you look at it, we’ve become now storage buildings and places popping up everywhere. Because we keep everything, everything is a keepsake. But we don’t want to forget, we don’t want this, we don’t want it that everything is becoming a keepsake. So if you’re looking, and this is the plug I’m gonna give right now, Michael, for you. If you guys are thinking about this and realized, wait a minute, that’s right, because I got some stuff in stores right now. I’ve gotta reach out to Michael.
MICHAEL:
that’s actually I think you hit the nail on the head. And that’s why I actually refer to self source sometimes as inflation resistant. Because we’re coming off a time where the government printed so much money, and a lot of people bought a lot of toys in 2020, and 2021, and 2022. And occupancy was at all time highs for the past three years or so now we’re starting to see a bit of a leveling now. And you know, there’s some recession talks, and possibly we’re in a recession, depending on who you talk to. And even during prior recessions that we’ve had self storage has still been a strong performer. Because as people downsize during a recession, they need more storage. If people are unfortunately displaced, they need storage if a divorce occurs, and one household becomes too they need storage. So there’s a lot of drivers there which drive the occupancy of self storage, and I think you hit the nail on the head.
CORWYN:
Yeah, I’d say this jokingly, but seriously, but there are some times when it does. So I say this often Michael and feel free to take this and use his way of real estate is not common sense. It isn’t. But there are some common sense approaches to real estate. And what I just shared is a common sense approach to real estate. Does it make sense that rents go, well, it makes sense on one side it rents go up and this changes in all this other stuff? No, it’s always tied to something else. But when you get to the common sense piece of it, let’s get it down to the basis to where most consumers reside. It makes sense to invest in storage buildings, storage units, those kinds of things and those types of endeavors. Because not only do you see them being built, but imagine like right now my garage is a storage unit. I’m gonna take the box truck home and I’m going to purge it and when I purge it, it should go to either goodwill so to speak, go to a nonprofit that sells it district whatever they do without Okay, once it’s off my truck, I’m out I’m done. But besides that also got a storage unit. right back okay. I rent for equipment and stuff for the business because we all have offices and big enough to store everything. But if you get an office big enough to store everything that you don’t need to stuff anymore, do what you got to do.
MICHAEL:
Those are frequent customers. It’s not just individual, it’s also businesses, it’s if they don’t want to spend more money on office space where it’s just unfeasible to store what you need to store in office space, you put it in storage, and it’s a good use. And it’s a lot cheaper than renting or buying additional office space. I mean, you can rent let’s call it 100 square feet and most markets for $75 a month, it’s a month to month lease, it’s a lot simpler, you can access your unit pretty much 24/7, it’s usually a safe facility, it’s gated and well lit. So a lot of people see that as an attractive alternative.
CORWYN:
Exactly. So lucky. If I had a bell over here, I’d be like, yeah, you Yeah, man, all of that. So if that is what it is, there’s such an opportunity within that space. And you may mention this a little early. So I want to take you back to this comment, before I bring us back because we quickly approaching the end of today’s show. But the residential side, it is hard to find a deal or opportunity on the residential side. And the reason being, is because everybody is fighting in the same space, what you did was, well, hold on, let me pick my bait up. Let me take my fishing pole and my hook. Let me go on over here to the smaller pond. That’s exactly why we did it outside. So if they fish over here, inevitably one of them went round the other way and got on the other side, because they want to be over here without a mother finish.
MICHAEL:
You see them saying that was the exact calculus.
CORWYN:
You can use that just so you know, you can take that and use that. Because people miss it or pause it interconnected. We miss that the streams, creeks, all these things that connect all this stuff together. Real estate is that type of landscape, where we going out with a fishing pole, and a rod, hook and worms or whatever. I mean, I ain’t gonna say hook got a handle on that and Gator and nut and you know, we down south, we got them down here. But not saying that you’re going to do that. But on the other side of it, it’s all interconnected. So the fish will get to the other pods. You just gotta get there.
MICHAEL:
There’s no best asset class. I mean, multifamily is great. We have multifamily, mobile home parks are great. You can invest in office, triple net, industrial self storage, I think what’s most important is that you devote yourself or you pick one or two paths. And you really devote yourself to those paths. Get to know the players in that space, the brokers and get really familiar with the operations and become an expert there and almost become known for self storage or multifamily or mobile home parks, rather than looking at all 10. And don’t try to figure out what’s best because they’re all good. Just depends on how well you operate them.
CORWYN:
Exactly. So Michael, for our listeners, first thing, how can people get in contact with you? Yeah,
MICHAEL:
Please visit my website. nextplayinvestments.com You could shoot me an email or set up a call. I’ll be happy to chat.
CORWYN:
Awesome, the next thing, Michael, I call this one mic drop question. All right. And you may have kind of went around some of this stuff, but I want you to zero and hit that target. Which is this. My mic drop question is, if you had to go back and do this thing all over again, if you had the opportunity to what have you learned that if you had the opportunity to go back and do it all over again, that you go back and do what will you change?
MICHAEL:
I feel like start sooner in general is the answer that you’ll always hear. And I feel like that’s always correct. So I’d say that would be part one. And then part two, if I try to niche it down a little more would be I wish I went bigger a little sooner, and just transitioned right into that commercial space. Right off the bat. I think a lot of the lessons I learned in residential were valuable. But I think I could have sped up the process if we had just started in self storage and multifamily and focused on that from the jump.
CORWYN:
Thank you for that. I’m gonna share this with you as we get to a close, and I’m gonna share this because you just confirmed something for me. So SOL in the real estate world. Most times people look at SOL as sphere of influence, you know, that circle to people that you know, that know people and those fears. And that’s where you get your business from? Well, you kind of grow. And eventually your sphere gets larger and larger, and you get more and more business further and further out. But SOI is also speed of implementation. And that’s something that we sometimes miss in the business. We overanalyze, we don’t do things quickly. And when you look back at it, if you’d have done this, then imagine how much further you’d be along now. So Michael, thank you so much for that confirmation for me today. And thank you so much for sharing that.
MICHAEL:
Thank you.
CORWYN:
So we have quickly reached the end of today’s show, Michael, I appreciate you being in. I appreciate you being all with us today. And most importantly, I appreciate them nuggets that you’ve been dropping this whole show. So thank you so much from the bottom of my heart for being on the show with me today. And being a part of Exit Strategies Radio Show Family.
MICHAEL:
Appreciate you Corwyn.
CORWYN:
Thank you. So for our listeners guys, look, y’all know what what it is, y’all know what we do, y’all know how we say we’re gonna put the two of them the two y’all see that two right there of them together and we’re gonna say it to you this way which is I love you I love you I love you. I’m gonna see you guys out there in those streets.
