- A short and sweet introduction to Tom Dunkel’s background and what got him into real estate investing.
- Pitfalls for high-net-worth investors and how to avoid them.
- Direct real estate investments vs fund investments and their benefits.
- Is self-storage a good investment for your self-directed IRA?
- The occupancy rate at self-storage facilities across the country for 40 years
- How syndication works. Why should you consider participating in equity syndication?
- S.A.F.E. method in self-storage investing
- What are the hidden risks for self-storage investors?
- Phone: 610-761-8940
- Email: tom@belroseam.com
- Facebook: https://www.facebook.com/belrosestoragegroup
- Website: belrosestoragegroup.com
- Ebook: The Safe Investing Checklist
- Contact Number: 843-619-3005
- Instagram: https://www.instagram.com/exitstrategiesradioshow/
- FB Page: https://www.facebook.com/exitstrategiessc/
- Website: https://www.exitstrategiesradioshow.com
- Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
Self Storage Investing, How It Works and Its Advantages
Corwyn:
Good morning. Good morning. And good morning guys! Welcome to another fabulous episode of EXIT Strategies Radio Show. Hey I’m your host, Corwyn J. Melette, Broker/Owner of EXIT Realty LowCountry group in beautiful North Charleston, South Carolina. Guys, hey, if this is your first time listening to this show you’re most certainly in for a treat because our mission here is very simple, very very simple. That is to empower our community through financial literacy and real estate education. So guys look, we are set to have an awesome time today. As you guys may have kind of picked up, we have been bringing more and more of a word to you about real estate investing. You know, there’s always questions, there’s always a thought about how it works and what it is. We want you to understand first and foremost there is no one size fits all, that’s number one. Number two, what most people believe or perceive how real estate investing works, or the advantages and all this other stuff that goes along with it. They may not have it the way that it actually is. So today we have with us none other than Tom Dunkel with Belrose Storage Group. Tom, how are you doing today?
Tom:
Hey, Corwyn, I’m doing fantastic. I love your energy, man. I can feel it from here.
Corwyn:
Well, awesome. Awesome. I greatly appreciate that. You know, we tell people we got to work from so we can bring it in, in good spirit, in very good spirit. So Tom, if you don’t mind, you know, you know, we’re talking behind the scenes a little bit about, you know, what is it you do? But if you don’t mind, tell our listeners a smidgen about yourself. Like where are you from? You know, what got you into real estate in general? And specifically what got you to real estate investing?
Tom:
Yeah, sure. Well, I’m coming to you from Wayne, Pennsylvania, which is outside Philadelphia, home of the six ‘n O, Philadelphia Eagles, and the Python Phil’s who just took down the Atlanta Braves. They’re heading to the NLCS, and get to the Padres. So yeah, we’re pumped up here in the Philadelphia area. Not only about sports, but you know, we love working with our real estate investors, we’d love to share with them, you know what we’re seeing out there in the marketplace. But my story real quick Corwyn is I was a corporate America guy for a number of years. I was out there doing mergers and acquisitions and corporate finance stuff. I’m a finance nerd by training, you know, the Excel spreadsheets and all that. But I had a great foundation in that kind of underwriting and, you know, building those projections and those models and doing that kind of due diligence, which has served me well since I left corporate America 2006. You know, all of a sudden times fly and it’s almost 17 years ago, I’ve been in and around different things within real estate. So like a lot of folks I started out as a wholesaler and fix and flipper, had some rental, residential rental properties. And so I think it’s a great place to start. I have to say, I’m glad I’m not in that business anymore. But I’ve graduated & along the way, we started a hard money lending business a while back, which actually we’ve since closed down and get to that more in a minute. But we have a vacation rental business as well. So we’re doing Airbnb stuff up in the it’s called the Pocono Mountains, which is a great spot between it’s north of Philly and west of New York City. So during COVID, when everyone wanted to get out of the urban areas, that business really took off. So that was a lot of fun. But what we’re really loving right now Corwyn and for the past several years, it’s self storage. I’d love to talk more about that as we go but that’s kind of the short and sweet thing about my background and how I got here today.
Corwyn:
So you know, so self storage. So you know, my first thought right sort of first thought is these doors, these roll up and roll down doors, even locks on, and the gate yard and all that kind of stuff. So that’s what you’re talking about.
Tom:
Oh, yeah, yeah, we were there metal boxes with concrete floors and roll up doors. That’s what I say all the time.
Corwyn:
That is awesome. That’s awesome. And people can’t. So it kind of gives me and I’m sorry, you know, people, you know, really, you know, they don’t think about you know, somebody owns those places, and returns the ownership of those places. There’s a revenue stream that’s created because of it. And I’m gonna say this and come back around to this question, Tom, but, you know, we are people now that we, look here, the word sounds negative, but we hoard stuff. So there’s a fundamental need for what it is, it’s the service that you provide on top of it being an investment opportunity. Yes, no?
Tom:
Oh, 100% Corwyn yeah. We Americans, we love our stuff. And you know, we’ll pay 1000s of dollars over a period of a few years to store hundreds of dollars where the junk that nobody wants.
Corwyn:
Look, that’s because in my mind, I’m looking, I look, I’m looking, I’m thinking about my garage at home. And I just went and got a storage unit not too long ago to try to get some of that stuff out. Right? In the daylight. Look, can I really just get rid of it?
Tom:
Yeah, right. I mean, you’re saving it for the kids and the grandkids or whoever, you know, end of the day? Do they really want it? I don’t know, maybe? Maybe? Maybe not.
Corwyn:
So what got you into storage, storage buildings and storage units? And, you know, can you kind of frame I guess, what is, what I’ll say is probably what’s either most unique or more unique about that type of investment than say, a residential, you know single, single dwelling?
Tom:
Sure. Yeah. That’s a great question. So as I touched on earlier, I’ve been involved in lots of different asset classes along my journey, in residential rentals and multifamily stuff. And but, and the other business we’ve been in for a while is, we’ve purchased pools of distressed residential mortgages, but those businesses are very up and down, right? So our distressed debt business, like when it’s when it’s good, it’s really good. But when it’s down, you know, we could go for a long period of time or that business will be down. So for years, we’ve been trying to find something to balance that out, right? So we wanted to find something that was steady, a lot more predictable, financeable, and had some tax advantages. And so you know, as we continued trying these different asset classes, like I mentioned, the hard money lending, etcetera, you know, when we found storage, it was like being, you know, just, you know, multiple light bulbs went off like, “Hey, this is it, it’s steady.” So here’s a stat for you Corwyn, for 40 years, for 40 years, I don’t know if you’re alive back then.
Corwyn:
I was pretty big by the end of the year.
Tom:
Me too. Me too. 40 years, at least, that’s as far back as the data goes that we have. But for 40 years, the occupancy rate at self storage facilities across the country has gently meandered between 80 and 90%. So what does that tell you? It’s steady income, right? It’s very up and down and I think about 40 years, right? We’ve had, we’ve had recessions, we’ve had great recession, we have, we’ve had bubble times and boom times, right? We’ve had all these different economies. But through all of that, self storage has been very, very steady. So it generates that consistent income. Now, the thing to note is, in self storage, the default rate on loans is approximately zero. If you look at your hotels and office and multifamily, they’re all pretty solid too, but they’re all way, way higher. Self storage is approximately zero. So that tells me it’s a safe place to park some money because they don’t, they don’t go into default. And so that, that tells you that cash flow that consistently is coming into that business is paying the debt at a minimum and then of course, you know, we have leftover to pay our investors and of course, you know, we’re into it, you know, to make some money ourselves. So, we said we love those, those couple of metrics.
Corwyn:
So let me, so on metric, so one of the first things I’m sorry, Tom for fumbling over it. But as I’m, as I’m listening in processing and taking any information, one of the things that I just thought about is that this type of property really and truly doesn’t have a tremendous amount of maintenance. I mean, you’re not dealing with clogs, I mean, granted, you may have an office with, you know, this might have a toilet and bathroom, and but you’re not fixing plumbing issues, you know, you’re not fixing electrical, well, you may have an electrical issue, but that’s industrial, electrical. But nonetheless, you’re not dealing with the nuances that you may deal with, and say, a traditional, you know, single family dwelling setting, am I correct?
Tom:
You are spot on. And that’s, you know, that’s definitely rank high on the list of things that we like about self storage, because, you know, tenants can be tough, right? Tenants, toilets, trash, all that, you know, it’s, so we, we substantially avoid all that. Because you’re right, our facilities do have offices that do have plumbing, but we’re typically you know, not being called out at, you know, three o’clock in the morning for, for a maintenance call, that all can be managed very, very well. And like we touched on a few minutes ago, it’s metal boxes with concrete floors and roll up doors. There’s not a lot that can go wrong there. Of course, you know, we have doors that need to be repaired, or someone might be moving in, and they’ll back their u-haul into the door or the side of the buildings, you know, something like that can happen. But you’re spot on for the most part of the maintenance is very, very reasonable. And not only that, the capital expenditures, right. So when I, because I do invest in multifamily as well as a passive investor. But those deals always have a pretty healthy capital expenditure budget. Because they want to go in, they want to spruce up the place, they want to swap out, you know, the formica for granted, they want to upgrade the lighting package, you know, they want to do the window treatments and paint and, you know, those kinds of things. We don’t have that in storage, you know, our capital expenditures are typically around, you know, making sure that the fence and the gate are secure, adding security cameras, so that people that our customers feel like, you know, their goods are secure. And then we do some spruce up things to give it the curb appeal. You know, so we’ll clean things up, make sure that, you know, trash is picked up, but, you know, substantially you’re spot on. Yeah, it’s very, very low maintenance kind of property.
Corwyn:
You know, so, you know, let me ask you this. So let’s, let’s get, I guess a little bit further over on the investing side of it, you know, operations on that makes, you know, spit perfect sense. So, you know, people look at this type of investment. My assumption is, and correct me if I’m wrong, Tom, my assumption is, you put together probably a lot of what we refer to and well, you know what it is, but for our listeners, guys, we refer to this as joint ventures. So you probably assemble a number of investors together to, you know, purchase, you know, when you go basically, go in as partners or in a partnership, on the unit, some of the units that you guys purchase, correct?
Tom:
That’s exactly right. Yeah, we put, we call it a syndication, that’s the fancy term for it. So we put a syndication, which is basically a group of investors together. And we carve out a piece for ourselves for putting, you know, finding the deal, doing the due diligence. A lot of times me and my partners will sign for the debt for the property. And then we’ll of course, take on responsibility for the day to day operations. And so we’ll get a kind of a larger chunk for that. But yeah, we’re bringing in passive investors that are looking for investing in secure real estate, right hard assets, it’s not going to zero, that’s generating cash flow. And it also provides tax advantages, of course, you know, folks who are interested in real estate, love the tax advantages, which is you’re writing off that depreciation against your income. So I love when, at the end of the year, when I get my K-one, you know, my tax statement for being a partner in a real estate deal. At the top, I’ve got my income that I’m going to be taxed on and sometimes that number can be really low or even negative because of the depreciation. But in the lower down on that K-1, there’s the distribution box, and that box is always a lot higher. Yeah, and the income box, so I’m getting cash, right, getting cash in my pocket, but I’m paying taxes on a much lower number. So I love that.
Corwyn:
Yep. And that’s one of the things you know, for you our listeners, guys, you know, there’s, again, a number of different ways, quote, unquote, to, you know, invest in real estate and, you know, it’s important that you understand that there’s, again, no one size fits all. There’s different property and product types and different types of ways to do it. So as Tom is talking about, as we’re talking about now, on the show, we’re talking about syndication, you know, you put together a syndicate. You know, you don’t sound like some gangster about the house. That’s right. Oh, In a good way, you know, you put together a syndicate and you make these acquisitions. So, you know, Tom, you know, for someone, matter of fact, let me not get too far going, because I want to make sure we get this and for our listeners, guys, Tom got something extra special for you. Well Tom, look here, I’m not gonna steal your thunder. What is it? What is it that you have for our listeners here today that they can take advantage of?
Tom:
Sure, sure. Thank you, Corwyn. Yeah, so I’d love for folks to go to our website, belrosestoragegroup.com. We have a free resource there, you don’t have to give me your name, phone number, email, anything, it’s just for free on our homepage there because we just, we want to be able to give back to the investor community. And what it is, it’s an ebook called the it’s called the “Safe Investing Checklist”. And it’s a resource that I’ve developed over time. By being an investor myself, you know, the lessons I’ve learned, the mistakes I’ve made, but the good decisions I’ve made, the good things that have happened. But I know people out there might be struggling, you know, maybe they don’t have time to, you know, go and find their own real estate deal. Or they don’t have time to go to the, you know, to the mastermind groups like that we belong to, to learn about self storage, and etcetera, etcetera. But, you know, they have some money, they want to put it to work in real estate. So this is a checklist of questions, basically to ask Corwyn, and it’s called the S.A.F.E. method, because S.A.F.E. is an acronym. S stands for Sponsor, which gives you a series of questions to ask about the sponsor. So for us, you know, you’re gonna ask questions about, you know, Belrose Storage Group, what is your background? What’s your track record? You know, tell me about your team, you know, how do these deals work? You know, what do I need to know about you, those kinds of things? And ultimately, Corwyn the question is, “Can I sleep well at night as an investor, knowing that those storage group has my hard earned money?” So that’s the key. That’s really at the end of the day that the key question. A is for Asset. What is the asset that you’re investing in? If you do a deal with us, if you participate with us, you’re buying membership interests in an LLC, that owns a self storage facility, and then you get your pro rata, you know, your share of those benefits. I’d love to ask, I’d love somebody who’s investing in like crypto currencies, you know, tell me what is the asset you’re investing in? I’d love to know. But that’s what we’ve got for another episode. F is for Financials. So what are the financial projections? Are they realistic? Has the sponsor delivered on those kinds of financial results in the past? And not only that, but for you personally, as an investor, what percentage of your investable cash does this represent is and are you comfortable with that? Because you don’t want to put all your eggs in one basket, right? And then E is for Exit? How do you get out of this thing, right? It’s not like you can go to schwab.com and click click, click and sell your position and belrose storage group deal. So you need to be comfortable having your capital tied up for a certain period of time. And not only that you need to be comfortable with what is the actual exit. Does the property need to sell for you to get your money back? Does the property need to be refinanced? What is that event that’s going to create that cash that’s going to then be sent back to you. And again ultimately with all of these you know sponsor, asset, financials, exit, are you comfortable? Can you sleep at night understanding what’s going on with this deal? So you really tried to keep it. This resource is very usable. I would love for people to use it as a workbook as they’re looking at a deal that comes across their desk. You know, they can use it as a checklist and go down and say yep, I talked to the sponsor about this, you know, I know what the asset is, I know what the financials is, I know what the exit strategy is. And just go through all this, through all these questions. So it’s a belrosestoragegroup.com and just scroll down to the bottom of the first page.
Corwyn:
So you know for our listeners guys, you know Tom while you were talking I went to the website I downloaded it. Just that quick. Okay, good. So guys, look, you know, we want to go get this resource you know, everybody doesn’t have quote unquote, a gift to give. You know, you know, we’re supposed to enter in with gifts so you know, Tom has brought a gift. He came on exit strategies guys and brought y’all a gift. Y’all please make sure that y’all go and download it and use it so you can get some understanding outside of. You know, you know, this is something so, you know, Tom, I’m, you know, I’m, uh, you know, you know, I’ve had conversations for a while about, you know, bringing people together to do you know, you know to do a similar model, not necessarily with self storage. Didn’t even think about that. So let me ask you this broad question for our listeners. Do you coach people on this process? Obviously, you’ve got to educate them, if they’re investing with you, but if they’re investing with you or not, or do you coach people on how to, you know, form syndicates and put deals and things together?
Tom:
Sure, yeah, Corwyn, I don’t have, like a coot. I’m not a coach, you know, I don’t have a coaching program per se. But sure, I, you know, I love talking to people about what we do and investing and, you know, the lessons I’ve learned along the way that, you know, the stupid things I’ve done and, and the smart things I’ve done, because I’ve done a little both. But yeah, I’m happy to, if anyone wants to reach out, you know, through our website, there’s a contact form there. I’m happy to spend some time just going over whatever questions they might have, you know, look at a deal. You know, just help give a little little guidance. Because, you know, as I get a little older, a little grayer there, Corwyn, you know, I am looking at more and more, you know, how can I give back, right? And so, I think one of the ways I’d love to give back is to be that resource, be that mentor, be that, you know, teacher, maybe not maybe not an official coach, but you know, just somebody that can just help guide others along. And, and I, I’d love to help anybody out there, reach their wealth goals, whether it’s through me and Belrose storage group, or just on their own.
Corwyn:
Cool, cool, well, we really appreciate that. So, you know, Tom, before, you know, we get, you know, too far, you know, too far gone in the show, I want to make sure I take an opportunity ro liberty now to make sure that people get into contact in place. So, you know, we’ve already said belrosestoragegroup.com. So y’all can go there. But Tom, is there any other information, phone number or, you know, social media handle that you love to share on for our listeners?
Tom:
Yeah, yeah, sure. Well, my email is tom@belroseam.com. That’s short for Belrose Asset Management, which is our umbrella company. So happy to, you know, field emails there. We have other podcast episodes on our Facebook page, which if you go to Facebook and search for Belrose storage group, you can see all of our podcast episodes there. We also have other articles and resources there just to, you know, again, try to, you know, help folks get educated. But yeah, happy to, you know, get in touch however works for folks.
Corwyn:
Awesome. Awesome. Well, Tom, look, thank you so much for that piece of it. So, you know, you made mention of it and this is something you know, and I you know, look I don’t want necessarily to have a horror story that since people are so malefic so, you know, it’s holiday season, you know, Halloween and all that stuff. And you know, we’re getting close to Thanksgiving as well. Yeah. So you know, my neighbors, you know, they take, you know, we have you know, in our neighborhood, we have three guys that dress up, like Jason, Freddy Krueger, and Michael Myers, right. And they literally walk through the neighborhood and stuff at night is yeah, if you come around the corner of the hallway man. Somebody’s calling the ambulance for you. Somebody’s gotta clean up after you. Right, right. Right. Well, one of my neighbors down the street. And they’re dormer has Michael Myers in an upstairs window and a dormer with a spotlight on so if you’re coming down the street, you know, me going home. Right? Um, you know, you mess around and just turn and look up at the window. It’ll illustrate freak out. It is a crisis, this delay, right? So we don’t want that particular type of horror story on here. But you know, you made mention of lessons learned. You know, that’s something you know, that’s the advantage that people have in reaching out and communicating with people instead of trying to read something on social media, or, you know, watch a video on YouTube or something. Because a personal YouTube ain’t telling you how they fail, doing it a different way. So you won’t try to modify what they did to do it the way that they’re completely, utterly failed. But if you could share with us a story of, you know, one of these deals that just didn’t go that way.
Tom:
Sure. Yeah. There’s been a few for sure. I’ll share with you. I’ll share with you something easy that anybody can do, that could save you $50,000.
Corwyn:
Oh that’s really good! You started with 50 and you add 1000 to it, that’s beautiful.
Tom:
Yeah. 50,000. So, and actually, this is, this is part of the reason that this Safe Investing Checklist came about. Because years ago, when I came out of corporate America, you know, I had, I had a pretty solid career there. I came out, you know, with some money in the bank, and I was starting to do some investing, and found this group that had a hard money lending fund. And I thought, “Well, that makes a lot of sense.” You know, they’re secured by real estate, and they’re, you know, they’re, you get your payments out of the borrower payments. I mean, it’s very simple to get my head around. Problem was, I never googled the sponsor’s name and company. And if I had done that, now, I’ll give myself a little bit of a pass here, because this was going, this is going back to before, you know, that was top of mind to just start Googling stuff. It was, you know, this was going back, you know, 12, maybe 15 years ago. But had I googled the sponsor and its company and the company name, I would have seen that they had several lawsuits out there where they had misappropriated investor funds. And so sure enough, that’s what happened to me. I invested $50,000. And that was it, at one “Bye bye.” So that doesn’t feel good. Especially when, you know, we had just come out of the great recession. I was, you know, at the time, I was in rebuilding though there because I got, you know, I got crushed pretty good and that whole downturn. So yeah, so that was, that was a tough lesson for sure. So you definitely use those resources at your disposal to, you know, find out as much as you can about the sponsor, about the deal, etc. So, that’s a pretty easy one. I know, people are probably like, of course, now, I Google everything all the time. But yeah, yeah, back then it was it was not, it was not the same. But, and I guess along those lines it’s, if you’re getting ready to hand over some cold, hard cash to somebody, it gives you the right to ask whatever questions you want, right? So don’t be shy, just ask away.
Corwyn:
You know, it’s funny, you should say that, because I have this saying, as relates in the real estate space in the industry, you know, I pay membership dues, and you know, penalties, fees, and all this stuff, and I tell him, I said my money, my mouth go together. So you know, if I get, if I get my money that my mouth comes into. I like it! I love that! I’m gonna use that! I’m gonna steal that. Please do. It is my gift to you. Yeah. Thank you. Yeah, you know, one of the things though, you know, Tom is just that guy. So for our listeners, you know, guys, we work to wrap up the show, we want you to make sure that you, you know, one, you know, an investment opportunity, guys is not how it is, it’s not, it’s not child’s play. And it’s not necessarily something that, you know, is always going to make perfect sense. But you need to make sure that you have an understanding of not only you know what the project or an opportunity is, but you need to also understand the risk because sometimes we stop with, you know, a basic understanding of the project. And, you know, understanding that opportunity, we look at how much money we can make, but we don’t understand how much money we can lose. So for our listeners, guys, you have to make sure that you tie in that third piece of understanding also the risk. Anytime you’re investing in anything, real estate, or anything else, you know, there is a risk of loss. That’s why it’s an investment. You know, putting money in the bank is safe. You know, going into your acronym is safe, the government is going to insure it up to a certain dollar amount. And when you reach that dollar amount, you put it in another bank. So, outside of that, the fundamentals guys make sure you understand the risks because there’s no such thing as a short thing as relates to real estate investing. Tom, again, your contact information, how can people reach you?
Tom:
Sure, well, there’s a contact form on our website, belrosestoragegroup.com. Or you can email me directly at tom@belroseam.com. That’s short for Belrose Asset Management. And yeah, love to hear from you.
Corwyn:
Awesome, awesome. Tom, again, thank you so much for being a part of EXIT Strategies Radio Show family, for being a guest on our show, for helping to educate people and for sharing your story. We look forward to having you back soon, because we maybe want to delve a little bit deeper in some of your projects. And let’s talk about maybe how some of that money moves and where the opportunity is for some of our lives and I’m pretty sure we’ll get a kick out of that.
Tom:
I’d love to. I’d love to come down and maybe talk about it over some LowCountry boil. What do you think about that?
Corwyn:
Look here my man. I’m in! Hold on! You see this guy right here? Let’s do it. Let’s make sure we get that set up. It’s great. Everybody, our listeners, guys, please thank you so much for tuning in today. Thank you again for listening to this show. Thank you for being you know, a part of quote unquote, our family and allowing me to be a part of yours. As I always say to you guys, in closing, I love you. I love you. I love you. And we’re gonna see you guys out there in the streets.
