- Who is Scott Krone and what got him to where he is today
- What is CODA Management Group and his other company,
- The difference between traditional investing versus self-storage investing.
- How to invest in distressed assets and how to make a profit?
- The true meaning of real estate according to Scott.
- Two massive things to improve the valuation of the property
- Best practices for finding a property value?
- Self-storage investing on the blockchain (Crypto). What is a Coin? How to utilize the Stor coin for self-storage customers?
- Multifamily or single-family properties. Which is a better investment?
- How to claim the freebies from this show?
- Factors to consider when investing in self-storage.
- Feasibility Study – not only covers the self-storage industry as a whole, but it also covers why you should invest in that specific location
- Self-Storage Deal Analyzer – a tool used to compare deals whether it be a multifamily or single family.
- Email: info@codamg.com
- Facebook: https://www.facebook.com/CodaManagementGroup
- Instagram: https://www.instagram.com/exitstrategiesradioshow/
- FB Page: https://www.facebook.com/exitstrategiessc/
- Youtube: https://www.youtube.com/channel/UCxoSuynJd5c4qQ_eDXLJaZA
- Website: https://www.exitstrategiesradioshow.com
- Email @: corwyn@corwynmelette.com
Episode 69: How to Maximize the Value of Your Property with Scott Krone
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 and owner of Exit Realty Group in beautiful North Charleston, South Carolina. Guys, if it’s your first time listening to this show, I always say this. And we always prove ourselves correct, that you are in for a treat. Because our mission, our mission here at EXIT Strategies Radio Show, is to empower our community through financial literacy and real estate education. Guys, we are legacy-building, that is our hashtag. So as I always ask you, when you’re doing those wonderful things when you’re investing within yourself, to create and build a legacy for your family for generations yet to come, guys, I want you to put that hashtag on that thing that says that your legacy building because that’s what you’re doing. So today, guys, I am super, super, super excited guys, you know, we have been on this mission, internally, to bring you the best guests, to bring you the best speakers, to bring you the people who are making an impact and making a difference, not only in quote-unquote, our local space but at the national and international level as well. And guys today, I’m super excited to introduce to you, Scott Krone with the Coda Management Group. Scott, how are you doing today?
SCOTT:
I’m doing well, I wasn’t sure you were talking about me when you were doing the introduction there.
CORWYN:
Well, look, just so you know, at the right time, I actually hired myself out for introductions. So yeah, that’s a new thing that I’m putting into place this year so please let me know. And I’ll make sure I send you a quote for my services.
SCOTT:
I appreciate it.
CORWYN:
So Scott,
SCOTT:
I think that’s one of the height man, is that what it is?
CORWYN:
Exactly? Because we gotta bring energy to anything that we do, right? You know, my word for last year was impact. My word for this year has increased. So if I go back, what I’m gonna say is that I’ve increased my impact. How about that? Sounds good! So, Scott, you are, look, so we were talking, for our listeners, guys, Scott and I was chatting it all, quote, unquote, behind the scenes before we came into the studio officially. And in our conversation, Scott, you have, we jokingly said this, but you’ve been a real estate investor or investing in real estate for a while, for a long time, I think it was the word that we used. And you said that’s relative or something like that, correct?
SCOTT:
That is correct. It is relative. And for me, it seems like a long time, but for others, it might not be.
CORWYN:
Well, so let me tell our listeners. So CODA Management Group, you have a few different companies. So I want to make sure we kind of talk about all of them and what each of them do, as we kind of delve into more of a conversation. But if you don’t mind, introduce yourself, and your CODA Management Group, but tell our listeners a little bit more about you, who you are, and what got you to where you are today.
SCOTT:
Well, my real estate career began when I was getting my master’s degree in Architecture. And I was fortunate enough to get a professor who was a real estate developer and architect and contractor and he worked on multifamily developments. And so my master’s thesis was $100 million 400 unit development on 50 acres. And so I was his TA. So, then, I worked for him in the morning. And then I went to class with him in the afternoon. And then I did homework for him in the evening. And so the only other thing I could do is sleep, so that was pretty much my life and graduate school for three and a half years. But I got a wealth of experience because when I was working for him, my undergraduate was in history, which meant that I could read and write. And so I was on the development side, while a lot of my classmates were furthering the drawings and developing the drawings. And then when I went to class, I would work on my portion of my drawings, and then homework. I would continue that. And so I got the architectural side of it, and I also got the development side of it and so at the ripe old age of 28, so that’s where it’s relative, I thought I knew everything at 28. And I’m like, Oh my gosh, how stupid was I way back then. I began the CODA design-build, and we began CODA. And we were a Development Architecture and Contracting Company at the time. And we were, we began in single-family homes, and then we quickly moved into multifamily as well. And we’ve worked on five different churches and done a range of things. And then the crash came, and everybody was being pushed into multifamily. But that’s when I began discovering self-storage. In 2013, we started CODA Management Group, which is more on the commercial side. And since then, since 2013, we’ve been developing a portfolio of self-storage. I sold off my apartments. And we’ve been focusing on that. And then 2020, and 2021, we started one stop self storage to facilitate our self-storage portfolio.
CORWYN:
So one of the things that people I think and sometimes miss, and it’s interesting, and the thing is just kind of phone when you said he sold off the apartment buildings. So people always look at traditional investing when it comes to real estate, houses, apartments, or what have you. And what you did was, and tell me if I’m wrong, so I’m telling you, what I heard you say, I heard you say that you exchange people for stuff. So what I mean is. So what happened was, you got rid of the people, because people have issues. So you got rid of the people and just kept their stuff.
SCOTT:
That is a good way of explaining. I haven’t quite communicated that way. The way I’ve described is as apartments without toilets. It’s all a box. I mean, I’ve worked on $14 million homes, and I’ve worked on $100,000 homes. And you know, the only difference is how much stuff we put into those homes. So if we take that analogy of self-storage is just the most simplistic form of that box, right? It’s just a box with nothing that people can put their own stuff in, as opposed to putting theaters or kitchens, or bathrooms, or those sorts of things. So to me, it’s all the same equation. It’s just a matter of how complex the box is.
CORWYN:
That’s fair. That’s fair. And you got out of the people-problem business, so to speak. Yeah, exactly. Now, you know, that’s, yeah, that’s rampant, especially in multifamily housing. A tenant floods out of the unit and you’ve impacted a building and how high you go up, you’ve impacted everybody below them. So you may have several people displaced because of one simple little thing. But when you don’t have the people, all you have is the stuff that’s a different animal. So that’s very interesting. So you can use that just by the way you can. From where I was it comes with the introduction. Yeah, it comes with the introduction. I got rid of the people. I kept the stuff. So now we just manage the space where stuff stays in, without the people in it. Absolutely. I like that. Yeah, exactly. So, let’s talk about the kind of, you’ve done a number of things, and a lot of our listeners, Scott is kind of, everybody approaches, I think kind of said this little earlier that most people kind of approach real estate investing the same way. They do the same tunnel vision, the same box, they want to first start with a rental. They get a rental property and have a person in it, and some people get turned off to that, and then, and do kind of what you’ve done, or go to some other type of some just get out of it altogether. But the people that are truly committed to real estate investing, let’s talk about a few of the things that you’re to be very transparent, you’re extremely versed on. And one of those is distressed assets and how to make a profit. So tell our listeners a little bit more about that.
SCOTT:
Well, to me, real estate is how to maximize the value of the property, right? So it doesn’t matter if it’s a single-family home or a multifamily or mixed-use or whatever it may be. And when I did real estate coaching, I agreed with your point, because everyone thought they had to do a template. I have to do wholesaling then take wholesale and then they get in the fix and flips and then I’m going to build a portfolio and then I’m going to have a, going into commercial with apartments and then after that, it’s a gravy train, right? But not everyone enjoys those things. It’s not like I don’t enjoy wholesaling. I feel like I’m spinning my wheels. I’ve utilized wholesaling but it’s not something that I’ve employed full-time. And so what I always say to people is like what do you enjoy, what do you enjoy doing? Right? So for yourself, you enjoy the interaction with a potential buyer or seller and how to help them maximize the value of their property. Whether that’s through your advertising, your marketing, how you show the property, your connections or all those things, right? So those are the things that you were doing to maximize the potential or value of that property. And for me, that is what real estate is about. So if I can look at a property that is distressed, and that has a huge variety of words, and for what we’ve been doing on the commercial side, is we’re taking an empty box or an underutilized box, and figuring out how we can get the most revenue out of that box. And for us, like when we bought a vacant building in downtown Dayton, it couldn’t be converted into apartments, because they couldn’t have enough parking. They had no other property to have parking in the basement and didn’t allow themselves to line up with cars to efficiently get enough density in the building. So for us, we could go in there and fill it with 800 lockers. And we could increase the revenue of the property and increase the valuation of the property. So that’s exactly what we’re doing. We’re taking a building that is being repurposed, changing its use of it, and then creating more value out of it.
CORWYN:
You know, there’s a term and I’m losing it right now that I think is obsolete or something. So basically, when you have a property the highest and best use of the property is not being achieved and the building is going to be considered to be obsolete. So, without, probably will fit in that umbrella of words that you could assign under a distressed is something that’s not being properly utilized, or it could be better utilized, and you guys approach it and take it, and okay, let’s repaint the canvas. So, I’m gonna stay in storage for just a moment, I want to get to a couple of other points. But one of the things that I see a lot of and I imagine you do it is where people take perhaps older dated self-storage locations, and then they go and raise the entire site, and then maybe build a larger high-rise or larger storage facility to be able to place more lockers there, as you would say it. Is that something that you guys do as well?
SCOTT:
We have never taken down a building to build self-storage. So all we’ve done is we’ve converted existing buildings, and we’ve expanded on existing properties. And then we’ve also built new on vacant properties. But for us, we see the value in the existing building, because like the one in Toledo or Dayton, I’m buying them for around a million dollars, which is like $11 per square foot, it’s well below replacement costs, I can’t, I can’t build a building for that. So why tear down and build a different building?
CORWYN:
Yeah, and, that’s something that a lot of people don’t think about as well. There’s a cost associated with it, so if you can have a space, and repurpose the space, there’s a significant saving on redeveloping overall. And to be, a lot about you having a development company. So, I mean, there’s money that you make in development. And especially if you’re doing development for somebody else, you make a fee in that development. But when you’re redeveloping, then you’re able to save them significant money, while you still obviously would make a fee. So you’re a big passive investment guy. Obviously, money-making money is a whole lot better than you making money, even though making money is great, too. So, you have a few of what we refer to as kind of tips, or that thing that you live by, that you swear by, that people should be doing. So, give us, kind of Scott, a taste of that. The introduction of that. What are some things that someone who’s looking to establish themselves to build, really build, grow, and accumulate wealth? What are the things should they be doing? And what mechanisms should they be utilized to get there?
SCOTT:
Well, I think we’ve touched on a couple of them already, in terms of one when you make your money on the buy on the acquisition. And so what we’re doing is we’re looking at how we can buy below market rate, below market rate. So if, for instance, we just bought nine acres of property in Michigan, it was $150,000. The reason why it was so inexpensive for us was because it didn’t have the proper zoning. And so we took it through the proper zoning. And then right before we were supposed to close, the owner tried to betray us, because he knew that we would increase the valuation of it, and we’re like, “No, we have a contract.” But by doing that, by changing again, we changed the purpose of the property and changed the valuation of the property. Now the property’s worth more. And so that’s just one example. So when we’re buying these buildings, but we’re below the replacement cost, that’s the other one, we’re buying. We’re making our money on the buy and a lot of people are speculating. So when I’ve seen I’ve been through four recessions I’m going to call them what we’re in our recession. So this is, we’re entering into our fifth one. And whenever I’ve seen it right before the recession, everyone is speculating on the future. And they’re buying based upon speculation, as opposed to buying based upon the market. That’s where a lot of people get burned because they think that the property is always going to appreciate. And so when I’ve seen markets that are just taking off, people are buying overpriced, not thinking that it’s just going to this process just going to continue. And there’s always that. That’s the thing about real estate. Once you think you have it completely figured out, it’s going to make a turn on you. I mean, who thought 0809, right? And that was a major turn that we’ve never seen before, an entire massive bank in the United States just going under because of how they did things, and how that imploded the entire economic structure. You know, this structure is a little bit different. We’ve never printed this much money before. You know, we’ve never gone through one, a pandemic, and then two, supply chain, and just the amount of cash that we’re flooding the market with. It’s going to, it has to cause a recession, because of inflation. Yeah, so what’s the only thing that the Fed can do? The only thing they can do is raise interest rates, which is going to slow down the economy. I mean, it’s not brain surgery, right? I mean, what the underlying causes are doing, but not the results of these things, right? Does that make sense? Yes, it makes perfect sense. And so what we’re doing is we’re always looking at how we can do it on the buy, we’re always making sure that we can do it on the buy. And then the second thing is how we can reposition the property in a better situation so that we can maximize it. Now if we’re taking it, it’s hard to do with a condo, right? You can’t expand a condo. You can’t make a two-bedroom condo into a three-bedroom condo unless you buy another condo. So when we look at a multifamily single-family house, if you put an addition on it, you put a second story on it, you turn it from a two bedroom into a three bedroom, or three bedroom into a four bedroom, these are all ways in which you can make the property have more value. Or if you’re looking at doing development, if you can get a little when I first did my 400 unit development that was my master’s thesis, we started off with 1000 units, and the municipality kicked us all the way down to 400. And we figured out, we could still make it work at 400. But imagine if we got 1000s, how much more value that property would be compared to 400? And so there are always ways in which to see how you can improve the valuation of the property by income density, those sorts of things. So those are the two massive things that we do.
CORWYN:
So you touched on something that a lot of people don’t realize, that and even, let’s say when the only other side. So, for example, if you have a piece of property that you’re selling to a potential developer, who’s looking to put whatever they are, whether it be self-storage, whether it be another commercial, development or even a residential, small resident of an element or what have you. The value is based upon, predicated upon what you can place there, and a lot of people miss that Scott. They think, well, you know, they kind of think tunnel vision one way. And like you said, you plan 1000 units in a municipality, kicked you back, and said no you can’t put any more than 400 here. So that is definitely a massive difference in value for that property because of the use. And a lot of people miss that. That’s interesting. Now, you guys do a lot well, let me ask you this, do you still work with investors directly? You know, with your company, do you still leverage investor funds and things of that nature? Or for redevelopment?
SCOTT:
We do. And we’re actually moving in a groundbreaking new direction with that as well. So every one of my projects since I started in 1998, with a single-family house, we’ve had investors, so that project, we had three investors, and we sold it and did very well. And they said, “do it again, and don’t tell anybody.” That means I have to tell everybody. So, and a lot of people like well, you know, I don’t know anybody I don’t know. And, you know, at that first project, we raised $100,000. And people say, I don’t know anybody who has $100,000 Okay, do you know two people with $50,000? No, do you know three people with three, you know, $33,000? 10 people with $10,000 Whatever it is, it actually becomes easier to raise more money than it is to raise a small amount of money. Because if you’re trying to raise $40,000, and people say well, why don’t you, why can’t you do it on your own? Don’t you have $40,000? Well, the answer is I do. But if I put $40,000 into this, then I’m not going to be able to do other things. But I’m trying to include you in this in order for us to both grow. And that’s where the team element comes in. But one of the things that we’re looking to do is we’re getting into Blockchain. Because Blockchain is, I think, going to replace the title companies in terms of transactions. But the derivative of the blockchains is the coin. It’s the crypto side of the world. And we’ve created a new coin called Store. And the store is going to be not only an investment tool, but it’s going to be traded at the Self Storage. And we have a network of self-storage owners across the country, that all have their facilities, which will be able to utilize this coin as an incentive for their customers. And the customers can work within any one of these networks. But the idea of it is someone who’s looking to take crypto and convert it back into a tangible hard asset, they’re going to be able to do that through the Store coin.
CORWYN:
Oh, that is whoa! Hold on, hold on, let me hold on, let me get my head, put my cap back on. Because that just blew my mind right there. That is amazing, man! So essentially, you’re developing a current, excuse me, currency within the industry to utilize for people to be able to utilize and trade and do things within the system. Is it relatively the concern?
SCOTT:
Yeah, so two sides of it. If you have crypto, and let’s say it’s in Bitcoin or Doge, whatever it is, you can convert it into Store and invest it into tangible hard assets, self-storage, and as the valuation of the coin increases, your investment will increase. And by all the facilities increasing in value is going to bring up the value of the coin. So the coin is tied to a tangible hard asset, but then also our customers, not our investors, our customers will be able to use the Store coin as well. So if they want to make a payment, they can pay in coin, or if they want to invest in the project, they can invest in Stor coins, but the idea of it is that if they move from, let’s say, Toledo to Dayton, or wherever they can transfer that account, they can transfer that coin to the next facility.
CORWYN:
That is amazing, man! You know, one of the things, Scott, that when you talk about crypto and talk with multiple people, you kind of get to different schools of thought. I mean, obviously, you know that. You have some school of thought that, obviously, this is what everything is going to be in the future. Let’s go. And then you have the others that kind of question, well, it’s not tied to anything. So you have a currency that is tied to a hard asset to a fixed asset, that building and going quote unquote, ain’t going anywhere. That is, listeners, guys, y’all have got to, got to, get your hands in your mind around this piece of it. Now, Scott, you know, we’ve been talking for a little bit. I want to make sure our listeners, obviously, for our listeners, if you guys hit our website, you’ll be able to pull Scott’s information from there and follow us on our social media pages. But for our listeners that may not get over onto our website, get over into our media channels, or what have you, Scott, how can people get in contact with you?
SCOTT:
Well, I really appreciate that. The best way to get a hold of stuff is at info at coda codamg.com. That’s info at codamg.com. And what we do is, if anyone references this show, we will give them two free gifts. So the first one is a feasibility study that we did on one of our properties, which not only talks about the self-storage industry as a whole but also talks about why we should invest in that specific location because the Self Storage market is a three to five-mile radius. It’s not like a city. It is a specific demographic. So when we do this feasibility study, it’s for that specific location. So you can see, like, why it’s beneficial to do that. And he has all the different factors that go into it. And, and it’s a third party, so that’s why, it’s not our assessment, it’s someone else’s, confirming what we’ve already determined. The second thing is we’ll give them a self-storage deal analyzer, so you can compare it to, like a multifamily or single family. So all you have to do is plug in the numbers and that will generate the rate of return and the calculations for you. So we will send out those two free gifts for anybody who referenced the show.
CORWYN:
Look here, y’all will tune in and get that right there. Look here, because when you start talking about your story and most people when people move, people use if they have more stuff or something, whatever is going on, they use a facility that’s close to them. They’re not traveling 20, or 30 miles to put their stuff in storage. They’re using a facility that’s right there next to them. So in this analysis, I’m pretty sure Scott that you guys kind of take into account in this radius. How many households are there? How many are renters? How many are owners? You know, there’s probably a formula as to the number of people, like, you know, demographic-wise, whether owner or renter that uses self-storage facilities, because everybody’s attached to their stuff. So, yeah, so you’re the guy that keeps stuff. You’re that guy. I keep your stuff. Hold onto that. That should be a mantra for Scott Krone. I keep your stuff.
SCOTT:
So we should have called you before we came up with stop self-storage. We thought that was a pretty good one. But here’s a better man.
CORWYN:
I love it. So that is impressive. And you know, we missed that piece. Again, we always are so focused, like you said, you made a gradual migration and as you made this migration you made massive improvements. Massive. You know, and I’m a Grant Cardone fan. So we talk about massive change and massive impact in your business by positioning yourself going from this over to this. That is, boom, mind-blowing, man.
SCOTT:
Well, there are two things about that. I mean, one is the industry is moving and adjusting, right? But the coin is the byproduct of the blockchain. And I think blockchain is the real technology where all of this is going. Because if you think about it didn’t click for me until I learned more about the blockchain. But what the blockchain is, it’s a contract. And what happens is when all the elements of the contract come in, that contract is locked. And then the contract is then dispersed across the Internet into different servers so that it’s high-level encryption. And so in order to see what’s in there, you have to have the keys, if you will, to see what that contract is. But that contract cannot be facilitated until all those things happen. What is the title company? A title company is basically an analog blockchain. And so you were thinking that the entire real estate industry, as well as the law industry, is going to be going into the blockchain. And the byproduct of that is the coin. So when people invest in the blockchain, they create a coin. So the coin is just simply a byproduct.
CORWYN:
That is awesome. That’s awesome. And now there’s such forward-thinking, Scott, such forward-thinking. So, Scott, we’ve had an amazing show, man. We’re back to the part that I don’t like, because it’s like, you can continue the conversation, like forever, because you literally have been blowing my mind over here with that concept. And I’m one of these people that when I start looking at and up because as I’m a serial entrepreneur and I’m sure you are, too, so every time
SCOTT:
Ohh I see it down the bottom, I hear with all the pages that you got here, right?
CORWYN:
So it’s like, okay, we can do this, we can do this, oh, this can be done. Let’s do this. And you started, it is like, you know, my wife says this thing is, she says she sees my matrix. It’s like, she’s like, she sees, and it’s like a bunch of calculus formulas and all this stuff that comprises the vision that I see. So, man, you got a heck of a matrix, my man. You have a heck of a matrix, and our listeners need to be in contact with you. So, Scott, I want to thank you so much for being on the show today. As we wrap up for our listeners, guys, I want you to, I want you all to braid Scott’s email. Okay, info at coda management. So info@codamg.com Right, Scott? That’s correct. I want y’all to break his email. I want him to look and be like, oh, shoot, what did I do?
SCOTT:
So I gotta change my if that happens, I gotta change all my marketing for we keep your stuff. You know, and
CORWYN:
because this is where we need to go. And I’m saying this guy’s you know what our mantra here is about financial literacy and real estate education, and about legacy. And we always approach it from the initial step, when we can hustle up and we can be much further along. This is that phase 23 is that year guys, for us to hustle up. All right. So we need to hustle up and we need to hustle up to people like Scott. We need to call Scott. Hey, Scott, I’m here. Alright, what can I do, teach me? Let me know something. Give me some ideas. Hey, how can I invest with you? How can I do this? How this is gonna benefit me and my family? Because we want to make sure that we show up so we don’t get shown on. So that’s one of the things that we want to focus on. So Scott, again, thank you so much for being on the show today. I appreciate you. For our listeners, guys, our listeners, y’all know what I say, y’all know that I mean it because I say it all the time. And I embody it with you. I love you. I love you. I love you. And we’re gonna see you guys out there in those streets.
