Ditching the Grind of House Flipping for Self-Storage Success with Rob DuBroc

Rob Brock is a 35 year old real estate investor from Kansas City, who went all in on self storage after testing the waters with house flipping, working as a realtor and single family rentals. After grinding those various side hustles he found his way into commercial real estate than self storage. In this episode, we talked to rob about how he bought his first facility for cash and then promptly quit his w two job. The challenges of transitioning poorly managed check and cash facility into auto payments. The best investment he's made to help his storage business run more smoothly, and the unique way he encourages stubborn sellers into giving him access to their financials. I'm Neil Henderson, and this is the road to family freedom. Before we get to this week's shelf, we'd like to make you aware of something we are self storage investors. We buy existing self storage facilities and vacant buildings that can be converted to self storage in the Sunbelt. We buy them with cash and somewhat loans. And we use private lenders who become Equity Partners in our deals, these Equity Partners share in the cash flow in the profits when we sell when we find a deal that we're considering. We call the Equity Partners and offer them a share of the ownership secured by the property. So if you've ever driven by a self storage facility and thought, I wonder who owns those things, and you have any interest in learning more about the storage business, we'd love to chat with you head on over to road to family freedom comm slash storage. That's road to family freedom, comm slash s t o r a g and set up a time to check We look forward to speaking with you.

All right. And that thought of us Let's hit the road to family freedom.

Well, Rob de Brock, welcome to the road to family freedom.

Thanks, do appreciate it. Glad to be here.

Absolutely. We've been you know, we've tried to get this going for so long. But you were on a sort of an epic road trip with your family that I was following of stalking you on Facebook for a while.

Right, right. Yeah, we were down in Arkansas doing a little bit of UTV, right.

Oh, that's great. That's great. And you are you're based in Kansas? Correct?

Correct. Yeah, Kansas City. So we're in just a suburb of Kansas City, Overland Park.

Okay. Is that Missouri or Kansas?

Kansas? Okay,

my my geographies. And is it half the city is Kansas?

Yeah, I think the the majority of the Metropolitan Kansas City areas on the, on the Missouri side, and all the sports teams are on the Missouri side. You know, downtown, mostly Missouri.

So gotcha. So I want to hear a little bit about how your journey into real estate. I mean, we were gonna focus on self storage here, but you have a very long and varied sort of road in real estate. And I'd like you to sort of give us a high level overview of your journey into real estate.

I think my first exposure really to real estate was commercial real estate, I work for a company called selligent. So at the time, they were co stars major competitor for data. So I worked with a software team as a product manager and we put together reporting tools some, let's say, it has been so long but we're Yeah, we did reporting. We also you know, they sold to appraisers, so it was really a data driven business and that kind of that went south I ended up working for a different software company that kind of was looking for a way out or a little way to make some extra money to then invest because I thought you know, eventually I'd like to have a bunch of rentals and then retire and live off the income had some family history of my grandpa invested in real estate and did pretty well so that's kind of that was what spawned getting my real estate license and kind of fell on that path I thought hey, I could sell a couple houses use that money go do a flip but I really I got my license and then started just using the data from MLS and and we ended up doing a flip did pretty well on the first one we'd had a live in remodel we did are pretty good on that one too. And so we really just started jumping into flips and snowballing that money, I got enough money to where we were ready to buy a rental and my mom and some others. Oh, you don't want to buy a single family. You don't want renters and you know all the horror stories that you hear about that, that tried to keep people out of the business but I was bullheaded, you know and I'm going down this path Hey, no, I'm gonna manage my risk by doing multifamily. So I ended up meeting a gentleman named Jason, who has since become a pretty good friend, and he had some multifamily for sale. And through the course of show me these apartments, it's like well, why why are you selling the apartments? And he was shifting all his focus over to storage. So he had already had some self storage started doing some bigger multimillion dollar developments like more RV and boat coverage storage and so okay, well, he's getting out of multifamily. Maybe I don't want to be there. This guy seems smart. So I started just digging in online and what Learning how the numbers work, I came across some information on on that value add strategy, how you can a force appreciation. And you'll like much like anything else. I was skeptical at first, like, okay that there's got to be a catch, you know, just like wholesaling real estate. It's, it's, it seems easy, but there's a lot of work to get it done. I think that's like an entry point where a lot of people jump into wholesaling. So I was kind of leery of that. But I just started telling people, hey, I'm gonna start getting into Self Storage, I'm ready to buy started looking for deals, just telling everybody. And that's kind of how I tripped upon my first deal was really just networking and luck.

So you were doing how many flips? You know, just give a ballpark figure.

We did three, you know, and before I hung it up, yeah. So that's not a whole lot. But But yeah, we did. I was doing flips and selling real estate, I was working my full time w two job. And really my, at some point, it became too much. So we closed on the we closed on the Self Storage business, and I knew what the cashflow would be. And that's, that's like I simultaneously quit my w two job when we closed on the storage facility. Gotcha.

First one

on the floor. Yeah, that the first storage facility? Yes.

Okay, so let me before we transition into the storage, I want to you know, let's let's touch a little bit on what it was that, that made you stay away from not keep on going down the road of flipping houses and, you know, multifamily?

Yeah, so flipping houses, you know, it can be really good, or it can be very mediocre. But at the end of the day, you don't have this passive income or, and self storage is less passive than like a triple net lease. But, you know, it's earned income. And there's a huge difference between earned income and passive income. And, and I knew that, you know, flipping houses was was ultimately just my way of my current vehicle for building wealth and move to the next one. And, and self storage could be that as well, it just, we'll see where it goes. But that, that ultimately, is what my goal was not to just be able to be a flipper for 20 years and do that I wanted to rapidly accumulate cash and invest it in passive investments, and then just continue to grow that way. And then multifamily was just a different level of touch, and risk.

So, you know, people when they come to me, and they're kind of new in real estate, and they start going well, you know, I've heard you can get into wholesaling without any money, right? Well, you know, it's part of, you know, it's kind of true, if you just want to drive for dollars, and just knock on doors, you know, but if you really want to do it, right, you're probably gonna have to spend some money on marketing. And then the other thing is that the, you know, for, for an entry level position, you really need to know, almost everything there is about real estate, it's one of the hardest things, you know, you got to know how to how to negotiate, you got to know how to market you got to know how to evaluate a deal, you know, and how to create a spread for yourself. And it's like, it's, it's the people that do it, work hard at it. And, and I don't think, I don't know, many of them are doing it with a full time job. Or if they're young, they're young guys who either don't have a family and they, you know, they've got loads of energy and time on their hands and, or they've already kind of like, built the systems and are doing it that way.

Right? It's easy to get and it's easy to get beat down. And I think I experienced a bit of the nose when I was sort of first started doing real to work. I was calling for sale by owners and that's how I tripped upon the like the first flip that we did, but there's just a lot of knows. So it's it's numbers and it's not for everybody. I don't I'm not opposed to selling to assigning a contract. You know, if if the if this I'm analyzing a deal, it's good enough for me to buy and and I have an investor friend that wants it more than me then hey, I'd have the conversation. But it's that's not my business model. But it's definitely not it's not as easy as as Instagram or Tick Tock makes it look absolutely

enormous house flipping. It's you gotta mind the store, you know, unless you have an absolute unless you've you stumble upon an absolute Rockstar contractor. You know, who's who's hungry. You know, as a friend of mine said, You know, I had to show up on the jobsite every day and count the dose aqis bottles, you know,

it's fair,

you know, it's it's damn

so I've got a great guy and and that's that's why we we had been pretty successful with our first the first two right and then then the third one. We're a bit more hands on a friend and I did a majority of the work and like, so we worked more, we got paid less. This doesn't make sense. But I think that was actually a case where we we just didn't, you know, we just didn't buy it right? We just got a little cocky. Oh, we can pay a little bit more than then what are our strict rules are? And you know, it's still a fair deal on both sides. But But you're not, you know, not hitting it out of the park every time. So, but Oh, good. Hey, still in the green on every every one of them. So that's better than being in the red eye? Oh, yeah. All right. Well, let's,

let's talk about storage. How did you? How did you find that first deal?

Yeah, so the first deal I done, I had crossed paths and with a, a lady that we were doing a benefit auction, and I was helping with a website. So we became friends on Facebook. And so she had put, I don't know, six, eight months after, after this event. She had posted on there about hey, I'm getting back into real estate. anybody looking to buy? Let me know. So I just thought, Well, hey, I'm ready to buy self storage facility, you know, bring, bring one to me. And then yeah, she called me short after that. I mean, yeah, within within a couple months, weeks, something like that. And by the time I got around to making my formal offer, it already had offers and was under contract. And so I kind of I snoozed on that. But I kept in touch and said, Hey, if this falls through Somehow, I really want to stab at it. I'll make a competitive offer. So we did we, we, she gave me a heads up that the deal was falling apart. And I put a pretty solid offer together we did cash offer with like, we did a 90 day closing because I needed, I was kind of getting ahead of myself, we hadn't sold a couple houses yet. So I needed a little bit of time. But yeah, we we made the cash flow contingent on a non contingent offer. I already had all the financials, and it looked rock solid from my point of view, because there really wasn't, she wasn't showing much as much net operating income as maybe should, you know, a lot of the mom and pop businesses are operating in a way where I'm trying to, I'm not positioning this to sell, I'm trying to save myself on taxes. So you know, if I looked look through that, I think I'm getting this for half price, you know, if I can get just a little bit more occupancy, and I was still pretty conservative on it. But I really felt like that this is just a home run. I ran it through a trusted friend of mine. It's like, Hey, can you poke holes in this deal? And, and he couldn't either?

So yeah. So you might ask them what the purchase price was?

Yeah, that one was 372. Five.

And that was all cash. Okay. How big was it?

It's 21,000 square feet, 131 units. And then there's a bonus 14 Rv sites at one of them. So it was it was kind of so I split the properties up there, there are two facilities or across a small town. And it was a little confusing, being branded the same so one of them's on Magnolia Street. And that one we we named mcanally storage and the other one I wanted to get a little bit more traffic to the RV park and search engine activity and so we named that like pleasant in RV park and storage and that that's worked out good having golf Allah get people calling shopping around and the prices are the same. But But now that that's kind of the the first two facilities was more like one portfolio purchase. Gotcha.

Gotcha. And when you say RV site, is that RV parking, or is it RV? Like our

hookups. Yeah, so you want to go camping? Okay. It's no frills, which is It's good, right? We it's, it's something that's easy to manage remotely, I can get it get hosed on the honor system, like I've had people park there and not pay, but they can call me like I have a phone number there. People can call pay, we do. So honestly, we do more monthly site rentals than anything else. So at any given time have two or three month a month people people are coming in and doing doing work in the community or like it's, it's it's kind of a rural town. So we had like a lineman crew for people rolled in and you know, $450 a month times four. And then, you know, we have some other folks and most of it mostly for work or visiting family, there's kind of a housing shortage in that area. So some people are kind of using their RVs as transitional housing.

Well in RV I mean our RV usage is just exploded in the pandemic to my wife and I were briefly entertaining the idea of buying a fifth wheel instead of going mobile for a while. And then it just we discovered that everyone was thinking about doing that, like prices went through the roof and and we just we've sort of abandoned that idea. So no no debt on the property at all.

Nope, nope, no leverage on that one. And I do have so that the one we recently did we use leverage and we can, we can sure cross that bridge. But

let me before we move on to that one. So the opportunity on this first one was that, you know, they were under reporting their their net operating income in order to avoid paying the IRS correct.

So not not 100%, right. So I just low occupancy, and there was a much higher operating expense. So then then what I'm doing right, I don't put my cell phone on the business or, you know, various other line items that I could just, I'm operating it with the, you know, intent of, hey, maybe I'll trade up in a few years, well, we got them stabilized a lot quicker than we thought we had, we had 26 units just full of trash and abandon stuff that had been there for you knows how long we went through the process of empty and that those out. And that's not something that I did I, I think I cleaned out, I want to say we did like three or four like 20 by 10s. And there's got to be a better way. Because I know people are treasure hunting. So we found somebody and worked, it worked something out to where it made a lot more sense, the ROI for me, was not there.

You know, one of the things that I run into frequently when I'm talking to potential sellers, is, you know, you'll run into that well, how much what's your what's your noi? What are your expenses? what's what's your revenue? They'll go well, you know, this is a cash business wink wink, you know, we're typically looking for, for places we're going to put debt on. And then you have to have this very uncomfortable conversation where you say, look, I'd love to pay you what you think your your places worth. But when I go to a bank, they're gonna ask to see your the last two years of your tax returns,

right? And they own that, and that's a good way of playing good cop, bad cop, right? He's, he's the bank is the bad cop. And that's, you know, what we, it's kind of how we negotiated This last one is, well, hey, you tell us what the price needs to be, you know, at the end of the day, the banks only going to loan what it's worth. So we'll try, we want to get your number that you're happy with. With this one. I was not the reason we did cat and it was a stretch to make it happen. But the reason we did cash was, you know, that previous deal fell apart. They couldn't get financing on it. The records were kind of we're not to the level where I think a bank would take you serious on it, or Yeah, so a lot of the pairs are check pair. So I'm sure they you get back into it, but I wasn't confident and getting it done. Yeah. So as much as I lost out on the, you know, first round. Let's just go all in.

Did you bring on partners for that one? Or was that 100% your cash? That

was me? Yeah. Okay. Well,

you went all in and you

Oh, yeah. Before it before I even had it right. We haven't listed this house and, and so like, yeah, it worked out. But yeah.

And then you after you bought that first facility. You pulled a mike Wagner and you quit your W two?

Yeah, I think only I think I want to say my last day was my last day was before the closing date by like a week, I think but yeah, we were. Yeah. Did did pull that. Gotcha. ready to roll? Yep.

Yeah. Well, you know, you

know what the setup had been? So that was July 15. That was

last July? 15. Yes. Yeah,

it's been. Yeah, I'm pretty. I'm pretty green. So november of the previous year is when open enrollment at work it come around, right? When sign up for healthcare, and I'm like, I'm gonna do my own thing. I have to do my own thing. The barrier, in my mind is health insurance. Right. So I told my wife, hey, we're gonna get on our own health insurance plan. And that way, when it's too much, pulling the plug, but I'm going to keep going until it's just too much. And so that was that was when it was too much. Yeah, I think. Yeah, it was a crazy June, July and I was selling it selling a house for a friend and the market would had just gone to Zurich last year. Like we we had, I want to say three, three simultaneous deals that were all over asking. And yeah, it was weird. It was a really weird time. Yeah. So

the market is still berserk. It's I think it's even more bizarre. We, you know, we've made some offers we make we've made some offers on some properties recently, and it's just absolutely bonkers. We had a realtor friend said that one of the offers that they saw, one of the incentives that the buyer offered was to pay the sellers kids way through college. Four years, four years at a specific state school. So that was a you know, there was a AP cap, but I mean, it's like, you know, We're getting we're getting into absolute bonkers territory here. So it's weird.

Yeah, I'm so.

Alright. So and you have so far you've converted a large portion of those people over to auto pay from paying by cheque, right.

talking about. Talk to me about what you mean by that. What kind of locks are you talking about?

Yeah, so they I've got one right here. So combo disk block. And it's just got like a, yeah, combination code, because I am not really wanting to give anybody a master key for all of my key to like disk locks. So if I need to pay a handyman, or even tell the customer, hey, you rented unit number 13, I've got a little disc lock on there, I'll give you the combination, if you can, please drop it in my Dropbox, when you're done, you know, after you've opened up your unit, and then we let them in, they can check in the same day, I don't have to be there. So like this facility is about an hour from my house, that that forces us to only take customers that pay electronically credit card or kch. Yep. And then also, I, you know, I don't I don't have to run down there and back to go make sure that somebody swept or clean a unit, I can leave a few of these with my guy down there, I can pay him a show up fee to open a unit sweep it out or say hey, these guys are good given their deposit back. Which I say the pauses we we have held deposits. And I'm not sure if where you're at on this. But we we've kind of we're getting away from deposits on on credit card, on auto pay folks to incentivize going on auto pay. And we charge an admin fee, you know, a $20 admin fee, I use that to kind of cover the expense of having my guys show up either to let them in, clean it out. Yep. But then if we have their you know, in the contract, we can charge them a cleanup cleanup fee if they left some trash, so we're kind of doing it more on the back end, less clerical admin work upfront. And also, people get really mad when you don't give them their deposits back. So at least in our small town, word travels fast, and we're so it's kind of like, Oh, those those guys are great. I don't want to get that. Well, they, you know, I was one day late past the notification period, and they kept my 70 bucks, I don't want to, I don't want to do that. Yeah, it's just a part of our business.

Here. It's just, you just get, you know, people get weird and that, you know, they get defensive about it, you know, and it's the, it's probably the quickest way to to get a bad review on Google, I kept my son and over a seven year old deposit.

Right. So we've just kind of been like, you know, this is part of the business, we're going to have to do cleanouts we're just going to get it done. We're going to kind of try to minimize, minimize our exposure. And this is a learning process. Like, like I said, I'm green, so I can let you know if if it starts to flop and we really get hosed. But that's kind of what we're trying to do low touch and then then also, you know, utilize some local people as well.

Yeah, we we have a keep my partner has a kiosk at one of his facilities. It's so expensive. And right, you know, we've sort of talked about just getting an iPad and sticking it in there or you know, just saying look, you know, check in on everyone's got a kiosk in their pocket, now they've got a cell phone, and then maybe, you know, we've talked about sticking a little vending machine with locks in there. Right, and people can buy a lock right there and it spits it out and you know, and you just got to have somebody go by and you know, refill the lock machine every once in a while. So you know, it's just them all sorts of different ideas lower lower, high mix of sort of high tech and low tech and not having to

get it So like, does your printer have the Insomniac kiosk? Is that what they're using some similar? Yep. Yeah, that's pretty cost prohibitive. I

mean, it's a gorgeous, it's a Class A it's a class a facility. But okay,

well, so it probably makes sense there. So in small town rural, probably not. Yeah. Yeah. And we have a mix of clientele. You know, some, some of the folks, you know, aren't really on smartphones, because they're a different generation. And, and some, like, just won't convert over to auto pay or may not have a debit card. So, so we still, you know, it's hard to complain when the money is coming in the mailbox, but hey, let's get it as efficient as possible.

So well, you know, first time you buy a storage deal, especially when you've got a lot of abandoned units, there's always people always have stories of interesting finds. Do you have any sort of interesting things that you found?

Yeah. So I kind of quit digging, digging, but I

careful what you find,

right? Yeah, we found Yeah, we found some taxidermy in it. This was the first unit I opened up. And there was a a while there was a deer head, and then there was a wildebeest. So the wildebeest is this kind of cow looking animal with these big horns on it from from South Africa, that kind of region. So I was I was laughing about it. I sent it to one of my hunting buddies, or I don't hunt. It's one of my buddies who does. And right off the bat. Oh, yeah, I think that's a will to be so I looked it up and then a few a few other buddies were saying, Hey, I'll buy that off. He's like, Okay, what what's this thing worth? But yeah, eBay, they're, they're going for like two grand. So Wow, that was pretty cool. I saw that. Yeah, I'm still I'm kind of holding out for Pokemon cards. If if somebody has a Pokemon cards, I heard they're going for a couple 100 grand for an open packs. Which is absolutely mind blowing. But But no, we I mean, we don't go we don't go dig in it, you know, we. So in Kansas, you can you can sell the, the way the lien law works, you can sell by any reasonable commercial means. And so that's what we've done, we just find folks to we're not holding a Storage Wars style auction, where we found a few people that are pretty reliable at cleanouts. And either pay or call it a wash, if you have some full of trash, you have some that they think they can sell some things, and we work out a sort of a sale transaction that way, but, you know, as a as an owner operator looking to scale. It's not it's not a good use of time.

Gotcha. Gotcha. So, talk to me about the second deal.

Okay, so second deal. This one, you know, if it was in a bigger city, I would consider like maybe a B class, a class b plus or something. It's a nice facility. It was it's five years old, in Newton, Kansas, the name of it storage, Max. And it's got like rock fash on, it really didn't spare any expenses. There been, you know, some changes with the family over the years. And the, the woman who owned it was just kind of ready to be out of the business, she had already kind of separated herself by hiring an onsite manager, you know it at a pretty high expense. And that's where we were finding the efficiencies in this place is operationally, the expenses are pretty high. And it's top of the market for rent. So we bought under appraisal, under appraised value, by quite a bit. But yeah, she was really just looking for an exit. And at first, I mean, it's, it's, it's a little bit smaller than the facility I have. But it's, I mean, it's nice that nothing needs to be fixed on it. It's really just in really stabilized. So we bought it was at 87% occupancy and just by like picking up the phones and taking credit cards and have it our handy combo locks on hand. It was like there people call in there at the facility. They want to move stuff in like now. Yeah. And I think the way that it was managed before the nose, you know, you call on a Monday. Well, I could get out there by Wednesday or Thursday. Well, it's too late. There's somebody else that has unit that can move me in today. So but yeah, our rates are more than anybody else in town. It's just a nicer facility. It's It's, it's, it's gated. It's got got cameras, we're real proud of it. But But again, what we're trying to do there so I did, we structured the deal with with partners of another general partner, and then we have a limited like a silent partner, as well. But we we financed, we leveraged 75% of it to kind of go through that exercise and and it was easier than getting home mortgage. It was refreshing to like that experience. So we went to a local community bank, but I think there's some upside in those operational efficiencies. were some of the bills are crazy. So

yeah, it's it's amazing how quickly you can, you know, you start calling around to storage and some of these smaller towns and you can very quickly, you know, first first thing is that on the website, no website, okay, you call them, and then you get, you know, you'll get an answering machine. And it's like you've reached such and such storage and such and such storage and such and such random business, please leave a message, you know, it's like, you know, I don't know, maybe in, you know, really small towns where there's just not a lot of stuff going on that might fly. But you know, man, it certainly smells like an opportunity to me whenever I hear that.

Yeah, well, I and I. So the the first facility that I've got, those are in a small town with no virtually no competition, no competition. But even those folks get frustrated when you don't pick up the phone. So we were actually using a system called call rail. And if you've heard of that before, not what is it it's a it's an Well, it's an app based call service, we can generate phone numbers, so multiple phone numbers. So I have like a different phone number for each one of the businesses. So it whispers in my ear, like call from Magnolia storage, or call from storage max. So it'll it'll you can set up schedules for it to go to voicemail after hours, you know that that was important for me to like put rules in place, hey, I'm not going to pick it up when it rings after six. But I will call back if I can. and nine times out of 10 I call I call right back. But it hits voicemails that Hey, sorry, I missed your call, hits voicemail after six, you know, after business hours, people understand but we're able to set up really cool rules in there. So even like my partner and I if, let's say he goes on vacation, like he so he does all the operations for our new facility. And if he goes on vacation or is going to be out of pocket, we can just on the app, redirect that call to my phone, and then I can just start answering and we use efss. I've got them on the two facilities in Pleasanton and then the one in Newton, and we're both familiar with all the systems we can back each other up. So even though he's like he's not a partner on that Pleasanton facility, speak it back me up. And and so, you know, the processes are all the same. I mean, ideally, ideally, like world, we're not, we're not answering the phones at some point. But you know, that's, that's not where the business is at today. And early in, in our self storage journey.

Well, you're still probably an acquisition mode, I realize but how much time would you say the operations are taking you each week?

Yeah. So would you say, yeah, a ballpark figure would be what, 10 hours a week. Right now. Oh, right now,

Yeah, probably. Okay. I mean, I think I think less like we had two weeks of I been grinding out probably 30 hours, those two weeks on making calls. But you know, every call that gets answered, you're on the phone for 15 minutes with a hint. Production and kind of going going through the whole the whole thing. So, yeah, I gotcha. I would say, yeah, stabilized sub 10 hours a week on that. Gotcha as far as managing operations, right. But but in acquisition mode, like you're always researching or like, your marketing energy or reading like I've, I've picked up a bunch of material on learning how to the syndication world works. And like, are we doing so the way we did this joint venture? Is that how the next one looks? Or is there something that makes more sense that we should be looking at? Yeah, because ultimately, we we touched before the call about like, reverse engineering somebody else's success, and that's what we're looking at is like, okay, so the real businesses are real businesses. They're not just, you know, Grandpa that own storage for 30 years, and he sold it and look at all the cash you made. It's okay. So there are examples, Mike Wagner, AJ Osborne, and some other podcasters in this niche have have shown, hey, we're built success by buying stuff that we think we want to keep, and then putting a price tag on it, when we feel like hey, this is this is the ideal spot for the, for this facility, and it seems to work out and if it doesn't, we have a really great performing asset you can hold. So you can hold and operate and it's, it's all good. But if there's opportunity to trade up, that's, that's kind of something we need to always keep in mind is not just get fixated on I own this thing.

Yeah. So, you know, it's the whole idea of constant cash flow forever is very seductive. But, you know, you sort of always like to use the term return on equity. You know, eventually you got to sit there and figure out what, you know, how much equity we have in this, how much cash flow again, and what's our return on equity? And is there some place that we can put that equity to better use, and sometimes that means selling a really good performing asset and trading up? And putting that that equity back to work?

Well, let's at some point, you're, you're going to be paid off right? And, and, and that that's a long hold. But at some point, your assets paid off, and then you're not using your leverage to grow. And maybe at a certain point, in your investing career, you go, look, I just really want hands off. I think I'm gonna be the LP on all these, you know, on pick a few syndication deals and collect my 8% or more whatever a 12%. And just be cashed in checks on the beach with a margarita in my hand. But that's not where that's not where I'm at. That's, that's a, it'd be a good good spot to be in for a lot of people situations. But right. Yeah. Well, that's what I that's why that's a good product. I think he dabble in that a bit, as well.

Yeah, it's, and it's what I encourage every, every active real estate investor to think about is that, you know, start to think of ways to diversify. And that doesn't mean learning a new active real estate endeavor, it means taking some of your money and you know, real estate, and start putting it into someone else, you know, let somebody else do the work for you. And yeah, it means you give up control, which is hard for some real estate investors. But, you know, you can't, you know, if you really want to scale, you're gonna have to give up some control at some point and in return for buying your time back.

Yeah. Well, and gets that. I mean, it's really not that big of a deal to release a little bit, and then put bet on bet on that guy. If you never know that guy might be better than you. Yeah. And like, you know, you they go they have some sort of a, you know, you may realize a, you know, a net, you know, like a realized gain and 20% IRR or something like that, you know, gosh, you know, if I did that myself, this other deal I did myself was 14%. And, Wow, I didn't have to do anything. And I just gave this guy my cash. So yeah, I don't know. It's Yeah, that's I think, ultimately, that'd be the goal is to get to that point, but we're not there yet.

I look forward to throwing some money into mobile home parks. And, you know, we're already invested in a couple of multifamily deals. I'd like to invest in, you know, somebody else's Self Storage deal in a in a part of the country that we don't invest in and, you know, ATM machines, you know, I mean, there's all kinds of different citations that you

might my buddy, his son is getting into candy machines like gumball machines. I thought that was pretty cool.

Yeah.

So besides the is it called call real?

Call rail?

Yeah, call rail gotcha call rail. I'll put that in the show notes. Is there is there anything that you besides that is there anything that you could throw money at your business to to improve your life

to improve my life? Are you saying something that I do currently or

I mean, some some aspect of The business that you you think is going to be the first thing that you maybe throw money at to remove yourself from?

There are two things, right one would obviously be if I could figure out the best way to have calls answer, that's less of a deal than less of a big deal to me than going to the mailbox, getting checks, entering checks going to the bank, you know, really, really, that's probably the biggest headache. And that sounds terrible, but you shouldn't complain about getting cash the way you're getting cash, but, but you know, if we can get those cheque payers on some sort of electronic payment, and I don't know that that's throwing money at the business, I think it's just being disciplined and who we take on. And as, and that's, that's what we're starting to do. Anybody that's new that moves in and needs to be electronic electronic payment of some sort. And that's, I think that that's the biggest hurdle for me, you know, the, the dream of stepping away for two months and running this from my, from my laptop and my cell phone is have somebody, I have to physically have somebody to check the PO Box to enter those into the system and then make a deposit, which could be done. Yeah. But yeah, we'd throw money at the at that, if I could make that that go with that, that problem go away. Or

so you have to currently you have to go to the mail, you've got to go to the Dropbox, period,

not the physical Dropbox, just my PO Box, and, you know, up the road from my house. That's right. I mean, really, the goal for me with this is to be able to just duck out and manage remote. Yeah, you know, we're probably we're 90% there, you know? if, if, so my partner on the new facility, you know, he was saying, Hey, you know, you could just do one batch a month, you know, you can you can have, you know, I can have him go pull from the box, or you hire somebody to go pull from the box, enter the checks, make the deposit, that that's, that's something that that can be a reality. So, gotcha, I need to get better at delegating stuff. And so this, this exercise of having a partner on our latest acquisition is really great for me, because I've, it's forcing me to figure out processes like, you know, getting the having somebody else asking the question, Well, what do I do here? Like, okay, well, I just kind of just do it. And, you know, it goes, Okay, so we need to figure this out in a way that we could only scale this, like, we would like to, we have an assistant that does this and maybe picks up the phone for the facilities and enters the checks. And, you know, yeah, you really could have quite a few small facilities managed by one person.

So the, the term that you're looking for is document and delegate. Yes. And it's something I'm having, it's something I have to do all the time, I have to remind myself, okay, this is something I'm doing again, and again, and again, I need to document how I did this. And it doesn't mean that it's I'm going to stop doing it means at some point, I can hand this off to somebody else, and they will, they'll have a script on how to do it.

Yeah. So as we figure out what to document and are kind of stumbling along some of these things that I figured out the first time and then maybe have forgotten, you know, eight, nine months, we're taking a couple cues from the software development world and like Agile software development, and we're doing like a retrospective. So like, we had a bunch of things in acquisition that we that that we tripped up on, it's like, oh, insurance? Well, maybe that would that should have been the first thing we got quoted and lying down, not, you know, the, the 11th hour, like, having our agents like, Okay, I know, we need this from our banks, and they fund on Friday, and where are we at? Are we, you know, are we locked in? And so there's, there's a few things there that, you know, you just sometimes need to take a step back and do an exercise. And so like I do with sticky notes and stick them on the board, and you know, what, what do we really do? That was awesome, what do we need to do better next time and, and just document that? So the next time we go to do it goes, Hey, remember, we really screwed up on these three things. Are we not going to do that? So don't just actively trading better, you can just keep making the same mistakes. Gotcha.

So location wise, how far are your facilities away from you?

The first ones that that's right at an hour and then the recent acquisition is right, about three, three hours from my house. Okay.

And then the second one.

Oh, yeah. So sorry that the first two are are in the same town. Okay, so those are in our way and then yeah, the most recent three hours,

okay, so about an hour and then three hours away? Correct. Okay. And so you mentioned you know, you mentioned, you know, being able to go off not go off the grid but but going remote for a while, what kinds of systems and processes or help would you need to put in place to be able to go, you know, to Lake Tahoe For 14 weeks,

right? So, I think you have to have your bases covered when you're gone for, like putting locks on, you need to be able to have any potential repairs, like so the recent acquisition has a gate, that's a new thing for me, gates can cause all sorts of issues. So need to be acquainted with somebody who can fix that understand, you know, have a spare belt in the office haven't had the ability for somebody to get a key to get in the office and make a you know, fix a bell or whatever they need to fix. But really think about what are all the problems that can happen and that I can't just drive you know, and, and take care of so. But but really like we, our day to day management? continues, I think that's just kind of over over and above is just make sure that any physical presence issues, so I had like at the RV park, that's it. That's a whole other thing, right? If I have a water issue, somebody runs over one of the water hydrants, who do I call, I've got a guy. Now finally, we had a, we actually had a breaker out, because somebody was, you know that during the winter, we had this crazy cold snap, I think half of Texas froze. Yeah, it was it was, you know, negative temperatures, and we had people out there living in RVs. And so there were two RVs. And then one, they ended up saying, hey, enough, enough of this, or no, we had three people with one of the folks decided that was the end of RV living for them. Their pipes froze, and they were done. Another person when they were using 70 space heaters that it overloaded the breaker and it didn't just trip the breaker at Friday. Wow. So I got a call. And I'm like, okay, even colder weather is moving in. What are we going to do? She had the RV moved by somebody with a bigger truck as a fifth wheel, she has a f150 and doesn't have, you know, the ability to hook up with fifth wheel. So we couldn't just move her move her site and say Hey, sorry for the inconvenience. There was so that one that got fixed and that introduced me to like a handed local handyman fixed all handyman kind of guide. So that was good, good exercise, because I had this crazy Panic of Okay, I'm not able to get there right now. And this lady her, she might just completely freeze. There's some irony there too, cuz she's from Alaska. So

she came, came south for the winter to get away from it all. So I want to sort of roll in, we like to talk about knowledge. But you know, we talked about, you are sort of an expert on reverse engineering, other people's success. And I want to kind of roll that maybe into how you learn how to do self storage.

Okay, so

I have absorbed all the online content that I could get my hands on. There's a few books that I bought Mike Wagner's storage rebellion. Course does. I think that was the first thing I bought. And then AJ Wagner has a book, that's really good. So I started absorbing like that. And then I mentioned the gentleman earlier, Jason, he, he kind of pointed me down the rabbit hole of self Self Storage when he was showing me the multifamily stuff. But so he's got this just killer, nice facility up here in Kansas City, actually, I store, we have a tow behind camper, and I store it there. And that's kind of how I how I met him. But, you know, he just listening to talking to him about how the business works. And then really, I talked to him more about the business that you know, where he's growing with developing and building and phasing out and learning off of that. And, you know, he's he's built these tracking buildings before and, and, you know, really encouraging how easy it is and hearing from somebody who's not just online trying to sell some, whatever somebody is trying to sell, right? Because I like I said earlier, I'm just a little bit skeptical because i've you know, I kind of went down the wholesaling rabbit hole and didn't do anything myself, but just see a lot of gurus speak, you know, and and if somebody says, Ah, you could just throw up a track the building in a week. If it's somebody online, I'm gonna go now that's Bs, but this guy's like, Yeah, no, we did. And, you know, once you've done your first one, it's like, cake. Like, okay, cool. So, like, he he's on the product, you just need to start building these, you're overpaying. You just need to start building them. But But I mean, that's part of his journey, right? He he bought and then built and then you know, and so we've been watching that and we kind of joke around. It's like, I think we're skipping the whole renting single family and duplexes and there was a part of his journey that made he's got an awesome journey, a great story, but it's just it's interesting to learn about all the all that stuff and then Really Mike with the Self Storage, learning, I think it was really just like diving in on that forced appreciation. And, and I learned about it when I was on the multifamily rabbit hole trying to research figuring that out about raising rents. But then when you see how, okay, a $3, a $3, rent increase across 100 300 500 units, it's, hey, it's just a nuisance, divided by the guy that works with with cap rate. It's just like, just insane. So you can't just bank on self storage appreciating because it's a bit, it's a business, right? You can't just say, Oh, it's like my house, my house went bonkers. The housing markets go at 8% this year raw, you have to actively be raising rents. And, you know, most people don't want to raise rents are kind of a I'm getting my cash. But yeah, no, I could get a little bit more, but I don't really want to move it, you know, I don't want to take anybody off, I'll just raise the street street rate, whatever. So that's kind of where I was at. It's just I like, I'll get to get the spreadsheet and work it out. And it's just like, Oh, my gosh, okay, this is real. And you know, and there's real examples, and you meet real people that have done it. It's, it's like, Okay, look, we can do this. Yeah,

I think that was probably my biggest eye opener with commercial real estate, as well as just the force appreciation. It's like, oh, okay, so I got a multi tenant asset, and I can very slightly increase the rents or lower my expenses per unit. And, a, it's going to increase my cash flow, and then be divided by the cap rate, and just increase the value of my property significantly off sometimes. And oftentimes, I can then go to the bank, and go, Hey, my, here's my numbers. Now, my property's worth, you know, 20 to 30%, of what I originally paid for it. And now you've essentially done bur, you've done the burn method with a large asset, and you've just pulled all your capital back out, and you get to try and do it again. I love it. And by the way, you're not really at the mercy of a local appraiser, you know, who's looking at the comps for the three bedroom, two bath houses that sold in the last six months in that area. You know, it's very, it's much more methodical, and it's math based. I mean, it's just math.

Oh, absolutely. So, in residential, every time we sell a house, it's funny how the appraisal comes back, you know, with within five grand of what the contract price is usually. So like a commercial appraisal, you know, a little bit of sticker shock on that one, we, it was like four grand, and I'm like, whoa, I'm used to these things being a lot cheaper. Like I was thinking like 500 bucks, what's going on, or $1,000, but 96 pages or something like that, and like, wow, this actually is the best tool that I can use on negotiating with my next seller. It's like, hey, well, we had to go through this before I spend the money on an appraisal, we're going to do this ourselves. We're gonna underwrite it ourselves, underwrite it conservatively, right? And, and really just like, talking about earlier, the good cop, bad cop at the bank, and it's really, hey, I'm gonna give you a fair price. But there's so many little levers to on the negotiation side to buy it right. And then on the sell side, like, like you said, you know, you can you can increase your revenue or reduce your operating expenses. And I think it's like an and it's just like a compounded thing. Because, well, you know, maybe I do only do three bucks on the on an increase or whatever 10% is, or something small 10% might be a little high, but and then on this side over here, gosh, they were paying, you know, $280 a month for high super high speed internet, like, do we need that to just check our cameras and enter gate codes? Probably not, can we cut that in half? Well, that might be a savings of, you know, like, on your, on your performance, it might make a $15,000 impact just a couple 100 bucks a month, 150 bucks a month. So that's kind of it's a good space, if turn this spreadsheet into actionable items. And then you know, some stuff, it's like, you cannot, you can't run a 10 you know, 10% expense ratio, it's just the bank's gonna laugh when you go to sell it. So you still need to be within this reasonable threshold. Like, we were saying, Hey, we're going to self manage as well. You know, in the appraisal, we're going to count for $5,000 management fee on a facility that size. Okay, cool. We know that for next time, or when we go to go sell?

Yep. What, what sort of expense ratio? Are you operating your facilities at? Or are you targeting?

You have to toughen up.

Yeah, I'm actually we had a certain the number went crazy, because we had a surge of RV people come in. So I think that actually was that contributes seasonality on that. That's, that's why that one's a little bit weird. But now that's a that's also a business. I go, okay. Instead of building something, you could just put some pads down and some electric and water, and what's the ROI there? So yeah, well, look at all sorts of different stuff.

Alright, so great, great segue, what is what does the future for for your business look like? what's what's next.

Yeah, we interviewed just recently, the episodes not out yet, but by the time this episode comes out, it will be I don't know the episode number yet, but it will be. The name is Catherine D'Agostino, from storage ninjas. And she talks on that episode. She talks a lot about RV storage and kind of the different ways to do physical feasibility studies when it comes to RV storage because it's different. You can't like it's not like storage, you got to you got to write

it's very different than a simple three mile radius.

And, you know, it's it's different, you know, and, but I highly recommend for him, he's got an interest in that. And you as well, you should check her out. She's sharp lady. Well, Rob de Brock, you've got rising tide investments. If anybody would like to find out more about you, what's the best way for them to get in touch with you?

Yeah, so they can go to our website, we just have a simple contact form. It's rising tide dot investments. There's no.com it's just rising tide dot investments. Great way to just message me would be Instagram and that's just my first name. Last name, Rob. Do Brock.

Okay, and we'll put all that in the show notes.

Perfect.

All right. Rob has been really great talking to you today. Thanks for taking the time on a Sunday or Saturday for me.

Hi, thanks, Neil. I appreciate it.

Okay. That was Rob de Brock from rising tide investments, you can reach him at rising tide dot investments, highly recommend you go and check him out, find out what he's all about, really enjoyed talking to him. So for me, the key lesson learned here was, I love the idea of using the cost of the appraisal, the appraisal, in the negotiation, when you're trying to get the information out of a seller, which can be hard, sometimes they're you know, they're like, Well, you know, I got records over here and records over there. And, you know, tell them, hey, listen, a commercial appraisals can be $4,000. And I'm not going to, you know, I'm not going to bring them in, unless this is something worth, you know, doing, and the bank is going to require it. So a lot of basically allow, again, use the bank as the bad guy, and come to them and say, Listen, you know, I need to see these numbers in order to give you a fair price for your facility. So, you know, let's look, you know, come to the table, give me what you got money, this is a great, I love this story. You know, he he went all in man, he he took $375,000 and bought a facility for cash, and he's operating it as cash and he immediately quit his w two job. And he is all in on self storage. Kudos to you, Rob. It takes guts time. He says he puts about 10 hours a week into things probably a little bit less, a lot of that has to do with the transition of buying a new facility. And he anticipates that it will be less at some point. And certainly the goal, location, as he said, right now it's there, his facilities are an hour and three hours away. And I would say it's not 100% remote yet, but I think that's absolutely the goal. And he talked about the idea of hopping in an RV and go into Lake Tahoe for a couple of months and be able to operate remotely. And we talked in depth about some of the things that he would have to put in place to really make that a reality. Knowledge, you know, we talked about this is the idea of forced appreciation when it comes to commercial real estate. That is a it's a real difference from residential real estate, residential real estate is very kind of nebulous, and you know about what, what's causing, you know, a property to be appraised at what it is. And it's usually, you know, what the, you know, whatever the asking price was, and you know, but what is that, you know, right now, places, you know, we've seen areas of the country where the appraisals can't even keep up, you know, because the prices are right, people are paying higher and higher prices, just to get the property. Whereas with commercial real estate, that's not really a factor. It's it is it is math, it is gross revenue, minus minus the expenses, divided by the cap rate, and the cap rate is the closest thing to sort of what the market is doing. And that's, you know, that can be a wild card. But in general, you kind of know what the cap rates are for that type of facility in that area. And you can you know, if you have to, you can pick up the phone and call a broker and find out what they what their opinion is. Alright, once again, that was robbed Brock from rising tide investments, we highly recommend you go and check him out both at rising tide investments and at his Instagram feed, which will be in the show notes. I'm Neil Henderson. Let's hit the road. Hey, before you go, if you like the show, we'd be delighted if you'd head over to pod chaser and leave us an honest review. And do let us know why you liked the show how long you've been listening, and in particular what you find really useful or entertaining. And let us know if there's anything you think we should change. Also, if you have specific questions about real estate investing, especially self storage or short term rentals, shoot us an email at info at Rhodes family freedom calm, and we'll be happy to answer your question on the show. We might even turned into an entire

episode.

Thanks for listening. We're doing this all again next week. Until then, safe travels on your road to financial freedom.