My First Million - #127 with Nick Huber - Building a $10m Self-Storage Business and the Opportunities in "Sweaty Startups"

Episode Date: November 11, 2020

Shaan Puri (@ShaanVP) and Sam Parr (@TheSamParr) host the podcast today with special guest Nick Huber (@sweatystartup), self-storage investor. In today’s episode you’ll hear: Nick’s background and how he started his real estate empire (1:25), Shaan asks Nick to summarize how someone makes money in real estate (6:55), Nick explains how he gets deals (13:00), Nick shares how he bootstrapped his business from his dorm room (17:30), Nick tells the story of telling his dad he was starting a moving company when graduating from an Ivey League school (27:00), Sam makes an observations about people from India owning a lot of hotels (36:00), Nick gives some other “low tech” personal services ripe for innovation (43:00). Thank you to our sponsor this episode, EPOS! EPOS are fantastic headsets that make it easy to work flexibly across situations and locations, with portable headsets including hassle-free device compatibility. If you are an IT manager running a big department or a head of a growing company looking to give your employees the best headset solution to work from home, check out eposaudio.com/millions for a free trial! Have you joined our private FB group yet? It's a page where people share each others million dollar ideas or what they're already working on: https://www.facebook.com/groups/ourfirstmillion.  See acast.com/privacy for privacy and opt-out information.

Uh-huh. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off. On a road, let's travel, never looking back. Okay, sweet. What's up, everybody? We're here with special guest.

Nick Huber, you are known as, what is it, sweaty startup on Twitter? It is. I appreciate you guys' work. Thanks for having me. Why is that your Twitter handle? Because I'm all about a different type of entrepreneurship, I guess. Talk to Sam a little bit about it, but I think you can gain a lot by looking up from your computer screen. And if you get out and work a little bit with your hands and see people's eyes and interact with the world around you, there's a pretty big opportunity.

And I'm living proof of that. And a lot of people that I know are on similar journey. So that's kind of what I pitch because not many people talk about that. A lot of people talk about the cool ideas out in San Francisco. But not very many people talk about moving boxes up spiral staircases. And that's how I started when I was 22. I like it. You're all, you're coming out hot already with the like, you know, you pansies who are just, you know, type in a way to your computer, go do some real work. No, I do talk down upon that kind of entrepreneurship, but mainly it's because those folks are a lot smarter than I am. So I'm, I understand that this is not for everybody. And there's a hundred ways to win. That's, I mean, that's the beautiful thing about entrepreneurship. There's thousands of ways to do this stuff.

So tell people in short words, what do you do? And then we'll ask a bunch of questions. So I am in the self-storage business right now. We buy mom and pop self-storage facilities and operate them. If we rewind a little bit, that all started because in 2011, when I was 22, we started a pickup and delivery student storage company while we were undergrads in Ithaca, New York. Basically, when the students went home for the summer, we would drive around and pick up their stuff, started out in our cars and then in vans. And when they went home, we'd store it. And over the summer, we'd put it in a warehouse and then deliver it back to them wherever they moved next year. year. So basically out of state and international students relied on us to help them move between

semesters. And our career kind of went from there. But now you, how big your, you have a miniature one day, large empire. What, what's the, can you give people the size now? Like, can you brag about yourself? So we look more legit. Yeah. I'm still pretty small. I mean, we have about $10 million for the self storage. We have a little over a thousand units. 100,000 square feet, but actually 250,000 square feet, eight facilities in about six different states. How much money do you make? Ah, gosh.

I don't know anything about self-source. I don't know if I should be impressed by all those numbers you just said. I don't know what square. I don't know what that's good. You asked the wrong question, Sean. You have to ask like the cap rate or something. I mean, you got to ask it differently. Well, I guess give me a sense.

Like, you know, is this something where, you know, There's three stages I'll talk about, right? Like, you bought yourself a job. So it's like, instead of getting a job, I have a business that ends up paying me maybe 100, 200k a year of profits at the end of the year. But I get to like run my own show. I don't have to, you know, have a boss and wear a tie to work. And then there's like the next stage where it's like, well, I've built up either

assets or profits that are, you know, made me a millionaire, a single digit multi-millionaire. And then you have like the 10 million plus range where it's like, oh, I've actually built sort of a mini empire here. Which of those buckets has your self-storage startup taking you to? And was it one step at a time or did you jump straight to one of those? Yeah. First two years, we were in bucket number one. We had jobs for ourselves.

By year three, which was about 2014, 15, we started making $250,000 a year each, my partner and I. 2016, we had a half a million dollar set aside that we developed our first self-storage facility with and did a big cash out refi in 2019. And now we're going and reinvesting all those. all that profit into bigger and bigger buckets. So I'd say we're somewhere between two and three. But yeah, I'm fairly early in the journey.

I love it. How old are you? You're 32. I'm 30. 30. So we're all the similar age. And by the way, Sean, he, Nick ran track and field at Cornell. He was a lot better than I was.

Okay. Is this your next race partner? I don't know what happened with that other guy. I was going to race him and I was fit. He would have beat me a little bit. bit, but I could have ran probably 22-8, which is like not bad for a 31-year-old. That's good. That's good.

You would have beat me. This guy, he's 40 years old. His name's Tyrone. He's badass. He's 40 years old. So I thought I would crush him. He could still probably run 21-8. So he would have beat me.

But Nick, and I think I might be able to beat you now, but you back then would have crushed me. I was a little bit. I was good at every decent at everything. So I did Decafalon, which is 10 events. And they add the scores all together. And it's also kind of a, the, if you could character my life into a couple words, it's like choosing the path of least resistance. Nobody did the Cathlon.

There's about 300 people in the country that did it. So I was top 10 in the country at one point doing that one thing. I'm all about choosing your competition. And if they're really good and really fast, go somewhere else. And Sean, did you hear how Nick and I became friends? I was doing a Twitter live video session. And he like asked a question. And I was like, hey, I keep seeing your picture all over.

You just want to call me? And he just called me and we did a 45-minute call live and that's how we became friends. That's amazing. Yeah. Unfortunately, I had to, I said too much about the structure of my investments. So we had to delete it. But yeah, that was fun. Thanks for having me on that.

So describe. Okay, so I don't know shit about self-storage aside from the fact that when I was, I think 20 maybe, I read this book that really got me hooked into real estate. And I was like, what I'll say, two millimeters away from just going down that path. It was a book called Confessions of a real estate entrepreneur. or I don't know if this is a popular book in the real estate world or if it was some random ass book that I picked up. But this guy basically just walked through a bunch of deals that he did.

And one of them was a self-storage deal. Actually, two or three of them were in the book. And it seemed fascinating, right? It seemed like a great business to be in. And so describe to me, like I like to think about, you know, different businesses like, you know, sort of like a business in a box. And it's like, okay, well, you know, like, let's take a restaurant. I now know how roughly the restaurant industry works where let's take a,

like for fast casual restaurants, it might cost half a million to a million dollars to build one. You know, you two part of that down payment part of it as a loan. It'll generate, let's say, a million dollars a year in revenue, 30% that goes to food, 30% of that goes to labor. You know, you're left at the end of the whole thing with 10, 15%, and that's like what winning looks like. And you need to do that multiple times in order to build a kind of multimillion dollar portfolio. So describe to me like the business in a box of self-storage.

So I know there's some variance. I try to just kind of like go for averages and rules of thumb and somebody will come nitpick later. But who cares? We're trying to get people. Let's say you're going to buy a million dollar property, a piece of self-storage that's worth a million bucks. You can count on that generating between $60,000 and $100,000 a year in net operating income, which is before you pay your debt service and your depreciation and so on. And then another, you know, 20 or 30 goes to debt service.

And the rest is what you have left as a real estate entrepreneur. So it's very simple. The bank finances about 75% of it. You only need to come up with about 25% of the cash to buy it. But then, you know, the tax, the real power of real estate is in the tax advantages and the slow amortization on that loan as you pay it down and just the economies of scale as you grow and get more assets that really make it kind of special. But what we do that's kind of unique is we buy these self-storage facilities that are in small town, America, owned by 65-year-olds who literally keep paper, ledgers, handwritten ledgers and have never accepted a credit card or check. And we come in and we automate the facility, make it so we can run it without a full-time manager. And really, we can find better yield. We can find better yield by going to these small towns because not a lot of investors can kind of automate these facilities.

Are you just using some off-the-shelf software for that? Yeah, 60 bucks a month for an average facility size. What's that software called? It's called easy storage solutions. So then I know a little bit about that space because I was looking at it. investing in a company called Open Unit. Have you looked at them? Yeah, they're awesome too.

I mean, it's a very competitive space and it keeps getting cheaper every year. The features keep getting better. I wouldn't recommend an entrepreneur try to compete with easy storage, site link or Open Unit. There's a lot of really good ones. And they're all owned by the same company, right? Like they all got rolled up. Not necessarily.

The ones we use are out of Salt Lake City, team of about 80 folks. They got several thousand units, though, that they help manage. They do a lot of accounting services. is they sell insurance. There's a lot of good subsidiary businesses off of that. But SiteLink is the big one. That was the big one that, you know, 2005 was dominant, was the only software.

They're the old guard now, more expensive than anybody else and not as good. How much you buy your average unit or your average storage business for? We buy the small ones. Yeah. If you're looking at one in Austin, Texas, you're going to spend 10 million bucks to buy it. We buy these little 30,000 square foot properties in Shipponville, Pennsylvania, or Newfield, New York. York and we'll pay between, you know, our average deal is about two million bucks, 1.5 and 2 million bucks to buy a storage facility.

And how much, what type of multiple is that? Well, it's generating an eight cap usually is what we're buying them on. So eight and a half percent, eight to eight and a half percent yield on that overall cost. So if we're spending a million bucks, that's $85,000 a year in net operating income. So $2 million is 170 grand a year. But then what's your what's your cash on cash return though? Because the cap rate is that's a little, is that misleading? you go just by the cap rate when you have debt?

Yeah, it is. After you pay your debt service, you got to, you know, the cash in the bank is what really matters. We target 15 to 20% cash on cash yield on the money that we deploy. Which is phenomenal. Yeah, it's good, especially considering that a lot of real estate entrepreneurs pay absolutely no tax and the money keeps piling up in the checking account. It's wild because bonus depreciation, we can count 30% of our purchase price against our

profit year one as a tax write off. And it's pretty spectacular. what that can do for you when you wake up at the end of a year and you got 500 grand in your checking account, but you technically lost $200,000 that year. But do you have any employees on site? Not on site, no. We have some stay-at-home employees, a couple actually that I've never met, that two of them live in outside of Chicago that we're friends with my business partner growing up.

They stayed home and hang out with their kids and answer phones and, you know, let people in their units. A customer pulls up to one of our units. There's a number to call. they call in, rent the unit instantly, pay online and get their lock right away. Don't you need like, do you just have connections in every town where you just have a security or the police know who you are or something in case of you need a man on the contract? Yeah, we get little cleaning contractors who bill us 30 bucks an hour to go every Monday to do the checklist.

Yeah, we do have the police, you know, to call if somebody breaks in, but that's pretty rare, honestly. If the cleaning service sees anything, they're like, hey, Nick, it looks like there's a homeless guy sleeping here. just so you know. Yeah, they show up and their job, their checklist is, we got a pre-regimented where they show up, they take photos, we look at it all. I mean, we see security camera footage every morning of all the motion in and out of all the facilities. So we can keep an eye on it from afar.

Because that's the one reason why I wouldn't want to go in this industry is because I wouldn't want to, and this sounds elitist, but like, I'll be real. I don't want to deal with like people who work in a storage unit facility, right? Like that, like, if you have to have like two or three. It does sound elitist. You have like two or three hundred of those employees. it's like a freaking pain in the neck. You know, it's like owning a restaurant.

Having 200 waiters work for you. Like, I was a waiter. You know, waiters like love to party and not show up and... I will say I came from a business that was logistically, the one we started with the pickup and delivery storage was the most logistical, challenging business that I can think of. We had to be on time. They were expecting Uber type service with their boxes being picked up and delivered.

And now we're in self storage where the worst thing that could happen is the latch doesn't quite open. There's no plumbing. There's no HVAC. There's no real problems. Nobody's living here, right? So nothing's ever an emergency. It's pretty easy to manage.

How often you're working? I mean, you're making this sound like the easiest thing ever. Yeah, I work about 30 to 40 hours a week and play golf and hang out. The best life ever. Awesome. What are we doing? I'm playing the game on hard mode, it sounds like. No, I think about the first three years of our careers.

I mean, we were literally working with our hands, carrying boxes to kind of finance and bootstrap the growth of our our company just as a small tech entrepreneur is writing the code, right? How did you find, how do you find your deals just on Yelp? We cold call a lot of self-storage owners. We get a hold of these 65-year-olds and hopefully catch one at the right time who the winter's coming and they want to go to Florida, man. They're tired of the New York or the Pennsylvania winters and they, the business is a lot more stressful for them than it is for us because they're taking cash.

They're going to the banks. They're doing all the stuff that is not fun. They want to get out of it and we are there ready to make them an offer. when they make that decision. This seems like, like, we've had people in the podcast. I forget who do we have, Sean. We've had a few storage folks. It seems like it's gotten way more competitive in the last decade.

Yeah, that's what I was going to ask as well. Like, you know. So self-story, I'm in a totally different asset class than all these Class A, three-story climate-controlled self-storage facilities that you see in major cities. Those things traded a five cap, right? I'm buying out of eight, eight-and-half cap. So, yeah, I'm a little bit nervous about self-storage industry as a whole

because of all the oversupply. I mean, when COVID hit, rates got crushed in a lot of major cities. It's like anything, right? When something sounds really sexy and really easy, a lot of investors flock to it. But you're paying back your equity into the business within what, two, two and a half year or something like that? So the real powerful thing about this is it's all valued based on how much money the thing makes. So we're spending a million dollars to buy a facility that makes 80 grand, but we raise

rents, we decrease costs, and all of a sudden it's $120,000. And the bank thinks it's worth more money now. So you can go back to the bank and say, hey, this thing I bought for a million bucks is now worth $1.5. And then they'll lend 75% of that 1.5. You get all your initial cash back that you put into that property in the first 18 months in. And you get to just go dump it into another property. You're personally guaranteeing these loans, though. I am. Yeah. Yeah. It's not like housing where there's a lot of, you know, regulations and options to do HELOCs and everything like that to get out of personally guaranteeing these things. How do you, like, how do you think about your safety net, right? Because your name might be on, I don't know how many, let's just call it five properties right now,

where, you know, if the property goes under or goes in the red, you know, you still need to make your payments. And you've now refied out, you know, yes, you took the money out, but you reinvested that. And so you're still on the hook for all these different buildings. So how do you design your safety net? Yeah, that's, that's, everybody thinks real estate's awesome until your property's worth less than what you refied out at. And that's why everybody went broke. Everybody who was over leveraged went broke in 2009, 2010. So we're really careful. We keep a lot of cash reserves more than we should probably. What do most people do? And what do you do percentage wise for that? We're about to, we're about to deploy two million bucks and buy about 10 million worth of storage over the next 12 months. And we keep a,

we're going to keep a million in reserve while we do that because we want to, we want to have that money available if things change and there's some opportunities and we want to have that so that we're not on that list of folks who made their first million before 30 and lost it before they were 35, right? So when you started the business, you had a traditional moving business. You said that was horrible, but you said it allowed you to bootstrap the storage company. How much capital did you start this with? Yeah, that was the best.

I mean, it was horrible work, but it was the best thing that ever happened to me. It changed my life. And I think more people should consider doing it. And I'm going to talk to you guys about that, I'm sure. But yeah, I was in my dorm. I had a 1999 Cadillac DeVille sitting in the parking lot that I drove that I bought from my grandma. I had a huge trunk. And I used that car to go pick up the boxes, stored the stuff in my room over the summer.

In the first year, me and Danny made $7 or $8 grand with no expenses at all. And we used that $7 or $8 to buy $1,500 cargo van into Lisa space and to get a bunch of flyers and to go do some marketing. And the next year we made, you know, $120 grand. And the year after that, we made half million. And the year after that, we made 1.2. And the year after that, it was 2.5. And then 2.5 and then, you know, almost three. So kind of over time, and we don't have any debt at all in the business.

We never have. And you've never taken any investment from an external investor yet? No. We own 50-50. And the thing spits off half a million year for us. And we don't do a whole lot. We automated it. So that's what's allowed us to kind of build that real estate portfolio now.

I love it. So then you started with half a million to build a real estate portfolio. that we put in half a million. We had a little bit extra, right? We had 250 grand extra as a safety net. But yeah, that's the thing about real estate. Everybody wants to get into real estate. But the cold, hard truth about real estate is you better have some money to get into real estate.

You can't just go do it. You got to be able to personally guarantee the loans. You got to have some assets as collateral and you got to have some cash. We have a lot of internet folks listening. I mean, like me and Sean, maybe more than me, but still me are like these, the stereotype to Silicon Valley internet folks, which I embrace because it's true. And we have a lot of those listeners, though we do champion like small businesses and we do champion not sexy stuff.

What opportunities are you seeing pop up in the space that you think that some of the listeners and some of the internet-based, software-based folks should exploit? Yeah, I mean, the way that I feel about business is that six months after you start a business, you're not going to be doing said thing anyway. So it doesn't matter if you hate scrubbing toilets or painting walls or doing any of this stuff. You're going to be hiring, managing, firing, training, delegating, and doing it at all, everything that, you know, takes to run a business.

And I'm all about picking your competition. Who would you rather compete against a bunch of brilliant Stanford grads or the guy here in Athens, Georgia on the corner who makes $300,000 a year and hasn't, you know, uses a fax machine and, you know, writes checks and doesn't answer the phone. and runs this business basically like it's 1985. But when you're going through this process, no, and I hear you on that. If you're a wannabe entrepreneur listening to this podcast and you're like a lot of people are like, wow, so my parents own a produce brokerage where they basically buy a million

of onions and they sell that millions of dollars of onions to Walmart for $1.1 million and they do, their business probably does 10 million in revenue, very tiny margins. but all done through fax machines and checks and no cell phones, no computers, things like that. Those are the businesses of Target. That's a beautiful opportunity, in my opinion. Yeah. But still, even I grew up around that, I'm like, you know, everyone's using technology. It's definitely not the case.

So, are there any examples of processes in your business that need to be automated that aren't or need to be more efficient that aren't that I wouldn't? I mean, yeah. Yeah, so I'll give you, like, I bought a house. When you buy, did you buy your house? Do you guys own your homes? Did you have to get your vendors and things? Like your lawn care, your, you got to take care of all those.

How was it dealing with those people, right? Half of them didn't answer the phones. You make 10 calls for lawn care companies and you can get maybe one or two to show up. Their lead time is three weeks. I was trying to build a fence out back and it took me, took me like 10 hours of work just to get a contractor to come out and bid my fence in my backyard to build it. They're all undercharging. They're not raising their prices enough.

And they're all so busy, they're running around like chickens with their heads cut off instead of kind of putting systems in place and raising their prices and scaling businesses. They're not business people. They're not entrepreneurs. They're not people who study business. They are just people who built themselves a job. So which opportunities are you referring to specifically? Home services. Yeah.

People are spending a ton of money in home services, painting, cleaning, maintaining, washing, doing all the stuff in your home that if you want to charge double, what the nearest competitor in town is charging, but you have your first on Google. You're going to answer the phone. You're going to provide online bids instantly to do the work. You can convert 30% of your leads instead of 70 or 80, and you can make really good money doing this stuff. And business is all about momentum. So you start out doing some of the work yourself, the year after that, you're delegating even more. You're making more profit. Five years down the road, you have 750 grand sitting in a check account. You can build a self-stores facility with, right? That's how kind of, that's how it works.

Who are some other people that are like you that have done sweaty startups that people should either follow on Twitter or that you can give us the kind of their one minute story about what they did. That's a slightly different path than you. Yeah, that's the thing. Nobody shares this stuff. The people who have done this stuff are 65 years old and they're playing golf every day at their country clubs and they're the wealthy people in our towns. They're not the ones getting articles written about them. They're not the ones on social media. This is a message that is not widely distributed by any means.

I can't, I mean, Andrew does it, right? Wilkinson. Yeah, but he doesn't do these types of businesses. So he buys internet businesses that are already profitable. I would say that's the opposite of a sweaty startup. I think his goal is not to sweat. And yeah, Andrew, who's our great friend, so I say this with love, he, he doesn't want to do any of this shit. He wants software. He wants, right.

He's not trying to break a finger now. Yeah, but similar mentality is you, but he wants some boring software company. similar in the sense that he's like, look, the fundamentals of these businesses just make sense. And why are you guys all chasing these unicorns when like there's a bunch of businesses models that just makes sense that are profitable? And hey, like, why is everyone forgotten about profitable and durable and like simple businesses, although of a different style? So, okay. So I don't think Andrew has ever lifted a box in his life, though. I say that with love.

I guess Brent B. B. Shore. Brent B. sure is the version of Andrew on, you know, he's buying, he's rolling up roofing companies and plumbing companies. I mean, if you got no money, no cash and no resources, you're going to start a cleaning company, right? But, but if you have some money, if you had some management experience, you have a team, you can buy plumbing companies, roofing companies, HVC companies that are doing 200 grand a year and you can roll them up and scale them up to be doing a million dollars a year,

pretty relatively risk-free if you do it right. You know who did who did this quite well and who we're friends with is Brian. Skudamore, the founder of 1-800 Got Junk. His business, I don't know exactly how the revenue is counted because it's like a franchise at this point, but it's like a 400, 500 million-dollar-year company. Yeah, there's massive versions of it and there's a good friend of mine in D.C. who runs a pooper-scooper business that does 550 grand a year in sales at 40% margin. And he works three hours a week, scooping poop out of people's yards, makes a quarter million

dollars a year. Like, because nobody wants to scoop poop. It's scooping up people's dog poop? Yeah, it's a pooper, scooper business where they show up and they charge you monthly fees to walk in and scoop the poop. I mean, pest control is another excellent one where you show up with an unskilled employee, spray some liquid for 14 minutes and charge $200 a month for that, right? I mean, these businesses that are not sexy and tech entrepreneurs are never going to go after, but if you look up from your computer screen at our everyday world, there's businesses that are making phenomenal money and honestly aren't very good at business. Right. So you're going to say something about Cornell. Yeah, so you went to Cornell.

So I assume you were pretty smart, dude. Yeah. I got in because I could run track. I had probably the lowest SAT scores at Cornell, but I got out, so I guess I'm smart. What was your SAT score? What did you graduate? What was your GPA? My GPA was like 3.2.

Yeah, that's good. I took a joke major, though. I mean, the engineering and sciences are on a whole other level, but I think my SAT score was 11, 1110 or something like that. This is on the 1600 scale. ACT was 2300. Okay. No, wait, ACTT was 23.

Sorry, 23, yeah, 23 on ACT. That's super low. I would did better than you. Yeah, my high school's ranked. I think it's in the, like, only the fifth percentile in the United States. I went to a high school with 83 people. So in Spanish class, in English class, we paid poker instead of studies. Never took a book on.

So you went to Cornell where you're going to be surrounded by a bunch of people who got like, you know, 1,500 on their SATs and take this shit super seriously. And we're like trying to fast track to banking, consulting, you know, that sort of. a thing. And so what was that like when you were there at that time? Did you realize, like, I'm not like these people. I'm going to do something different? Or were you also trying to play that game at that time? That's a tough question. I mean, we knew we had a ton of opportunity cost leaving Cornell. I mean, when I told my dad, I was going to be starting a moving company. He goes, are you kidding me? You just told me your buddy is going to get paid $120 grand a year to go work in Manhattan.

And you're going to buy a $1,500 cargo van and move boxes around. He's like, what the hell did I send you to the Ivy League for. But I don't know. We just got excited about it. We saw all that cash on our bed after we ran around and worked our butt off for a week and a half. And then we said, all right, what do we have to do to make this worth it? So instead of just keeping it really small and starting just doing the next year at Cornell only, we said, all right, we need to take some risk here and get after this. So we convinced the friend at IU to open a branch there. We convinced the friend at Illinois. And we said, if we don't get 300 customers and do over 100,000 revenue, we're wrapping this thing up and we're going to go get jobs. And we, and we're, and we, and we,

just got after it and we had a blowout year and then another blowout year and our friends made fun of us early on that we were moving you know they made fun of our van because it was a 1998 windowless van that we were driving around college campus and and uh but then you know five years later we're out earning um you know all of our friends so it's it's and we did it virtually risk free no decision did we look at and say if this decision goes wrong we're going to be broke or we're going to waste three years or you know we're not going to get funded or we're not going to have an exit And, you know, most people I know who go into real estate have a similar path where they start with a kind of operating, operating business that's giving them cash flow. And then eventually they buy the land or they buy the building and then they operate inside of it.

Now they're getting the sort of double dip where they own the real estate and they own the business inside the real estate. And what I've seen is that a lot of them just say like, fuck this whole operational thing. I'm just going to own the real estate. I'll just be a developer. And I'll lease it to the next kid who wants to run self-storage and manage customers and do all this. Is that the path you're going down? Yeah, definitely. I mean, we do manage, we self-manage just because we're good at it and it's low stress

and we can wrap it in technology. And with three employees, we can manage $10 million with a self-storage. But our goal is to own the real estate and let the real estate work for us. And over the next 20 years, just grow that portfolio so that, yeah, we're making a couple million bucks a year by not doing a whole lot. And so you said, you have three employees managing how many facilities is that? Oh, well, they work in our other. company too. So I guess if you would say self-storage portfolio only, it's about two full-time

employees worth all year. They manage, so about 100. They manage how many facilities? Eight facilities worth about 10 million. Wow. So each person can manage about four facilities. So individual employee can manage four facilities and the rest you're doing as contractors to come clean and do do any of that stuff. Those are not people on your payroll that you have to manage. And that's only, and that's only $300 a month on average per facility to do the on-site stuff. Yeah, we're buying these buildings from people, sometimes they have an office with a full-time person in that building. Right. And we are replacing, like we have a facility in Ithaca, New York.

It's 51,000 square feet. And we have no full-time manager, $300 a month in payroll. The guy down the street has the exact same amount of square feet, the exact same amount of revenue an annual basis. And they have a full-time employee, almost two full-time employees working retail hours in an office right there. But what did it take? And what did it take to do that? How much equipment did you have to purchase in order to automate that whole thing? $60 a month on easy storage solutions and a $15,000 automated gate and keypad and about a $6,000 security system so that we can look at the hallways and look at the driveways and make sure that, yeah, people aren't sleeping in our units and there's not a big couch left outside of a unit and so on.

And then, but like in that, can you take a credit card payment right there? Yeah. Oh, yeah. They sign up. They pay right on the line and they get a text message with their unit number. They go right in their unit like five minutes after. They look at our facility. They have a unit. They've signed to the lease and everything is done. But don't they don't. And you said you needed a gate security cameras. Don't you also need like automated doors for each unit?

No, they're just normal storage units that you slide open. We put a free lock right inside and they go to their unit number, open the door and a lock is waiting for them right inside. They lock it with their own combo. And then they manage that themselves. So so let's just take. Okay. So on one side, door number one is traditional, the guy across the street from you who's not doing it your way. he might be paying a total of what like $50,000 a year or something like that to kind of manage that property or more do you think yeah 80 grand a year retail hours so one employee can't work retail hours all year that's you know that's that's way more than 40 hours a week so okay so 80 grand a year and then you're replacing that with essentially nobody or a quarter of an employee let's say because one person's managing four and then you're putting in certain technology software to automate this thing your whole software you're

stack plus contractors to do the cleanings and anything else your all those miscellaneous services what do you think you're adding up to or do you probably know what are you adding up to and when you replace that? Yeah about 20 25 grand a year 25 grand so great so yeah

their expense ratio is maybe 50 or 60% of revenue our expense ratio is 35% of total sales so if we have a facility that does 500 grand a year in uh in in revenue you know our our customer our competitor may be making $250,000 in net operating income. We're making $350,000 in net operating income. And could you sell like a training system to like the other self-storage operators that are

not selling right now that says, hey, here's how you can reduce your expense ratio by, you know, 50%. You do these five steps and I will, I'll be with you on the phone and kind of explain to you how this works. And look, you get all your time back. You get more money to the bottom line. I mean, have you ever tried to teach your grandma how to use anything that makes her life more efficient on a on a computer i mean these people don't want to do it they've been doing it one way the whole the whole time they want to see people they want to shake their hands they want to have a signed lease we're buying this from 65 year olds but there's another path of i in this is what sean's getting at is how if sean wants to buy this to get into storage units uh no that's

not where i'm getting i'm just thinking like you know there's only going to be so many that you're going to be able to buy or want to buy when you'll be limited by cash and how much the sellers want to sell and so but it sounds like you're your secret sauce is, you know, there's just a normal blocking and tackling of doing a real estate business that you're doing well, right? Like getting money, getting financing, building up credit, you know, watching your books and doing your taxes smartly. And then there's this other side, which is you're actually able to operate each facility cheaper, which means that you're buying it when it's valued at 100 grand of profit. But to you, you know, within a year there's

going to be at 180 if I just do my normal playbook. Right. And so I was just wondering, These things are worth more to us than they are to anybody else when we buy them. Exactly. So that's the secret of real estate is when you get more value out of the thing than the next buyer, then you're always going to be able to bid in a sort of smart way. Yeah, real estate is ripe for disruption. I mean, you guys wouldn't believe the amount of money that's made by people who do not wrap their businesses in technology.

Like the tech mindset allowed us to, yeah, we have a competitive advantage. We're going to scale it up and we're going to do really well for our sales. There's hundreds of other real estate asset classes. I mean, why do we still have to check in to a hotel by talking to somebody there when I can go to an Airbnb five years ago and instantly check myself in and go right to my bed? Yeah, I hate that. I think five years from now, 10 years from now, somebody's going to make a ton of money by totally automating hotels. Why the heck do you need that check-in process when we have the technology to do all of it on our phones? Let's go down this path. Keep riffing on that. What else have you noticed?

Like, you know, Sean and I don't know anything about this. Yeah, hotels are valued at the same way. You buy a $5 million hotel. It's going to be valued at a $7 or an 8 cap. So it's going to make $70,000 times five in revenue. But if you can cut the expenses, boom, you instantly just made a huge competitive advantage. So while it's a five or six cap for the other person buying it, you can get a lot better cash on cash returns. You could scale up a business like that very quickly.

And then all you got to do is worry about staffing the cleaning. A hotel has to staff 24 hours a day there. what's 24 hours a day times 20 bucks an hour, 15 bucks an hour at the front staff? You can save 70% of that when you're, if you ought to be in boutique or small motels or hotels at the moment when everyone's going out of business. Somebody's going to make a lot of money doing that. Yeah. And a lot of people are able to convert these kind of crappy motels that are, they're pretty bad as motels, but they could be pretty great as Airbnb's. And, you know, if they're generating X dollars because, you know, their occupancy rate is 75% or whatever per month now, they're going to be valued at that.

that price. But if you know, oh, if I list this on Airbnb and I can charge a little bit more per night because I have now a vintage looking Airbnb, then, you know, this is worth more to me than it is to them. And, uh, and you can go scoop a lot of these kind of like distressed or, or just sort of like, um, misused properties and use them, uh, as Airbnb's. In a small town America has a ton of 10, 20, 30 bed hotels that are ran by families that the next generation is not going to want to take over. Right. And some, Particularly, I've noticed, particularly Indian families, Sean, are, like, crushing the motel industry in middle America. I think they own, like, 70% or something like that of motels.

I don't know too much about Indian culture, but what's the Patels? Yeah. Well, it's just like one of the, like, five, it's like Smith, right? It's like one of the five common last names of Indian people. There was, like, an article about, like, the Patel clan. Maybe there's one Patel clan. I don't know, like one group, one large extended family. I was reading about them that they just crushed Dunkin' Donuts.

They just own 80% of them. And then they also own most the motels. Right. Like a large percentage of the motels. And the problem was is that the children were like, I don't want to do this. You sent me to Stanford. Like, you know, it's like the same. It's like the whole immigrant cycle of like, you know, you come here, poor, hardworking, and driven.

And then your kids get saw because you send them to Stanford because you succeeded so well. So it's like an interesting problem. or an interesting opportunity, I think. I agree with you, Nick. Yeah, the immigrants, I think they have an advantage because they can say, hey, come over to the United States. We'll get you the green card to work here if you run this pizza restaurant or this Chinese restaurant.

But we're going to own 50%. Like, you're just going to do a lot of the work and own a small amount of it, kind of like a mini franchise system where they bring in family members to to help grow an empire over time. Here, Abrae, you want to read? What's this say, Abrae? You just shared us a link. I'm not sure if this is the guy you're talking about.

It is. Patel. Yeah. It kind of goes over a story of like coming to the United States at 1985 like $20 in his pocket and then building up like a little empire around hotels. Yeah, it's motels and Dunkin' Donuts. So one of the things that happened was so Patel is not actually one family. It's just, again, it's like the last name Smith, but it is like a race of people that are all like from a certain part of India.

And what ends up happening is that they're financing these for each other. So they found a model that works. They tell the other people like, hey, this motel thing works. and then they provided, they basically became a community bank for each other, as was what I understand, where they provided financing. And I think Jewish people do this really well, too, where Jewish people do a great job of funding other Jewish entrepreneurs and business owners. And so the whole sort of the whole society or the whole race will do better over time

because they have this great culture of paying it forward. Have you ever heard of this, Nick and Sean? I used to have this good buddy. I dated this girl in Nashville. My girlfriend in Nashville at the time, she had a good friend, and she worked for him, and he ran a locksmith business in Nashville. And he was from Israel. And the whole schick was they convinced their Israeli buddies to come here and they go, yeah, I got a locksmith job for you. I have no idea why Israelis and locksmiths, but it's like all of the locksmiths in Nashville.

And I think even throughout the country are Israeli immigrants. And they come and they just crush the locksmith industry. And they do it by, this guy, I won't say his name, but I knew him. And he was like, yeah, so here's all I do is I create 10 different websites. I call it like Smith Locksmith. I call it Expert Lott Smith, ABC Locksmith, AAA Locksmith. And I rank on Yelp for all of them. And no matter who they call, they go to my call by service.

And on the phone, I just see like, yeah, you know, like, you know, maybe $300. Does that sound good to you? You know, they just make up prices. And then they deploy their. their coworker out there. And they own the whole Nashville locksmith. They own number one through 10. That guy's got like 10 shirts in his truck.

So he gets out. He's like, who am I today? Oh, I'm expert locksmith. Let me put that one on and head inside. And like their businesses will be like ABC locksmith or a plus locks because they always wanted to. Alphabetical rank. Yeah.

I got a funny story like that too. I was when we were in the early days of starting our self storage, our student storage business. We weren't sure if it was going to work. So we were putting a lot of other irons in the fire. And Bloomington, Indiana has always been. in a town I wanted to move or live in because it's awesome. I put up a little lawn, the lawn squad.

So my business was called Storage Squad. I put up the lawn squad in Bloomington, Indiana, a little Google my business location and a website. And I didn't really do much with it for about three years. And then my brother got into IU, went to IU. And I'm like, Andrew, I've been getting a lot of calls for lawn care in Indiana. Do you want to start answering him and go make some money? And you fast forward three years.

And now he's a full-time landscaping business in Bloomington, Indiana. He works 30 hours a week for 20. 27 weeks a year, clears about 100 grand and then plays golf and fishes all winter long and living the dream. There's some like overworked person right now listening to this who's just like saying fuck to themselves like at their desk or in the car. I'm telling you, if tech entrepreneurs, if tech entrepreneurs who knew how to wrap these small businesses in technology, whether it be SEO, content marketing, you know, software to do

the bidding, I mean, just look up from your computer screen at the world around you and there are opportunities galore everywhere. It's incredibly inefficient. The problem is, is that in San Francisco and in New York, where a lot of these folks, whatever we call them, techies, I don't know, whatever you want to call them, there aren't local you don't need local, you don't need a long care. You don't need, like, and people don't, everyone rents. Like, you don't, that is not, postmates.

That's not, that is not true at all. That is not true at all. There are tons of people who keep the city clean, maintained. Sure, but I'm saying that a renter, I haven't had a lawn in 10 years. Like, what I'm saying is like you have in these cities that you're referring to, most of these people, they don't know this is actually a major opportunity because they're like they forget how many, how most of America has a lawn. They forget that most people own a home or that you need plumbing help every once in a while. You know, that's what I'm saying. They forget that the plumber walking into the law offices on the 54th floor in New York City are making more money than the lawyers while they're there.

That's the pool quote for the episode. My father-in-law owns a moving business. And it's very, very, very successful. They've got a house. My father-in-law, they got a house in the Hamptons. They got a house here and they got a house here. They're very, they crushed it. Immigrants knocked it out the park.

And all they do is commercial moving. And high school dropout type of situation. And so, no, I feel you. And I think it's all looked under the hood. If you guys looked under the hood at how these businesses actually did business, how they build, how they communicated amongst their teams, how they communicated with customers, your head would explode when you see how much money they make at the end of the year with those methods. I mean, that's what we did. When we launched our student

storage business, there were 20 other companies doing exactly what we were doing. And part of me and Danny were like, hey, are we going to try this? And he goes, well, let's look at all the other competitors and see what we think they're doing. We kind of counted their customers, asked a ton of questions about how they did business. And really soon we realized that every time they'd say, oh, this is how we do business. We'd be like, oh, my gosh, really? That's how you guys do it. you really haul around clipboards and when Google Sheets is a thing now and you can get a tablet with LTE where you can live update this stuff and you've got to send in a check and we've got to sign up by mail sometimes and that's that's real.

Okay. So what's a tell me. Teach me brother, which, okay, you got the storage unit business on lockdown. Where, where should I look at? You said home services. Specifically, what does that mean? Yeah, home services are the people who clean your carpet, clean your driveway, install shelves in your closets. These are the people, anything, that you need done where you need a person to show up to your house, whether it be pool service, cleaning anything, like, you know, putting together anything, building anything, fixing a pipe, fixing, I mean, 20 years ago, everybody knew how to do everything at their house. They're outsourcing everything now to companies because nobody knows how to do any of this stuff.

Nick, so your business works because you started with the moving boxes in a truck and then you're like, okay, we'll have a storage facility that will run. and then you're like, okay, I'm going to own the building for the real estate game. You got into the real estate game. That's why your business is actually great. Now, you go and try to do this with painting and with shelving and with lawn care. You're never going to be able to do the real estate side of things. You're only going to be in the service business for as long as you can. Now, that business might be profitable, but it'll stay sweaty, right? It's not going to be, I guess what you're saying is the systems, cash. Cash. The cash and the systems that these guys operate with are, are, totally under optimized, whether it's labor or it's marketing or customer service, right? And what you're saying is you can make them more profitable and you don't have to do the service. You can hire and train people to do these dumb services. They're not that hard to learn.

You can, you know, the pest control guy can learn this in a month how to do this and serve a certain area. But they'll never get the real estate side, which I think is a pretty big difference between your success and what somebody going into these spaces might achieve. Business is all about momentum, though, right? I mean, I think about the wealthiest people that I know. They all started really small. They all started really low risk.

I mean, you guys know a different subset of the population. You know people who went big and hit it big and won. I know people who started selling t-shirts out of the back of his truck. And he got an artist to draw caricatures on those t-shirts. And then he made a deal with the NBA that when Michael Jordan and Larry Bird won the NBA title, they got to put those shirts on of his. And then he sold that business to Haynes for three or four million bucks, started buying Planet Fitnesses with his,

three or four million bucks. And then when Planet Fitness went public, he was worth $150 million. Business is all about momentum, right? Who is this person? What you're doing when you're 21, 22, 25 is not going to be the same thing that you're doing 10, 20 years from now. Who's that person?

Oh, I can't say his name, I don't think, but you can look it up if you, if you search the, those caricature, yeah, the, the, you know what I'm talking about those shirts with all those sticks, you know. Like where Larry Bird had a huge nose. Yeah, exactly, exactly. Yeah. I think you're right that business is about momentum, but business is also about leverage. I think really, really ultimately, it's about leverage.

And you're trying to get enough momentum so that you're leveraging the different things that can be leverage. Right. Like Silicon Valley, people leverage code, right? It's like, oh, you have to, every day you have to go, you know, trim someone's lawn. You know, I wrote this program once that, like, fixes this bug on their computer. And now I sleep and people just keep using that product and it just works for me. It's my server does the work. I don't even need a human, right?

So that's the leverage that they get. Or Sam, right? Sam does media. It's like, I write one thing, I write one email one day, and I can have a million people read it. I don't have to go print and deliver newspapers. So he's got, you know, media plus software as his leverage. Capital is leverage. And so there's all these, I think, really what you're really what business is all about.

If you really want to make money is figuring out a point of leverage that makes sense. Now, it's true that when you're operating momentum is what feeds you, right? And as your momentum dies, your business basically dies. And so I think there's some blend of the two where you'd have to find a point of leverage if you're going to go into these kind of sweaty startup spaces and figure out, okay, how am I going to use either software, capital, media, or how am I going to use one of these levers to make this business worth a lot more with less work or reach more people with the same amount of money or the same amount of employees? I think that's what you've done well as you found leverage where you're using technology so that one person can operate force. self-storage facilities. Yeah. And then that lets you double the N-OI, which lets you buy things and make profits and lets you refi them out quickly because you're able to like increase the value so quickly.

That's your, that's the real secret to your model. Yeah. I just think it's a little bit about risk too. Like if you wanted, if your goal and what you want in life, if you want to, uh, to, to make it big, if you want to be, uh, you know, to continue to do bigger and better and scalable things and become a 10, 20, 30 millionaire. Um, obviously a lawn care company is not the place to start. But if your goal is to make 250 grand a year and work 20 hours.

a week and that can make you happy, then, you know, I think the lowest risk way to get there is to compete with the folks who are making that kind of money and don't know what the hell they're doing. Yeah. Let me wrap up by asking you a question, which this question is going to sound disrespectful because, but I don't necessarily believe it, but I want to get at it and hear what you think, which like you're talking about doing these things and not working a lot. You're talking about, again, it's going to sound rude, but I don't actually think it, but

like you're relatively meaningless stuff. Like, you know, you're not making something that is potentially going to change the world or potentially is not going to save a life. How do you... It's not sexy. How do you sleep at night, Nick? No, like, but like, how do you stay motivated when you're just like, what's the point, man? This is just financial arbitrage.

Again, I'm not saying I believe this, but this is like the devil's advocate of like someone would say is like, you know, like you're not like solving cancer. You're not... It's also a little bit like low creativity, right? So it's low innovation in that sense. Yeah, it's tackling and blocking and at some point it's not rewarding, right? And what do you want and what do you want to do and who do you want to affect? Yeah, like, how are you finding meaning in a lot of this or excitement or joy? I mean, like getting rich and providing for your family is a good answer, but is there more. Well, I think rich, unfortunately, money is power. Unfortunately, money is power and money, wealth is that's when you can start doing things that are fun. Like, that's when I can start the sweaty startup podcast and all of a sudden I have half a million people that have heard this message about changing their life for the better because I see too many people.

working 100 hour weeks, driving an hour each way into town to work for corporate America that have already been through a divorce and are not, you know, that's what the majority of my buddies that I care so much about are spending their time doing. They can't get together for bachelor parties. They can't get together for golf trips. They can't see their kids. They can't see their wives. So then this whole journey for you is definitely not that you give a shit about storage business. I don't give a crap about lawns or painting or cleaning. I give a crap about living the life that I want to live with the people who matter to me and making memories with those people. And if you ask me the quickest and easiest way to make that happen, and everybody

wants to do what they want to do. They want to work on what they're passionate about. They're mixing what they love to do and how to provide. I like to divide those things. I like to make the money in the most efficient way to make money and then do whatever I want to do in my free time that is rewarding to me, affects people in a positive way, allows me to make memories with people who matter to me. And honestly, when you start making good money in these service businesses, you're in a lot better position to change the world and you're in a lot better position to then take a big shot. You're like, look at me. I'm just a Southern guy who scored not much on his SAT and I'm sitting here on a podcast with you two guys. And I have a Twitter 20,000 people on Twitter following me. And, you know,

it's just the door's open. The door's open when you get out, you learn something, you master something, you make a little bit of money. So what's your end game here? Do you have a goal? The end game. I want to build a big real estate portfolio that I can hand off to my kids. I want to, and then I want to spend my time. doing exactly what I want to do every day. That's my goal. I don't want to spend a single day doing something that I don't want to be doing. I mean, I love working. I thrive on progress.

When I wake up in the morning and I'm achieving things, I sleep better at night when I feel like I'm moving things forward. But I don't want ever to have to do things because somebody else told me that that's what they want me to do. What would be that day, those days where you're like you're doing exactly what you want. What would that be? Yeah, I mean, me and my business partner sat down three weeks ago and we said, look, all we have to do is buy a couple more.

storage facilities and we're going to be making a half million dollars a year and we can pay another employee. And if we deploy all this money, we'll be making a million dollars year each. And we can do absolutely nothing. We can do nothing. That's a pretty good spot to be in where you're have an opportunity to keep growing and going after. Let's say you got to that point. What would you do with your time then? Exactly what I'm doing now. And I'd probably start another business and I'd probably get excited about something else. Right. I think I'm, I'm too much of a person who thrives off of accomplishment to sit back and have fun on vacation all day. But I'm just going to get to work on solving some bigger problems now. Like I've carried a lot of boxes up upstairs. So now I get to

attack some things that matter to me and, you know, maybe even take a big shot at a bigger company. I'm only 30. I don't know. What's something that matters to you or what's a big shot? You would be interested in taking. Well, right now, what I'm really excited about is getting this small business message out to a lot of really smart people. It's, it's, you know, taking a lot of my energy. But I, yeah, I think there's some other asset classes in real estate that are pretty exciting that have a ton of innovation. And I think I'm in an old man game at 30 years old. It's hotels. Like we said, it's industrial real estate. There's boutique. You know, there's all kinds of little niche like animal crematoriums that can be a real estate play. There's all these little really cool things

that can be a play in real estate that 65, 70 year olds are the only ones who make the calls in these things. And they don't care about slack. They don't care about... Animal crematorium, like a, but you get ashes from your dog. People will pay three to five hundred dollars to take their dog in, get cremated and get it earn of their dogs so they can remember their pet. That's a lot. I'll do that. Yeah, it makes a ton of sense. And you make a little business that is like a drive-through.

It sounds crazy, but it's a 1,000 square foot piece of real estate. And you put a pretty low-skilled staff in there or you pay an operator to operate it and you own the real estate. And they're cropping up all over the place. You learn something new every day when you listen to this podcast. Funeral homes and actually cemeteries are a really good asset class. Cemetery are profitable businesses, whether you know that or not. Many of them are owned by cities and municipalities, but they can be very profitable. You have cold storage for, like, distributors.

You have little pieces last mile industrial warehouse space that, you know, there's a big shortage in our cities of this last mile industrial delivery space. Real estate is really fascinating to me, and I love it. And I'm sure that I'll stay in it my entire life. But, but yeah, it's cool. Awesome. I think this was a dope episode. People were going to like this a lot.

You want to let them plug himself here. Where should people find more about what you're talking about? Yeah, they can email me. Nick at sweaty startup.com. They can follow me on Twitter at sweaty startup. They can listen to the sweaty startup podcast. I interact, a pretty small community. This is not sexy stuff that excites a lot of people.

So I have two or three thousand people that listen to each of my podcast episodes. And I'm very active on Twitter at sweaty startup. Awesome. Thanks, Nick. Yeah, thank you. I appreciate everything you guys do. Cool. See you, man.