The Startup Ideas Podcast - Wealth Building: Sweaty Startup to Real Estate Investor with Nick Huber

Episode Date: December 22, 2022

►►Subscribe to Greg's weekly newsletter for insights on community,creators and commerce.You'll also find out when new and exclusiveepisodes come out from Where it Happens. And it's totally free.https://latecheckout.substack.comFIND ME ON SOCIAL:Twitter: https://twitter.com/gregisenbergInstagram: https://instagram.com/gregisenberg/TikTok: https://tiktok.com/@gregisenbergLINKS FOR THIS EPISODE:Production Team:https://www.bigoceanpodcasting.comNick Huber:https://sweatystartup.com/https://twitter.com/sweatystartuphttps://sweatystartup.substack.com/https://boltstorage.com/https://recostseg.com/https://www.supportshepherd.com/SHOW NOTES:0:00 - Intro2:36 - How to find a niche in real estate16:04 - Finding sweaty startup opportunities20:36 - Using real estate as a wealth multiplier28:30 - Managing risk in real estate33:00 - Turning a sweaty startup into a media company49:40 - Advice for first-time sweaty startups

Nick Huber, welcome to the show man. Good to have you. Greg, thanks for having me. I feel like we've been friends for almost two years now and getting closer by the day. And we rarely talk in person. It's almost all texting. I know. I know.

I don't think, have we ever even, like, chatted? I don't think so. I think this is the first time I've heard your voice, except like listening to your pod and stuff. Yeah, this is weird. This is super weird. But I'm happy we can make it happen. And, you know, I really wanted to bring you on the show. to talk real estate because I'm more and more interested in real estate. The stock market is

painful. And although, you know, a lot of people are saying real estate is a scary place to be in 2023. I just wanted to bring you on because I think a lot of people have these questions and you're the real estate guy. You're the self-storage guy. So I thought, let's hear it from the horse's mouth. I won't sit here and tell you that it's easy being a real estate investor right now. I was talking my mentor, Chris Powers, about a month ago. And I was just, I got on the phone with him and I was just complaining. And I was saying, man, it's tough out there. The bankers are paying the butt.

The investors are paying the butt. The deals aren't any good. Like the sellers want too much money. You know, the market's not doing great. And I was just complaining and complaining. And eventually he said, Nick, stop. He's like, you don't understand. Like, this is how real estate works.

Like, why do you think we make so much money when times are good? It's because we'll go three, four, five, seven years when things are really freaking hard and nobody has fun in real estate. So he's like, Nick, so stop complaining. Nobody's having fun. Nobody is having fun in real estate right now. It is not easy to make money anymore and it's hard. And that's part of it. And we just got to keep our businesses going, keep our head down, focus on operations and keep working so that when things turn around, there'll be half as many competitors as there are right now. Because over the last five years, everybody who has bought assets, no matter how good of a job they do managing them has made money.

And everybody thinks of real estate as a passive investment. And it is if you just stroke checks into deals as a GP or as an LP, which means a limited partner, a silent partner. But if you're a GP like me and you're actually buying real estate and trying to make it more valuable and running it and answering the phones and collecting money from tenants, it's a business. It is a small business. There's people.

There's management. There's hiring. There's firing. There's problem solving. And so the people who are, are best at business, win. And that's something that a lot of people don't understand about real estate. So real estate's like, I mean, it's a multi-trillion dollar asset class. It's a, it's a really big space. It's like saying tech, right? There's consumer, there's social, there's marketplaces,

there's B2B. You focus on self-storage, which is a niche. How do you recommend to people to think about which niche to focus on and why are you excited about self-storage? In real estate, you look around, I mean, are you sitting in Miami right now, Greg? Yep. Yeah, if you're in Miami, within five mile radius of where you are right now, there are probably 400,000 businesses, real estate businesses, operating just one building, renting space to retail, renting space for storage units, renting space for multifamily, condos, all these different asset classes.

And if you zoom out across the whole United States, there's millions of buildings, millions of buildings. And all it takes is one building to change your life. So when I thought about, okay, here are my goals in life. I want to have free time. I want to make money. I want to have it all, right? I want to have it all.

I want to, except maybe like people to know who I am, which kind of happened through Twitter anyway. But if I want to succeed in life, for me, that meant not having to answer to anybody and having financial freedom. What are the odds? What game can I play where the odds are the best that I can do that and I can accomplish that? It's either go start a business and try to raise money or look at this business self-storage or real estate general where a lot of people can win at real estate. A lot of people can win. So it's all about odds and picking who you're competing with. And I looked at the real estate investors out there. We're not that smart. We don't do anything special.

many of them don't even know how to use email, and a lot of them are wealthy. All it takes is to be the top 75 percentile of real estate investors to make a lot of money. And why self-storage? Like, how did you get into it? Yeah. Yeah, why? Yeah, so I picked self-storage because I was running a moving and storage company out of college called Storage Squad.

We did pick-up and delivery student storage, and I was able to leverage that into about a $1.5 million bank loan on our first self-storage development. So the big pull for me into self-storage was that I looked around at the storage businesses operating, and I didn't think they did a great job. I thought that I could come in, and I know I didn't need to beat them. I know I didn't need to take everything. And it wasn't two companies battling, and the winner is going to take all, like a tech, you know, like a race in tech in one area in one niche. It was, hey, these companies that run self-storage facilities, they kind of operate like it's 1980. they got somebody sitting in there in an office.

You know, many of them don't take online payments, credit cards. They take cash. They take check. Not that efficient. Not that good of technology to help people rent units. And if I can do this, I can probably carve out a piece of the pie for myself. And so that's what we did. And now we've kind of innovated as much as possible with, hey, we're going to come in,

get rid of that manager that's on the ground in an office renting units and replace them with one manager on the phone who can rent units at several different. different locations. So what we have now is 61 self-storage facilities. None of them have an office. None of them have a full-time staffed manager on site. And we have 50 employees spread really all over the world, 20 of them in the Philippines, 10 of them, Columbia, and several all around the United States that kind of run the business of renting units and operating the self-storage business. So basically, we found an opportunity to use a little bit of technology that already existed. We didn't build software. We didn't try to reinvent the wheel. There was some technology that already

existed and we realized that we could just come in and carve out a piece of the pie. So I feel like that's a little bit of a framework for thinking about which niche you should go into in real estate. So I think you said before if there's a fax machine, like chances are there's an opportunity. Yeah, I mean, you find a business that makes a lot of money and has a fax machine. And the odds are competing with them will be a little bit easier than competing with the Stanford grads, you know, the VC-backed firms, the smartest people that you know. Right. There must be a lot of other opportunities.

You know, boomers are going to be giving, you know, hundreds of billions of dollars of wealth to millennials soon. You know, America runs on small business. A lot of those are mom and pop shops. A lot of those probably have fax machines. I know you've talked a lot about boring businesses before. What opportunities do you see in boring businesses right now? Yeah, I think you kind of think about who are the wealthiest people in the world.

And they're on one level. You know, those are the Elon Musk's and the Mark Zuckerbergs and the Steve Jobs. If you look at it on who are the wealthiest people in my town, who are the people that are at the nice restaurants right now in Miami? Who are the people that are at the nice restaurants right now in Athens? Who are the ones that have the nicest houses? Who are the ones that are in the country clubs? who are the ones that have money? Who are the people that have money

so that they can do what they want to do? And if you walked to my country club in Athens and I went around and I just asked everybody what they did, I think the answers, there'd be doctors, there'd be lawyers, of course, and then there would be entrepreneurs. There would be people who, they didn't go raise money,

they didn't go raise venture capital, somebody, either them or somebody in their family, a lot of old money in country clubs as well, but somewhere, somewhere along the line, at some point, somebody started a small business. And you'd ask them if they were entrepreneurs and you'd talk about, you know, raising money and they'd look at you like, what are you even talking about? Like all I did was, hey, I had a couple of resources. I had an opportunity to start this HVAC company.

I hired two guys. Next thing I know, 10 years later, we wake up. We got, you know, 30 crews and I got a business worth $30 million. Pest control, you know, one of my good friends at the club is a pest control guy. He's got seven crews and he sits around and plays golf all day and makes $800 grand a year. on and on and on and on down the list of businesses that most people would say, why would I ever do that? It's a race to the bottom.

Those services, you know, you're competing with a guy in a truck, when in reality, they can be really good opportunities to start your wealth snowball. And people also forget about the momentum that is involved in entrepreneurship. Very rarely do you have these people who, the Evans Spiegel's, who go from zero to billions of dollars in wealth on their first shot when they're 25 years old. The more likely story is, you know, several businesses over 10 or 20 years, learning a ton and just more and more opportunities come up as you get better at business. So my story is no different.

We started hauling boxes with cargo vans and 10 years later, we're buying, you know, millions of dollars with self-storage. Do you know the story of Rollins? Like, I've recently heard about their story. Do you know Rollins? No, tell me. Rollins is a company that was started in the 1800s. I think they do about two or three billion dollars a year in revenue.

2.4 billion in revenue. They got 16,000 employees. It's the largest conglomerate pest control. This has happened to me. You have lived in New York and all of a sudden you come home and there's mice or rats or whatever in your place. You will pay anything to get them out of your house. right as fast as possible you call up a mom and pop shop you know maybe nine times out of 10 that is a mom pop shop but maybe one times out of 10 it's this rollins company and rollins started off funny enough

in the owning car dealerships they own car dealerships and then they bought a couple local radio stations i think they must have seen that pest control companies were advertising on these radio stations so they said to themselves hey let's go start buying up some of these pest control companies. You know, fast forward to today. I had heard about them on CNBC. I was watching CNBC and one of the newscaster says like the number one recession stock, you know, this isn't financial advice, but the number one recession stock is roll-ins because

people, and if they've got rats in their house, they're not trying to save money. What do you think about that business? I don't know about you, but my parents, like my dad, back in 80s when he first got married and he bought a house, he did everything in his house. He didn't call contractors to mow his lawn. He didn't call people to fix his sink. He didn't call people to remodel his kitchen. They just did it.

They spent a ton of time. They learned how to do it and they did it. I don't know anything about anything. So when I have a problem in my house, I call my dad, right? So what are my kids going to do when they have a problem? They need to kill a mouse. Like my dad would have never called a pest control company to kill a mouse. But I have a pest control company that comes here to my house every single month.

And I pay him $30 a month. And I'm never going to not own a house that I don't pay a pest control company to do that stuff. It's just like the shift of specialization in the economy, people getting more focused on time and people outsourcing everything else. I don't have the initial stat of this, but I have the 2018 stat. So back in 1990, 10% of people paid to have their lawn cut. Like pay for somebody else to come and cut their lawn. In 2018, 44% of people paid to have their lawn cut.

Do you think, Greg, that that number is going to go up? or down in the future. It's going up. Yeah, man. We're outsourcing everything. We're paying other people to do stuff around our house. Now, these are not sexy businesses. They're not fun to tell you, you go back home to your family reunion or, you know, for

Christmas and you tell your grandma, hey, I'm going to start a, I'm starting a new business. And she'll be like, oh, well, what did you invent? Like, what's your new idea? No, mom, I'm just going to kill bugs. You know, nobody's excited about that. Nobody thinks you're going to make really good money. people aren't going after that for the ego stroke that you get of being an entrepreneur and walking around in sweatpants with a backpack on.

And that's not the cool thing to do. So the really smart people are not flocking to pest control. They're not flocking to self-storage. They're not flocking to building decks or power washing or any of these little things around the house that more and more people are spending really good money to get done. I think back in the day you had to like your dad fixed things because he had to. to probably. Like there was no, there wasn't Google, there wasn't like YouTube. There wasn't, you know, Yelp and the directory of places that he can call. And he just had to figure it out

himself, you know. I remember learning how to drive standard, standard cars. And like, I basically got into this car, brought my phone, like went on YouTube and like was basically watching how to drive standard while I'm driving standard. A ridiculous way to learn how to do something, but I just had so much help. Like when was the last time you stopped, you know, because you didn't know where you were going, you put something in Google Maps. Yeah. And I think that just made us as like a softer generation.

Yeah. I mean, the fact that we can get anything in the whole world delivered to our front door in two days on Amazon, the fact that we can have, you know, sit down and stream any video in the world in 10 seconds. You know, it's absolutely. I mean, last Thursday I went to volunteer at feeding. It's called Feeding South Florida. It's a sort of a food shelter for families that need food, basically.

And I went to a warehouse and I went and inspected a bunch of canned goods to make sure that they weren't expired. I, you know, sorted it, put them in boxes. I went to my girlfriend and friend after we did it all together, and we spent an afternoon doing it. It was three hours. And I was like, I have such a headache. Like I can barely breathe.

I don't know why. And they were like, yeah, we have headaches. And it's because like none of us at all are used to like, you know, hard physical labor. And that wasn't even hard physical labor. It was literally sorting cans of Campbell's suit. but just like being in the warehouse fumes everywhere i think you're you're right when it's like we're kind of soft our generation is kind of soft everybody everybody wants to get rich nobody wants to for me it was carrying 70 pound boxes up spiral staircases for 20 hours

straight for college students that's how i started everybody wants to be ripped and sit on the beach and have that feeling of having a good ripped body nobody wants to wait up at 5 a.m. and when you're not motivated and do the actual workout to get rich or to get ripped. It's like everybody thinks you can just fast forward entrepreneurship and make a ton of money when in reality you got to do a bunch of not fun things and you got to be willing to suffer and you got to not really make decisions with your emotions. You got to think logically about maybe a best opportunity that you can go after. And if you talk to a lot of people who, you know, maybe they didn't have the network, they didn't have really wealthy parents, they didn't have that

head start, they just got started by doing not fun stuff. They were sorting Campbell's soup bottles in a warehouse for, you know, it wasn't six hours. It was, it was weeks and months. What would you do if, you know, you started with under $100,000 liquid net assets and you wanted to make seven figures next year? What would you do? I don't know. I think it's, it's all about kind of walking around and, like, how to scope business ideas for me. And everybody, that I know as an entrepreneur thinks about this the same way. Like when we go to restaurants, the first thing that we think about is like, is this restaurant making money and you're counting heads in the restaurant and you're thinking about how their business might work? How much rent a month

do they pay for this building? You know, how many employees do they have in here? What are the net costs on this dish that I ordered? How profitable might this restaurant be? Then you walk by this little bitty boutique and antique shop in downtown Athens and nobody's there and you've never seen anybody there. And you're like, how the heck does this business make money? What's their rent? How do they make money? Every entrepreneur that I know kind of walks around life just thinking in a more intricate way about how business works. How does this business work? And when you start to walk around your town and you watch the lawn care companies, you watch the pest control companies show up, you watch the garbage companies show up, you watch, you see all of a sudden all the, you know, five or six different

power washing companies just in a little small town like Athens. And you start to see how they work and you start to Google, how would I find this company? How do they make money? It becomes pretty evident where an opportunity might be for you in your town if you just kind of think critically about that stuff. Do you do the same thing, Greg? Do you walk around life and just kind of think about how business might work everywhere you interact? I actually do it more like on the internet.

Like my version of walking around is like quote unquote teleporting to different Facebook groups or Reddit, subreddits and seeing like what are different niches that are underserved that are growing really, really quickly right now. And then looking at these Facebook groups or subreddits. it's in being like, what are these people asking for? And then how do I build products to solve their needs? Yeah. Yeah, my story was, I was in, I was at Cornell in, I was at Chicago, New York, and we were watching this company called Big Red Storage, just make an absolute killing during finals week. I'm talking, we did some basic math and found out that they were doing like $450,000 a year of

revenue. And we watched how they did their business. And they showed up and they had scales. They had, they like had physical scales. So they were weighing every box and building receipts. And building receipts. They spent like 45 minutes with every customer, building a receipt of of the weight of everything and billing the customer. There was no way to sign up online. They weren't taking last second customers. So all we did was see that. They're like, okay, here's a company that makes a ton of money and they're not accepting customers last second. And they're weighing everything and their operations, their logistics are terrible. So we're like, let's just throw up a website and see if we can get some customers. And two weeks later, after a lot of sweat, we had five grand of cash sitting on our

bed because we went around and picked up all the stuff and did the work. And then you fast forward five years later. We had a business that was doing 2.5 million a year in sales and making 500 grand a year in profit. And we had half a million bucks after tax in the bank to go build a self-storage facility from the ground up. Fast forward five years later, we got 61 self-storage facilities and we've acquired over $75 million for the storage. So it's like those little steps of like, hey, I just I was walking around my life looking at how this one storage company made money in my town. And there was that opportunity. There was that little opportunity.

How important is looking at other businesses and trying to emulate them in some capacity? I think, well, the next three weeks involved us studying all 20 companies in the country that did pick up and delivery student storage. And there was one company in Bloomington, Indiana, called Guys and Dollies, and they did it really well. They gave away free boxes. They had like pick up hubs where you could bring your stuff to a truck that was parked there for certain hours during the day. They were really efficient. And we basically modeled half of our business off them.

We found another company in Boston that had a really good way of like handing out those free boxes and like marketing and having their sign up form was perfect. Their customer service was way better. We modeled half of our business off that. Again, it's not it's not like I have to be the best company in the world to win in this and what we're talking about. I just have to be good enough to get a piece of the pie. And if I can get a piece of the pie, then I can improve and I can improve and I can improve and some awesome opportunities will come. So yeah, we absolutely had very little innovation.

We just built a Frankenstein business by taking bits and pieces of other companies, putting them together into our business. And then before we knew it, we were one of the best and the biggest. Should you start a cash flow business first and then buy real estate? Or should you get into real estate somehow? I think it's expensive, right? I think most of the gurus that you look at online will say you got to start with real estate. You got to wholesale deals.

You got to find investors. You got to go out and start with real estate. Buy that one fix and flip and fix it and flip it, whatever you got to do. And my advice is if you don't have a network that you can raise money from, meaning like you are a private school kid and your dad is an entrepreneur and your grandpa's an entrepreneur and all the people you know are entrepreneurs that you can go out or even. not entrepreneurs, but doctors, lawyers, people that you can go raise money from. If that person, I would say, go ahead and get in real estate and go find that deal and raise money and get the help because you're in a great situation. No shame in that. But if you're just a kid from the Midwest whose mom was a school nurse and dad was a construction manager and you got

maybe they have a $100,000 net worth and you don't have any money, absolutely forget about real estate. Stop getting obsessed with real estate and go start a company or work for a company and find a way to make a ton of money, period. Absolutely. And then once you have money, then it's like, okay, what's my real estate thesis? How do I think about my portfolio? Do I get into commercial, residential? Real estate is a really good wealth multiplier. It is a way to like roll your wealth snowball.

If you have a wealth snowball rolling down a hill, real estate is an amazing way to like make that snowball bigger and keep it rolling. But if you're starting with nothing and you're trying to, you're trying to, you're trying to get somewhere and build wealth, I don't personally think that real estate's the best way. So I would agree with you. Like wait until you have some money, then think about how to put that money to work because in real estate, you have to have cash. The person with the cash calls the shots. And luckily, when I did my very first deal, I had a half million bucks in my own cash. So I had a little bit of leverage. We didn't have any one investor that just took over and

named the terms, the bank. You know, we didn't have to go get a co-signer for our first loan on our first bank. We would have owned very, very little of the upside if we had zero cash bring into the deal. Sweat equity means almost nothing in real estate, in my opinion. The people with the cash call the shots. What advice do you have to someone like me, frankly? So I'm a founder. I've got a team of about 40 people. You know, I'm busy doing that. I'm interested in real estate, but I also don't want to, I don't want it to hurt my main, my main business. You know, how should someone like me think about real estate. It's just like I consider, well, two parts. Number one is I would focus on continuing to make money the way that you're best at making money, which is your agency. Let's assume,

you know, you're doing 10 plus million year in revenue, multiple millions a year, EBITDA. There's no reason for you to take the eye off the ball because of some sexy opportunity in real estate where you're not the best at that, right? I have 300 people on my, on our investor capital stack that I've invested passively in our deals. I'm what's called a syndicator. I'm the GP. I put 10% of the cash needed for a deal in or a little less or a little more. And then I raise money from a bunch of people. We put the deal together. And that's my business. That's how I'm in business. All 300 of those people, very few of them are full-time real estate professionals. Actually, I don't know any of them that are. They're all just getting real estate exposure by investing.

Now, the second part of that is to do it, you really need to understand real estate. It's just like having a CPA. you can have a CPA that gives you really good advice, but unless you know a little bit about the tax code, you're probably going to miss some stuff, probably not going to be able to pick a good CPA, probably not going to figure out what big overarching strategies you want to implement. So understanding leverage,

understanding value add, understanding net operating income, understanding the risk of debt and cash flow and how all that works together, it's really critical because there's a lot of folks that went under in 2008, that lost a lot of other people's money. And if this keeps up and interest rates,

stay high for another couple years, it'll be no different this time. And a lot of people who do what I do and raise money from outside investors will go bankrupt. And the people who invested the money will lose the money. What do you like better if, you know, if you can invest in a trailer park or a parking lot, which one do you like better? The good thing about a parking lot is it's a more operationally intense business. And the more operationally intense businesses, like the old manual car washes, you know, some of these businesses that really, they're not necessarily, you know, passive as passive. And you can't necessarily find third party management as easily.

If you buy a self-storage facility, you can pay CubeSmart, 13% of your revenue, and they'll do everything. They'll just send you checks, right? Parking lot, who you're going to find a manager parking lot? It's a little bit sweaty. The returns are probably a little bit better. It hasn't been institutionalized. It hasn't been rolled up by private equity.

But mobile home parks are an asset class where you can roll them up. You can scale management. You can manage them at scale and you can build a bigger portfolio. And there's appetite right now from private equity to buy big chunks of mobile home parks. I don't know about parking lots. So basically my plan is I'm going to go do the work in self-storage to buy one-off deals here and there. A million dollar deal here, a $2 million deal there will stumble upon a $10 million deal. And I'm going to go around and do the work to accumulate a big portfolio.

And when you have a bigger portfolio, you have less risk, you have economies of scale. and you have appetite from new buyers. New people, new money with cheaper cost of capital, bigger players come in and buy tranches of bigger assets. So the values go up when that happens. And that's our long-term play. It's like build something where we're acquiring assets at small scale, but we're combining them and it gets more valuable as you do that.

So one part of your strategy is modernizing basically some of these self-storage facilities. The other part, it seems like, is buying these storage facilities in, you know, secondary tertiary markets, right? Like, you're not buying self-storage in Manhattan or Miami Beach or whatever, right? Correct. Yeah. So, you know, this is not easy. You might think, oh, Nick's just buying self-storage facilities. I'm competing with 50 other groups just like me.

50 other groups are out there trying to find self-storage to buy. And when you're in investor boardrooms and you're trying to raise money and you're trying to get financing for deals, the first thing investors are going to ask is, you know, when can we buy storage in Austin, Texas or Atlanta, Georgia, or Miami? Because those areas are growing. They're growing nuts. I want to own property there. So there's a lot of people who do exactly what I do trying to buy deals there. And obviously that runs the price up. Demand for those assets is a little bit higher. And cash flow, year one is almost non-existent or sometimes impossible to find in those markets for guys like me without. the cheap cost of capital. I'm not raising a giant fund. I'm not borrowing it two and a half percent. So we found our way to find your one cash flow and going some other areas where other investors aren't necessarily as excited about. A lot of people ask me, Greg, how do you build products that foster community? Well, I've got good news. That's exactly what Late Checkout does, my company. We partner with the largest brands in the world and fast-paced startups.

to design products that resonate with your community. We add a couple interesting clients every single year. So if you're interested, and that sounds like you, email front desk at laycheckout. Dot Studio with what you're working on, what you need help with, and don't forget to mention the Where It Happens Pod. Thank you. Tell me a deal where, tell me a deal that went horribly. Like, what is your worst deal and what's your best deal?

Well, you got to talk about why real estate sucks right now. We haven't had a deal, and none of the properties that we've acquired so far, I'm worried about losing the building. So I got to say I'm lucky, and none of our deals have been horrible, right? We have a deal in Springfield, Illinois. It's one of the bigger markets that we bought. It's about 250,000 people. It's right in the middle of town.

We're missing pro forma on that deal. We projected 7.5% return. and we're about five to six percent return year one on that deal. When the interest rates went up, starting in November of last year, the homes that sold started to decrease. Like people weren't moving, people weren't hiring local movers and people stopped buying homes. And this month, compared to last December, we're like 30% of the amount of homes transacting.

So that's a big driver of how many people rent storage units. So not only is our debt getting more expensive, our debt's getting more expensive, our debt's getting more expensive, asset values are dropping. That's exactly what the Fed wanted to happen because when you borrow more expensive, you can afford to pay less money for the same amount of yield, the same amount of profit. So the value of our buildings are dropping or all buildings are dropping and less people renting storage units. So operations are under pressure as well.

We moved in at one of our big portfolios, we moved in 140 tenants last November. And this November, we moved in 45 tenants. Right? So occupancy is dropping. And luckily, we didn't put a ton of leverage. on many of these deals. We're pretty lean. We don't have full-time overhead of staff. So we're still cash flow positive everywhere. But yeah, I can very easily see how somebody paid money thinking that, because from 2020 to 2021, we were able to drive revenues 25%. I'm talking like if a storage

facility that I was going to buy was doing 20 grand a month in 2020, I knew that if I bought in 2021, I could do almost 30 grand a month. Like I could literally go almost 50% up on revenue or even 25,000 month, that's huge for net operating income and earnings and thus the value of the property. That is now changed. Like, we under right now that revenue is going to stay the same year one. So if you bought a deal thinking you were going to drive revenue by 25% to make your numbers work, that's how deals fall apart. And I mean, the difference between real estate and, you know, stock equities is that, you know,

If the stock market goes down, what people say to do is dollar cost average, right? Just put it in a little bit every week or every month and, you know, over a long period of time, you'll be okay. With real estate, if you want to get into real estate, you can't really do that. Like, you only have, like, if you, you have to be very smart about when you're purchasing your building, your product. If it's your first building that you're buying, should someone buy it in 20, or is it too uncertain?

So there's just so much real estate in the world. Look, there's 50,000 self-storage facilities. Some of them are going to be really good deals. It all depends on how much you pay for one. Like there's 100,000 buildings within five miles of where you are in Miami. Some of them will trade at really good deals where the people who bought them are going to make a lot of money. We haven't acquired very much storage in the second half of 2022 because overall, as a market, seller expectations are still too high, and I don't think it's wise to deploy a lot

of capital into real estate. But we just bought a deal and closed it on the 15th of December for $1.65 million, and it's a really good deal. I think in a couple years, it might be worth $3 million. You know, so it's really hard to say. It's really hard to say. It's all depends on there's deals. What you're saying, what you're saying is basically like, no matter if it's a bull market or a bear market, bull market will have deals, bear market will have deals. You just have to be like a hawk, basically, and you have to do your research and you have to have a thesis and you have to be probably not afraid to walk away from deals. Yep. Yep. And you got to do the work. You got to stay in the game. You can't get frustrated and all upset. Like when I was talking to my mentor and I was like,

we just need to go pencils down and like stop everything. And he's like, no, no, no, no, no. That's not how you make money in real estate over the long run. You have to keep working. You have to keep underwriting. You have to keep talking to sellers. You have to keep talking to brokers. And eventually, it'll open back up. I love it. Okay, I want to switch gears a little bit and talk about the sweaty startup empire, the ecosystem of sweaty startup.

You know, when I look at you, I see you as a creator in the space. Like, you've got a few hundred thousand Twitter followers. You've got an amazing podcast. You've got an email list. You've got a community. You've got courses. is how do you think about yourself as a creator? And do you think of yourself as a creator?

I do. And I think when I started, and I think to be successful, I think you would agree with this. When I started all of this, I had no plans of making money or having a ton of opportunities come from it. I literally just recorded myself and broadcasted it into ether,

tried to find ways that I could grow, and eventually it started to catch on. And the whole thesis, as you know, is, hey, you can think about entrepreneurship a different way. You can think about entrepreneurship and the fact that you don't need to necessarily go raise money. You can just do little simple things over time, not sexy things. You're going to make decisions with logic. You're going to try to choose your competition. You're going to use some core fundamental strategies to think about entrepreneurship.

And even if you're a person who works at a company, like think about management. Think about value added to that company in a similar way. The podcast started to grow. Twitter started to grow. You started on Reddit basically, right? Like, you started on the entrepreneurship subreddit. Yep. I got really lucky in that they allowed links on there for a little while and they put up with me

for about a year and a half of promoting the sweaty startup. And so I would write, I would write really good copy. I would write something about entrepreneurship. All the techies would hammer down and hate on me and all the small business junkies would engage and love it. And it was just a, you know, a time where a lot of folks were. pissed off that I was writing on Reddit, but it was the only place that I could find a bunch of entrepreneurs that I could know of. I didn't know entrepreneurs. Another thing about entrepreneurship,

it's really lonely. I can't just in my town go around and find and see all the entrepreneurs. They're busy. They're working. They're secretive, whatever it might be. It's pretty lonely business in general. So eventually a guy named Moses Kagan found me on Reddit and said, Nick, you know, you're getting into real estate. You really should go on Twitter. That's where the deals happen. You got to go on Twitter. And I was like, oh, Moses. like social media is a waste of time. Like, I just want people to listen to my podcast and do my own business, whatever. Call me back about six months later.

And this is a guy that has over $200 million with a real estate. He took the time to call me back again. Say, Nick, I'm serious. Get on Twitter. You're right. I can tell you right really well. Like, you're going to grow there. And I got on Twitter and I wrote my first thread and I put the profit and loss statement

of a self-stores facility and just got radically open. Like, you see more of it now. But back in 2020, you didn't see entrepreneurs like opening the books up and telling everybody how much money they made or how much money. they lost or exactly how they did business. So I got on there, posted a real estate deal, a thread. And Moses quote tweeted he had like three to five thousand followers at the time. He's like, hey, Nick's here, you got to follow him.

He's a friend of mine. And boom, I got my first thousand followers. And you fast forward a year later, I've had that one really big thread where I met you guys. But we'll talk about that. Talk about that. Because that was like legendary. Yeah, I have a blessing in that I can, I can. I'm a prolific content creator.

Not all of it's good. As you know, you probably disagree with a ton of stuff I write. So many people disagree with a lot of it, and that's fine. It makes me smarter. I love it when people challenge me on Twitter. But I can write a ton of content, especially when I get in a zone. So I got in a zone one Sunday and I wrote for like four hours, just business principles, life principles, things I agreed with, things I disagreed with.

And it ended up being the first major thread of mine that got, you know, got me 30,000 followers over the course of it a couple days. Yeah, I remember I had a thread once that got 60,000 likes and you sent me a message and you said, it was just like 20 minutes after I had posted it. I had like 2,000 likes and you were like, Greg, a viral post can change your life. Your life is going to be changed. And I didn't really understand what you meant by it. But, you know, I got 70,000 followers.

and 24 hours from that post. And it did change my life. You think about the opportunity that comes along with 250,000 followers in a unique niche, especially like real estate. I've started businesses and advised on them. We can touch on RE Costsug if you want. I've raised money from Twitter. I've met people like you from Twitter.

I've started businesses with people that I've met on Twitter. And it absolutely changed my life. So, like, yeah, you can be on Twitter and you can ship post and you can waste time and you can talk about fantasy football and politics, or you can get on Twitter and get pretty serious about a certain niche. And it can just be a side effect of that, that you can find opportunities to make a ton of money, which has been a blessing for me. My takeaway is from your story of like how you, you know, became quote unquote famous is number one, you started in Reddit. And if you can make it on Reddit, you can make it anywhere. It's kind of like Manhattan.

It's like New York City, right? If you can make it in your own. York, you can make it anywhere. If you can create content that really connects with people on that platform, it really, really forces you to be an incredible writer because people don't have time for, like people go down on you on Reddit, you know, if you say stuff, right? People are mean and grow, especially to the capitalists and the entrepreneurs, right? Yeah, that's definitely one takeaway is like, if you want to like sharpen your skills, like Reddit is a great place to do that. The second thing is don't write cookie cutter stuff. So figure, you know, in your niche, right?

So in your niche, you pick self-storage and real estate. Look at what everyone else is doing and don't do that, right? Like push it a little bit. Have a unique voice. And like you did, right? You put it your numbers when people weren't putting out their numbers. You wrote stories when people weren't writing stories on Twitter. I think you're forgetting the most important part and like the number one reason why most people have a ton of followers on Twitter is because they're actually doing something interesting and uncomfortable and hard in their real life.

Everybody wants to be an influencer on Twitter. Everybody wants to have a bunch of followers. Nobody's willing to actually start a business and raise a bunch of money of other people's capital and go out and buy a bunch of property and like do that scary hard work of building an actual business in real life. So I don't know. I mean, Sahel came to Twitter and did something incredible. He built a brand off of writing alone. I mean, he had a badass private equity background, and we know he's brilliant, and we know he's going to build an empire.

But he came in, not necessarily talking about his own experiences, but like breaking down the framework to just be a badass human, I think that is so incredibly rare and so incredibly hard. And I would never want to compete with Sahel to try to make it on Twitter. I couldn't. I'm not as dedicated. I'm not as smart. I'm not as good of a copywriter as Sawhill. But I was doing something interesting in real life. I was buying a bunch of storage. I was building a real estate private equity company. I had sold a company. Those things are what really allow you to grow a big following. And if you can do it in a way that you can follow the badass people, the movers, the shakers, the deal makers, the investors, the entrepreneurs start following you and latching on to you because they like the way that you think. You can make a ton of money. Whereas, the shit posters that have three to 500,000 followers on Twitter struggle to make five or 10 grand a month sometimes. What would your business look like if you never had an audience? If I didn't have Twitter, we would probably own about 10 self-storage facilities right now

instead of 601. My net worth would be about 10% of what it is right now. I would not have invested and advised on R.E. Kosig, which I think is going to be one of the biggest businesses that I'll have done, you know, if we look back 10 years from now. And we'd probably still be running our moving and storage company because we would have to keep that cash flow coming in to feed ourselves because the real estate, you know, we just wouldn't have been able to find investors and we'd be struggling to find deals. And yeah, man, I'd be 10 years behind or 20 years behind my career where it is now. What's, what's Ari Kossag and why do you think it's going to be big? So with real estate comes an army of folks.

background who helped real estate transact. You have attorneys to buy $75 million with real estate over the past 18 months. We've had four full-time attorney salaries. We've had title companies that we've paid hundreds of thousands of fees. We've had closing attorneys. We've had property insurance agents. We've had all of these different people that do services so that we can transact real estate. That's another lesson is that transacting real estate is super, super expensive. You can sell Apple stock with a click of a button. If I wanted to sell a couple properties, it would take me six months and hundreds of thousands of dollars in fees and expenses. One of the things that you do when you buy a piece of property is you got to figure out the

depreciation schedule with the IRS. And all the real estate cost-set companies out there were just, they were slow, they had to actually visit my properties. It didn't make any sense. So my CPA and the smartest dude I know is Mitchell Baldridge, him and his wife own a firm CPA. I don't know if you've spoken to them either, but he has done. He turned out he had done almost a thousand cost XX for his clients as a CPA in-house. And it was a pretty simple pitch for him to actually start a cost segregation firm. The basis behind it is you need an engineer to break down your building and tell you how fast you can depreciate certain aspects of a piece of property.

Anybody who buys a piece of property over a half million bucks is going to get a cost segregation study done so that they have a depreciation schedule to show to the IRS and to offset taxes that way. Our firm simply does remote visits and we do it at a really affordable price and we turn them around really quick and we're 20 employees deep now and ruin 150 grand a month of cost sex. It's crazy. I love it because it's number one. It's a it's a creator-led business. Like Mitchell, Mitchell writes these awesome tax threads on Twitter, which get a lot of love. and he's basically, along with the help of you, kind of getting interest in real estate and tax savings.

And then you've got this niche down services business that you can funnel those people to. And it goes back to what you're saying about Twitter, which is like, it's so valuable. If you can be a creator, amassed an audience of really high value people, and then you can create a product or product-ized service in this case. there's seven or eight figures or maybe in bigger. This is the way to put in perspective. Imagine if every single day a stadium, a football stadium of real estate investors, Dallas stadium full of real estate investors,

and I got to stand in front of them in a mic for 20 seconds every single day and tell them something. How valuable would that be if you knew what real estate investors wanted, how to help them, what services they needed, what parts of the closing process were not great. I mean, it's just like having a megaphone and being able to scream in the ear of your direct customer over and over and over again. It's insanely valuable. Yeah, and you picked a niche that's like highly, highly valuable, right? Like when you're thinking about picking a niche, if you do want to create a creator-led business, I think, you know, if you're trying to optimize for revenue, like you want to pick a niche that is highly valuable, right? That's why you look at YouTubers and you have someone like Graham Stephan, who's one of the biggest finance.

YouTubers that just took off during COVID. He's got three or four million YouTube subscribers. He's making three, four, five, six million dollars a year where you have someone else who has three million YouTube subscribers and they're making two to four hundred thousand dollars a year. And it's just because finance as a category is just way more valuable than, let's say, comedy. So bigger pockets, many of the people listen to this have not even heard of that podcast.

It probably gets 50,000 downloads an episode. If you're into real estate investing, you probably listen to bigger pockets. They talk about a lot of the same stuff. I talk about they're actually much bigger. They have bigger influence than I do. But maybe their platform, maybe their blog, maybe the ads, maybe their podcast, maybe all that generates, let's say a couple million, five million dollars a year of profit, right? Let's say it's pretty big business, pretty big media company.

But in the background of that media company, the guys who started, the podcast with Bigger Pockets, they are now raising $50 million, about $50 million a month. They're raising from the Bigger Pockets audience money to buy real estate and they're syndicating and they're buying tons and tons and tons of real estate off the back of that podcast. So, relatively small reach, you had never heard of Bigger Pockets and you're in the creator world. Huge, huge, huge, mega wealth business in the background running behind it, behind the scenes. I'm like looking at this website and you would never expect that this business is doing that well. But it makes complete sense.

Do you know the car dealership guy? I've talked to him a couple times. Yeah, he's trying to figure out how to monetize his business too. And he started doing some of those spreadsheets where like helping people buy and sell cars. I love that. Yeah. Can you talk more about like what he does and why you might why you think it's interesting? He writes a really good copy.

I mean, it's it's over. and over and over again, the people who rise up to the top on Twitter are the ones who know how to write clear and concise copy. They know how to ignore nuance. They know how to piss people off. They know how to write things that make smart people think deeply about something. And car dealership guy, his family owned a big bunch of car dealerships. He knows the business really, really well. And he talks about the business. He talks about when to buy a use car, how to buy a used car, the inner workings of a car dealership business. And I'm sure, I don't know how old he is. I don't want to share too much about him. that he doesn't, you know, want people to know. But he is going to build. If he plays his car ride, he's going to build a really big business buying and selling vehicles.

Yeah. So he's anonymous, which is pretty interesting. Like, if you were him, would you, like, why is he anonymous? I don't have patience for people who are anonymous. Like, if you, if you're not even, if you are not willing to put your face behind your ideas on Twitter, then I am not going to heavily wait your ideas on Twitter, period. I mean, I love the concept of Web 3, and I love Belagie's idea of everybody being an anonymous being on the internet. But in general, in business, when it comes to people doing deals with you, when it comes to people wanting to get to know you, when it comes to serious opportunity, that all comes when people get to know a person, that they can trust and they can build rapport with.

And people invest money with me. People bring deals to me. People talk about business and opportunities and I can make so much money on Twitter because I'm a real human. And the Anon stuff, I don't know, it's kind of a cop out in my opinion. My best guess is he has like a full-time job and probably didn't realize like it was going to be this big. And then all of a sudden he's got hundreds of thousands of followers. He's got his community. He's got, you know, all the stuff he's doing.

And he's just like, all right, I guess I'm the car dealership guy now, you know. I think Strip mall, Trent is another example of just somebody who they write incredible copy in their prolific content creation. and he's already been doing real estate for a while. So I don't know. Who is that? Who's a strip mall tent? It's just a guy who tweets about strip malls and real estate on Twitter. And it's an anonymous account that writes really well.

And you can learn a lot about real estate by following them. In my opinion, as well, if you're going to raise money from people on the internet and you're not going to disclose who you are, it's kind of like having your cake and eating it too. It's like it reeks of like trouble down the road. if people start raising money and building businesses with anonymous profiles. But that's just my opinion. I don't have anything against these folks who are anonymous. I have made the decision to put my name out there, and I'm reaping a lot of the rewards from the network that has grown.

What advice do you have for folks who are interested in sweaty slash boring businesses if they want to get into it? Yeah. I would say it's not easy. Of course, there's a lot of reasons why you shouldn't do it. you can name a ton of reasons right now why a small service business in your town might be a crappy thing to do. But no business is easy. Contrary to what you read on Twitter, making money is freaking hard. But if you're willing to do the work and you don't care about your ego and

you're not going to make decisions with your heart and what you want and everything that you want out of a job and everything that you want out of life and you're willing to do something that other people want and give customers what they want and get excited about the process of entrepreneurship. Maybe what you want is to build a business and to manage people because all businesses when you're, it could be a sexy tech startup or it could be a lawn care company. Every business, if you're doing it right, involves hiring people, firing people, making hard decisions and managing problems.

That's every freaking business. So you might as well do a business where you don't have to be the best to win, where you can choose your competition, you can study a market, that already exists, you're not training customers, you're not dependent on raising venture capital, you're not dependent on the debt market of how your VC-backed company might be valued at any given time. You can just take steps forward and over the course of five years, you can put some money in the bank and then you can put some more money in the bank and you can get better and better at managing, hiring, firing, doing those decision-making, doing those things that make an entrepreneur and

your whole world will open up if you do it long enough and you have what it takes. I love it. Nick, thanks for the time. Where could folks find you? You can go to sweaty startup.com. You can get on my email newslet letter there. That's where I send an email to everybody once a week, once a week. And follow me on Twitter if you don't know about me already. But Greg, I really appreciate it, man. I have a ton of respect for what you're doing. I consider you a mentor of mine and close friend. And I appreciate the fact that you want to see me when and you've done a lot to add value to my life, man. So I really appreciate it. Of course, man. It's just, it is. It is,

weird that we've never met though we will we're going to smoke a cigar together within the next 12 months all right man take care