Wayne Gretzky once said “you miss 100% of the shots you don’t take” and that’s also true for self-storage investors. While you may feel you have no risk in never moving forward, the truth is that you pay the ultimate price in the form of never having created a form of financial security with an additional cash flow stream. Indeed, you are far better off taking an educated guess and buying a storage facility than never taking action at all. But you have to do it the right way.
“Achievement seems connected with action – successful people make mistakes but they don’t quit”
Conrad Hilton was America’s greatest hotel owner, and he said those words when asked about how he turned his career around after a string of losses in the Great Depression. He meant that there is no shame in taking the shot – if it’s a well-planned one – and missing, as long as you try again. Using this logic, you should not ever avoid buying a storage property strictly due to your refusal to shoulder any blame if it does not do well. The important thing is to take educated risks and to keep trying even if you don’t initially hit your numbers.
The Army’s “80% Solution”
The U.S. Army has a management book for officers, and it contains a concept called the “80% solution”. This concept is that taking no action is more dangerous than taking an educated gamble. In modelling of combat situations, the Army found that leaders who took action had an 80% better chance of success than those who took no action at all. Again, we’re not suggesting that you simply buy a storage property without putting in the effort to do terrific due diligence, but that you should not fear taking action as a barrier to making a good investment.
So if action is key, how do you make good decisions on what self-storage facility to buy?
To make a correct decision on buying a storage facility you must accomplish the following:
- Understand how the business model works. We would suggest our Home Study Course on how to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance and operate self-storage facilities. But if you cannot afford that, at least scour the internet for every article you can find on the topic. The key is to understand the profit drivers and how to reduce expenses and mitigate risk.
- Create a strong deal funnel. There are essentially four ways to find a storage property to buy: 1) on-line listings 2) brokers 3) cold-calling and 4) direct mail. They all have their place and you should never use only one of these resources.
- Look at a large number of storage deals. The more deals you look at, the better your odds of finding the right one. Although you have no control over what specific deals are available in your lifetime, you do have control over looking at each and every one to comparison shop, and only those buyers who look at a huge number of offerings have achieved this mission.
- Do exemplary due diligence. Ben Franklin once said that “diligence is the mother of good luck” and that’s as true today as it was two centuries ago. Smart buyers understand that drilling down on every aspect of the property – from condition to permitting to demand to revenues to costs – is what reduces risk and makes success more assured.
- Apply strong management systems. Most owners of storage properties are a simple team of an off-site owner and an on-site manager. You have to understand your role and how to be an effective manager of the manager and press hard on the items that are key to success and not stress over things of little consequence.
Don’t hold back on taking action on self-storage investing but do so in an intelligent manner and improves your odds of success. You do not want to look back on this moment, years into the future, and regret that you did not do more to build your financial security.