The best way to find a winning self-storage facility to buy is by looking at a large volume of deals. But how do you accomplish that? In this episode of the Self-Storage University podcast we’re going to go through the action steps necessary to build a strong deal funnel. With volume the key to success, this podcast is devoted to helping you build champion-level numbers of potential properties to buy.
Episode 18: Building A Successful Deal Funnel Transcript
Volume is defined by Wikipedia as the quantity of three-dimensional space. This is Frank Rolfe, the Self Storage University podcast. I'm not talking about that definition of volume. I'm not a scientist. I'm talking about more of the definition we all know when I use the word volume, and that is basically sheer quantity. Most particularly, sheer quantity of deals for you to look at to find the correct self-storage facility.
Now, sometimes people talk about conversion of volume into the specific deal, and that is called the deal funnel. A deal funnel, by definition, is when you have something with a wider opening that narrows to a narrow opening, typically used in the form of a way to put gasoline, as in a funnel in a car. In this case, it's talking about taking volume of self-storage deals and creating those down, sifting through those down to that micro self-storage deal that fits your parameters.
So let's talk about how to build volume and convert that into deals to look at. Let's start off with a territory. Anyone who's looking at buying a self-storage facility needs to understand that the best beginning spot is you need a territory.
Now, what is a territory? A territory would be defined as the geography in which you would look at seriously buying that facility. For many people, that territory is based on the simple geography of how far it is from their home. For most investors, they'd like a geography of roughly four to five hours from their home, that radius, because it gives them the freedom, the ability, the control to get in their car, drive out to the property, spend some time there and drive home by dinner. So they feel at any given moment, maybe next weekend on a Saturday, they'll go out and visit the property and it will fit seamlessly into their lifestyle.
Other times, however, the geography of the territory is based not on where you live, but where you want to invest. You might live in California, but say, "I don't want to buy anything in California. I think it's overpriced. I don't think the market's good. I want to buy only in the Southeast because that's the region I believe in." Or, "I want to buy in the great Plains or the Midwest or the Northeast," or whatever region it is you want to invest in. But, again, you've got to identify that on the front end. You can't just say, "I'm going to buy a self-storage facility somewhere in the United States." You'll never be able to find one. It's like shooting a shotgun wildly in the air. It's very rare you'll ever hit a target. So before you could even look at building volume, you've got to come up with your territory.
Number two, if you're going to take that volume to convert the volume into something that's usable, you have to create the funnel, the funnel, or the basic criteria that you're looking at buying. It could be the size of the property. It could be attributes of the property. It could be the numbers on the property. But the funnel is what defines from that raw volume what it is you're actually trying to buy and, again, you've got to define that to a very narrow reference. It can't be broad. It can't be, "I just want to buy a self-storage facility." No, that can't be correct. You must have some limitations, your capital for your down payment, there can be certain parameters of a facility you'd buy versus one that you would not. We need to identify all that on the front end.
So once we have that geography and once we have that deal funnel, which are the attributes we're looking at, now it's all about volume. So how do we now create volume?
Well, the first thing you can do to create massive volume on the front end is look at online listings. So you can go to LoopNet for example, and you'll find any number of self-storage facilities that are already for sale and already priced right there online. So there's an immediate resource you can tap into at this very moment.
The second would be to build your list of brokers. You will very quickly see by looking all the various websites online, you will be able to create the list of self-storage brokers, and there are quite a few. Many brokers in the United States specialize just in the self-storage product, and you want to build that list of brokers. The next thing you want to do is you want to start contacting them by email, by phone, saying, "I want to buy a self-storage facility. These are the parameters. What do you have?"
Don't forget one of the most important things they have that most people don't realize, and that's what they call pocket listings. These are listings of self-storage facilities that are for sale, but they're not publicly advertised. You might say, "Why would someone do that? If you're going to sell your self-storage facility, wouldn't you just put a sign out front or put it on MLS?" No, not always. Sometimes the owner does not want the customers or the manager to know it's for sale because it might spook them. You could see that, right? You could see that if you are storing your stuff at a self-storage facility, and then suddenly you see a sign in front that says for sale, you might think, "Well, I better get my stuff out of there. I don't know what's going to happen here. Maybe they're going to redevelop it. Maybe the rents are going to go up." Same with the manager. That's why people like to often remain anonymous, so brokers are a great source of deals.
So you have your online sources, you have your brokers. What else do you then have? Well, the next thing gets a little more granular, cold calling and direct mail.
How do these efforts work? Well, first to do that, you've got to come up with ideas within your territory of where you really want to focus. I think a good thing to do is take your territory in the form of a circle, if it's a circle, and divide it into four quadrants and then decide which of these four quadrants is technically the hottest part. It seems that every territory in America, there's that one section that is more attractive economically from a population perspective, population growth than the others. So let's focus on that.
Now let's find cities or Metro areas within that that are more attractive than others. Once you've decided these are the areas that attract me the most, maybe it's based on high income, high home price, low supply, high occupancy, high population growth, now let's get down to it and get all kinds of nitty gritty.
What I'm going to do is I'm going to build a list of all the storage facilities in that market. Going to do that from Google. Google will pretty much pull since self-storage is all about advertising, it is very hard for them to be off the radar screen. So you're now going to get this giant list of properties. From the giant list you're going to get the address because the address will be available right there online. But I'm not going to contact that address because if I do that, I'll only reach the manager and the manager knows if I buy it, well, they're probably going to get fired.
Instead, what I'm going to do is I'm going to take that address and I'm going to enter that into the tax assessor's database. Throughout America, typically online, but if not online, by phone, you can call, you can give an address because every property in America is taxed through all the tax assessor's database. You can get that address, put it in property ownership, and it will give you the name and address of the owner of the property. Typically, their home address if it's a mom and pop or an office address.
Now that I have that information, I'm in a position I can go ahead and do a direct mail piece to them to see if they would like to sell and at what price. Another option, of course, is to take that information of that owner, their name and address and put it into switchboard.com or a similar website and out will pop the phone number. Now I have an additional tool. I can call these owners to see if they would like to sell and at what price.
The great thing about cold calling and direct mail is you get a lot better chance of bonding with the seller. Bonding is a very powerful force in real estate, self storage, any sector. In that case, you become kind of a friend of the owner and, as a result, the owner tries to work with you and give you a better deal.
Also, when you deal with moms and pops with bonding, you can often get seller financing, which is, again, an extremely powerful item. Everyone wants seller financing. There's a few things in their world better than seller financing. That's really only achievable when you actually talk person-to-person to that seller. You're not going to be able to get it in one whack, unless it's part of the listing of something online, or maybe even from the broker immediately that option. It's a very attractive option.
Now, if you work those four arenas, online, broker, direct mail, cold calling, you'll be amazed how quickly your deal funnel will start to fill up at the top. And as you go through those deals and get greater facts, you'll define those down into potential targets. Now your deal funnel in action, taking that macro hole of those listings, and then narrowing that down to the ones that fit your criteria.
That's all there is to it. That's how you build a successful deal funnel. That's how you build successful volume. The key to all that is the ability to find the property that will work for you.
This is Frank Rolfe for the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.