Self Storage University Podcast: Episode 5

Old-Fashioned Theories That Still Work Well Today

Even though we’re in a new age, there are still some basic theories about investing that hold true for self-storage today as well as they did decades ago. But what are these old-fashioned words of wisdom? In this episode of the Self-Storage University podcast we’re going to look at some of the best classic thoughts and sayings and see how they are as relevant today if you want to be a smart storage investor.

Episode 5: Old-Fashioned Theories That Still Work Well Today Transcript

Well, we all browse the internet and post on Facebook. Sometimes we've forgotten that there's old-fashioned theories out there that still hold true, and this has never been more true than today in the self-storage industry. This is Frank Rolfe of the Self Storage University podcast. We're going to be talking about old-fashioned theories. Things that I believe are still very important if you want to succeed, but we don't talk about them much anymore because they've been replaced with new jargon and new concepts. This first one comes from an unknown author. It's a little plaque that I have on the wall of my office. It simply says three words. Time kills deals. Now what the heck did that mean? Well, it's been often debated over the decades what it actually means. But to me, what it means is that you always have a sense of urgency when you deal in trying to make deals in real estate and certainly in self-storage.

If you don't go to that seller today and try and close that deal, that somebody else may well do it before you get there. If you could go in and try and seal that deal on Friday but you procrastinate, let it drop until Monday, by Monday someone else on Saturday or Sunday may have contacted that seller and they may have bought it. Or if you have that lender that says, "Yeah, I'll underwrite the deal," but you take them for granted, you go hit another lender and then you go back to them later, hat in hand, saying, "Oh, I should have gone with you originally, I guess." And now they say, "well, we don't really want to do it anymore." Again, an opportunity lost. Things are always lost through time. Time allows people to get soured on the idea, to have buyer and seller remorse, all kinds of terrible things are ushered in by Father Time.

So as a result, time is simply not your friend. It never has been. So when you're looking at doing real estate and self-storage or really anything in life, time kills deals. Do not forget that. Always have that inner sense of urgency. Number two, a quote by Ben Franklin circa about 1778. "Due diligence is the mother of good luck." What does that mean? It means if you do good due diligence on a property, more likely than not you will do well with it. And if you do no due diligence, more than likely you will fail, which is what we all call basically bad luck. So what does it mean? It means you need to make sure that you know what the heck you're doing to analyze the property, both revenue and expense side, the physical plant itself. If you need third party reports from other vendors more knowledgeable than yourself, by all means get them, but you have to do great due diligence.

Otherwise you simply will never succeed. It's not as simple as something you can just get online in five minutes. You can't buy a $15 online package analyzing your storage deal to tell you whether it will succeed or fail. You have to know how to do this yourself and you have to make sure you put in the time and energy and cost to do it. Those who do good due diligence, like Ben Franklin said, always seem to win and those who don't always seem to fail. Next, a concept by Sam Zell, the largest owner of three different real estate sectors in the US, office, apartments and mobile home slash RV parks, who wrote an entire book on risk and reward called Am I Being Too Sublet? What it means is basically we all take risks, but when we do take that risk, there has to be a healthy amount of reward that comes with the risk.

If you have a low risk deal with high reward, you should buy that. If you have a high risk deal with low reward, you should never buy that. So it's very important at all time that you stay on top of making sure that that relationship is in fact healthy. You don't want to be out there spending your money, spending your time only to get very little reward, and certainly if you have to take a lot of risk in doing so. Next is a quote from Al Dunlap. He was also known as Chainsaw Al Dunlap. Now who the heck was Chainsaw Al Dunlap? This is a guy that back in the 1960s was one of the first to write books about and, through practice, be the guy that turned around big multinational corporations. If you had a big conglomerate that was failing, people would bring in Chainsaw Al Dunlap. And he basically got his name Chainsaw Al because he would take some pretty drastic efforts to fix these big dying companies.

He would close down divisions. He would spin off divisions. He would get rid of entire departments overnight and everyone in big companies hated this guy. Absolutely hated him. Now it turned out years later, he got so carried away with himself that to promote his abilities, he was sometimes cheat a little on the accounting side of the businesses he was turning around. So even though he was considered one of the great turnaround artists of all time, he also got in a bit of legal trouble there at the end. But nevertheless, his theories he put into practice were revolutionary at the time and still hold true for a self-storage facility today. Basically his favorite line was, when they asked Chainsaw Al, "How do you turn these big companies around?" he responded with, "I sell, sell, sell, and cut, cut, cut." And what that means is he expanded the revenue as hard as he could and he cut every cost that he could out, whether that meant laying people off or shutting buildings, data, or whatever the case may be.

Self-storage today, you face the same issues. You need to be able to sell, sell, sell, expand your revenue as much as possible. Get every unit occupied. Push rents when you can. Maybe ancillary services like U-haul to bring an extra money also. And then chop expenses down as much as you can. Maybe you need to go back and try to get your property tax reduced. Maybe you need to change for a different vendor who does the mowing, whatever the case may be. But think of Chainsaw Al and his old sell, sell, sell, cut, cut, cut mantra. Because that is, indeed, probably about the best thing you could come up today, particularly as far as operating your self-storage facility.

This next one comes from William Kaiser. Who is William Kaiser? I'm sure you've heard of Kaiser Aluminum. He was big in the steel and aluminum business back in the day. Think his heyday was probably back in the 1930s through the '50s. And one thing that he liked to do was he liked to buy factories and plants that were not doing well and then he would go in and he would buy them cheap and then fix them. So his quote was, "Problems are opportunities in work clothes." So he didn't look at a problem as being a negative. He saw problems always as being a positive. And in fact, even later on, when he had his big metal plants up and running, he always looked at every problem in those plants as an opportunity to get better at what they were doing. So if they didn't hit their budget, for whatever reason, he saw that as a wake up call for them to fix whatever they had done. Somehow they had gotten off the path of being a good operator.

And so they saw this as a resounding call for them to get back on the path, to figure out how to better do what they were doing. So when you're out there looking for a storage facility to buy, it's often great from a business-making, profit-making perspective to find things that are troubled and then fix them. You'll make a lot more money doing that than you will buying things that are in good condition. Because when things are broken, you can typically buy them cheaper and as we all know, you want to buy low and sell high. So buying deals that are in work clothes, things that need help, is a very profitable way to go. But even after you buy that storage facility, you still want to watch for opportunities inside of what you just bought, where there are problems in order to fix them and to learn from that.

Possibly if you learn from how to fix this storage facility, that means you can do the same on the next. So really Kaiser was correct just as much as he was back then today. Finally, the golden rule. Do unto others as they would want them to do to. We're all in the people business in the self-storage industry. We're trying to make customers happy. We're trying to provide them with what they want, which is a safe, clean place to store their belongings. And those who don't follow the golden rule, those who say, "Well, yeah, that's what I would want, but I'm going to go ahead and cut corners and do this thing instead," those are the people who typically get in deep trouble. Because if you can't provide what the customer wants, what's the customer going to do? They're going to go ahead and go some other place that gives them exactly what they want.

Don't do that. It's not good business. If you know that I can go ahead and I could put up this chain link fence with a better gate and more lighting, do it. If that's what you think that you would want, then do it. Don't always be thinking, "What can I get away with?" That's the mindset in America today on many products and services is, "What can I get away with?" I had to call Spectrum the other day. I had a problem with my cable. The wait time was 30 minutes long. Now, what are they doing there? Well, Spectrum figures that cable is kind of a quasi-monopoly. It's a big pain in the rear to change everything out. So they're figuring they can get away with you being on hold for 30 minutes. Does it make me really like Spectrum? Not really. If another carrier came on down the scene, down the road, would I get out of a Spectrum? Potentially. A waste of my time to sit on hold for 30 minutes just to ask them a question on a bill, but that's the way it is.

Smart people don't do that with their customers. They don't take them for granted. They want the customer to be happy. They want the customer to be pleased. They want the customer to write positive social media reviews of the product itself. So when you look at your storage facility, it's very important that you look at it from the perspective of a customer, not an owner. Not where you say, "Well, could I get away with this?" No. The question should be, "Is there anything better I can do?"

Now we're all limited by money. You had a budget when you bought it, but nevertheless, you need to look, even at your budget and say, "Is this still the best way that I can spend this money? Is this what my customers really want?" Because you'll always succeed in any endeavor, particularly storage, when you are making the customer happy. So that's the key. The golden rule, again, is true as it's always been and will always be going into the future. This is Frank Rolfe of the Self Storage University podcast. Hope you enjoy this review of old-fashioned theories that we think still hold true today, and we'll be back again soon.