Self Storage University Podcast: Episode 13

Storage Books Are Lousy

I have a collection of books on self-storage from a number of authors – and they’re all worthless. In this episode of the Self-Storage University podcast we’re going to review why most of these written works are not worth the paper they’re printed on and some of the facts that they’re missing. There has to be more than untruthful, content-lacking upsells into coaching for a book to be of value, yet that’s what most storage guides represent and in this podcast we’re going to discuss why.

Episode 13: Storage Books Are Lousy Transcript

I have a large collection of self storage investing books and they're all terrible. This is Frank Rolfe, the Self Storage University Podcast. And yes, like many people, over the years I've amassed just about every written work there is on the self storage industry and couldn't be more disappointed in them. So what's wrong with most self storage books? Well, the first problem is, they're not specific. I have one here in my hand and if you look through it, it spends roughly about three to four pages on each topic about a self storage facility, that's not nearly enough.

It talks about how to rent a unit in three pages. I think three pages would be hardly even the beginnings of your employee handbook and what to do when a customer walks in the door. They're always short, self storage books are always tiny. They're typically 80 pages, 100 pages with the really, really big type. So the first problem I have with them is, they're just not enough information. It's just lacking hugely when it comes to content. The next problem is, they're typically not truthful. They don't really tell you what's going to happen. In fact, it looks like most of it is distilled out of just things have been captured on Google from other sites.

So it would appear that anyone who buys a self storage is going to make money, completely untrue. It would appear that it doesn't matter where you build the self storage, the customers will flock in the door, not true whatsoever. So really there isn't a whole lot of truth to them. It makes me wonder, in fact, if the people who write them typically have even ever owned real estate property. Finally, they almost always have a hook in them. The book, the course, whatever it may be, is always trying to get you to spend money, big money, trying to sell you coaching programs and mentoring programs.

Some of these [inaudible 00:02:30] books even suggest that the author of the book will help you find and buy and partner with you on your self storage facility item. And that's just not what you want to have happening. You want the person who is writing that guide, that book, not to be trying to sell you something, that makes it just into a TV infomercial. And then crosses the line from something that's actually legitimate and fact-based and educational to sell his promotional tool to try and make an extra buck. So why are most of these self storage books that way?

Well, I think one big problem you have is the self storage industry is fairly, fairly young. So, it's the youngest of all real estate sectors, only been around since the '60s and the '70s. And there's many people in the business who just haven't been in it very long. So maybe then they themselves don't really know the answers yet to what you're supposed to do. Another problem is, it just looks so simple. A building with a roll-up door, typically orange, if you look at the photographs, with a lock on it. And you sell that space, you rent that space and the customer puts his stuff in there and they go in and get it wherever they want.

Sounds simple enough, right? But of course, it's not really that simple. The problem is that most of the books out there and the courses out there, what they're not really telling you about is the constant timely information you need of how things really work, what you need to look into buying and what you need to avoid. For example, you probably have noticed recently all the ads on TV about these pods, they'll bring them to your door. You put stuff in them and then they take them away. What do you think that's going to do to urban self storage facilities? How do you compete with that?

People love door to door service. Who's going to want to go and take their stuff down themselves physically to some locker when they'll bring the thing out and put it in your driveway and you put the stuff in, they'll pick it up. No muss, no fuss. [inaudible 00:04:30], most people would want that. And the problem is, if those pods, if that type of business then prevails, what does it do with regular self storage? It renders your locations worthless. The people don't ... If you're bringing it to their door, they don't care where it goes. It can go to a warehouse in the middle of nowhere, no signage, no highway exposure, nothing. So, there's all kinds of risks to the urban part of the industry.

Just look what's going on right now with what they call, the great reshuffling. People leaving cities and moving out into the countryside, in the suburbs and the exurbs. That's going to do terrible things to self storage demand in those urban markets. Surely they're going to see lower occupancy. Than what happens when you have lower occupancy? You end up with a pricing war, a bidding war between all the various storage owners, all trying to get their best share of the market. So you see declining prices, all kinds of move-in specials, revenues decline.

Where is the action going forward? It's obvious. It's in the suburbs and the exurbs, that's where people are going. In those areas, they don't have things like pods. In those areas, people are going out and they want constant access to what they've got. So they're going to go ahead and place items in that storage unit and they're going to go pull things out. And they want the freedom to do that anytime they want. The pods won't really work there. The pods are more of an urban thing. Yes, I'm moving. I'm going to store my stuff. That's what those pods seem to me to be for.

Just look at the ads that are going right now with COVID-19. It would appear they're trying to prey on people who are vacating their homes because they can't pay for it until their industry reopens and they get a new job. But that's not the future, that's not the strength, I think of where storage is. I think the people who are going to make money are those who look at the storage options, not in the urban markets where there's been so much focus all this time but out in those outlying suburban and ex-urban areas. They've built about 2 billion square feet of new storage over the last few years. Almost all of it are in urban markets.

Why do they do it? Well because often when people are developing things, they do it because they follow the herd. They do it because that's where the bankers say, "Yeah, I think it'd be really great idea. Let's build more storage in downtown Baltimore." Doesn't make it right, doesn't make those people wise. It just means that they're following the narrative of what everybody else is doing, thinking, "Well, I hope this all works out in the end then." And perhaps it will but there's certainly no guarantee. It's certainly not going to happen during this cycle. The great reshuffling as Zillow calls it ... To me it appears to be a mega trend.

I see that going on for years, even for decades. I see people, their love of urban markets declining. I don't know when that will come back or when it will be rekindled. Part of it's just millennials saying, "Hey, I'm ready to start a family. I want to move out and have my own house with my own yard. So I can have a dog. I don't want to be in this really tight urban environment." So a lot of it is natural. And then a lot of it's been caused by COVID-19, the fact that people can't get the same things out of the city living as they thought they could in the past. Any way you cut, it appears to me that all the pressure is going to be in the opposite direction from where most storage investors have been heading.

Now, it's great news for those who haven't bought any storage yet, who are looking to buying, you don't have the baggage of owning one of those self storage facilities that's got problems with occupancy, maybe even paying the note. It's also good for most smaller buyers because you'll be interacting with moms and pops on smaller facilities and things that larger companies won't go after because they don't really meet their profile yet. Remember that over time, typically institutional money will chase after the second person in the door, behind those original pioneers and originators. That's where storage began.

So public storage basically was an early aggregator, early embracer of self storage but a lot of it, they bought because they were the first person to see the chance to assimilate the industry. And those same aggregators will ultimately spread out into suburban and even ex-urban areas over time because those will have the best financial performance. So again, these self storage books I have seen on my bookshelves, gathering dust, all very similar, tiny in size, not a lot of information in them. Don't read those, those won't do you any good?

They're all completely wrong. Instead, try and find good content that is fact based and tells you how it is and is not trying to sell you something. We ourselves have prided ourselves on doing that for the longest time. But there's also other options online, lots of articles you can read, things you can find that are realistic, other resources. You can call up another self storage owner, get some actual field input, get some actual data. But above all, just don't read all these things you see in these books, they're not of any value. They're interesting. You can get some good ideas out of some of them, perhaps, but as far as an investment strategy, they're not going to take you where you want to be, and that's successful. This is Frank Rolfe, the Self Storage University Podcast. Hope you enjoyed this, talk to you again soon.