Jeremiah Boucher has built a self-storage portfolio of over 20,000 units in 10 states – and he built it one property at a time. In this discussion with Jeremiah he reveals his top five deals in unbelievable detail, reviewing not only his action steps but the actual numbers of what he paid and how much each of them made. It’s a huge amount of factual material that demonstrates the kind of returns attainable in the storage sector and answers a huge number of questions on what the key drivers to profitability are.
If you are investigating investing in self-storage – or already own a facility and are looking at ways to maximize profitability – then this event is well worth your time to watch.
Jeremiah's Top Five Storage Deals of All Time - Transcript
Frank Rolfe: Welcome, everybody. This is Frank Rolfe with Self-Storage University. We've got a very special event for tonight. We're going to be doing a discussion with Jeremiah Boucher. Jeremiah has been the storage industry for around a decade, and he's a really big deal to quote Ron Burgundy out of Weatherman. [laughter] he owns about 20,000 lots in about 10 states. So he's a very, very dominant player in this sector. One of the fastest growing. And he's gonna be giving a speech with PowerPoint on his top five deals of all time. And clearly, if you're trying to buy a self storage facility at a huge profit, it's important to try and walk that established path that people like Jeremiah have figured over all these years on how to make money and how to do things successfully and avoid the pitfalls in which you don't make money.
0:01:00
Frank Rolfe: Beause obviously, the only reason to be in storage is to make money. These are income properties. Whole point of the movie here, it's, it's all, it's all about the performance. Just like an NFL team, they're judged by winning and losing. That's it. You win if you make money and you lose if you don't. So he's going to tell you his top five deals of all time, everything from how he found them to how we did them, and what the plan was and why it turned out so well. So I think you're gonna find this a very, very fact filled and entertaining discussion on something that should be of very great interest to you if you're looking at buying a sell storage facility, or if you're already own one, you're trying to figure out what a better path to making it more profitable might be. So with no further ado, we're gonna turn it right over here to Jeremiah Boucher. So Jeremiah welcome, welcome to this evening's discussion. I'm glad you you're here and I know we get to learn a ton. So go, go ahead.
0:01:50
Jeremiah Boucher: All right. You hear me all right? Every, everything sounds good.
0:01:52
Frank Rolfe: Yep. Everything's perfect, Jeremiah.
0:01:54
Jeremiah Boucher: Perfect. Frank, you're, you're still a mobile home park junkie, you said lots, you know, so you can't, you can't get away from it.
0:02:01
Frank Rolfe: Well, I'm sorry. I'm sorry to offend you, Jeremiah. Exactly.
0:02:03
Jeremiah Boucher: No. I, I love lots too. You know, they're complimentary, so, all right. And then Frank, what are we looking on time that an hour, maybe a little more?
0:02:14
Frank Rolfe: Jeremiah, whatever you wanna do, you just run wild. And if you, and if you get too slow, we'll come on and bug you, but go ahead. Do, do, just tell 'em everything. I know there's, this is some a topic everyone's very fascinated with. I know I am myself, so just jump into it.
0:02:25
Jeremiah Boucher: And you chime in because I know you're not afraid to you know, interrupt, so.
0:02:32
Frank Rolfe: Exactly.
0:02:32
Jeremiah Boucher: Okay. So I'm gonna go over the, like Frank said, the top five deals that I've done, and they're not always the biggest or the most profitable, but they were the most creative, they were the most value that I added in terms of percentage wise on the facility. And I think for the most part, I still own 'em all, and the bigger picture in the portfolio is to keep everything aggregated together. And someday, who knows, maybe hold it or sell it. We'll see. But what I wanted to get into is just, it's similar to I think a lot of people that follow. I look at single story, typical, you know, drive up suburban type facilities where there's sometimes a little bit of climate control, but for the most part it's non climate decent sized drive aisles.
0:03:17
Jeremiah Boucher: I don't have a lot of conversions. I've done a lot of ground up. I've done a lot of just acquisitions and improvements. But for this talk, you know, we're gonna focus on single story suburban and tertiary third tier markets. And I know Frank is an expert in those. So, yeah, we'll hit it here. And this is, if you have any questions, just chime in along the way. This was one of the first deals that I did. This was actually the second deal that I did. And I grew up in Vegas as a kid, but as a little kid and as a with my father I grew up in New Hampshire. So, and when I was a little kid in New Hampshire I would come back in the summertime. And then throughout my teenage years and my college years, I worked paving.
0:03:57
Jeremiah Boucher: So I do understand the basics of site work, of soils, of drainage, and a lot of storage, if you're gonna do development is just a lot of drainage 'cause you're essentially having a lot of boxes and you're supplying a dry box, typically in a metal, metal structure, and you wanna keep people's stuff safe and clean and dry. So when, with that being said, I understand the development side of things too. So if you want to chime in and ask me any questions there you can. So I bought this facility out in a small town, about 10,000 people in a small area of New Hampshire on the border of Vermont and New Hampshire. And why it was a nice deal is number one is because the acquisition was creative. You know, this is how I started with Frank and Dave 15, almost 20 years ago now when I bought Mobile Home Parks with them.
0:04:46
Jeremiah Boucher: So in the beginning you know, I didn't have any money and even in 2017 times were tight. So what I did is I bought actual units, I bought the units of the ella of the corporation and I bought a 20% ownership position in the company. And this was a New Hampshire corporation. And that was roughly, I think three or $400,000 that I saved up. That was pretty much all I got. And I paid off the, the seller's note. And then at that point I was able to fix a price at 1.25 million for the entire property. So it was roughly a million dollars or so a little over a million dollars for me to buy out the other 80% of the units. So it was a fixed price and it helped the seller because they didn't want to take all the tax gain out of the transaction and they wanted their price and I couldn't pay their price 'cause it wasn't big enough and it didn't really appraise at the time or justify that value.
0:05:47
Jeremiah Boucher: So what I did is I paid off their existing note, but then now I controlled the property, I got pretty much the voting rights and I was able to go back to the bank and go in and borrow a half a million dollars on a free and clear asset. And then I was able to do the expansion and double the size of the facility. So I took it from three buildings at 15,000 square feet and it already had the land there and we were across from a Walmart. And I felt there was some good, some good demand there. And there was there was, we were a hundred percent occupied, so I doubled the size, I was able to do it for that $500,000 that I borrowed on the asset. And then at that turn I was able to then fill it up and then actually then rebar, then pay them off.
0:06:35
Jeremiah Boucher: I was able to refinance and pay the actual seller off. And the value far exceeded the 1.25. I think at that point it appraised for 2 million dollars. And then I was able to buy out the majority of their position and then I was able to take on the asset myself. And that was one way that I could do creative financing to lock up a transaction and to add value to it. And then what we did there is after I bought that one and refinanced it the competitor down the road came up for sale and I was able to buy them as well. And actually the sellers liked the transaction so much that they lent me a part of the money. They lent me, I think, a couple hundred thousand dollars on the next transaction as a second mortgage or as a, actually as a partner in that LLC as a minority partner.
0:07:20
Jeremiah Boucher: And I was able to get into that one for very little money down and we were able to raise the rents on that and do some capital improvements. And I'll show you the pictures through this, but it was pretty amazing. I was able to double the size and it was triple the size actually, and able to create 80,000 square feet. We created $4.3 million in value and there's been $900,000 of cash flow over the last, you know, 4, 5, 6 years. So it's been a very successful deal and this'll kind of articulate visually. So if you can see on here, and Frank, I, I hope do I need to share this screen or did I hope everyone can see it, but this was the first phase.
0:08:04
Frank Rolfe: Jeremiah, Jeremiah, we see it fine, it's just fine.
0:08:06
Jeremiah Boucher: Okay. And then this is the second phase. So this is that first expansion that I did for the $500,000 and that took us to 30,000 square feet and then the Walmart's across the street and we brought in, we used track key buildings, they were affordable good quality buildings. We managed the, I actually managed the site work with my dad. He does paving. They a good concrete provider. I think our concrete at the time was around $5 a square foot. Now we're paying almost up to eight or $9 a square foot. And you know, obviously it's typical layout of the other buildings. And then this other facility down the road had a small garage. I was able to paint the garage and lease it out to another tenant. Then I did another phase in the original facility. So we, I built onto it again where I put these four buildings around the corners. And luckily, and this is a strategy you guys might want to use, is when you're working with a seller and if they do stay on as a partner or if they, if you, they you do buy from them they can submit the permits and it's a little bit easier than you going in there.
0:09:19
Jeremiah Boucher: And me being even from, you know, another part of New Hampshire or really Las Vegas, if they see my address, they're not gonna like me going into town and submitting for these permits. So the owner stayed on as a very small partner and submitted for the permits and made the process a lot easier. So I was up to that many buildings and over time it, we just continued to expand it and you know, that's the best I got for the pictures right now. But it ended up being a really successful transaction because in a small market, you know, we were able to get 80,000 square feet. I'm currently at 70, well over 85% occupancy between the two. And now I'm just filling up the last phase and it should appraise for well over 9 million dollars. And the cash flow is terrific. So I just wanna impress upon everybody that small markets, you could still make money.
0:10:08
Jeremiah Boucher: I think the key is if you can, you know, see a Walmart and if you can smell a McDonald's and if you're off of Main Street, then I think you have a good spot for storage. And I think as long as you underwrite it effectively and you don't overpay for the land, you can do really, really well over time. And ideally if you can get at least five acres of land, that gives you enough room to expand. But if you can get, you know, seven to 10 and you have decent coverage ratios where the town allows you to build on at least 35 or 40% of that site, you can really expand out and get plenty of space. I wouldn't go more than a hundred thousand square feet, at least in the northeast where I know storage well. In some other markets you can go a lot more, but that's about as much at as this, this market could take on.
0:10:55
Jeremiah Boucher: And and this is was a phenomenal deal and now I'm just cash flowing and I'm gonna fill it all up and I'm done expanding. I don't wanna build any more, but I did pave it, I painted it, I put in lighting, I put in fencing, I put in good cameras, I put in obviously good management in marketing. And I would say, you know, even even in these other markets where you, the rule markets where you seem like that's not needed, it really is. I think it's when it's muddy out there and you can't see and it's, it looks gloomy and you, you know, you're trying to get your stuff in and out, you know, that's a poor business. So I would take, go to the extra mile and do all the improvements on all your facilities and you're gonna be a premium product and you're gonna be able to charge premium rents. And maybe not in the short term if you need to give discounts to lease it up, but in the long term it will pay off for you and it will give you a much better value if you didn't.
0:11:53
Jeremiah Boucher: Oh, Frank, you good on that one? Case study number one? Good. Okay. Okay. Number two. So this is another facility in New Hampshire about 40 minutes away. And this was an interesting facility. So I was outta money and I was buying it and I needed to find an investor. And I... Before you start reading that, I just, I needed to find that investor. And what do you know, I went to the Storage SSA Show in Las Vegas and I was sitting and eating lunch at the Paris Hotel and I saw a guy with a badge on there and I struck up a conversation with him and he ended up being a plastic surgeon from Santa Monica. And he was trying to get into the business. And at the time in 2017, I didn't have any very few investors.
0:12:52
Jeremiah Boucher: So I said, Hey, I'm happy to help you. I got a facility, it's doing very well, and out of the gate he didn't want to invest, but what he did want was advice. So I looked at all his different facilities that he was presenting to me throughout Central California and none of those fit any good criteria. They weren't good deals at all. And I ended up just hanging in there with him until he finally said, you know what what do you got? I'd love to take a look at the what you want, or I mean what you have as a facilities because I can't find anything good. And I was being honest with him. I knew there was nothing good that he presented to me and I ended up showing him this deal and he said, yeah, you know, that fits my criteria I'd love to invest.
0:13:34
Jeremiah Boucher: So where it was at is we ended up finally buying it in 2019. I think it took about a year in Escrow going back and forth, or 2018 square footage is roughly 50000... 3000 square feet between two facilities. They're right down the road from each other again. And I would look, if you guys are getting in the business I would stay at least 30,000 square feet or bigger. It's you know, if you, I would, you don't want to go much smaller than that. So if you can't buy something and create at least 30 to 50,000 square feet, it's very difficult to run. And the economies of scale don't work. I know in mobile home parks, you know, you have a kind of minimum lot size that you're gonna be buying. And I would stick with something around 30,000 feet between one or two facilities in a region where one person can help manage it.
0:14:20
Jeremiah Boucher: So that, that would be my rule. And we were able to get 53,000 and expanded on these two. And I bought it for 2.4 million as the cost basis. I got a loan with a commercial bank locally. 775 was the equity injection. I was a guarantor personally guaranteed the loan at the time, you know, as we all know, interest rates were really good four and a quarter. So even though the rents weren't that high, the interest rate was good enough where I could buy it at that basis. And it was it could still cashflow even with the lower rents. And this was a play of expanding. So we went in here and we added another 17,000 square feet just like I did on the last deal. So as you can see, you wanna buy a site where you have existing facility and then you have additional land.
0:15:11
Jeremiah Boucher: And luckily I was able to reinstate the permits on this site and that was the, the key for me to quickly being able to expand without getting all the permits from the state. The town reinstated the permits that the seller had from years before. And I used a local engineer, which was a really good move where the engineer had experience with the town. And your civil engineer is very important when you're getting expansion approvals or development approvals. So I put on there 17,000 square feet. The local civil was so connected, he got an extra 2,700 square feet on top of it. This is what I built it for on the cost basis 685000 and 155,000. And then we did, of course, like I told you there, the capital expenditures. So we did paving and painting and lighting and fencing and it already had some gating, but I improved it all and put in good signage, obviously good advertising and marketing.
0:16:10
Jeremiah Boucher: And then I was able to increase the cost basis well after everything, after I built it all, I was into it for about 3.67 million and the recent appraisal came in over 10 million. So these are those deals where you're like, holy cow, I can't believe it turned out that way. And I had to give up a big piece of it to the partner to get the money. So looking back, you know, I wish I could have kept some more ownership, but hey, you know, he's very happy, he's invested many times and it's helped grow my business and I'm happy that he basically is, this is a big piece of his retirement that that's a phenomenal investment on his end. And he did come up with the full amount of equity. So that was a big bonus. Well most of it for the most part.
0:16:50
Jeremiah Boucher: So that was really helpful for me at the time. And at the end, you know, we still are cash flowing really aggressively. You know, so far we've pulled out 2.75 million in cashflow and our equity multiple is three and a half times our investment in four years. So it'll be terrific. I mean, it's worked out and we kept it and we refied it and we're gonna hold this thing for a while and it's pretty much stabilized in full. So once again, I mean it's not a lot to this, right? You're looking at just putting in floating slabs. You know, it's typically there there's a hunch around the edges here where it's deeper. I think we go in New Hampshire, I think we go 14 or 15 inches deep, maybe it's up to 18 inches on the perimeter of the slab.
0:17:40
Jeremiah Boucher: And then on the inside of the slab it's typically, you know, six inches, five and a half to six inches is the thickness of the slab. And this again, was I think less than $6 a square foot on the concrete and very simple site plan. But the drainage is everything. And what was very helpful here, if people are thinking of developing is the stormwater requirements, like I were telling you in drainage is very important. So here the site already had a template laid out where I could expand and the storm water retention, I dunno if it's not in here, but the retention pond, meaning where all the water drains and fills up like a normal pond, if water were to run off of a rainstorm that was already on site and that typically can cost you over a hundred thousand dollars and it takes up a lot of space.
0:18:28
Jeremiah Boucher: So here it was already built, I utilized it and that's what allowed me to get so much square footage on a small site like this because of the water retention was already done and it did have a little bit of drainage built into it. And so it was really easy to tie into it. But we did also, you know, we, we finished this thing and you guys will notice in the fall if you miss your season in cold weather climates, it's, it's pretty tough even though the winters have been pretty, pretty mild over the last year or two. But it's pretty tough to do construction in any cold weather climates with concrete after November 30th. So you wanna try to get your permits early in the summer so you can finish your facility in the summer and then you can start leasing in the summer because also the summer, your second quarter and your third quarter are gonna be your biggest months in cold weather climates. 'Cause typically it's very difficult to move around the other times of the year. So that's where you want to time it right if you can.
0:19:28
Jeremiah Boucher: Because if you miss that window, you gotta wait to start construction all the way into... You're looking at into March and early April, and that's if the ground is not Frozen, I think it was at my dad's company, I grew up paving, I was on the back of that paver as a kid, and they did a good job with the drainage. And then there was a second site included down the road, and it had this small commercial space in front, you'll notice that a lot. This was up and down a highway, and we leased this out to a smoke shop, not a fabulous tenant, but it's somebody that pays and it was an approved use in this area, so we didn't have storage. People aren't too picky about who the tenant is in the front, and it's still a clean looking building, good visibility, and then you got really good signage, and I have to tell you, visibility, even in this day of Google and the websites and social media with storage convenience and visibility and traffic is huge, it is everything. So if you have bad visibility in this market, if you're not getting a great deal, don't buy it, you have to...
0:20:36
Jeremiah Boucher: You really have to have good visibility in traffic in order to buy a storage, at least signage, at least have the sign out there, you don't need all the units visible, but the sign you do. Yeah, we didn't need a management office because we were... I'll go back here, this typically could be a management office, but instead it's a waste of time and space and money to be able to put a manager in here because this was roughly 18000 square feet, and we had people pay mostly by credit card or they had to go into town anyway, which was 15 minutes up the road, and it was the other facility, and we did have a manager in-house there, and I ended up building my corporate offices there on the East Coast, but we did have a manager on this site and I don't think you need to, but you do need a maintenance man to be going back and forth and doing some of the over-locks and cutting locks and sweeping units and auctioning units, at least cleaning out those units if they don't auction, so those things... You always need a physical presence, but you don't need an actual office on the property, for every single site.
0:21:41
Jeremiah Boucher: I really like the hub and spoke model, where you have one major facility that has a temporary office, but then you can have your other facilities around it that you don't need an on-site office manager, and it's gonna be very expensive on a lot of these facilities, if you do pay someone prevailing wages in this part of the country, which should be 50000 plus, that'd be very difficult to pay that on these small facilities for each location. Now, you'll see on here, the existing site had CMU, Concrete Masonry block here units, that's expensive to use, and it's a great construction, we appreciate that it's done, but you don't need to build with concrete these days, if you can get away with metal, it's much cheaper, it's much faster because like a company like Traksy, they pre-engineer it, they prefabricated it and then they ship it out to you after they have the site plan, and it's like a Lego kit, so you're gonna hire an erector and they're gonna put it on the slabs, and it makes the process a lot easier instead of putting actual concrete block if you can get away with it, and then also the shingled roof is... It's pitched in...
0:23:00
Jeremiah Boucher: It's nice, it looks good, but it is a maintenance challenge over time, and now with the way they manufacture storage units, single storey, and with even climate control or non-climate, you have standing seam roofs, meaning that the panels go over each other on the top of the roof, and there's no penetrations, so you don't have any drilled-in holes, which end up rusting, 25 years ago, they used to have... You'd have to bolt the roofs down or with these shingled roofs, you're gonna have to maintain it at some point. The standing seam roof, they should last 40-50 years or at least 30 years. And it really reduces your CapEx, and like I said, drainage is your number one friend, and water is your number one enemy when it comes to storage. This was the existing site plan where we... Here also, if you wanna notice a little nuance is, if you have an elevation in your site-work, you see there's a step up here in the slab, and then you see a step up here in the roof, and that continues to step up because the front of the property has the drainage and it goes...
0:24:05
Jeremiah Boucher: It elevates to the back of the property and all the water comes down. But what you wanna do now is this was, I think, built in the early 2000s or late '90s, they didn't typically build on a slope, but you can do that now, and what that means is you don't want these step-ups, 'cause one, you don't want your roofs having any type of penetration or any elevation, 'cause it just causes a challenge in the future for drainage and possibly getting leaks and secondly, it's difficult to get in the units, that's a huge gap there, and thirdly, it's ploughing can be difficult because it creates a hump sometimes when you're trying to get up your elevation, and there's a lot of humps in the way that your site lays out, so instead, if you can lay it out, you wanna... And talk to your engineer. You could build on a 1% grade.
0:25:08
Jeremiah Boucher: So what that means is, you can actually tilt the slab in the entire building, I think these are 250 feet long, the whole thing is built on a 1% slope, so you could do that so that way all the water and all the concrete and everything on the in, you can build the streets, it's all sloping just a little bit, so you're building a straight building, but you're building it on just a little 1% slope, and that's gonna create enough drainage 'cause you're gonna get a foot over 100 feet 'cause you're at 1% so that's enough to get the water to drain, but you don't need all of these elevations or up your step-ups and your slab, and it costs you more in concrete and more in buildings, so yeah, if you can have your engineer make sure they designed it on a 1% grade because in some parts of the country, it's still not common, and that's a very effective way of building where you might wanna import or export fill and lay it out where the whole sites flat on that 1% rather than you have any step-ups and maybe you don't have to bring in fill, but then you got all these jets in your buildings, so that's a big strategy, and it's a cool one. And with storage that you can't rely, I don't think you can do that in other retailer office or industrial. I don't think you can build on a slope like you can with storage...
0:26:21
Jeremiah Boucher: Not very sexy buildings. But, hey, you know, This is what we like. So Poland, this is in Maine, so this one, believe it or not, and the other two I found, they were... They were found on letter campaigns like Frank taught me, or they were a cold call when I cold call every day and get lists of owners and call them up and see if they wanted to sell, and 10 years ago, it worked quite well, it still works, but not as well, but here, this one was actually on Traksy, I think it was even on LoopNet, but this was right before the pandemic, and this is about 30 minutes outside of Portland, Maine, and a good small bedroom community, not much population, and here, a developer, a local guy, he actually built the facility and didn't wanna run it, didn't... He doesn't like the business, he just wants to buy land, build, make a profit and move on to somewhere else, and so he put it on the market. And what we did here is...
0:27:25
Jeremiah Boucher: I'll go back to the summary of the deal, but here we're able to... He left the slabs. So this was pretty awesome where... And this is sometimes what you might wanna do, if you have a good site where contract and you have a good paving and concrete contract, sometimes it's better to do all the site work right out of the gate and all of the in-browns. So you do your electrical and you do your concrete, and you do all your... Even your bollards here where you protect the corners of your building, so you're basically everything except buy the building, and that way when you lease up this first portion of the property, as soon as you hit about 80%, you wanna order your buildings, maybe 70% by the time they get here and erect them, you should be full on the first phase and you can start filling up the second phase, and why that's important is because typically when you're building a property, you are...
0:28:19
Jeremiah Boucher: You're basically taking on a big construction loan and you're paying interest, so the less interest you can pay, the better because you don't have any income. You have to get the tenants to fall, you gotta get the units to fall and get your tents paying, that way you can start paying the interest on the loan, so you wanna reduce that interest cost as much as possible, so there's no reason... Unless there's a huge cost benefit to building it all at once when you could phase it over time. So it's better to be lucky than good. Is what they say. So here, I knew the suburban markets, so these tertiary markets would do well, but they did really well after covid, so I bought it at a kind of a high price before covid, but I did like the quality of the facility. Why? Because one, I could smell the McDonald's, it was right next to us. It was in a gas station, but it was still McDonald, and I knew McDonald did their homework, and then there's the high school football lights across the street, so the high school was across the street, and I think that's just almost as good as a Walmart, 'cause everyone's gotta go and bring their kids to high school.
0:29:25
Jeremiah Boucher: So it was right in the middle of town, and I thought, okay, this is gonna be a good site to... Over time, I just didn't think it would lease-up so quickly, so covid hit and leased up immediately the first roughly 15000 square feet or 100 and some odd units. And then we put in the back buildings here, we put in... We actually came in a kiosk, and a lot of people have conflicting advice around kiosks for me, and I think I've heard Frank talk about this. It's not worth the time and money invested, you know, by the time... Especially this type of customer in a rule market, you're looking at someone that doesn't really wanna deal with a lot of technology, now covid accelerated that, but now your phone is gonna be your next kiosk, so I wouldn't buy this piece of equipment and paid a monthly fees, we got rid of it over time, we do a remote management sort of model, there's a small office here, but for the most part, we have our call center managed the facility and our maintenance man frequent there three to four times a week, so we got rid of the kiosk and I could take questions on that if you guys in the future, and he kept...
0:30:37
Jeremiah Boucher: For me, he kept the seller, decided to sell it, I got an SBA loan on this one actually, so I think SBA for anyone starting out, it's a great, great option. It was terrific financing, and you do have a big pre-pay, so you can't really sell the asset or it's gonna cost you a lot of money, but if you had no value, you can if you want, but overall, we got it very low, so I think I came in with 10 or 15% down. It was a terrific loan, and basically, I carved this out, he wanted to sell me retail. I took Frank's advice. I want retail, I don't need it, I don't need to complicate things, the returns, no good. So I wasn't an ego thing for me where I didn't need to own the entire parcel, we share it in a lot of the wire, the storm rider retention, so as long as I had the water drainage, she could keep the retail, I got the storage at a good price, 'cause that's what I really wanted. And then I leased back a unit in the beginning for just the office to get it leased up, and then we got rid of that unit and got rid of the kiosk after we were fully leased, I think after 18 months.
0:31:40
Jeremiah Boucher: And what you notice here is you see... I don't know if it's a parapet or how they... It's the facade how they want that A-frame facade, even though it's a flat roof behind it, it's so silly, but the architectural committee of the town wanted the architectural design to have an A-frame, so even though there's no roof behind it, you have a panel on storage that looks like the front of the building is in A-frame and you got one large door, they didn't want multiple doors there for some reason, and you got your windows, and that met the requirements of the town, even though there's really no use for that A-frame because you have no roof behind it, but it's an aesthetic thing that the town wants and the town gets what they want to give off to issue the permit, problem solve, and it adds maybe a couple of bucks maybe or less a foot on the whole project, so it's not horrible in terms of price per foot, and it's something you have to do if you have that requirement.
0:32:44
Jeremiah Boucher: And here's a better image of it, see how it's still a flat standing seam roof. I think we call it a 112. So a flat roof is your cheapest option, and it's actually the option that you want when there's heavy snow loads because the more pitch the roof is, the more snow is gonna get in front of your units, and you're... Not that you don't plow 'cause you always have to plow. And that's one of your biggest expenses. But you don't wanna be shoveling all the time, you don't want all the water constantly draining, so you really... What happens with these flat roofs is the snow actually stays up there and then melts a lot slower, and because they're engineered to the specs of this region, there's plenty of snow load...
0:33:28
Jeremiah Boucher: I don't know what it is, I think it's 40 pounds, I think per square inch or foot or something, but whatever the engineer requires or the building department, it has the buildings are manufactured with plenty of snow load so the snow can hang on top and then melt off slowly, and you don't have as much plowing or snow removal, believe it or not. And then I'll go back to the economics of the deal since it makes a little more sense here now that I showed it to you, but like I said before, 42000, that's kind of the sweet spot, if you can hit 40000 feet on your project as a minimum, that's a great site because you can generate typically 400,000 to 500,000 a year in top line revenue and gross income, and it yields enough at the end of the day, after you pay your expenses, after you pay your debt, and then after you pay your investor, there's still enough left over where honestly, we're all in it's to make five or 10,000 a month. Or between you and your partners. So I would say that if you're gonna go through the trouble of all this, we wanna keep it around that size and targeting around a half million dollars a year from that facility and income gross, if you could to justify all this work.
0:34:39
Jeremiah Boucher: Now, like I said, the value creation, it was already built, so I just took... I bought the facility, it was only 10% occupied, but leased it up in six months, and then actually bought all the back buildings and built the rest of the buildings 'cause the slabs were already there, leased it up again and then another few months, and then I think we got one more expansion here for 4,000 square feet, we were able to get a little more approved and got that total of 42,000. And the nice thing was, again, on this site, storm water was already built in, so the rents went up because covid really accelerated it, but you do wanna find out in these local smaller towns, if there's no larger competition or there's no sophisticated owners, they typically keep their rents low, and that is an opportunity for you because the rent people think in the industry that are long time kind of fat and happy owners in these towns, if you're fully occupied, that means that you're fully maximizing the site's capability.
0:35:44
Jeremiah Boucher: So if you're 95 or 100% occupancy, you did your job. And that's far from the truth. So the national reach, meaning the big public companies, the extra spaces, the public storages, they manage for revenue, they don't care about occupancy, so just like the Expedias and the travel sites, dynamic pricing is what storage is. All the hotels price this way, high demand, high price. Low demand, low price. So what you wanna do is you always wanna have a 5% to 8% vacancy, because you should be dynamically raising your prices so that the people that are paying market rent get out, and as long as you have a good management system and management marketing team, then you're gonna get someone in there that's gonna pay the higher price for that unit because there's only a few units available with that occupancy, so you wanna dynamically structure your pricing, which is not easy when you're trying to self-manage it, some of the bigger... All the reads to management companies, the big ones, they do that for you. If you wanna hire them, it's kind of hard to get higher them on these types of smaller facilities, there's not a lot of good management options at this point that might change in the next year or two as some of the big players might enter this space, but I would suggest you're gonna have to manage your manager and you gotta watch your pricing, and there's nothing wrong with being the highest price in town.
0:37:07
Jeremiah Boucher: Now, what you need to be aware of, though, is that if you're seeing more supply and more actual or competition, more new storage coming up, you wanna be sure that you have the best discounts, you have good concessions, meaning free rent, you have good advertising, and that you get people in the door and you have a good quality product, but brand new, good looking like I showed on here, or at least all the amenities of paving, lighting, fencing, security cameras, and it's safe, it's a very clean, safe place to go. So with that being said, total cost basis all in, 2.63 million, it's a very good cost basis on 46000 total square feet after all the expansions. The appraisal came in at 6.87. So that was a creation of 4 million dollars in value. Which I don't think a lot of people would believe that for a deal that was on LoopNet four or five years ago, or not even... I think it was three, four years ago. And here, we were able to go back to a community bank, and I think eight or twelve months of stabilized, good trailing income there. It's full. Good solid rents of 12 dollars.
0:38:19
Jeremiah Boucher: So our local community bank out of Boston came in, did the cash out ReFi, got all the partners their money back, and we still after the debt service, cashflow, 11,000 a month in cashflow. So, I mean, those are those the best deals ever. The infinite cashflow play where you buy something, you add value, you don't sell it, instead you refinance it, you don't pay taxes because you're taking on more debt. You get all your money back and you still get cash flow. And then you take that money and you go buy another asset and you do it all over again. Good old American Dream right there. Just keep using leverage and in debt in order to compound your money. But now you got to be careful. You don't wanna over-leverage it. You don't want to take on too high of interest rates and you don't wanna leverage something where you don't have good occupancy or good income. If that's the case, that could burn you. So you have to be very careful with debt. Its a double-edged sword. You live and die by it. So it'd be, but it's a very powerful tool as Frank's brought up. And as the rich know, you just have to know how to use it wisely. All right, and I think we're getting through it here. I think there's two left. So, another one up in the northeast. This one's in Vermont, it's in Rutland, Vermont. And this was the same play. I think you're seeing the same strategy and this is a good actual case study. And we know Frank's conservative politics.
[laughter]
0:39:51
Jeremiah Boucher: And I don't disagree with him, but this is in the Social Republic of Vermont, and I like Vermont a lot, but it is quite a interesting regulated state. So, very challenging to do business here, and that is frustrating. So, it's a beautiful place and it's amazing countryside, but so much state regulation, so much town regulation. And here, once again, I found a facility that was in pretty, it's a little rough here. This was the existing facility, good traffic going north and south up in this town. This town, actually, I think it was at one point the heroin capital of the northeast, which is, not the claim of fame that we're looking for, but it's really odd because because of development regulations, you, there's not a lot of supply anywhere. You just can't get stuff built. And you, that's the exact opposite of like some parts of Oklahoma or Texas where you can build everywhere. You just go down to the town building department and pull a building permit. And sometimes in the past you could damn near put it on a handwritten sketch, but out here you gotta go through state and town and special use permit and town meeting, all those process regulations to get this permit. So, what I'm saying is, look at the barriers to entry. And that's gonna tell you a lot about if your site is gonna have a lot of potential competition or not.
0:41:16
Jeremiah Boucher: And I know here there's not a lot of competition. There's a high barrier to entry because one, there's very little zoning that allows for storage. Number two, there's very little actual land that actually fits this template where it's flat, there's not a lot of wetlands, there's a lot of set, there's big setbacks, that there's actual visibility off of a good highway and there's enough residential traffic and residential housing in the area. It has to have all those components and there's just not a lot of options, especially at a cost basis. That makes sense. And that's what I wanna, I can share in on the question and answer on what's a good cost basis and what's our cost basis to build. And we can get into that if you wanna remind me later in the call. But here, so what we're at here is, this was the expansion.
0:42:03
Jeremiah Boucher: I think everybody can see it. So, if we're looking at the existing site, it looks a little bit older. We had to comply with some very important color schemes and there was the permits in place, but we had to get them renewed. So, I used the local engineer that, the original seller who was in a family partnership and that family partnership was getting dissolved. And once again, I think that if you guys can find mom-and-pop owners that are typically over the age of 60, and in this case, when a sibling inherits it and there's three or four or any two siblings, it seems like not one of the siblings wants to manage it and split it up with everyone else. I tell you this has been 80, 90% of the time I've incurred some type of inheritance property where they're selling it for the estate.
0:42:54
Jeremiah Boucher: This is the case. Over time, they tap out, they say, "I don't wanna manage it for everybody. This is not my gig." And they're not buying more facilities. And this is, they have maybe less than a handful. That was the case here and that's why they sold and they didn't once again wanna pony up the money with the other siblings because that's the other thing is when there's two or three or five siblings, no one wants to put up all the money for everyone else to benefit from the asset. So, that's the case here. No one wanted to put up the money for the construction. So, we came in, it took a lot longer than I thought to get the permit, but we got it, built it, paved it, and filled it up in like two months. It was un... No, it was two to three months. It was the fastest I've ever filled a facility in my life. And what's weird is this town has really high income and it has a ski resort and it has some colleges and it has a lot of old money, it has really low income and it has so a lot of very low, tiny workforce housing, not even workforce. It's very low income housing. So it's a big disparity. And that was huge because you're gonna have a lot of different customers in your storage units. And so it fit all the different demographics where we provided big units.
0:44:02
Jeremiah Boucher: So people can park a car in here and they can drive through and a lot of small units where they could put in their, a lot of their belongings, they can't afford a bigger unit. So, I bought it in 2020, it was 35,000 square feet and there's a small industrial bay in there and I really like small industrial bays in these for small warehouse users or small contractors. And I'll get into that more. Bought it for 2.54, put in $650,000 down and the expansion was great. 25,000 square feet that got us to what, 60,000 square feet. Beautiful number. Didn't oversaturate the area. It's a good size that the big public companies would want. Took it, built it at a good cost basis because of the land was already flat, a lot of the grading was already done, so it was a very cheap price per foot. And we raised the rents from 850 to 1260, which is phenomenal, right in over two year period. And during COVID to get a 40% or 30% rent increases unheard of.
0:45:09
Jeremiah Boucher: But this was one of the cases where a lot of people from the cities moved out to this region. And I know Frank writes about it, talks about it, he lives in a small town outside of a big city outside of St. Louis. So people fled from some of those urban markets and then they came to these markets to enjoy the lifestyle and it created a lot of demand and we kept it. So, we did what I did on those other deals. I refinanced with another community bank in the region, got a really good interest rate, returned all the capital, plus some to the investors, and the recent appraisal came in at 8.6 million. So roughly $120 a square foot. We were able to pull out a lot of cashflow with the ReFi and the distributions, $3.33 million and we're still cash flowing $16,000+ a month.
0:45:58
Jeremiah Boucher: So, it's terrific. I mean very, very exciting and fun deal. The whole thing with, some people are asking me here is we self-manage. So that was a big part of this strategy, for me to grow this part of the business because I don't know if people know my story, but I work with Brandon's father, Dave, and he taught me almost everything I know about real estate. And Frank as well. I went to their boot camps, I think it was 18 years ago, and I was learning about mobile home parks. And with that, I realized on some of these smaller assets in rural markets, you got to manage them yourself. And this is just like mobile home parks, in some of these smaller facilities and smaller markets. I invested a lot of time and money and I brought in a small minority partner that, actually I bought one of her mother's facility.
0:46:44
Jeremiah Boucher: And it was that first facility that I showed here. She came in and became a management partner for 5% equity across the portfolio. And that was big for me because, she was able to be my eyes and ears and she was able to hire and I was able to invest in a lot of the systems and an office and learn the business with her over the last five, six years. And it's better that I understood the business. So I could develop and I could acquire and know those things that my actual customers in the area uses versus what some management company tells me or some passive management company just does. And I don't know what they're doing or why they're doing it. So, I think in the beginning, if you're gonna be in this business and you're gonna grow it, start out managing a few of your facilities or bringing on a small partner to manage, and that's gonna give you a lot of insight into one, the trends that your customers want, that they want big units, small units. Do you advertise on Facebook, do you advertise on...
0:47:43
Jeremiah Boucher: Obviously do you use AdWords, but how do you advertise on AdWords? How do you change your pricing? How much free rent do you give up? That's a whole nother conversation. It's a whole nother aspect of the business. And I have to say the difference between mobile home parks and storage is that, you're obviously gonna have a lot more turnover. So, you're gonna have to constantly be marketing with mobile home parks if you obviously do your job and you make it nice, people typically don't ever leave. But here, your average customer could be one to two years. Now you're gonna get your 10 year lifers or your, sometimes you're gonna get your six month or three months and they're gone.
0:48:19
Jeremiah Boucher: So, but in the blended you might have that 3-5 year average tenant stay, which is great in these markets. And you want to keep those tenants, but you do have, it's still a retail business, it's still a management intensive business and that's why you're gonna find opportunity to buy because eventually people decide they don't wanna do it. I mean, and there's not a lot of options on who they can hire unless they can find an employee and manage those systems. So, I think that the main thing is around this is learn it and then you can hire out. But then if you know what you're looking for, you can then make sure you spot and hire talent. But you gotta be careful and you gotta not just trust anyone managing your facilities because no one's gonna care about it, like you care about it.
0:49:02
Jeremiah Boucher: All right, it's a mouthful. So, here's the expansion, like I said, 25,000 square feet on top of it. So, it's a total of 60,000 square feet. It's odd is that this owner, built this contractor one long big contractor unit in here with a taller door. And I have to tell you, if you can get taller doors, that is a nice little upsell because people are looking now at cubic feet, even though we don't measure it that way, it feels a lot bigger or you can get a premium in order to try get, have the taller units with it's a nine foot six or a 10 foot door and your buildings are 10 foot six or 11 foot high without having to get a heavier gauge of steel. So yeah, try to get the bigger, taller units. But anyway, I digress that what I'm saying here is if this guy bought it, I mean this guy built it and this guy had contractor space and we ended up leasing it out rather easily. There was a local contractor that took that whole unit, which we were very happy with.
0:50:05
Jeremiah Boucher: And I'll get to your questions here. Someone asked about SBA and I know down especially, Noel and Georgia, live Oak Bank, I think they're based out of Georgia. So, I would definitely talk to them and I'm sure I know, I think Frank and Brandon, they've talked, I know they've introduced those guys to other people. So, Live Oak Bank is a great one and they... I don't know if under $150,000 if they have a minimum loan amount, but I would say, I would look at something a little bigger if you're gonna do your first project, honestly, and I think it's a great option for you with 10 or 15% down, you can't beat it. And the other side of that is I think you do need to self-manage it.
0:50:53
Jeremiah Boucher: So that is something you got to remember. And the other side is, I think the rules are now changing with SBA where they're allowing some type of creative seller financing or structure behind SBA. And Frank, we should do a little episode on that because people are probably gonna wanna know how to get in with very little money down and I think my lender just told me that. So, we should look at that into the future about the sellers carrying or investing back into an SBA deal that you're gonna be buying and getting financing with. Okay. How important is climate control? It depends. So, I think the good rule of thumb is, and thank you Rodney, the Live Oak minimum is $500,000 as of 2022, so appreciate that. So yeah, I would do at least a half a million dollar loan. So, you gotta have at least a six to $700,000 project minimum.
0:51:47
Jeremiah Boucher: Or they won't finance it. So, climate control, it, what I've noticed is this, is some markets, it's not worth it. And if you don't have the demographics, if you don't, and this is just me knowing the Mid-Atlantic, a little bit of the Midwest and the Northeast and some a little parts of rural west coast, but I don't have familiarity with down south. And I know you have a lot of humidity down there and it's, I'm sure it's very important I would put it in. But in other parts of the country, I would say 30% premium is kind of the easy rule of thumb. So, if you can't charge, let's say for a 10 by 10, if in your market you get $100, for a non-climate drive up unit, and I think that should be the bare minimum where you shouldn't really invest in those markets because it doesn't really make sense if the rents are too low, then you need to charge at least 130 for your 10 by 10 climate. You gotta get that premium to justify if you're gonna build it for the extra cost, it's gonna cost you about eight to 10% more, maybe a little bit more on your construction and a single storey.
0:52:54
Jeremiah Boucher: And you gotta make sure that the heat, you gotta heat it and cool it or put the power to it to dehumidify it. 'Cause technically true climate control climate means humidity as well. So, you have to have a dehumidifier and AC HVAC unit if it's gonna be true climate control. And if not, then you gotta label it, for liability reasons, temperature control. So, if you're not gonna do humidification, then you gotta call it temperature control, just little liability thing in your leases. But I would say for me to answer your question, I like the new projects and if you're in a decent market, I would say meaning that you and I'll make things tangible so it's not so ethereal, like a real solid median income market would be, I would say, no less than 60,000 median income. I would like 70 or 80,000 median household income and you're five mile or 10 mile radius and you're gonna need, I would like housing above 250,000. So for us, I mean I know a lot of people maybe in their markets they don't have that, but in those markets that allows for the customer to have the disposable income to pay for the climate. So, that's gonna allow that extra premium for the climate control. And those, types of customers typically have nicer goods and they're gonna want that climate.
0:54:19
Jeremiah Boucher: 'Cause I'm, when I was in college or right outside of it, I didn't care where it was at, but my stuff got all dusty and I used the storage unit for five years and it pretty much ruined my stuff, because it was in one of those drive up units. But then if you have, when I got, recently here moved out of a high rise, yeah, the climate was a lot better and you're gonna protect your stuff from all the elements and the dust and the heat and all that. So I would go with 20% of your project climate and to go to touch on one last item on that is, if you could see my screen, my cursor, if you're gonna do a single storey building, sometimes the way to do it is do the interior hallways climate. So, that way you're insulating just the interior hallways. So when you have a climate control building, you're either gonna have it fully enclosed and you're gonna have a couple hallways and you want a wider building to do that because you're gonna have your four foot or five foot wide hallways inside and then you're gonna want to, or you're gonna have the interior hallways as climate and then you're gonna insulate inside the building because you don't wanna climate control a building and then someone leaves their door open or those doors are...
0:55:27
Jeremiah Boucher: They have a lot of air space anyway, a lot of breathing room. So you're never gonna have a climate control building that that's gonna have typical drive up storage. You gotta do some special things to do that. So, just keep your climate interior that way you keep your cost relativity cheap and you're gonna keep the overall amount of climate control minimal. You're not gonna have that much on a project if you just do it in your interior hallways. This was, what it looked like in terms of the existing. So you could tell it's a lot different than the older unit. I mean the newer units that we built there. And what you wanna do when you come up to these units is shake the door, like push on it and see if it really flaps a lot. Then eventually you're gonna have a problem and you're gonna have to replace doors because those are weak door tracks and they probably didn't maintain them. Luckily these were decent doors so we don't have to replace them. And then in time we've actually painted this, it looks a lot better, but your doors can be a major item and then you have your latches here, which, we do like to replace these, they get rusted out in cold weather climates.
0:56:38
Jeremiah Boucher: So if you buy from Chateau or a couple of these, you can buy a couple hundred of them and come in and and replace them there. It's not super cheap, but it definitely helps because they get rusty. And think of everything like the customer experience. So, the more of a pain in the ass it is to get into these for anyone, especially like my mother and then, she can't pull up the door or it's too tight or there's, their latch doesn't work, it's just gonna create friction and stress. And what I figured out with storage, I'd have to say what business are we in? The essential core value proposition in storage is just...
0:57:17
Jeremiah Boucher: We are minimizing stress. That's all it is. Because people that typically store things 95% of the time, there's a stressful situation, they are either downsizing, they're divorcing, there's death, there's a disturbance in their job or in natural elements, or they have to move, or there's just clutter everywhere and what they wanna do... What do they wanna do? They don't wanna spend their weekend dealing with crap, they wanna get it out of the way, out of sight, out of mind. Push, procrastinate. Don't make a decision. When my mom got a divorce, she couldn't throw things away, she didn't wanna move out of the house, I had to literally take to stop, put it in the storage unit for her and just say, "Mom it is here, we're gonna forget about it and just let's move on for now, and it's easier for people to process and then it's out of their mind and then just auto pay every month, so that's what we love, and then eventually they'll come back to it, but in the meantime, we're just alleviating stress for people, so the more you can do that and easier you can make the process, the better you're gonna be able to build your company.
0:58:19
Jeremiah Boucher: Once again, you got, make sure you have room for your plowing because yeah, you can have a lot of snow in certain markets, and if you don't have room, you can't have all the buildings covering the perimeters up in the North, but in the South, you can. Because obviously, there's no snow to get rid of, so here you gotta have your dry alls, you gotta be able to get rid of your snow. And that's one of your biggest expenses in the Northeast, or admit Atlantic, you're gonna have... You're big, you're gonna have taxes is number one, 'cause they pay for a lot of the school through taxes, and number two, it's gonna be obviously your payroll or your management, and then number three is gonna be lower as your top top expenses, except if you're in Florida, the insurance right now is your number one expense, and I know it... 'cause I bought a few facilities in Florida and insurance is through the roof, and then I know... Bruce, yes. What have we done in the last seven, eight months?
0:59:13
Jeremiah Boucher: That is the magic question with the high interest rate environment, where do we find value creation, and it's so hard to get deals to pencil, and these deals were great, three, four years ago, it's really through developing, which is not easy 'cause you're waiting three, four years and you gotta really have a good market where there's low supply and there's high demand, and you have to be able to make sure that your rent you're gonna cover your development costs, so a lot of it's through development, but that's not for the faint of heart, and you gotta get into your land at a low cost basis, so you gotta be sure that you get your land for under...
0:59:49
Jeremiah Boucher: For me, I like 10 a square foot of the size of the projects, of the buildable square fee, so if we can build 50000 square feet, if you can get that for 10 on the project level or less per square foot for half a million dollars or less, that really pencils, but I know that's very hard to do, but I'm just telling you now is you can find deals on land because financing stuff and people aren't transacting on land unless it's a core piece of property, if the rents are high enough and this whole business is all about revenue.
1:00:22
Jeremiah Boucher: It's a lot different than an apartments are in mobile home parks where you can really finale your expenses and whittle them down, once you've got your basics in here with the ones I just shared with you, you're not gonna get them down much, this is a revenue game, your expenses, to some degree, are pretty fixed, and it's all about driving revenue, so the higher rents you can get in the market, the more you can obviously pay for land, but for me, person is just a single story facility in some of the suburban tertiary markets, 20 of food is the absolute highest, and I pay a little bit more, but not that 20 a foot on the project level, so if you're looking at 50000 square feet, you're paying no more than a million dollars on land, but you better have really like 14, 15 average achievable rents, annual rents coming in.
1:01:15
Jeremiah Boucher: I hope I'm not going too fast for the new guys, but it's all very useful information if you re-listen to this, and then last one here, and this one I was... But I guess it was over two years ago though, in a little bit better interest rate environment, this was purely a buy. So this was a buy and lease up play, and why I like this is I paid a premium. And what I mean by that is I paid... Well, it looks like not a premium now, but at the time it was...
1:01:47
Jeremiah Boucher: And based on the cap rate, it was sub-six cap on actuals, and the reason being was one, the visibility was phenomenal, so it's up and down this corridor of... It's an interstate highway that's very busy in New England, probably 80000 cars a day on the traffic, and it's very visible, you could see it and no trees, you can look... You can see every building on this facility, so you can't miss it, and the other thing was the rents were low, but not only that the owner was managing it improperly, and let's just say all the money wasn't always going to where it should...
1:02:27
Jeremiah Boucher: So on paper, it didn't look that good, but... So I had to kind of trust that the tenants were there and we counted the locks, and I watched the activity, had my management staff watched the activity, it looked like they were being used the units, 'cause you don't know... At the end of the day, these are month I'm on tenants, so you really don't know who's paying and who's not, and we couldn't verify the income, but I did know that market was strong, and this is another market with the high barriers to entry, so it's very hard to build and these towns are very difficult to do it, so that we came in there instead of building because it was really no room to build or the town setback requirements, I didn't wanna try to get a variance... It was challenging. I put in portable units, I think we'll show some pictures on that, but they are... Personal property is a great way to utilize parts of the property where you don't wanna do development and you can stick them in there and rent them for a good price, and we get really good rep per foot...
1:03:28
Jeremiah Boucher: I think it's over 12 a foot. So portable units, it's a pure cash flow play, look at those, you can go to box, well, there's a couple of different ones and we're trying some new ones, and we'll probably... Me and Frank talk about them, they're gonna put on your mobile home park to know people need these storages and affordable units are beautiful. We don't move as much, they are portable per se, but once they're there, they're there, and that maximizes land that otherwise wasn't being monetized, and we were able to dramatically increase the... Rents are very proud of this through good management from $9 to almost %14, and we took it from 2.5 to a million refinance at a 4.75% interest rate.
1:04:12
Jeremiah Boucher: And yeah, so we still had really low rates groups here, just caught it in time, and then return back all the capital and ended up getting a great appraisal over 100 bucks a foot, created over a million bucks and value really quickly distributed over a million dollars with the cash flow and the new refinance, and we still cover really well, 7,500 a month, and we're on a long-term fixed loan, so the home run there would love to get part of these, but it's really about knowing your market and knowing how to manage the asset, because you could go to other places and if you don't know that the rents are strong, you could buy this for that price, this cost basis for $70 a foot or so, but it's only worth 75 or you lose tenants because it's not a good market, because you didn't do a good feasibility study, everyone's full, there's too much being built, there's not high enough income, there's not enough density, there's not enough traffic, there's no good services in the area...
1:05:12
Jeremiah Boucher: The area is declining. So those things matter a lot. So you've got to know your markets, I think for me, it's a little more important in storage to know the markets versus mobile home parks, I mean mobile home parks for the most part as long. It's not a war zone, and you know what you're getting into in terms of the quality of the... You could tell the type of tenant that are there, you can pretty much gauge if you're gonna have a decent community or not by just typical telltale signs of how people keep up on their home and the type of vehicle they drive. But here with storage, you really don't know your area, you need the asset itself, it won't tell you the full picture... And that's nice, you got flyers for storage, Parker, there's a lot of buyers out there right now, so it's a huge... It is a huge asset class, but it has cool down, I have noticed it's a little more challenging if you have something that really cash flows, it's not... It's still in good demand, but if something is too much a heavy lift where you're gonna do a big conversion or you gotta build, that's not trading right now, so there is an opportunity there if you believe in the business and believe in your area.
1:06:25
Jeremiah Boucher: So we change the entire signage in the highway is over here, so we got better visibility, better lighting on the signage on the highway, and that helped a lot with the rents. Nothing sexy, though right just a normal old looking building, but I do like the layout, so I'd prefer people in the beginning, stick with metal buildings built in the 90s or 80s, or storage pretty much started in the 70s and the early 70s, public storage was created in 1975 at scale. So the industry is very new, so that these buildings are not that old in relation to other real estate assets, so not as long as you can stick to a good wide layout, you have at least 20 feet between buildings, so people can drive up and pull in ideally, if you get 25, you can pull a car in there, so that's very helpful, but you have a nice open layout that's important for you if you're trying to get rid of snow and you're trying to have a good user from the experience. And here, again, step up in the layout here for the drainage, 'cause we do have the storm water on-site, and that was the reason why we couldn't expand is because you had to have room to put the water...
1:07:40
Jeremiah Boucher: Lots of lighting. You wanna upgrade your LED lighting. There's gonna be restrictions on the towns on how bright it could be and how many you can have, but I can't hurt to light it out, sometimes they ask me emotion sensors, but that's good. There's not the wrong with that, and this great layout, very easy, easy to get around, plenty of room yet. And here's the highway, so very easy to see when the... At least the foliage is fallen, so it's just a perfect location and people would find it and we could raise rents on this and make sure you have your Ballards in there, people don't know how to drive moving trucks and they will back into your metal buildings and create nightmares for you. So make sure you put those big thick, heavy concrete Ballards so they can destroy the movie truck and not your building. Here's the portable units that we put out there, I like the two... You can actually get two 10 x 10s and this. I think they're 9 x 20 is so nine wide by 20 deep, maybe 10 x 20. So that... Yeah, they ship them on a truck, they erect them for you box...
1:08:53
Jeremiah Boucher: Well, I can give you the insight into these guys, and I'm gonna try it a few others that they're actually manufacturing with plastic bottles, a company out of Maine that are creating the panels and it's recycled plastic, and there should be comparable and competitive with the pricing and they're supposed to be really drained, really waterproof, so I'll let you know if those come through... I'm supporting the guy, I think it's a good thing he's doing for the environment and it's a good thing for business 'cause they're still economically feasible. So in the end, you wanna push the asset appreciation, so I was able to double the value of the asset in my first deal, but I cut it at the right time and right market and learned it and scale it and built and here drove asset value through the roof, more than doubled this one and created 60% value in this one, so these are obviously the best deals I want to share, I can go through some nightmare deals. I'm sure Frank, will ask me on that one, I learned some lessons and those are always fun to talk about, but I'm happy to talk about the winds because that's what keeps us in business, and Frank, you can fire away if you like here.
1:10:08
Frank Rolfe: Dude we've got some additional email questions in that I wanted to go over, these are people who are gonna watch this in recorded form, the first question is, with all the banking and certainty going on right now, can you still get a loan... What are your thoughts on that? We all read in the headlines of, we've seen three banks collapse in recent times, can you still get alone and if you can... What's out there?
1:10:34
Jeremiah Boucher: Yeah, you know, Frank, and this is why I think your content's good, I read it when you send it to me, you know, the community banks, there's a lot of hype that every community bank in your town, your local, small, suburban or tertiary town was doing... What Silicon Valley Bank was doing, buying those short-term treasuries and getting our long-term treasuries and getting stuck with a liquidity issue, and that's not the case. So a lot of these local banks, they're well capitalized, they like local projects, now you can't be off the street and you can't be from out of town and just show up and say, I wanna do storage, you might need a partner or you might need to be local and have ties there, but no, Frank, they like local community credit unions, banks, community banks, those are savings and deposits. They're good resources. Now, maybe you're at the 70% loan to-value or loan to cost, we can still get 75 even sometimes 80. And you're at 20-year M typically on the minimum and sometimes 15-year M, but up to a 30-year M, Frank sometimes too, but we are seeing interest rates for this region of the country, we're seeing around...
1:11:51
Jeremiah Boucher: We're still getting high five, 5.85 because we're a preferred borrower and we do a lot of business with them, but say off the street with some of our new banks that we're going to 6.5 High six is 6.8. And just to share with people on the call, the way that it works in this part of the country and with community banks is they use the index, the Federal Home Loan to Boston index, so they have their own... There's different parts of the country that have different indexes, and it's typically when it's... Even today, it's about 200 to 250 basis points spread, a percentage point spread over the index right now, and that's about what we're borrowing it on a cash-flowing property now on a development that's a little bit higher because that's a lot more risk.
1:12:39
Frank Rolfe: Got it. And we just got a question here, it says, Which self-storage facilities are good for college students... I guess if you wanted to focus on college students as your primary customer base, what are you looking at there?
1:12:55
Jeremiah Boucher: King, New Hampshire, where I have my offices, and you've been to Frank to film some stuff, there's a big college there for New Hampshire, we get some, but. You all have tried to really control that, so I think you need to be very close to the college and you have to target, you gotta know the pricing, so you definitely don't want to discount your units in the summer time when all your college students...
1:13:25
Jeremiah Boucher: You do wanna discount some of your units in the summer time, which is contrary to what we do typically when they're all leaving, you wanna be able to get their stuff, so we don't really target them Frank, but you do wanna know how do you work with your college students, to get them in there, but there's a lot more movement, and I would say you wanna target markets where you need to have a higher vacancy, so if you have a lot of college kids, I would factor in 20-25% vacancy, 'cause you... Unless you have a lot of good economics on other types of tenants because they just... They come and go so frequently, they're a tougher customer base to deal with.
1:14:06
Frank Rolfe: Okay. Another question we received here, Jeremiah is, how will demand hold up when the next recession hits? That was a big deal back in 2007-2008, 'cause no one had really seen how storage would do... It did really well. It turned out the people, when they start losing their homes and get dislocated, they put their stuff in storage for safety. Do you see the same thing happening in the next recession? Of course, we're not a recession yet. Everyone predicts will have one by end of next year, we might be in one now, we don't know until the end of the quarter we have to have have two quarters in a row, but what are your thoughts? What's gonna happen in the next recession? Is it gonna be okay? We be a problem, what do you think?
1:14:44
Jeremiah Boucher: So demand drivers, I think they're all positive. Not 'cause I'm in storage, I'd be this objective about it, but where I think we're at is... What I want people to understand is, like I was saying, we're in the stress relief business, so cost of housing is only getting higher, space is getting fewer and fewer, apartments are getting smaller, people are consolidating and staying at home, they're consuming like crazy. There's still gonna be a lot of divorce, they're still gonna be death, they're still gonna be displacement with job, the volatility is not stopping, but I want people to understand is there will be more supply... The cat's out of the bag that there's gonna be a lot of competition, so one, that's gonna create a balance where you're not always gonna be able to fill up because there's a lot of demand, and number two is just because you can keep occupancy up because there's a lot of demand, if you're in a recession, the customer still is cost conscious, so they're gonna cut down the size of their stuff, they're gonna throw away a lot of stuff, they're gonna question how much they consume and where they're gonna move and how often they're gonna move.
1:15:52
Jeremiah Boucher: So Frank, I think the key is gonna be revenues stay flat and maybe it declines or maybe it increases, but it doesn't really go a lot of places, but you wanna maintain so you've still got that tenancy and you got your occupancy, but you gotta adapt your prices and drop it down to the recession and then make it out of there, and then you can raise your prices. But if you don't adapt, you're gonna lose your tenants. Other people are gonna adapt, and then you're gonna be in a bad place when you know all the other competition's full and you're not...
1:16:23
Frank Rolfe: Got it. Okay, next question here, Jeremiah. Whenever people talk about stories, they're always talking about radius around the storage population demographics. Where do you get that information? How do you access radial information around a storage, how you do that?
1:16:44
Jeremiah Boucher: And we can highlight this in the chat, so you got radius.com, you pay for a subscription. There's a competitor we're looking at right now called Track IQ, there's StorTrack, those are the three big ones that the big companies use. And the problem is with the markets that we're in, that Frank talks about, the smaller tertiary markets, they miss a lot of data because it's hard to get that county information for building permits, or for a lot of the owners don't have their facilities online or they're not... They can't scrape and find their facility pricing 'cause they don't put their pricing online, you have to call the owner. So you've gotta do your check, so what I would do is your best feasibility study, and what I did in the old days, is just good old Google maps, and you're gonna measure your facilities around you, you can pull demographics anywhere or you can go to any of those reports, employer population demographics, you can see what we like at patriotcriteria.com, and that gives you my minimum demographics that I like, and from that point, Frank, you always wanna do the formula there that you want.
1:17:53
Jeremiah Boucher: If you can, seven or eight square feet or less per person, so if you have a 100,000 square feet in your five mile, you want really... You look at your five-mile radius around that storage facility and the other competitors, there shouldn't be more than 700,000 square feet of storage, if you got 100,000 people in your five mile, so you wanna be careful that there's not 10 or 20 square feet per person, which in some markets like Manhattan, obviously, or some markets that are very dense, people live in various tight spaces that can handle that, but not in some of our tertiary markets.
1:18:29
Frank Rolfe: Next question, how will the collapse of the office building sector impact self-storage? We can't help but see every day, Jeremiah, in the paper, on MSN, office vacancy is 50%. In my nearest metro of St. Louis it's at 35%. Largest office building in St. Louis recently sold for only $4 million, it cost $100 million to build. So what is all this carnage mean as far as storage? Do office buildings really have any impact on storage?
1:19:01
Jeremiah Boucher: The work from home movement does, so that has helped us quite a bit, people run out of space and everyone wants to work from home and they don't have a room, and that adds up over time. Now, from a conversion standpoint, I don't see municipalities or towns jumping at allowing storage as a use, because number one, it doesn't create jobs, and a lot of politicians don't like to promote that they're not creating jobs, especially if a big U-Haul or a public storage come in it's not... Some property tax revenue is okay, but it's not a big deal for the town, so that there, Frank, is a downside of, I don't think they're gonna really be converted. And then secondly, it's very expensive, so to convert something to a building, an office building into storage, and even a big box retail, you're at 30 to 40 bucks a foot, if you're gonna do it right.
1:20:00
Jeremiah Boucher: Your cost basis with just your interior partition walls, your lighting, your elevators, you're just upgrading the facility, the access, the everything. So if you're buying it, you have to buy this stuff at $10 to $20 a foot. And that happened on that office building, don't get me wrong, it can happen, but if it's an outdated building, and people are lazy, that's the last piece that you taught me over the years as well is, if anyone has to do anything that takes any stress on them, then choose another option... That's why McDonalds is so successful. So if you have a drive-up facility that's super easy to get to and you just throw your stuff in and get out, that's gonna be nine times out of 10 more important, and for the customer, then go in to the middle of the town and trying to get it to an office building on the 18th floor.
1:20:50
Frank Rolfe: Next question here, where do you see interest rates a year from now? Obviously this whole Jerome Powell interest rate rollercoaster... It's not even a roller coaster, it's only been straight up but you have to go down to be a roller coaster, right. But since Q1 of last year we're raising rates, fastest rate in 40 years. It's probably not sustainable, you can't keep going up like that. I know Ronald Reagan did all the way to 18%, but of course, Reagan only had to contend with under a trillion of federal debt, we have $30 trillion now. So the interest at 5% interest, the interest on our federal debt would be 80% of our entire tax income, and we've already seen the Federal Reserve is now insolvent, right, so there are already ramifications for what's already occurred. But do you see rates going up a little more a year from now, do you see them starting to come down a year from now, what do you project?
1:21:45
Jeremiah Boucher: Why do you do that to me, Frank? I don't, Frank... You're better at this than me.
1:21:47
Frank Rolfe: Well Jeremiah, I just turn questions out here, so what do you think? You want me to help you out on this one a little?
1:21:57
Jeremiah Boucher: Well, I'll keep mine super concise. I'm gonna say it's flat for the next 12 to 18 months, and that's just my prediction because it's like I'm gambling on the Super Bowl, we don't know.
1:22:10
Frank Rolfe: Right, yeah. Well, I'll throw out my own opinion on that, which is that I think Jeremiah is probably pretty much correct. I think you're gonna see things through the end of this year, you're not gonna see much relief. But a lot of people are projecting by the end of next year to see some significant drop simply because by then, the body administration will be desperate for good news going into the election, and also the government just can't afford this stuff. We talk a bit, Gabe, we're the brokest country in the world at $30 trillion of debt, so it's really hard to make debates on that. Alright, we gonna do a last call for questions, if you have a question, put it out in the chat box. While we're doing that, I just wanted to thank you, Jeremiah, for doing this. This is great.
1:23:00
Jeremiah Boucher: Thank you.
1:23:01
Frank Rolfe: We never had anything like this before of real factual information on the deals. So I think that's really important for people. It's one thing to talk esoterically about storage and self-storage, how cool is that, but it doesn't mean much if you can't actually tie it to any kind of numbers.
1:23:18
Jeremiah Boucher: Yeah, I'm excited to do these each month, Frank, I'm happy to... I think everyone's gonna get a lot out of this. I wanna share, 'cause I'm passionate about... When I started with you guys, I was broke, I lost everything. I worked with Dave and you guys got me going. And I learned everything about alternative real estate, so I wanna get into how you finance it, how you find it, how you build it, what to look for. And I think it's a great business. I got my dad to build one, it's helping his retirement here 'cause he has a paving yard and he was able to get the zoning and build it behind there, so I'm really passionate about the small investor and with SBA financing, I think it's anyone, if you got a decent credit score and you got some competency and you wanna get into business. I think it's a good opportunity, Frank, because... When you're seeing it on the mobile home park side, it went crazy, and right now, sponsors, a lot of people got in our space and you taught a lot, most of them, and they really are in trouble because they were more money raisers than they were true investors, real estate investors and operators.
1:24:26
Jeremiah Boucher: And they got a fancy letter head and they got fancy decks and models and all this good stuff, but this is the stuff that you taught me with very basic with you and Dave is what everyone on here needs to know, and that's it, that you guys could get one facility and start small and expand it and grow it, and you can have one or two assets, and right here, just like I showed you on these numbers, I mean, you can create four or five, six, seven... A lot of millions in value, and that's one project.
1:24:56
Frank Rolfe: Yeah, absolutely, and I'll also a few other people this, there's a lot of people, we talk about crazy things like flipping houses, you can't get off of HGTV with at least 10 shows, it looks magical. You buy a house, you put in $100,000 of renovations and you sell it for another $100,000 of profit, and of course it's BS, most of those shows are very old, you cannot buy single-family homes any day today and make any profit like that. This is an industry that's still attainable, if you do like Jeremiah does, if you get out of the big urban markets, you can let a public storage and those folks, they can have 'em, they can keep 'em and they are welcome to have San Francisco and Detroit and everywhere else, because there's no money in that.
1:25:40
Frank Rolfe: I think Jeremiah would agree with that. That ship sailed long ago. But if you will stick with smaller, what we call suburban extra urban markets, like what Jeremiah has been doing, that's the future, that's where all the money is, that's where the population is going, and that's... Every mega trend in America right now, since COVID, will tell you, you wanna get outside of those urban markets, that those are death at this point.
1:26:06
Frank Rolfe: So I would also throw out, if you like what you've heard tonight, as far as Jeremiah's thoughts, the way he delivers it, look at his boot camp. We now have his boot camp, it's the only product on storage like that that has ever existed, so that is there. And then additionally, we're gonna have, or I know Jeremiah's gonna have some, I think live events this year where you can actually go out and walk around some storage properties.
1:26:31
Jeremiah Boucher: Two of those sites, Frank.
1:26:34
Frank Rolfe: And learn how it works in person. So again, this is not a one and done, this is the start of something we're trying to do every month on a different topic, but we really appreciate, Jeremiah, you being here, I appreciate everyone for being here. I know that everyone has many choices with your time, and I think you made a smart one being here tonight because there's a lot of good information that was involved in this, so again, Jeremiah, thank you for being here on the first of these discussions, and thanks everyone else for being here. We will talk to everyone soon.
1:27:00
Jeremiah Boucher: Frank. Frank...
1:27:04
Frank Rolfe: Yes.
1:27:05
Jeremiah Boucher: Did I come a long way from picking you up in the red BMW with the paint running, falling...
1:27:09
Frank Rolfe: Jeremiah, I gotta tell you... The first time I ever met Jeremiah, he was driving a BMW and he spilled a five-gallon drum of bright red paint in the back seat all over his beautiful tan leather, and I was just absolutely horrified and thought, "Oh my God, Jeremiah, what have you done?"
1:27:25
Jeremiah Boucher: Fixing my mobile homes, fixing my own...
1:27:26
Frank Rolfe: That's right. That's right. So he is truly a hands-on operator, that's one thing about Jeremiah.
1:27:34
Jeremiah Boucher: No more painting, no more.
1:27:35
Frank Rolfe: He's done it all himself. So he knows what he's talking about. At any rate, Jeremiah, thanks for being here, thanks everyone else for being here. And we will talk to everyone again soon.
1:27:46
Jeremiah Boucher: Thanks guys.