Thread by @sweatystartup

Over the last 36 months my partner and I have:

Sourced, financed, and acquired $64 million worth of self storage (1,060,283 square feet, 41 properties) and raised $21m in investor capital.

And now we operate it with our team of 38.

A thread on what I've learned:

Real estate can be over-complicated to that point that its unapproachable.

When we built our first building back in 2017 we didn't know how cap rates were calculated or what a debt yield was.

We had a basic spreadsheet and a gut feeling we could out-operate the other players.

The lesson:

Get the big things right.

For us it was:

Operations
Asset class / market selection
Lease up / revenue projections

It turns out we were right and it worked.

The little mess-ups didn't kill us because we picked a fundamentally good business and we operated the property well.

We underestimated our expenses by a lot. But our revenue projections were right on the money. The deal still did very well.

We constantly got enticed to do bigger deals with larger players.

But those players wanted to (rightly) own most of the upside and make a lot of cash off of our effort.

We decided to do small deals and play the long game while owning almost all of the upside.

It worked.

If you have no money and you can't raise money you will never own the upside and real estate will be very tough for you.

Because the family office or the general partner you join forces with will (rightly) be entitled to almost all of the upside.

You're just an employee.

The best thing we did was start a service business that spit off a bunch of cash for us every year.

And it funded the first few properties. Which generated more $.

Then we found our own ways to meet investors.

We controlled the capital, so we were entitled to the upside.

Sourcing deals is 50% of the battle.

We work our butts off cold calling and looking at deal after deal.

We underwrote 50 of them before we pulled the trigger.

We send 10 offers for every deal we secure now.

Its a numbers game. Don't get emotionally tied to any one deal.

Financing the deals is 20% of the struggle.

Talking to bankers and partners requires its own language. Know your terms and do "enough" homework.

Operations is the last 30%.

It was easy for us compared to our service business.

Answer the phone and make it really easy to rent clean units at a well-kept property. Thats it.

Cashflow is king.

You can chase appreciation or cashflow.

Are you hoping to "add value" and unload it to someone else? Thats risky.

Are you planning to hold on to it for a long time and make money every month? Thats safer.

We focused on cashflow.

Real estate is all about trade-offs.

Hot markets demand a premium and might not cashflow. Are you going to focus on rural markets with cashflow or big cities with appreciation?

Do you want a fixed rate loan or do you want to avoid the pre-pay penalty?

Leverage is our best friend and your worst enemy.

It can supercharge your growth.

And it can take everything from you if cash gets tight when times get tough.

How risky do you want to get?

Time moves in slow-motion and then everything happens all at once.

You can work for 18 months and feel like you didn't get anything done.

And then one day you get $2MM wired to your checking account.

Real estate is a game of years, not days.

If you signup for my newsletter, the first emails you'll get are deal breakdowns which explain the ins and outs of how we sourced, financed and operated individual deals (and made a lot of money).

sweatystartup.ck.page

Signup here 👆

A few others:

Investors don't pay you to speculate with their money on factors outside of your control (what somebody will pay, interest rates later, value on market in 1 year).

They pay you to protect the downside and operate the properties really well.

You can't time the market.

It's about responsibly deploying capital in any environment and cost-averaging into self storage over 5 to 10 years.

More equity = less risk.

Leverage is a beautiful thing, but in an environment like this we're using less debt and more cash on each acquisition.

We want to be able to take a 7-8% interest rate without losing money.

Anybody who says they know where the market is headed over the next 12-36 months is full of shit.

But most ppl have a pretty good idea how things are going to look 10 years from now if you operate well and protect the downside.

Be prepared to ride out an asset for a long time.

If you run out of cash its game over.

Most real estate investors don't keep nearly enough cash on hand.

Its painful, but it can be the only thing that keeps the party going when things get tough.

To make a lot of money you can either deploy a lot of capital or out-operate everyone else with a unique competitive advantage.

I recommend developing a competitive advantage.

The biggest lie in real estate is that you buy something and just cash checks forever.

It's a small business.

If you can't get tenants, keep the place clean and manage expenses you'll lose.

Real estate isn't passive.

On really small deal can change your life.

Here's an example of a property we bought for $472k back in 2019.

It's worth $1.2m now.