“Show me the money”.

It’s funny, having been a buyer of Self-Storage most my life. But now that I am selling one of our facilities in today’s climate, I find myself repeating the old saying from the Jerry Maguire movie, “Show me the money”.

I can’t tell you the number of times that has been said to me…and with good reason. When I first got in the business, and put a 2-plus million dollar facility under contract, both the sellers and agents would take one look at me and say “Show me the money”.
I would just say soon. “At the closing, I will show you the money.” The truth was, I had no idea where the money was or where it was coming from at that moment.

How I started on the ownership side was finding a facility I liked and that worked financially, putting it under contract, starting the loan process and due diligence, then I went out to raise the money. I am not necessarily advocating that method, but it works. It does create many sleepless nights. I have also lost good faith deposits using this plan. But all in all, it has worked for me.
It also develops two skill sets most Self-Storage owners never have to develop, (1) how to find and relate to an investor, and (2) how to be a good partner.

I learned early, very early, that investors couldn’t care less about you. An investor has to have confidence in you, but they are absolutely not interested in you or what you want to do. You have to sell yourself and your skills, but in the final analysis, they are not interested in you at all. They are just trying to be good stewards of their money.

If you can:
(1) quantify the risk
(2) demonstrate a competitive return on their money, you have a shot for them to allow you to use their capital.

Just be aware that every investor has multiple people offering them “deals”. I suggest you don’t simply offer a good deal. You are just part of the noise with a good deal. You have the Self-Storage story, and it is a very unique story indeed. I spend as much if not more of my time educating an investor on the Self-Storage industry. It is by far the best asset class for any income producing real estate out there. This is because there are so few variables and pressures on the net income line of an income statement. As an Owner and manager, I can project with a high degree of accuracy the cash flow, and the feasibility report can quantify the risk to a large degree.

If the above paragraph does not make sense, that is ok. Research it, buy my book Creating Wealth Through Self-Storage, or watch the many blog episodes we do over here that cover that.

In reality this is what you are offering, the Self-Storage industry.
Once a potential investor gets it, and if they are a sophisticated investor, they will then decide if they interested in you and/or any facility you may be trying to purchase.

At that point they are interested in your track record and experience. Remember, everyone, 100% of all Self-Storage Owners who have raised money from investors, started with their first project. And guess what, on your first project, you have very little experience. That’s OK.

Create a story about yourself and the industry. Everyone, especially investors relate to stories. I will go so far as to say, no story, no money. My story was about how I was a commercial real estate agent and I sold a number of Self-Storage facilities. I saw the perfection of Self-Storage as an investment type and at the first chance I got, I went out to buy a facility. That is my story. You can create your story, one that demonstrates skill sets that build confidence in an investor and highlight your experience. I used statistics from the industry because I didn’t have any. I sounded knowledgeable. I told the investors “We design the office and the first visual entry points to appeal to women, because women make 7 out of 10 of all Self-Storage leasing decisions”. I read that in the SSA Almanac that year, but it gave confidence that we knew what we were doing. And we did design the facility to appeal to women, and women do make more decisions than men about renting.

The final skill you need is to be able to analyze a project and not just tell an investor what he is going to as a return on his money and when, but you have to know it, really know it. When we tell someone “you will receive 4% year one, 8% year 2, and 12% through year five return on your money, then we will give you the capital back in year 5 and any deferred 12% returns from years 1 through 2”, I know how and why that is going to happen. Then do it. No matter what, do it.

There are a lot of resources out there to help you learn how to analyze Self-Storage, and I will shamelessly plug my “Step 2” Video in my FREE Three Video course “How to Purchase Self-Storage in Today’s Competitive Climate”, located at CreatingWealthThroughSelfStorage.com.

To close I will share the good news and the bad news about Self-Storage and investors. First the bad. No investor is going to get a home run in Self-Storage (or they are very far and few between). This is not an asset where someone is going to double their money in three years. Self-Storage as investment is not a home run.

The good news however, is that most investors are not seeking a home run. They need solid returns generated by safe assets. That is exactly what Self-Storage is and once you get that story down in your bones, investors come to you.

Next week we will look at exactly what to show them.