The Storage Investor Show
Learn how to turn your cash into cash flow with self-storage and small bay industrial. If it has a roll-up door, The Storage Investor Show covers it. Your host, Kris Bennett, will ask the right questions to help you find, fund, and close your next deal. New episodes every Tuesday.
The Storage Investor Show
Scaling From 0 to 15 Locations with Jon Farling
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John Farling shares his remarkable journey of building a portfolio of 14 storage locations in Ohio in just over five years. Buckle up. This is a great episode.
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Hey everybody, welcome to the Storage Investor Show. My guest today is John Farling. He owns 14 South Shores locations, roughly 350,000 square feet, all in Ohio, and he's accumulated that portfolio over the last five-ish years. John, welcome to the show, man, I appreciate you having me on. This should be fun. Oh yeah, man, it'll be great. In this episode I do want to get a little bit more into the personal story, because you've built all this from scratch, kind of starting out and then just going, and you have a lot of resources, podcasts, et cetera. I was listening to a little bit of your last episode earlier talking about the gurus and all that and just how to get started. So I think it's great guys. I'll have a link in the description below. But John, tell us you started five years ago. What got into storage? Like, if you think back to that time as a beginner, what was the reason for getting into the business?
Speaker 2:Yeah, well, we can back up a little bit further than that. So I was working a? Uh, a nine to five um outside sales for electrical contractor from since 2008, I believe, and had a few you know outside sales jobs before that. But I was in sales. I was coaching basketball, um, up until our first daughter was born our first kid, uh, which was in 2014. And so I stopped coaching basketball. Uh, I just didn't want to trade my time with my kid and my family for someone else's kids. And then, uh, I think I was getting stir crazy a little bit. I was like I've got to do something other than just working a nine to five Um. I think I've always kind of been like that.
Speaker 2:So my parents were. They built spec homes growing up I want to say around 20 some. They had a couple of rental properties here and there. So real estate's kind of always been in my blood and that was just a natural. I was just drawn to it.
Speaker 2:So I started looking into rentals, ended up buying a rental in 20, I think it was just the end of 2014, early 2015. Bought one per year, did a flip in there and realized, hey, this is a great vehicle, while they didn't cash flow that great. I could see the power of real estate investing and I knew I needed the scale somehow. So I started looking at other avenues apartments, actually small businesses, car washes Almost landed. A car wash Deal fell through but I found out you could do SBA financing, which back then the rates were a lot better but you could bring less money as a down payment typically 10% down and get into a commercial asset. And I found out you could do that with self-storage. So that was kind of how I got in storage and then, yeah, kind of the rest is it's been great. First, two facilities in 19 and then, yeah, go ahead Sorry.
Speaker 1:Oh no, no, so. Okay. So you found out about the SBA, that you can get a loan from the SBA for a lower down payment. In other words, how did you find that information out? Was it a podcast or just doing searches?
Speaker 2:online, probably just research. Yeah, I don't remember specifics, but probably just researching. Talking to banks Okay, somehow I found that out with the car wash and then, I think, within conversation with one of the banks I was talking to, they're like oh yeah, you know, self-storage is another asset class. You can do that.
Speaker 1:Okay, got it. And then you said you bought two. Was it 2019? You were about to say something, yeah.
Speaker 2:I bought two in 2019, quit my job in 2020 and bought a few more since then.
Speaker 1:Okay, you make it sound so easy. Yeah, bust, bought two in 2019, quit my job, went to the beach, came back, bought a few more. Okay, so how in the heck put yourself in the shoes of the beginner? How did you find those first? How did you find the first deal Like? What did you do?
Speaker 2:Yeah, it's funny because when I started looking in 2018, I found Mike Wagner with Storage Rebellion and back then it was just Mike Wagner was storage rebellion and, uh, back then it was just Mike Wagner and he I think he was on bigger pockets, um, probably uh on there criticizing people cause they're giving them given wrong information, um, but found him, um great friend of mine, um, and we kind of talk back and forth. He helped me a little bit. But in 18, I'm like I missed the boat. I'm looking at storage facilities. I'm in Columbus, ohio, which is a bigger city. I'm looking at some that are listed. I'm looking at off market, talking to a few few uh owners and nothing makes sense. I'm like I missed the market. I missed the, you know, the, the kind of gold rush and storage. And then more talking to Mike Wagner, a little bit more. He's like dude, I invest in small, more rural, tertiary, secondary markets and I actually had a single family rental in a tertiary market.
Speaker 2:Why I didn't think to look there for storage, I have no idea. But I did that and made that small little pivot which ended up being a huge pivot, and I was probably the first one, one of the first ones, maybe the first one to send letters, and that's how I did a direct mail, um to these owners in these smaller towns. They were just happy Someone was reaching out to buy their piece of junk. So it was easy conversations. I had a high success rate. I think I got I think it was around four or five deals out of 60 letters, which is insane. You can't do that nowadays. Um, yeah, but yeah, develop relationship out of 60 letters, which is insane.
Speaker 2:You can't do that nowadays that is nuts, yeah. But yeah, I developed a relationship and with my sales background I just look to try to meet these sellers on site. Develop rapport, develop a relationship and try to solve both of our problems and ended up working out.
Speaker 1:Okay, so you sent out letters. I have like 75 questions. I want to make sure I get back to the thing about tertiary markets and buying in those markets. So remind me of that. Okay for sure. But as far as finding the owners, talk to us about the practical ways you did that. How did you, we understand, writing a letter? You just print it out, sign it, whatever you did, right, you put in the mail, put a stamp on it, fine. But how did you find the correct addresses for the owners? Did you mail it to their home or did you mail it to the facility? How did you go about that process?
Speaker 2:Typically their home. Um, I'll send to their facility as well. But back then it was, it was a little bit easier cause they weren't again. I was one of the first ones sending letters to these people. But yeah, I did it the long way. So I would go to Google maps, look up self-storage facilities and then I'd look at the local county auditor's website and find out their tax mailing address and then I'd send them a letter. So I was basically and I remember I don't remember the exact timeframe, but I remember like Tuesday I'd research a market, write down all the facilities that I like, and this is at night. At that time we had two kids, so once the kids were in bed, this is what I'm doing for two or three hours. I'm basically researching markets, putting them in an Excel spreadsheet, and then I'm getting their mailing information next day and then the day after that I'm sending out mailers and it was just repeat, doing that, um, and yeah, it's.
Speaker 1:Uh, it was a long way to get there, cause you can buy a list and get the same information. Okay, so that makes sense. That's what I talk about, and several others say the same thing. You can do the old school method Google maps If you don't want to spend money, right, it's fine, like there's nothing wrong with doing that and finding the mom and pops uh, jim's packet stack, right, and send them the letter. So that was good. So you went to the tax assessor's office online or the tax records online, and you found out where they actually mail those tax bills and then sent them a letter. That makes a ton of sense to do it that way.
Speaker 2:We'll build a long way to do it but it's okay because it's cheap, it's free, essentially, yeah, okay. So you found those. Yeah, go ahead. Yeah, and I was gonna say at the time I had more time than money, right, so if you've got more, money than time.
Speaker 1:Then buy a list and, uh, it makes a lot easier. Oh, it makes a ton, ton, ton easier. Talk about using yardie matrix, but, um, that's expensive, so and they lock you in and all that jazz. But anyway, if I, if you and I, could build a database of just owners in just that piece of it, I think we'd be pretty wealthy. But it's a bit harder to do so. Okay, all right. So you found those first two. Once you've got them under contract, got them like what was it? Was there anything special about those deals? As far as, like difficulty or just working with a mom and pop? Like, were the records all you know bunk? Like, did you have to figure things out? Or what was that experience like?
Speaker 2:no records. Um, the, the, the first facility, I remember a little bit less because it wasn't as uh. The second facility I remember a lot more, just because it was that it was a lot of webs untangling. So so it was. The facility was built in 79, 1979. It's all block construction a little bit different. There's interior hallways but it's not climate controlled and there's I don't know how many exterior doors. We'll call it 25 maybe because there's some exterior units. So there's like 30, some keys. This guy is carrying around. He has a milk crate full of all the leases that I had to basically right put everything into. At the time I was using easy storage solutions. I had to put into an excel spreadsheet, so it was a lot, and there was only I don't know 140 units, I think. So not a ton, but at the time I'm like is awful. I've got to go through all this, and the first year I didn't make that much money on it, but since then obviously rates have gone up and I learned how to operate a little bit better.
Speaker 1:Yeah, no kidding, that's funny. That's what we always say about mom and pops. Right, so that their records are pretty poor or, like you said, a tangled mess sometimes. Okay, so you got that one done. You did all that yourself. The first deal, you figured all that out yourself. Okay, you used easy storage solutions at the time. How did you manage it, like if you have 100, you know roughly minus, plus or minus 150 units, did you go there yourself every day, like after work, or how did that? How'd that look?
Speaker 2:Yeah, so they're opposite ends of where I live. I'm in Columbus, which is center of the state. One facility was one hour South. Another facility is one hour North so I was going the first facility, which was one hour South. I was going probably once a week because I did have to put in fencing cameras, gate, all that stuff. So I was down there quite a bit just overseeing that. But no, I hired day one, both of them boots on the ground, just part-time guys that are there four to eight hours a month. That were my eyes on the property.
Speaker 1:And then how did you? So? If you haven't put in the cameras and all that stuff, how did you finance it? How did you finance the property? And then, for that CapEx, was that part of the financing or was that out of your own pocket? And then, how did you finance the property? And then, for that CapEx, was that part of the financing, was that out of your own pocket, like. And then how did you get the equity, like, how did all that come together?
Speaker 2:Yeah, no good questions. So both those were SBA loans and that was back when rates were probably I don't know. I've since refied, uh, three and a quarter probably. So rates made sense and I, uh, I got construction loans for both those two. So everything was wrapped in. Rates made sense and I got construction loans for both those too. So everything was wrapped in, which was nice. I brought my own money as down payments and I did have some money saved up. I used part of our HELOC. I had four single-family rentals. I ended up selling those off. I think 2020 was the last of the ones. So I had some equity there that I put in more deals. So I had some equity there that I put in more deals. But, yeah, I did anything and everything to fund these myself as far as the down payment.
Speaker 1:Okay, got it, so that makes sense. So using SBA loans rates were a little bit more reasonable. It's funny because when you say three and a quarter or whatever, they were a little bit below 4% I remember back in those days and it seemed like it was a little bit like ooh, it might be 4%.
Speaker 1:It's kind of crazy to think about when rates are double that, almost Okay, so fast forward. You've now closed since those two. You've obviously closed 12 more over the last five-ish years. So what's that? On average, roughly two a year, something, something like that. Yep, um, how have you found the other deals to get where you are? Is it letters? Is it same thing? Like what's been that process kind of.
Speaker 2:That's like anything. The more you're doing something and in something that you're doing, whatever it is right, whatever profession, things just start to snowball a little bit. I have done more letters, um, I don't know how many deals I actually got off letters, but more people started, the more people I talked to, more people would reach out and say hey, I know a facility that's for sale, um, one of my boots on the ground. Actually, my first facility was an auctioneer. He knew of a facility in a different town that was looking to sell, so he hooked me up with that seller. Yeah, word of mouth, two or no, three or four of them were listed. It's just all over the place. The longer you're in it, the more. And what's important is I, not day one, but pretty early, maybe year one I knew my buy box. I knew what I was looking for, I knew what towns I was looking for. I knew what towns I was looking in. That helps, you know. You can go a lot faster and things are a lot more clear knowing your buy box.
Speaker 1:Okay. So I know people want to know what is well. First, what was the buy box, and then has that changed?
Speaker 2:over the last couple of years. Yeah Well, originally, day one buy box was collect cashflow, which is still true, uh, but I was just trying to collect cashflow, get on my nine to five, um, my third facility, which was right, when COVID hit, so March or April of 20, um, that got me out of my nine to five. But, yeah, I've just been collecting cashflow and, uh, my buy boxes. Now it's expanded pretty much anywhere in Ohio, but at the time it was within an hour radius of Columbus, ohio and smaller towns, so pretty simple, was it?
Speaker 2:Oh, go ahead. Sorry, go ahead. So I haven't. I haven't put parameters on size, um, and I think that's helped me out because I'll look at anything. Anything that's in my markets I'll look at interesting.
Speaker 1:Okay, so it just has to be like you said. Now it's state of the state of ohio. Back then it was about an hour drive. So any size, uh, that's a good way to do it, I think. Uh, any size. You know, within a certain distance, when you first start out and then expanding it from there, and then maybe some people they look, you know within a certain distance, when you first start out and then expanding it from there, and then maybe some people they look at you know they say 40,000 square feet above only, or something below that only, or whatever. So, okay, very good man.
Speaker 1:And so back to the question about the tertiary markets. Help me understand that, because oftentimes I will be, I won't look as favorably, just to be open, like positive, like from my perspective, like if I were to buy. Well, the mountains of north carolina are kind of trash now, but like, for example, out in the mountains of north carolina there are some deals, right, so there's a hurricane that came through that really devastated that area. Um, unfortunately, in the last two weeks or so. However, prior to that, there's a lot of opportunities up there, maybe in the mountains, which was interesting because we like to go to the mountains, but there's just zero population growth there. Of course it's, you know, maybe it's laying fruit or whatever, but like, if you have to raise rents and backfill, like that to me is a could be a problem. It just depends, but it could be a problem. But how do you? How did you get comfortable, like for you? Why is it? Why are tertiary markets work for you?
Speaker 2:Yeah, that's a good question. I completely work. I have no idea. The way I see it is we're in the Midwest. Ohio is obviously in the Midwest. We're pretty stable as far as anything, right, even in the uh, the great recession, yeah, there were jobs lost, but you don't. You don't see going from $500,000 to losing half their value, right, it's the same thing. From what I've seen with storage, other commercial assets, I'm not going to lose all that much. Commercial assets are a little bit different. I can raise the value, obviously with value add and raising rents, but there's not going to be a ton of job losses if we have a downturn. There's going to be some, but we're more stable in the Midwest. It's just worked out.
Speaker 2:The towns are not I think every town that I'm in. There may be one town that I'm in that's growing a little bit, but it's just the past hundred years. It hasn't changed. It's probably not going to change. I've also noticed and this was by accident, I'm in by accident starting, but now going forward, I look at it Every town that I'm in there's at least a Walmart in there, which Walmart does a lot more research than I do.
Speaker 2:They're not going to, for the most part, invest in areas that they think aren't going to be around in 20, 30, 40 years. So that's something that I've kind of looked at. Um, I don't really look at the, the median um income. Um, I'll look at the square foot per capita, but I don't live or die by it. In fact, I'm in one town that's it's like 30 or 35 square foot per capita, which is insane, and it's the easiest town for me to um in fact, we're expanding for me to rent up in which none of that makes sense. Um, so there's a lot of uh, there's a lot of metrics in storage that don't make sense. Um, there's obviously general rules of thumb, but there's some things that just don't make sense.
Speaker 1:That defies conventional wisdom. Right, 30 square feet per person. Most people would pass on that quickly. Uh, but you're saying in that market you can raise rents, or you have raised rents and you're actually expanding. When you have raised rents in the past, did you have some like backlash with bad reviews and like some trouble backfilling? I'm asking just out of pure curiosity, like how has that been for you? Yeah, we don't.
Speaker 2:Since we are in smaller towns, I try to keep it once a year and we're not like going after people. We'll raise them day one when we take over facility and we're not going to go crazy. I mean, you're not going to see a $30 increase. It may be 10, maybe $20, depending on how low it is their current rent is. But yeah, we don't go crazy because it's a smaller town, right? If there's 12,000 people in a town and you make five customers mad, those five customers are going to talk to at least five more and it just snowballs. So we don't want to have a bad reputation in the town. We will push rates, but it's more the slow cook than anything.
Speaker 1:Okay, that makes a ton of sense. Going in there slowly, not doing it. We will push rates, but it's more the slow cook than anything. Okay, that makes a ton of sense Going in there slowly, not doing it. A $5 rate increase isn't a huge deal, but that could be a 5% increase in your pro forma, which does great things for you. So, okay, that makes a lot of sense. You're not going to be doing hardcore revenue management.
Speaker 1:And then what you said about the reputation I've heard that that's very, very important because it is, like you said, small town. Most people know everybody else in your facility. We get a pretty bad reputation pretty quickly. Okay, so that that helps man, that that makes a ton of sense. So if you go in, you find a deal in a tertiary market. It's kind of like you follow the Walmart strategy, right, or you draft off those guys. Like back in the day, if McDonald's put a location somewhere, then all the other fast food places were seen to follow because McDonald's had a ton of research. So I think that makes a ton of sense, like looking for the Walmart. If you're probably, if you're buying in a saturated well, not saturated, I'm sorry in a primary or secondary market, it might be good to look at a Whole Foods or something like that, because they'll go, you know where the money is and all that stuff.
Speaker 1:And I think what you said about Ohio and some of those markets is kind of being stable. That makes sense too because, uh, you know, the South is growing, they're expanding out in certain areas, uh, but, like you said, in some places like Philadelphia or elsewhere, it's just it's just stable, like the housing is built, they're not building like more new construction homes for the most part, whereas down here there's a lot of land, a lot of places to expand and some of those towns and cities and all that's what's happening. So, and on the reverse that I'm talking a lot here quickly, but you said a lot, so it makes a ton of sense. Down I live in Charlotte Dude. This market is nuts, like there's a ton of competition, for good reason. But there's a ton of competition for good reason, but there's a lot of competition fishing in this pond and like places like austin, texas or whatever, um, and it makes it more difficult to find deals that pencil and make sense. So your tertiary strategy, um, it does make sense to me and hopefully to the listener as well.
Speaker 1:You mentioned mike wagner earlier. Uh, are you part of his storage rebellion group now, or were you at that point, or?
Speaker 2:uh, when I first started, he didn't have a group. Um, he did have one-on-one coaching, but I only needed, I understand, I understood real estate investing, just cause I'd been doing it with same family rentals Um, I just need to wrap my head around operations. So we did, uh, basically one-on-one half day training and then after that I joined his mastermind for a couple of years, but I've I'm not in it right now.
Speaker 1:Okay, no problem, that's a. I've heard good things about his. Uh, I do remember, yeah, I remember when he first started. Uh, I'm sure it looks better now, but I remember the website was like horrible, uh, but it was a thick. It was it was. You know, you got to start somewhere, so I'm building one now. Maybe by the time you're listening, uh, that's already up, but it's like it's, it's a task. It's uh not easy to do so, uh, but he's good man. I remember him coming to charlotte. I think he did a, a seminar back around 2019 or 2020. It was like 2019, I think it was something.
Speaker 2:Yeah, yeah are you part of?
Speaker 1:yeah, are you part of any masterminds now or are you just kind of going yeah?
Speaker 2:So, um, yeah, and Mike's. If anyone's looking to learn about self-storage, mike's is great. Um, it's uh kind of what you said. The website wasn't that good. I don't want to say it's no shrills, but it's like you get to the point and he's not. He's not looking to, um, I guess, wreck you over the coals, right? He's just trying to help out. I know his goal was to create as many millionaires as he possibly could through storage and he's also kind of on the life side too, so he wants to make sure you've got time, freedom and all that stuff. But right now, myself and a buddy, ian Horowitz, we run a mastermind together. It's a small group. Right now it's uh, I think it's 16 people, 17 people, small group of guys. Um, and we uh, we meet twice a year, monthly, virtually, and then I'm also part of, uh, brandon Turner's, the 50, um, which will be eventually 50 members, but it started out as 13 of us Um and yeah that's been good, but yeah, those two are what I'm part of right now.
Speaker 1:What is uh so with your guys's mastermind? And guys, this is not a promo thing, I would literally just asked and it's come up so, um, uh, just to just so you guys know. Okay, so with your guys's mastermind, you said you meet monthly and then twice a year. Is that right? In person, twice a year, is that right? Yeah, yeah, yeah, yep. And you guys like trade notes and just try to help each other out as far as problems that come up, et cetera. Like, what is what do you guys do in the mastermind?
Speaker 2:Yeah, well, ian and I were. We were both in storage rebellion and Mike's really good at um, kind of get you getting you going with storage at the first couple of years, and then we started looking for more. It's like, all right, this is kind of a business now. And it's funny because we all kind of got into real estate, investing for the freedom, right, whether we're leaving a job, time, freedom, it's just freedom in general. And then we don't really think about oh, now we have to run a business. We have employees, we've got to manage, we've got to be a leader, we've got delegate, we've got to come up with SOPs, all these things.
Speaker 2:So now it's a whole different beast. We're not just looking at one deal and saying, oh, what's my cash on cash return. There's so many other aspects. So, yeah, our mastermind is more business and personal development. We're the guys that form the group, but we don't. Everyone runs it in their own way. Um, and yeah, it's just kind of a guy's club and we bounce ideas off each other. Um, business development, personal development, and it's uh, it's good we have speakers that come in. We just had a Dan Martell come in virtually last month, which was pretty cool.
Speaker 1:And it's private invite only. So yeah, that's in. We just had a Dan Martell come in virtually last month, which was pretty cool, and it's private invite only. So, yeah, that's funny. Okay, great man, that's really cool. Do you guys offer any sort of coaching for first time people, or is that more like a?
Speaker 2:Mike Wagner thing. Um, ian is going down that path. So if you're interested in learning more, you can reach out to me and I can put you in touch. Um, but yeah, I don't, that's not something I'll. I want to help and that's why I've got a podcast is I try to give back as much as I can, but I don't want to do coaching. I tried that route and it's just not. It's not for me. So, yeah, for our group is it's uh, guys that are in similar, on a similar path and and want to grow personally and professionally and, um, yeah, it's not, not really for beginners.
Speaker 1:Understood. That makes sense. And then Brandon Turner's group talk about that for a quick second. Uh, what does that look like?
Speaker 2:It's somewhat similar. Um, it started with 13, which I'm more of an introvert. So I like the uh, I like a few guys or two people. Guys or two people, Um, once the group becomes 30, 40, 50, it's like, uh, it's more of a conference. There's clicks for me and I'm not talking bad about it and I know we're recording here, but, um, yeah, it's. It's definitely changed in the year, that um, since it started. It started a year ago. So, yeah, it's, uh, it's going to be up to 50 members, Um, no more than that.
Speaker 2:We were just in Phoenix last week. We had Mauricio Raul. He hung out for the two and a half days we were together. He's a CPA. Ken McElroy, which is Robert Kiyosaki, if you've heard of him, they're partners. I don't know how many units he's got. He's got a ton. He was there for 90 minutes and just just talked to talk to us, which was pretty cool. And then, uh, Tommy Miller also spoke. Uh, who's a garage door, I think, the largest garage door operator owner in the U S. Um, so, yeah, they have those. Come in and then we just have breakout sessions where we talk and uh kind of hang out.
Speaker 1:That's great, man. I think it's the value of getting other people around you to help spur you towards your goals is really, really helpful, because you're in the trenches every day and sometimes you forget you're just in emotional battles and whatever life, kids, family, health, these things pop up, unexpected expenses, whatever and you kind of lose track. You get around those guys and gals who are going towards something uh and you help kind of spur each other towards that goal and I think it's uh, it's great, it's refreshing, it can be refreshing. It can be um, uh discouraging sometimes. If you allow it to be cause you can pay yourself other people which you don't. You shouldn't do that. We're all in our own path, uh, and I never do that, you know yeah.
Speaker 2:And I don't want to cut you off, but that's a great point and most people and I've been in several groups and that's everyone's like how many square feet do you have? How many years do you have? No one talks about and I know it's a tougher conversation, but no one talks about what do you take home? What's your net income Cause? None of that matters, right? You could have 4,000 units or 4 million square feet of storage and own 5% of that, right, and you're not bringing much home. So it needs to be talked about more. But yeah, it can be discouraging because it's like this guy's got 2 million square feet of storage and I've got this much, but then when you kind of dive into it you're like, oh, not making what you know, it's apples and oranges that's what we did.
Speaker 1:So we were uh with my partnership. It ended, um about a month ago september. What month is this october? So september is last month. So, yeah, it ended last month.
Speaker 1:Uh, and the way that it worked is, if you come in as a GP, you own a slice of the pie, right Of the GP share of the deal, and so it depends on what that looks like. But you own a slice of that pie and also depends on what the value of the properties are, right, and so that value changes over time. And you don't. You're doing the work. You have a partnership they may bring. They would hope.
Speaker 1:Like you said earlier on, you had in the beginning you had, uh, time right, and then later on, now, now it's a little bit, maybe a little bit different now, so you might pay somebody else to do stuff for you, but you have plenty of time. So that's what we had plenty of time, I myself and my partner. So you own a small slice of the pie. Somebody said the other day, um fernando, I'm gonna have him on the podcast later today with the episode will come out later but uh, he said I'd rather own a small piece of the watermelon than an entire grape, which was actually a funny way of putting it, and so that's why a lot of people think that way. But you got to really look at like what your slice of that watermelon looks like, and maybe sometimes for some people it is better to own the whole grape because your life, you know, isn't driven by 75 investors or whatever else is going on. You know that's. That's actually important as well.
Speaker 1:It's funny what you said what you said earlier about uh, you will start running a business and you realize, oh shoot, uh, we have to do all these other things and now I'm not working like I thought I would for myself, I'm working for all these other people. I got to feed and take care not feed, but you know, take care of, give a paycheck and all that stuff. So, yeah, it kind of overtake you.
Speaker 2:So, yeah, and I've always wanted to, you bring up a lot of good points. I've always wanted to have someone on my podcast to kind of debate, whether raising money or doing it by yourself. There's no right right or wrong right. You said it before. You got to find your own path and you got to stay in your own path. But for me, I would rather have the great and I own the entire great. I don't have a boss, I don't have investors I need to talk to, I don't have a partnership. It's simpler Now, obviously, I can only grow so fast, but if you're doing value add anything storage or any other real estate you should be able to have equity that you can tap into. Obviously, you're making more money, but yeah, there's ways to get it done. But yeah, I would love to. I've always wanted to do that on my podcast. Bring someone and debate about that.
Speaker 1:Well, ask me later, cause I'll be on your podcast later. So we're doing a two for today. So I'm on John's later. This today, today's October 17th I'm not sure when you guys are listening to this episode, but I'll be on later and I'll break it down.
Speaker 1:Uh, it's not not. You know there's I wouldn't say one is better than the other by any means. It's trade-offs of both and what makes sense for you. And if you're starting out, you don't know what makes sense, and so you have to just take a path and figure it out, and then you might pick the path that does make sense and you may not. And that's okay. You pivot, uh, because I pivoted like 75 times in my life, uh, and so that's a completely fine. And so is john, right, you've made some pivots, from single family to storage and car wash and then storage, and you know, you kind of figure out what works best. So, yeah, but yeah, that's happy to talk about that, and even I mean dude, okay, so for my listeners then, so the way that it worked, so you, you own the whole grape, which is great.
Speaker 1:I own a slice of the watermelon, right? It depends on how big the watermelon gets. It's really what it comes down to and what that exit looks like when you go to sell the watermelon, because that's how you actually make money. So if you're looking for deals for cash flow, then you get the cash flow. Obviously you get the experience You're doing it yourself.
Speaker 1:Like you said, technically you have no one you have to answer to other than yourself, really maybe the lender On the flip side of that you have if you're part of the watermelon, right, you have your investors you answer to. Then you have your partners that you answer to and there are interpersonal conflicts that can come up and will come up. It happens with every team that has ever formed since the beginning of time. So you have to deal with all those things. But on the other side of that is, if you can grow the watermelon large enough, then you exit and you take that slice and you go do whatever it looks like.
Speaker 1:So plenty of people have done that. If you think about it over time, plenty of people have done that, whether it's in tech or other industries. It's the same idea. You go public and you have shares and now and you and you go do whatever you want to sell those shares and go do whatever you want to go do so, there's different ways to do it and there's different headaches that come with each. Like with you, sure, like what says you don't have anybody technically that you're you're answering to, but you do have accountability in the form of, like the lender, right, they need to see financials. So you do have to push yourself to like, you know, obviously, make sure you meet your debt covenants and all that stuff. Yep, yep.
Speaker 2:And and I don't if, if you guys are, obviously you're listening, but rewind, listen to everything you just said, because it's not talked enough about, because I didn't know either, especially starting off, it took me a while to figure out. Raising money, more than likely. You're looking for an equity pop at the end, large equity pop, right, Probably a little bit less cashflow, Some people, depending on how it is, you may not get any cashflow but you might get some management fees, fees on taking the deal down, those types of things. The other side is, which is how I've done it using my own money, going to a bank, using my money for the down payment and doing deals by myself. I'm probably cash flowing more, but I'm in smaller deals. So my equity pop at the end probably won't be as much and really for my plan, I plan to hang on, I'm guessing at least 10 plus years, if not more. You guys are probably exiting sooner, more than likely. So yeah, if you guys rewind, listen to everything you just said about all that um, what questions you ask? I?
Speaker 1:apologize, I didn't ask a question.
Speaker 1:Oh, I was just rambling. Okay, so was I. We were just, yeah, we were just talking about the watermelon versus the grape. Yeah, uh, and you know, thank you, fernando. Uh, he's going to be on later today, I have his episode out later on, but, uh, he, so he's got the watermelon right.
Speaker 1:So, if you so, john, if you wanted to scale the business there's pros and cons to that too. So, let's say, you got your what is it? 14 locations, right, there was some value, whatever that looks like. There's cashflow, some amount, there's some equity there. I don't know. Let's just just in a hypothetical. You refinanced half the locations, uh, tomorrow, and you pulled out whatever $3 million, a million, 5 million, I don't know what the number is, but you pulled out some number of uh amount of cash and you said you know what? I want to go do larger deals now, uh, in other markets or other States or whatever. But I don't have the time because I'm running my locations myself right now. And so how do I scale it up and go buy, you know, a 50,000 square foot facility in whatever good market in some other state, in Charlotte, for example? Okay, great, other locations there. Yeah, charlotte, atlanta, you know, austin, texas, whatever. I want to scale.
Speaker 1:Okay, so we're going to take that money as seed capital. I'm going to find a partner who's got some time and knowledge and so, and then we're going to scale. And let's just use me for example. Okay, chris knows the brokers, he knows those markets, he's done deals in all those markets where I'd like to be. I've heard good things, et cetera. I bring the money. I don't have all the time. Chris has the time and the knowledge and the connections and we put the partnership together and that's how you'd scale.
Speaker 1:Okay, we can leverage a million dollars into three deals or five deals or whatever, and then we'll go raise equity. So then we can actually let's say it's a million, let's say we raise another three or 4 million, so now we have $5 million or whatever it is, and now we can leverage that into $20 million of deals, and that can be whatever number of deals. We're going to hold those. We have to give cashflow to the investors, but the plan would be to refinance them or sell them in three-ish, five years or whatever. That's when we get our big pop.
Speaker 1:And along the way, john, you and I would get acquisition fees because we're raising money from investors who, again, they have money but they don't have time and maybe they don't have knowledge, but they want to put their money somewhere. They feel good like self-storage, and they've got to find some people who know how to run the business. Well, john's run the business, chris has run the business, I trust those guys with my cash, and so that's how it works. So we take a little acquisition fee to keep the lights on right. We can pay ourselves and all that stuff to keep the business going, pay for data, travel to meet brokers and look at deals whatever, and look at deals whatever, and that's how that business works.
Speaker 1:And so you and I would get paid some acquisition fees, some asset management fees, and then when we sell or refi later on, we give the investor money back plus a return, and then we get a little bit of that upside and that's how we'd make money. And then we can take that and put that in our own deals and scale and go from there. So the trade-offs are great, though I don't mean'm sure. I don't mean great in the sense of like wonderful, I mean they're great in the sense of magnitude. There's a lot of trade-offs there, so you're now responsible for other people's money, and so if the deal goes wrong which we've had, deals go wrong. If they go wrong, you get a lot of questions from investors. You know, if there's things you can't control, there's a lot that happens, a lot of moving parts, um, and so that's how that looks, you know, I kind of rambled for a second, but no it's good.
Speaker 2:People need to know that because it's not talked enough about. People don't understand. People just get in and like especially if you don't have any money to start, whether it's residential, commercial stuff, whatever it is it's a great way to get in the game Right. Um to me, I I like the way I do it. I've seen too many people get in tight spots, especially the last 18, 24 months Um to where their deals are basically a hundred percent finance and this we're not obviously not having a debate, this is just, you know, back and forth. But I've seen some some, some guys get in trouble and they have to pause distributions and I don't want that headache. Like I'm okay putting my own money in. Technically, I should be safer because now I'm putting equity into deals to where, if I do happen to lose value, I'm still okay, I'm still above water.
Speaker 2:So yeah, but yeah again, there's no right or wrong. You got to figure out what works for you.
Speaker 1:No, no, I'm just giving the goods, I'm just telling, that's all, and I never do this. So this is the first episode where I actually went on and talked longer than like two minutes about anything.
Speaker 2:Oh, this is good. I try to give the guest you know the stage the floor, but it just came up. It's good because it needs to be out there.
Speaker 1:Yeah, thank you, man, I appreciate that. Yeah, it just, you know every plan is different and you know we've, we've, we've run into those bumps along the way as well. So, but happy to talk about it more obviously and share the same information for your audience on your episode later on. So talk to us real quick. If you're a beginner, right, let's get back, let's get back to the episode here. Sorry, guys, if you're listening, but hopefully that was helpful and insightful. So, real quick as we start to wrap the episode up. John, if, as a beginner, what would you recommend people do? Right, because, real quick, if I go back and I really think about what I would want, you know, I would want to own my own whatever 50,000 square feet, so that no one could tell me what to do or get mad at me if things don't work out. So put yourself in that person's shoes. What should they do to start out looking for deals?
Speaker 2:Yeah, well, one. You need some type of vision, and it may not be crystal clear, and then you can vision goals, whatever. You need to have a roadmap on where you're going. Timeline I don't make it a 10 year timeline. Shorten that timeline, um, and figure out where you want to go, and then you can kind of reverse engineer it to okay, here's how much money I need to get per month.
Speaker 2:Uh, this is when I want to get it by and then start looking at deals, start networking, get around, if you have to I don't want to say have to join a group helps to join a group because you're going to see more deals, you're going to get ideas. Like you said before, it's motivating to be around other investors doing deals and seeing how they operate. So, yeah, those kinds. I think those are three things that I would recommend. And then you have to take action. At the end of the day, you have to take action, you have to get in the game, you have to swing the bat. Um, if you're just looking at deals for a year or two years, three, whatever it's more in a year and you haven't pulled the trigger, you know, find a pivot, find something else, or just get the balls and do it, but at some point you just have to do it. It may be a basic deal, maybe it's not a super great deal, but you have to do a deal and you're going to learn so much just from doing a deal.
Speaker 1:Absolutely A hundred percent, man. Thank you so much, John. Talk to us real quick about a career high point.
Speaker 2:And what did you learn through that experience? Career high point, man? I mean it's got to be leaving my nine to five um, becoming financially, financially free. I think I was 38 um, which was you know I I the single family rentals that I had, just my first one. I thought I was big time. Then I'm like, yeah, I've got a single family rental, this is going to help in retirement Um. And then, as it grew, it's like, oh, I can do a lot more than that Um. So yeah, leaving my, my nine to five um and and having more than enough money than we needed per month when I left my nine to five was definitely a career high.
Speaker 1:That's excellent, man. Talk about a career low point. And what did you learn through that experience?
Speaker 2:And the first thing that comes to mind. I don't know if it's a low point, but I remember I think it was January of 20. So I had two storage facilities and we're in Ohio, so there's probably some seasonal depression mixed into this. But I remember from the two storage facilities at the time maybe I was collecting three grand a month, so not much. My operator hat hadn't really come on. I wasn't really operating them the way they should. Since then they've probably 3X that.
Speaker 2:But I remember kind of having a mental breakdown, like I got to get out of this job, like this thing is tearing me down, it's not, it's making me worse of a person. And I could also see the light. Right, there's a little bit of light here with these two storage facilities, um, and I remember talking to um, I guess a coworker kind of, about it, like I gotta get the F out of here, um, and I remember talking to Mike Wagner about it too, and he was like listen, you're making some money. He's like maybe it's worth it. Go find, you know, go deliver pizzas, make money on the side, whatever frees your, your, you know your mental freedom up, um, go do that and then you know, hopefully you can buy more storage facilities. That was probably somewhat of a career low. Fortunately, I was able to get my third deal. Uh, I think it was March, so two months later. And yeah, I was able to leave nine five then.
Speaker 1:That's excellent man. I know we've all kind of been there. It's kind of funny, right, you got two deals and you are still, uh, we, everybody faces that you have some good going on, but some bad thing kind of outweighs uh that positive aspect. Uh, it helps to get perspective and talk to somebody like Mike Wagner, whoever, you can uh get some perspective there and kind of encourage it.
Speaker 1:Very good. And seasonal depression is a real thing. Uh, go to the winter time, so be aware of that. Guys, try and get outside, get some vitamin D, go for a jog, do something physical. That'll help a lot with that. Physical, with that, uh, seasonal depression, all right, talk to us real quick. A good business resource, uh that you'd recommend for folks, whether it's storage, investing or anything else. Uh, it could be anything.
Speaker 2:Man, uh, the first, again. First thing comes to mind is we'll podcast. Actually, I heard this. I'm kind of a Dan Martell fan boy right now. I'm going to admit it. Uh, the stuff he's putting out. This dude's going to explode. I think I looked the other day he's got maybe half a million followers on Instagram In a year. It's probably going to be five million Stuff he's putting out, stuff he's saying, is just a lot of. It is like short clips but it's like, why didn't I think of that? It's mind-blowing. I think it was him that said this. I think I saw it last week. He's like you know, this little thing, this phone that we have has all the information that we want on it or that we need to do anything we want. So whether it's podcasts, books, I mean, even if you're using social media for for good and you're following, you know good stuff, educational stuff, you can find anything you want on that level device. Um, but yeah, I mean, it's all the information's out there. You just got to find them and take action.
Speaker 1:Yeah, you know, it's funny, you mentioned that so you can play around with chat GPT, of course, and get a lot of answers. Uh, but another one I found very helpful was is a perplexity perplexityplexityai because that will actually cite all the sources it pulls from. So it scans the web and pulls information together. So if you literally go on there and ask it how to buy a storage deal, it will pull information, cite all the sources and give you links to the articles or whatever on how to do something and then put it all together for you. So it's actually very, very helpful something and then put it all together for you. So it's actually very, very helpful. It's a different type of AI than chat GPT, but it also it also uses chat GPT, but then it pulls information from the actual internet.
Speaker 1:So you mentioned the gurus and all that out there. I don't think. I think the information is. There's so much out there now, according to like you know, like you said, dan was saying the same thing like everything you want is on your phone and literally it's just a matter of like what you said earlier, just taking some action, going and doing it, sending a letter, you know, putting a little Excel spreadsheet together and looking for deals, um, and going from there. So, yeah, absolutely, man. How can people contact you, john, if they want to learn more? Maybe, maybe get an invite to the mastermind, uh, or at least follow you, follow your podcast. How can they get in touch, for sure?
Speaker 2:So, Facebook's just John Farling, instagram is JFarlingInvesting. And then I've got a podcast that's called the Do More Podcast on Apple Spotify you can find it anywhere YouTube. So those three areas.
Speaker 1:Awesome, I'll have those links in the description for the episode. John, thank you so much for being on the show.
Speaker 2:Thank you, man Appreciate you having me on and putting this content out.