Jason Hartman starts the show with a discussion on flexibility when it comes to real estate investing strategies. He talks about how conditions change and how investors must be willing to adapt. In the interview segment of the show, he welcomes Mitch Stephen, author of My Life and 1,000 Houses. Mitch highlights the importance of not having 100% occupancy, how to look at whether a market is overbuilt, due diligence, and a lot more.
Jason Hartman 0:00
Be sure to check out our cyber monday sale is going all week long. It will end soon, but it’s our best deals of the year at Hartman, education calm. That’s Hartman education calm where all of our info products and educational products are half price for Cyber Monday, her best sale of the year Hartman education calm
I started investing in real estate to supplement our retirement for the cash flow process. I currently own 10 properties, and then additional 10 with my husband. So 20 total, we found the creating wealth show to my husband going on the internet and looking around for something like this. Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and Freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in thousands of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day. You really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:34
Welcome and thank you for joining me episode number 1092 1092. And greetings from San Francisco, California, the very famous San Francisco yesterday we went and looked at that incredibly iconic landmark. And that is, of course the Golden Gate Bridge. Now, it’s not like I haven’t seen it a million times. been there before. I’ve been across it many times. Yesterday just looking at that marvel of engineering that was actually originally conceived in, I think it was eight teen 72. It opened in 1937, during the tail end of the Great Depression. But, of course, it’s amazing. And probably all of you listening have visited the Golden Gate Bridge and you know about it. It’s certainly very iconic. It’s appeared in so many movies and TV shows, and so on and so forth. But, of course, we could talk about how it’s 90 feet wide and 46 feet tall, and it’s incredible how they constructed it and so on and so forth. But I think the biggest lesson for real estate investors from the Golden Gate Bridge is this. And it’s not just a real estate investing lesson. It is a life lesson in general for all of us, and that is to be flexible, to be flexible. The Golden Gate Bridge has survived new Numerous earthquakes. It has survived. When I don’t know what the highest wind it survived, I can’t remember but I think 7580 mile an hour winds or something like that no damage. The earthquakes, no problem for the Golden Gate Bridge. It’s amazing. Because it’s not what it’s not rigid, it is flexible, it bends with the wind, it has some flexibility to it. And as real estate investors, we constantly have to be flexible, right? our environment, we need to adapt to it all the time because things are changing constantly. And nowadays, they are changing faster than ever, and we will be disappointed. We will have problems we will have bumps in the road. All of these things come up. They come up all the time. And you know, I just think the general lesson is be flexible. Go with the wind at times and be willing to change and use sensory acuity Now, the concept of sensory acuity is a very important one too. And you’ve probably heard this that a pilot, I was just with my cousin who’s a pilot for American Airlines, a pilot, any pilot will tell you that when the plane takes off, and it leaves say San Francisco, right, it leaves San Francisco Airport. And it flies to, for example, New York City, and it’s flying to New York. And 99% of the time has that plane is flying even with all of the modern technology that we have available to us in terms of autopilot and GPS and so forth. Don’t quote me on the 99% By the way, it’s a kind of a figure of speech. I don’t know the exact number. Probably pilots don’t know either. But most of the time that that plane is in the air, with all the modern technology, guess what, it’s off course. It is off course most of the time. But all of those high tech instruments Give it sensory acuity. So it can constantly course correct. It can constantly adapt, and it can constantly get back on course. And that’s life, isn’t it? That’s how life works, right? But it’s also how building a great real estate portfolio works. Things will knock us off course constantly, constantly. And we can get really upset about it. We can be exasperated, we can complain like crazy. We can throw our arms up, we can quit, we can just give up. But that’s not going to serve us is it? What we need to do is constantly adapt and constantly push ourselves back on course, push ourselves back on course all the time. You know, I think this kind of ties in. I am a student of Marcus Aurelius. He wrote this great book. I don’t actually know if he wrote it. But you know, the, the ancient Marcus Aurelius. Well, there’s the book, Marcus Aurelius meditations, right. You’ve may have read that you may have heard about it. It’s about stoicism, this philosophy that has a lot of good points, a lot of things we can learn and use in daily life. And one of the concepts that I was reading about recently reminded me of Thanksgiving. And of course, I talked about this all the time. There’s this one HOLIDAY
Jason Hartman 6:20
Every year, I just talked about that last week, where we really focus on being thankful. And I understand that we have a global audience, we have listeners in 165 countries. So maybe you don’t celebrate Thanksgiving, probably a lot of you listening don’t but you you know what the holidays about. And maybe you have another kind of holiday like that, that reminds you to be thankful and grateful. And that is all very important. It is a huge key to success in life. But you know what nobody ever talks about. They don’t talk about the flip side of that. And so I thought I’d just talk about that a little bit today. Before we get to our guest and we’re going to talk about we’ve got Mitch Stephen on today. Friend of mine, great guy, we’re going to talk about his real estate portfolio where he over owned over 1000 houses if you can believe that. He’s very big in the single family home industry. But in this episode today, we focused on self storage and commercial properties. So you learn a little bit more about that. And it should be very helpful to you. But the flip side of this gratitude thing, you know, we’ve all heard a lot about toxic people and about how we shouldn’t let people take advantage of us. Well, I think we also should be mindful of the gratitude perspective, not just from our own side of the equation, but from the flip side of that equation. And Jim Rohn quote, as I always talk about your income will be the average of the five people you spend the most of your time with, right? Carmen was on the show recently quoted Pitbull, right? Yep. And what was that quote? Can Do you remember?
Mitch Stephen 7:59
Yes. mcconkie an era kinetise
Jason Hartman 8:03
See we do this in Spanish to folks, what does it mean? translate? It means tell me who you hang out with. And I’ll tell you who you are. There you go. So this is very important. Well, we have to really curate this. And that’s one of the great things about a mastermind group. So, don’t hang out and don’t allow toxic people to be in your life. Don’t allow them to associate you being with you be in your business, if they are not grateful. Now, of course, we need to be grateful maintain an attitude of gratitude. But if other people in our lives are not grateful, it is very important that we get them out of our lives, because they contaminate the space right? And it’s very important. You know, one of the things we need to do is try and keep our space clean. Keep our mind clean our mindset clean, because it’s very hard if you have people that are constantly contaminating your space, they are locked. If they are ungrateful, if they are toxic in whatever way, it’s important to be a cleaner, okay? Clean the space and get them out of your life. So when I was thinking about Marcus Aurelius recently, I kind of thought of that and combining it with thanksgiving and blending those concepts together. I thought it was kind of interesting. Okay, so before we get to our guests, I want to read to you a couple of sound bites, if you will, about the economy, about the economy and about the housing market. And we’re going to do something very different this time. Our host, yours truly is going to shut up. He’s not going to comment on this. I know you’re all thinking, really. I think that Jason Hartman guy has an opinion about pretty much everything Carmen is laughing.
Mitch Stephen 9:50
I don’t think it’s possible we’ll see what happens.
Jason Hartman 9:54
Okay, so I just want to read these to you without Any commentary from me. And the reason I want to do this this time This way, you know, I share these sound bites with you frequently. The reason I want to do it this way is because I want you to think about how conflicting so many of these things in the news sound and how conflicting this data sounds. In fact, I shouldn’t even be commenting saying it’s conflicting, right? But it is. So I will just redo a couple of things. And I’m going to take the fifth, I’m going to take the Fifth Amendment. I’m not going to comment, I am going to withhold my comments. And then we are going to get over to our guest for today and get on with the show. Okay, so here are some sound bites. Lacking my commentary. new home sales fell in October, however, data last week showed an increase in building activity. A larger supply of available homes could bring more sales. Oh, I got a comment. I can’t resist. I can’t resist. Okay, I’ll shut up after this. But see how I told you that.
Mitch Stephen 11:05
I knew it was impossible.
Jason Hartman 11:09
I couldn’t even get through one.
Mitch Stephen 11:10
Jason Hartman 11:12
I got a comment on this, folks, you need to hear what I’m going to say. It’s so valuable. Remember how I told you that the sales activity, you know, when you hear sales are down, it’s not necessarily that sign of the market cooling. It might be that the market is too hot. Because when there’s no inventory to sell, and hey, this has been our problem for a couple of years. Now, it’s been pretty tough. When there’s a lack of inventory. By extension, there has to be a lack of sales. So sales volume can slow because the economy is slowing. And people aren’t buying. That’s the normal thought, right? Hey, there’s a recession. People aren’t buying they’re scared to make decisions. So that’s why sales are slow, but the other reason they’re slow, the flip side of that one is that You just don’t have enough inventory to sell. If you want to sell the the lemonade at your lemonade stand, you got to have some lemonade to sell. No matter how many customers you have. If you can’t fill the demand, you’re not going to have sales. Okay. I will refrain from commenting now I promise
Mitch Stephen 12:16
and we’ll see.
Jason Hartman 12:19
October’s pending home sales dropped 2.6% from the previous month. sales were down 6.7% compared with October of 2017 for the 10th month of annual declines. No comment. I’m dying to comment. I’m not going to despite moderation September’s annual home price gains remain strong at 5.5% as reported by Case Shiller I’d really love to comment about Case Shiller. But I’m not going to you’ve already heard it. Okay. The economy grew at 3.5% in the third quarter lower than the second quarter is 4.2% expansion. Still, corporate profits reached a six year high. Consumer spending increased by the most in seven months in October. But underlying price pressures slowed, meaning inflation is less of a concern. recent comments by Federal Reserve Chair Jerome Powell have markets questioning if we’ll see policy interest rate increases in 2019, which could be good for mortgage rates. All right, there you go. I only got one real comment in there only one substantive comment in there. Before we get to our guest look for an announcement real soon on our meet the masters of income property event, our big event coming up in Southern California in probably late February, early March. We space that one out again this year because we just finished our profits in paradise event and our venture Alliance event in hope Why also venture Alliance Cuba cruise or Cuba trip coming up? Probably a cruise. We’re working on that. So announcements coming there. By the way, the winners of our last contest, I hope you are enjoying your Alexa or Amazon Echo devices, we bought you the nicer one. I hope you appreciate that. And notice that that wasn’t the one we were planning to give away. But hey, we wanted upgrade and we picked two winners rather than just one. So enjoy those devices. They really are cool, they do everything. Without further ado, let’s get to our guest today, Mitch, let’s talk to an old friend of mine. And we will learn more about what he’s done in the real estate investing world. single family homes. Certainly he’s been very big in that over 1000 properties, but also in the Self Storage world. So here we go.
Jason Hartman 14:58
It’s my pleasure to welcome my friend Mitch, Stephen, this guy is amazing. He is into creative financing. He’s into authorship. He writes music. I mean, what doesn’t he do? I don’t know. I don’t know. But he’s got some great books out there. He’s author of my life in 1000 houses and falling forward to financial freedom. Today, we’re going to mostly focus on his self storage business. I’ve always been intrigued by this asset class. Mitch, welcome. How are you? I’m doing really, really good. And thanks
Mitch Stephen 15:31
for having me on. It’s a pleasure. I haven’t seen you
Jason Hartman 15:34
in quite a while. I’ve been missing you. Yeah, yeah. It’s good to have you on and you know, Mitch, I’ll never forget that first time I met you. I was with another friend of mine. We were in a mastermind group. It was in Tampa, Florida. And I’ll never remember the genius and the all I learned from you, as you were scribbling on the back of a napkin quite literally, you were doing the napkin presentation about finance. I’ll just never I bet I still have Yeah, like nothing. I mean a lot of money was, I bet I have that napkin actually. So, yeah, good stuff. Really? Yeah, really? I think I kept it. Yeah, I think I’ve got it somewhere. You’ve done a lot of stuff. And really just kudos to you on that. But your big thing nowadays seems to be self storage. And you are, you’re doing a great job with that. I love the asset class. I’ve never been in it only single family homes, apartments and mobile home parks for me, you know, in the real estate world at least. But Self Storage is pretty great, isn’t it? Is it a fire away? A question for you right away?
Mitch Stephen 16:35
Is it isn’t as though you get older and you get lazier and you start to see what’s easier.
Jason Hartman 16:41
That’s okay. Yeah, easier is good. Easier is good. In Self Storage, overbuilt. I mean, people have been paying attention to this asset class for a long time. We’ve seen new facilities go up everywhere. Is there enough demand for all the supply?
Mitch Stephen 16:55
Apparently there is you know, it’s very scientific if you hire those consoles, Companies though, if you’re thinking about building one, I think for about 5000 bucks, you can get a pretty good consulting company to tell you, it’s based on population and income and purchasing habits. And you know, they’ll tell you exactly how many square foot per person per population there needs to be. And then they go around and they look and see how much of it there is. And they’ll tell you if there’s a shortage or over abundance. So one of the good things about it is it’s an easy business to run. And it’s not really rocket science. I say that but you got to remember I’m doing the mom and pops I went out rural, where no one could tell me and I didn’t have to make blueprints or plans and no, I held my finger up to the air and I drew stuff on a napkin and I said, Okay, I’m going to build this right and I built a lot of my stuff at the beginning out in the country, for all I needed was a septic tank permit if there was even going to be a septic tank on there. And so I suppose it’s a lot more sophisticated if you get these multi high rise things, but I’ve never done that, but I’d like to do it but I haven’t done it. So in my area in rural, you run the risk of, it’s all great. And then people start building around you and they ruin your market. So I try to find like a Canyon Lake, it’s really hilly, and there’s not a lot of spaces. So I try to buy a flat space or make a flat space where there is no flat space. So it’s not very conducive for someone just to want to come in and
Jason Hartman 18:20
put something up. Right, right. So your, your way to try and maintain your market is not by the typical zoning restrictions that you’ll have in a city in an urban environment where they won’t let them build another one. Your way of doing it is to just look at the typography look quite literally and say, Hey, you know, it’s going to be really hard for my competitor to come in and build something here and take my customers away. Right?
Mitch Stephen 18:46
Right. Because the typography and so you’ll spend a little money sometimes flattening something out or doing something but most people don’t have the nerve for that. You know what I mean?
Jason Hartman 18:55
So, the thing is, you’re building from scratch though. Always or did you Did you try and acquire first or tell me what you do? The first storage is
Mitch Stephen 19:03
I ever had, I bought these little corrugated aluminum, dirt floor, fishing boats, eight by 25 by 10 wide. And there was 13 units in front of this canal park at Canyon, like right in front of State Park. And they were just so cheap. They were like 6000 bucks. And they were written for like 25 or 30 bucks apiece. And I thought, well, that’s a super ROI. And so I thought, well, I’ll try it. And I started written out those things. And then I liked it. And I went to the local realtor there. And I said, how many of these mom and pop facilities are there around this lake and I don’t remember what he told me is like 30 or 40 of them or whatever. And I went and made, I made 10 bundles of letters, and every bundle had a letter to every one of them. And every six months I would drop the bundle at the post office and send it to all the owners saying if you ever want to sell your place, I’d like to talk to you about buying it and over so it was 10 bundles. It was a bundle. every six months, I did it for five years, and ended up buying 14 locations around the lake. I am
Jason Hartman 20:06
calm. That’s pretty good. Now, Canyon Lake, are you talking California? Were you talking about?
Mitch Stephen 20:11
No, but I get calls from there all the time. And I’ve actually learned a few units only to find out that they’re not going to show up. Okay. Now I know to ask,
Jason Hartman 20:19
okay, so Canyon Lake what in San Antonio area where you’re
Mitch Stephen 20:22
Kenny like Texas, right between San Antonio and Austin?
Jason Hartman 20:26
Okay. Okay, great. So you bought 14 facilities there. And what’s your average size facility?
Mitch Stephen 20:33
Well, they were tiny. You know, some of them only had 20 units. Some of them had 55 units, some of them had I was buying what I could afford to buy, you know, and who or who, whatever someone had for sale. Now over the years, I’ve added on to the ones that had mega land or had enough land, and I’ve made them, you know, in 200 150 units. I’ve even combined them I’ve even like grown some of the units together because they were contiguous. And then I sold off the time You’re ones in the name of just consolidation. You know? Yeah,
Jason Hartman 21:04
yeah. Okay, so you bought first and then you decided to build right? Is that the way it went? I bought
Mitch Stephen 21:09
and then I add it on. Then I got to a point where I’m just buying the ground and building straight out of the ground brand new,
Jason Hartman 21:15
you know, tell you something amazing. We were trying back in 2011. Now we probably should have in the rumor, we should have bought everything we we made a letter of intent on, but we were trying to buy self storage facilities and mobile home parks back then, and ended up buying one mobile home park. But I was amazed. We looked at building and we talked with one of the companies that provides the parts for self storage facilities. They’re like erector sets, they go up so fast. They can build those things in like four days. I couldn’t believe it. Yeah, yeah, exactly. But interestingly, I remember the guy telling me that he had a client who was doing a facility in Northern California in the wine country area, and It took four years because of all the regulation and the red tape and the government.
Mitch Stephen 22:05
Everything else, you
Jason Hartman 22:06
know what I, California is impossible. It really is impossible to do anything there. But yeah, so Okay, so you found it was a good enough deal to build Hmm. I mean, that wasn’t cost prohibitive. It wasn’t better to just buy an old facility that’s pre rented
Mitch Stephen 22:21
could have been you know, I I bought a lot of use facilities in my time, use second hand when they want to call them I just bought some facilities that were existing. But you know, how I got to all this was I was buying houses and flipping houses that I was selling houses with owner financing. So I was doing about every strategy, I could think of the house flipping department. But one thing I figured out after reading like jack Bosch his book was that I needed a forever stream of income. I personally, you know, didn’t like to deal with the human factor as much you know, like families and all that stuff. So, I stumbled into this mini source thing that’s become my forever strategy so I flip as much or owner finance As much as I can, and I take the wealth and make from that, I’d put it into this forever strategy of storage isn’t. That’s how I got into it as deep as I did, because this is the last move in the chess game. You know, you got to get into long term money into something long term.
Jason Hartman 23:17
So if someone wants to get started in self storage, and I know Mitch, that you offer coaching and things like that, you help people do this stuff and tap into your vast experience in this, but just give us a little outline, like if someone’s listening, and they say, Hey, you know, I heard Self Storage is great. It sounds even better now that Mitch is talking about it. What do they do? How do they start? They look for an existing property, should they look for a site and look to build one,
Mitch Stephen 23:42
unlike them to the city and find out what’s being planned way out ahead? You know, what I mean? Where the permits getting pulled where the big subdivisions going, you know, if you can get out far enough ahead, that they’re still cheap, because everyone hasn’t figured it out yet, right. It’s our start seeing if there’s some, for lack of better words and land, you know, some land That’s not really good for anything else. It’s a weird, some kind of flag that you know, it’s just a road up front and it’s a flag in it, you drive down the road, and then it opens up in the back, find something that’s not worth a lot, even some places, you can buy a floodplain and hauling enough dirt to pull it out of the floodplain. You know what I mean, interesting, or something, but try to find the cheapest piece of dirt you can, where the growth is headed,
Jason Hartman 24:25
in what’s called the path of progress, right the path of products,
Mitch Stephen 24:28
what I like to do is have a master plan and build a phase and then wait to see how long it takes to fill up and get comfortable with that phase. But also listen to what they tell you that they want. Like, oh, they asked him for 10 by 20. So they asked him for five by fives. I mean, in the face two, three and four, you just build what they’re asking you for. So it’s the it’s the common sense way instead of going out and paying the consultants to tell you what your unit mix ought to be in kind of that gamble right? One time, it’s like, let me just build 25% of this thing. And then let me see what the audience tells
Jason Hartman 25:04
me. Well, that’s a good philosophy. That’s the iterative method, right? You just iterate and you keep making it better. And that’s exactly what they do in the startup world, the Silicon Valley startup world, you know, the Lean Startup book is all about that. You do something. And what you’re doing in self storage is the same thing. You produce a minimum viable product, you put some units there, and then you listen, and you monitor, and you use that feedback for your next phase. So that’s a really good plan. That’s great that you do that. And I try
Mitch Stephen 25:34
to get economies of scale by just building around the lake where I live. It’s a reasonably decent sized lake. So there’s a lot of shoreline all the way around. So I wanted to have a presence like sometimes they call me and they go, I’m calling about your storage. I said, Well, which one do you call them wrong? They say this one over here. I said, Well, where do you live? They say, Well, I live over there. I said, Well, no, you need to you need to start by the place I have over right next to your neighborhood. One reason I got out of small commercial Was I didn’t have enough presence to give myself any advantage, you know. So I sold my small commercial stuff and put it all into the storage is, you know, because I wanted a place where I had some magnitude, that magnitude in that presence can definitely provide some opportunities for you. No question. When you say small commercial, what does that mean? What property type for the last 10 years I office in a 12,700 square foot building that I occupied about 3000 square feet in and I was leasing out all the other class B and C office space there, you know, yeah, okay. Yeah.
Jason Hartman 26:36
Office is a mess, isn’t it? That’s just too crowded one way. It was a pain
Mitch Stephen 26:39
in the end. So you got
Jason Hartman 26:40
people doing tenant improvements, construction projects just too hard, right?
Mitch Stephen 26:45
Mine wasn’t even that sophisticated. I open up the door. If you didn’t like it, you needed to find something else.
Jason Hartman 26:52
Well, I’ll tell you, Mitch, now is the good time for me to tell you my revelation and this was huge and Forgive me because I’m probably not going to get the numbers exactly right. But they’re going to be close. This was back in. I’m going to say this was 2010. Okay, we had moved out of a big office in Orange County, California. And we moved to a smaller office I was I was working over the course of years on virtualizing my company and making it more lean and mean, okay, and that was a very good decision, in hindsight, but when we moved, we had a bunch of extra stuff. Then I had to put it in storage. Now, we leased the office, I signed the lease on this office, and I think I want to say I paid like $2 and 75 cents a square foot for class A office in Irvine, California. It was quite nice. It was a famous iconic building. They’re as famous as they get in Irvine, but you know, kind of iconic locally, and it was really neat, you know, restaurants class, a marble floors, all the great stuff, right. And then So we signed that lease that got plush bathrooms, all this stuff, right? We signed that lease. And I thought okay, we can’t fit anything more in here. We got to get a storage unit. So right across the San Diego freeway, there’s a storage facility. I go in and sign a lease on a storage space. The same week I did both of these things right?
Mitch Stephen 28:22
same price two
Jason Hartman 28:27
to 60. The storage facility was like 15 cents a foot less I think you have
Mitch Stephen 28:33
Jason Hartman 28:33
and it had nothing. It didn’t even I don’t even though there was a bathroom there. Much less beautiful lobbies and marble and plant service and
Mitch Stephen 28:44
Jason Hartman 28:45
I couldn’t believe it. I couldn’t believe that I thought these guys and the Self Storage are cleaning up all these rich institutional sophisticated investors with the beautiful Klaus a office building are losing their shirts.
Mitch Stephen 29:02
Hey, I never thought about it like that. But you’re right.
Jason Hartman 29:04
You know, I couldn’t believe it. And since then I did try to buy some self storage units never got one though. But you know, I want to talk to you about something else. So comment on that, please, if you would, but then don’t let me forget because I want to ask you, there’s a lot of people out there that are turning the self storage facilities into like fractional ownership where you own a unit and there are definitely some scams in that world. So, you know, be careful, but where you own like a, I guess it’s a condo essentially right or what?
Mitch Stephen 29:35
storage is I’ve heard of it. I’ve I don’t know that it will fly out here in Texas yet, but maybe it’s already being done in Texas. I just don’t know. It’s been in fact, I was talking about that, like two days ago. It’s funny that I haven’t talked about it in years. And then I started talking about two days ago, so maybe it’s an omen. Maybe I need to analyze something.
Jason Hartman 29:51
Maybe, maybe, maybe, but you know, you’re not doing that. Then you’re just doing straight simple rent, right?
Mitch Stephen 29:57
I’m just renting it out. It’s where I take My wealth so I can preserve it. You know, it’s really cool because you got 1300 units right? Right now I have 13. I’m Trump, I’m headed to 2000. But you know, you only have to you just start on January the first you start working your way around, and you’re increasing everybody. Three $3 and 50 cents. Of course, now when it gets to me summertime and it’s 107 degrees here, then you can start increasing people by $5. because no one’s moving out for $5 when it’s 107.
Jason Hartman 30:24
Right, exactly, exactly.
Mitch Stephen 30:26
But you should never have you should never be full. That’s one of the misnomers.
Jason Hartman 30:30
Yeah, I agree with that, by the way, in residential, real estate, or apartments, whatever it is, they say, Oh, you know, I’m great. I’m a great love investor, because I have 100% occupancy, no, you’re an idiot, and you’re not charging enough. Right, right. Well,
Mitch Stephen 30:45
the other side of the story is we struggle to have to have everything available all the time. If we get down to 110 by 10, we start calling everybody in that facility that has a 10 by 10. I mean, not calling them but we start sending them letters to raise the rent until somebody flips out. Cuz I gotta have two at all times because I’m going to rent one. When I have one left, that’s like the notice, you got to start raising all the 10 by 10s in here, because if you say that you’re full when you call if you tell me that you’re full when I call a storage place, and I call the next place, and they say, therefore, I’m looking for dirt, huh? Yeah.
Jason Hartman 31:19
Yeah, yeah, good stuff. Good stuff makes sense. Are you automating your facilities at all, Mitch? Like, do you have to have a lot of employees I know you don’t have a lot but what’s your structure as far as management some of these facilities are just automated now right? You can sign up get a lock and do believe someone on an ATM right?
Mitch Stephen 31:38
I’m sure maybe someone’s made it work or there’s such a demand that they can find it work but I’m kind of out here rule around the lake. 70 year old man pulls up on a storage he dealing no chaos. He’s driving like the hell off. You know what I mean? fumbly Me too. I’m 57 and sometimes if that chaos poses any problem to me, I’m piston out of there. You know I want to go someplace where there’s service damage. And so we actually were doing that before the recession. We were taking great pride that we were people were calling us. And we were giving them the unit number over the phone. And they were moving in and they were picking up, we had a way for them to get a lock and do the whole thing. And they would mail them a contract, they sign it, send it back, before the session hit, it got tough. We said, we’re going to roll up our sleeves, we’re going to meet everybody. And the minute we started meeting everybody, we were filling up like crazy and like nobody left because if there was a problem, we can address their problem. If it was price, we can take a look at our inventory and even adjust the price right on the spot. If we wanted to. We could make deals we can make decisions. Otherwise they go and they roll up the door and say, I thought a 10 by 10 would be bigger. I’m leaving and they just leave and go someplace else.
Jason Hartman 32:48
Right, right. Well, the other thing is you learn a lot by talking to your customers too, right?
Mitch Stephen 32:54
Right. I even learned something the other day. There’s a guy in the storage business and when he has people coming couple of months behind, he just divides divides up the riff and gives them a second chance. Like if they own $100 a month in there, they’re a month behind. He’ll just start charging them one 20th and let them make it up, you know?
Jason Hartman 33:14
Yeah, yeah. Well, in the long term, he probably he probably does better with that, actually, because he increases his coupon rate, right?
Mitch Stephen 33:21
The only way it really works is if you have a lot of vacancies because of your food or you know what I mean? When you’re full, you’re quicker to, to foreclose on people. One of the things I like about storage in Texas is if I’m Johnny on the spot, which means I don’t have enough of that size units on that location. So I’m going to be Johnny on the spot. If you’re late. You’ll be hearing from me like the next day, right? I can foreclose on a unit in 31 days from the minute they’re like, Oh,
Jason Hartman 33:47
yeah, yeah. Well, good stuff. Mitch. What else do you want people to know what question I haven’t asked you. You know anything about real estate about financing, deal structure, evaluation, whatever you want.
Mitch Stephen 34:00
What I’m looking for the mom and pop stores is, which is why I started out and where I’m still at the mom and pop, I’m just at the upper end of the mom and pop now in the rural, you know, that’s why I’ve stayed rural and I’ve stayed. I’m not high riser. You know, I’m doing my first climate control storage is in my life right now. Because where I live, that’s not what’s in demand. But when I go to look at things I’m looking, I really want to buy storage is that are half empty. But then I want to quickly understand if I can change what that half empty is. And so I look for web presence, I call and see how they treat me or if they answer the phone, or if they get back to me. And I start to have this assessment of why I believe they’re half full, and if I can change it, so if you mean if you go out to one of these mom and pops and they’re half full, and you ask them what’s the name of this facility because I don’t see a sign, which is right away a problem. There is no sign What’s the name of this place, and then they tell you the name and then you get on the internet. You type it in there and they’re nowhere to be found. As I pretty much know why they’re half empty, they don’t have a sign anywhere. And they’d have no presence on the on the internet. So I start, I, that’s what I’m looking for in the mom and pop when I buy. Because if you want to get like on Marcus million camp or whatever and you want to look at storage is they’ll be happy to sell you one at a 4% cap rate.
Jason Hartman 35:18
Right, right, right. And what are your cap rates typically on deals you do? Well, you’re not always buying from scratch. So you gotta fill them up. And
Mitch Stephen 35:26
I’m gonna buy them on a lesser cap rate, but also look to see if the rents are under market. Yeah, yeah, because there’s a lot of units and just 10 bucks a unit can change everything. You know what I mean? Like real easy. cap rates. I don’t like to look at anything under 10 or 12.
Jason Hartman 35:42
Wow, that’s still phenomenal.
Mitch Stephen 35:45
Well, I just, I don’t like Class A stuff. I buy Class B and C stuff and I try to swing it around and get it to pick up some extra income or do something to improve it so that it makes more than it did when I bought it but yeah,
Jason Hartman 35:57
yeah, absolutely. And is the extra Income just strictly coming from rent increases or is there any other kind of value add idea certainly could put a vending machine on the property that’s probably not gonna make you a bundle of money but
Mitch Stephen 36:10
anything else I’m a nosis late fees and overclocks last year I collected $68,000 and late fees
Jason Hartman 36:17
wow on what gross though on what gross revenue
Mitch Stephen 36:21
little over a million
Jason Hartman 36:22
okay so 6% on late fees that’s that’s pretty good late fees lock
Mitch Stephen 36:27
cutting fees charging to overlock charge option charge for all this stuff you know?
Jason Hartman 36:33
Yeah okay got it got it. Okay good Mitch give out your website tell people where they can find out more about you
Mitch Stephen 36:39
can find me at 1000 houses calm that’s 1000 houses calm. That’s where there I usually specialize in the owner finance strategy and owner financing Walmart houses for Walmart people my podcast is Ari investor summit calm our investor summit calm and as Just started going YouTube. So Ari investor summit calm forward slash YouTube. And you can look at my ugly mug.
Jason Hartman 37:07
Fantastic, Mitch. Yeah, you’re awesome. Keep up the good work. And thank you so much for joining us today. We appreciate it.
Mitch Stephen 37:13
Man. I appreciate you having me on.
Jason Hartman 37:16
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out the show’s specific website and our general website heart and Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are their own. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you all The next episode