GI318: Self Storage Real Estate Investing with Joe Downs

GI318: Self Storage Real Estate Investing with Joe Downs

Joe Downs has over 17 years of experience in commercial real estate and is the co-founder of The Belrose Group, which focuses on niche opportunities in the self-storage sector. He has led the firm’s growth from acquisitions into development and consulting. As a lifelong entrepreneur, he has been involved in securities, mortgage, hospitality, and real estate ventures.

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Transcript:

Charles:
Welcome to another episode of the Global Investors Podcast. I’M your host, Charles Carillo. Today, we have Joe Downs. He has over 17 years of experience in commercial real estate and is the co-founder of The Belrose Group, which focuses on niche opportunities in the self-storage sector. He has led the firm’s growth from acquisitions into development and consulting. As a lifelong entrepreneur, he has been involved in securities, mortgage, hospitality, and real estate ventures. Thank you so much for being on the show!

Joe:
So good to be here. Excited. Looking forward to questions you have for me today. One, one thing you I just realized is I gotta update that profile. It’s been a couple years because it’s 20 years. Okay.

Charles:
So that brings us right into our first question. So tell us a little bit about yourself, both personally and professionally prior to getting involved with real estate and ultimately self storage properties over that 20 years. Yeah.

Joe:
Well, it was a journey. And I’m aware I didn’t think I would ever be, because I never imagined I knew or knew anything about self storage even seven years ago. So it’s, it’s pretty fascinating to me. You just never know, right? When, when, when one door closes, another one opens. You just never know. You just gotta be prepared in life and, and ready to go. So, about myself I, I learned at a late, well, I recognize is a better way to say it, at a late stage in life that I’m like a serial entrepreneur. Grew up in a big family, one of 12 kids was always hustling and bustling as a kid. ’cause You had to not, not to feed myself, that type of thing, even though, you know, you get all the jokes when you’re from a big family.

Joe:
But no, just because, you know, there wasn’t a lot of discretionary dollars. So if you wanted to do things, you had to work. So, and I, as a kid, I was always, always out shoveling, drive driveways, selling kindling for firewood, caddying. I DJ’ed, I bartended you know, as I got older. And then after college, I I’ll skip over one quick pit stop, but for six or seven years I was a financial advisor. And but always bartended. So I always had like two or three jobs and hey, the writing was on the wall. I don’t know why I didn’t realize it, but and I was, ’cause I was too busy working to, to, to reflect on anything, I guess. But so I long story short on being a financial advisor nine 11 happened no stolen valor there for me.

Joe:
I didn’t lose family in the towers or anything like that. I just it, it, it was, I wasn’t happy in being in the industry as it was. And that was just kind of the final straw for me. It was just like, you know, no matter what, no matter what you’re trained to do and to tell people about it, just you really have no control at the end of the day, right? We’re we’re just small fish. And I didn’t like that. I didn’t like not having control. I didn’t like talking to clients saying, it’s gonna be okay when I have no idea if it’s gonna be okay. I don’t know what tomorrow brings. Let’s be honest here, right? So I, I, I had always wanted to be in real estate, but interestingly enough, something happened that week, nine 11 the markets were closed.

Joe:
So I had a friend, we, we were young, we were late twenties but we did belong to a golf club, you know, as single guys. And and we played a lot of golf that week. ’cause There was nothing to do. And one day we were reflecting on what our futures were going to bring us. ’cause Neither one of us wanted to stay where we were. And we both wanted to get into real estate and realize that the two wealthiest people we knew, and I don’t mean Warren Buffett or Elon Musk or anything like that, I mean, that we actually knew we’re in real estate. And so, for me, it was, all right, the journey begins. Now how do I get into real estate? Well, it didn’t you know, it wasn’t a straight line. It wasn’t a straight path. I, bartended opportunity came along to own a bar, to own the bar and restaurant that I bartended at, that got shut down.

Joe:
Long story short, it was a Villanova college bar that got shut down ’cause so the the owners approached me about taking it over. We had to redo it, bring it back as a bar and restaurant versus just a, a bar. It lasted about a year. I knew the front end of the house. I knew how to run that from just, you know, years behind the bar. I didn’t know anything about running a kitchen. That’s where all the expenses were, that that was the sinking ship. You know, I trusted a chef to do it. It was, I call it it’s one of my learning examples in life. I, it’s easy to look back on and say, wow, what a great experience and learning experience. It was brutally, brutally awful at the time. I went through it.

Joe:
You know, lost a lot of money, lost my job, right? Lost pride, lost credibility with some people. Not credibility, but a little bit, I guess. My, my reputation took a, a little bit of a hit, I would say. And and that was tough. So I had to, to reinvent. And I ended up taking a job, selling radio, talk radio. It was, I knew it was always a stop gap, but I was broke. I just lost everything I had. And I owed about 80 grand. ’cause I borrowed money from friends and family to, to get into the venture. So life was not looking up at that moment. But I I took the job, started selling radio. And this is what I meant earlier, when you never know when, when one door closes, what, what door’s gonna open if you just, you know, keep, keep moving forward.

Joe:
I, you know, forget the line from Rocky, which I should know exactly ’cause I’m from Philadelphia and I’m sitting here in the suburbs of it. But it’s something to the effect of, you know, it’s winning isn’t about how, you know, getting knocked down. It’s about getting back up, right? And, and not how, not about how hard you get knocked down, but about getting back up, right? So you’ll see in my journey there was a series of knockdowns and getting back up and trying to figure it out again. And this was just kind of another one of ’em. And so I was selling radio. And along comes one of my clients who is a real estate education company. And they’re advertise, they wanna advertise on the radio. It was talk radio. It was conservative talk radio in Philadelphia. And they wanted to advertise to put butts in seats at hotels.

Joe:
‘Cause We were doing seminars then, not webinars. ’cause There was no technology. We had no zooms. We’d know, you know anything like that. There were no podcasts even to, even for me to listen to, to try to figure out what the next step was. So I commend you for, for you know, bringing well hopefully, and I end up interesting to your, sorry, interesting to your audience, but for bringing probably way more interesting people to your audience. Like, I commend you for that because we didn’t have that back in the day, right? This is circa 2004 yeah, 2002, 3, 4, 5, 6 is kind of the next period I’m talking about here. And so I’m working with this client and they’re having success and they’re putting people in seats and they’re teaching people how to buy rehab and either flip or rent single family homes.

Joe:
And they were Philadelphia based. So after, you know, maybe six months of working with ’em and me always wanting to get into real estate and having this mental block, that’s another reason these podcasts are so great. I had this mental block at the time that and you know, and I, I was reading some books, but even then you don’t, the podcasts tell you what books to read. I don’t know what books to read, obviously, you know, you find you’re searching for stuff on your own or word of mouth. So I, but I had this block and I laugh about it now that I, I, I, there’s no path for me to get into real estate. There’s no real path, which was just so dumb. ’cause There was obviously so many ways to get into real estate. And, and I just, I needed the encouragement or the podcast to listen to, or the right book to read or, or the right person to show me the way.

Joe:
So along comes this company and I’m like, what am I doing this right here in front of me? So I took their course. I started doing this. Now I had a third job ’cause I was still bartending at another job. So I’m selling radio day. I’m bartending two nights a week. And now I’m on Saturday and Sunday mornings where I could have been driving around listening to podcasts. Like you. I was, and I was probably listening to the radio and I was looking I got up early every Saturday, Sunday morning, and I would go out and look for at least my goal was 10 houses. I wanted to be, I wanted to see 10 houses. So I’d mapped that out the week before and go see 10 houses. Keep in mind, I’m broke. I have no money, so I can’t buy anything.

Joe:
I’m just, I’m, I want wholesale. So I started wholesaling. And so I, I did that and, and, you know, wasn’t making five grand a wholesale and actually had a partner on a lot of ’em. So I split it. So I was making 2,500 wholesale and, ’cause I think I needed the partner for money ’cause I didn’t any money. So we were splitting the wholesale fees and, and, but it was, you know, that was a decent amount of money at the time for me. You know, trying to recover especially with all the debt I had. And, and I was learning, I was learning residential real estate in the business. And and that was great. And then another client came along and ’cause I couldn’t quit my job, but just doing that at that point at least I thought that was maybe another mental block.

Joe:
But another client came along. They were a developer and they were advertising these high-end condos in, in just outside of the city, which was from a tax abatement standpoint, made sense. And I got became friendly with the broker, the real estate broker who they built a demo unit across the street from my office and became familiar and friendly with a broker. And he told me about his friend who needed a sales guy, who had a background in securities, needed a real estate sales guy, a background in securities. What do you know? I have a background in securities. I still have my series seven. It wasn’t, it was inactive, but I had it. So I met with, met with him, and then I took that job. So now I didn’t know anything about commercial real estate. I had to learn about commercial real estate, which that was the, that was the easy part.

Joe:
What he needed was someone who could sell and understood the securities angle. So I started to just lean in and immerse myself and learn about commercial real estate. We were, we were buying and selling interest in, and this, by the way, this why, why securities? We were doing, it was all 10 31 exchanges, but done as securities, right? So they were private, private offering, you know, syndications 5 0 6 C offerings back then. And so we were raising money, buying and raising money for multifamily and office at that company. And I learned it was an incredible experience. Learned a tremendous amount. I ended up raising over $90 million over a couple years for these exchanges. You know, these are kind of bigger deals. Thir 25 to $30 million deals. And and it was an incredible experience until the, the markets crashed in two, the debt markets crashed first in 2007.

Joe:
And then we all know the story about eight, nine, and 10. You know what’s funny is when I was a young strapping young buck financial advisor, you heard about this crash and that crash and what happened. Now, I’ve lived through them, which just means I’m old. But <laugh>, it’s, it’s different when you can actually reference them historically as, as something you’ve experienced. So we’re out of business is the bottom line. Within nine months, those companies were all outta business because we were doing 10 31 exchanges. And if no one interest rates went through the roof, no one was doing anything in commercial real estate. Banks weren’t lending, banks aren’t lending on real estate. There’s no, there’s no buyer. If there’s no buyer, no seller. No seller, no exchanger. So guess what Joe’s doing again? He’s reinventing again. <Laugh>, what are we doing now?

Joe:
Now with my new tool set, right? I got new arrows in the quiver and now I got a new, new war to go find, a new battle to go fight. Or first I gotta find it. So and, and I about for maybe another nine months, ’cause I was in that world, I, I ended up being hired as a hired gun raising money for distressed debt fund, oil and gas deal, a platinum lead certified office building. But never storage. Never once in my travels did I ever see a storage operator owner building. I don’t even know what storage was, if I’m totally honest with you. I never rented it. I guess if you asked me back then, I would’ve said, I don’t know, it’s this garage looking things with orange doors, right? To me, that was storage. But, but I didn’t know anything about it.

Joe:
Never met anybody in it. So but I’m not there yet. I I go to a tax lien seminar in Philadelphia. I was invited about a invited by a guy. So I’m thinking, oh, am I gonna get into the tax lien business? Maybe? And you know, something in real estate, I wanna stay in real estate. And it, I didn’t, I didn’t see the, the pathway there for for anything really substantive. It seemed like a nice hobby, but not a business. And ended up meeting a, a partner who ended up becoming partner. I met a guy there who we started talking. We lived near each other, started talking about different types of deals and trying to do different deals and raise money for this and do that. And, you know, largely failing. And he says, ah, I bought this note, this distressed mortgage note.

Joe:
That’s why I was asking about notes earlier. And he said, I bought this distress mortgage, and it was the second mortgage and it was yielding 25% to him. And I was like, 25%. I just raised $90 million at 6%, six point half percent, 25 percent’s ridiculous. So he said, I, he tried to explain it to me, could I? He said, go to the seminar. I went to the seminar. Still a seminar. We’re not at webinars yet. And <laugh>, I’ll never forget what night it was. I couldn’t tell you the date, but it was the game one of the World Series 2009 Cliff leaves on the mound for the Phillies against the Yankees. And I’m at a seminar and I, and I bring that up because sometimes I’m asked, is there a, is there a decision you made to change your life? And I go right to that one because not staying home and watching that game and going to that seminar changed my life.

Joe:
Because what I learned at that seminar was about distress debt. And I know we’re about to talk about storage, but that’s how I got here. So ended up buying, learning how to buy distress. Second mortgages built an entire company doing it. That business was the wild, wild west. It still is a little bit the secondary market. I mean, for these you know, after the banks sell ’em to a secondary buyer and then there’s a maybe sometimes a third and a fourth buyer. Holy cow. Is that a a, was that a wild, wild west scenario? We came in, cleaned it up grew our business. We’re one of the largest buyers of that in the country. Now at my other company, US Mortgage Resolution. But even that had its down cycle. So 2009 we get in that business, 10, we formalized somewhere around 15 or 16.

Joe:
The CFPB almost puts us out of business because they put these owners regulations on banks. So you can’t sell debt anymore. Or they made it so it wasn’t worth it for the banks to sell debt. They didn’t tell ’em they couldn’t. So now what are we gonna do? So now we’re letting people go. You know, it was a slow, slow slow death, you know, it felt like a thousand cuts type of death. And and so you know, I’m, I’m looking for the next thing again. And in my inbox ’cause I probably had been to, between that business, the one before, I don’t know, 30 conferences in Vegas over the years. And I’m sure there was a self storage guru at one of these meetings somewhere. But in either case, somebody got my email somehow, or they, or they sold a list.

Joe:
Anyway, I get an email in my inbox. The subject line is real estate with no toilets, tenants, and trash. I’ll open that. So I open it up and in the body of the email, by the way, that’s not true. That’s a, I I poke calls on that in a second. But the body of the emails, what, what blew me away. And I I, at the time, if you had asked me, if you had said, Hey, of all the storage facilities in the United States how many do you think are owned by the REITs? Or what percentage I should say, or owned by the REITs Public Cube Smart and Extra Space, driving around suburbs of Philadelphia for most of my life I see public extra space in CubeSmart, by the way, is 15 headquarters, 15 minutes from where I’m sitting right now?

Joe:
I would’ve said, I don’t know, 80, 90%. I would’ve thought they were all of ’em, right? I, I don’t know anything about 80 80%, this is what got me 80% of all self storage facilities at the time. I’m reading this email are owned by mom and pop owners. And I went, what? Because coming out of my, of the distressed debt business, I, I was in where when I, it was the wild, wild West. There was, it was the wild, wild West because of dislocated fragmented information. You know, just even how we, how these things were traded, it was just, there was nothing professional about it, in my opinion. You’re telling me 80% of an entire industry is owned by mom and pops not institutions. That’s opportunity. There’s, I don’t know what it is yet, but I know it’s there. So I got real excited about that.

Joe:
And I started leaning in and started to learn more. And I was, you know, like, as I mentioned, it was from a ment a guru you know, it was an education company. They were teaching people how self, how to buy self storage. A guy’s named Scott Myers. And real quick on, on the tagline, we don’t have toilets and storage, but we do have tenants <laugh>, and we need them. And sometimes they leave some trash behind. But so that’s why I say it’s not true. But it got me to open the email, and that was the most important thing. So I went through Scott Meyer’s training program. I I bought his at home course. Then I went through his his program, his, he’s a mentorship and academy. And my, my partner and I went through it. And I mean, that, that’s how we ended up in the business.

Joe:
That’s how we were mentored and trained. We bought our first deal and, you know, recently just bought our 20th. We’ve got another one under contract, tumor on the way we’re now developing not self storage. We’re developing a, a, a tangent of self storage called pro storage, which is business storage. And I’ll, I’ll pause here. ’cause Then I, I’ve been talking too long here. But it, that’s how I get into where, that’s how I’m, that’s how, that’s why I’m here right now. And it has been an unbelievable ride and self-storage. It is incredible. I’m a, I actually teach at Scott Myers Academy now. I mentor and train people how to do it. It’s, it’s been a wild ride. And so exciting and wish I knew about this 15 years ago. Yeah.

Charles:
Well, thank you so much for the background. You know, one of the questions I have usually at this point is really on your current investment strategy and criteria, and you kinda just went over it there, where you guys are buying for value add, you’re doing development. Can you talk a little bit about the pro storage and kind of a little bit behind, like, is that like a flex business type office slash industrial type setup?

Joe:
Yeah, so you’re very, very close. So there, there is there’s a new industry kind of popping up. It’s, it’s always been around, but it’s, they’re giving it a name now and it’s becoming in vogue, which is, which is small bay flex, and that’s what you just described, right? So Small Bay flex might be a thousand square foot unit. Your typical, your two bedroom apartment, if you will. You’re a multifamily guy. So your two bedroom apartment and self storage is the 10 by 10. That’s our most common unit size everywhere, right? That’s our two bedroom. That’s a hundred square feet. Small bay flex. Anywhere, typically you’re gonna be about a thousand to 2,500 square feet. Maybe you might find ’em smaller than that, but that’s typically where, where they’re gonna be. And I say that size, they’re slightly bigger. And I say that than what I’m about to tell you.

Joe:
And I say that size because what makes it small bay flex is you nailed it, the office portion. So that’s where I might wanna operate my business out of. I need some sort of warehouse space, maybe, maybe I need 800 square feet of warehousing, whatever that the, the tall ceiling wide, you know, wider unit, deeper unit. And maybe 200 square feet of office, depending on what my business is, or maybe I need a little more, you know, it, it varies. That small bay flex from from a, a bird’s eye view or a satellite image, you might not be able to tell the difference between that and pro storage. They’re gonna look the same. The difference is, and there’s a very fine line between them pro storage and our brand store pro. It’s just a thousand square feet of storage or flex. Okay?

Joe:
There’s no office in it. You’re not working in it. The, that’s the physical difference. And that physical difference matters from a construction standpoint. We don’t have toilets. We’ll have a toilet on site, but not a toilet in every unit. We don’t, we don’t have fit out for offices. We don’t need to sprinkler. We it’s a different use and occupancy. So all of that costs more, takes longer, whatever. I’m not saying it’s not worth it. I’m, and, and we, we will actually dabble in it as well. It’s, I’m just identifying the difference. That’s also, you’re also dealing with probably one year leases minimum, probably three to five ideally, right? If I’m the owner and operator of that facility, we are pro storage. We are just take self and make it pro take, take your personal items, make ’em business instead of B2C. We’re B2B.

Joe:
So no one’s working in our facility. We don’t need all the, it’s a, it’s a simpler build. That doesn’t mean we don’t function 90% the same we do. And then my favorite part, to be honest with you, because we’re dealing mostly with small businesses, is it’s flexible in terms of your rent. So we’re month to month, we kept it storage. So if you’re a business, you’re a startup and you know, you can’t commit to a three year lease, or you’re a startup and you need a thousand square feet this year, and if you’re successful, you need, you’re gonna balloon to 3000. You’ve got the ability to expand and contract with us, or even move somewhere else without being tied into some lease that’s gonna hold you up from doing that, right? So yeah, sure, we could lose customers because of that. We probably won’t because we have the ability to help you expand within our facility, right?

Joe:
If we have other vacancies. But, but that, that’s kind of the key difference. But you nailed it. And that’s becoming very in vogue now, both of them because of the paradigm shift happening in how we, we, you, you’re guilty. I’m guilty. Everyone listening is guilty of creating this paradigm shift. And that has to do with logistics and Amazon, it’s how we consume. Everything’s getting delivered to us. We’re not going to retail stores anymore. And that’s changing the supply chain. And that supply chain change is putting downward pressure on old the business owners that used to be in small Bay warehouse and flex spaces right now, those are getting gobbled up by the Amazons and the Walmarts who need them to be able to deliver goods to you same day. They’re not even that same day. They, they are, but not at the, not the percentage of the same day they wanna be. So there’s a, there’s a lot happening going on behind the scenes with pro storage and small bay flex. Some of it’s indirect, some of it will be direct. There’s also businesses popping up that are gonna be renting these use units as well, Amazon wholesalers, et cetera. But there, there’s a paradigm shift happening and, and you know, it just by what arrives at your door and cardboard boxes every day. So <laugh>,

Joe:
It’s, it’s pretty neat. It’s exciting. So

Charles:
Joe you know, we know about adding value through, if you’re doing construction, it’s easier. I mean, the whole commercial real estate investment business is about creating value, whether we’re taking something from land or building something, but in most situations we’re acquiring something and we’re adding value to it. How that’s done in apartments is, you know, physical renovations. And we’re fixing a little bit of management here. How is value added on your end when acquiring a self storage facility?

Joe:
Great. And I totally get the question having a background in, in multifamily. So what you guys do to value, to add value is very visible. It’s, you take, I don’t even know if, do granite countertops still exist in apartment mills? I don’t even know. Or sorry for Micah countertops, I don’t know if they still exist, but it’s very obvious. Anyone, whether they’re in commercial real estate or not, or in multifamily or not, can see the difference between old looking, kitchen, bathroom, whatever, apartment and new, right? It’s very obvious. It’s not obvious in storage. It’s obvious to me, but my eyes are trained, right? We, we don’t physically add value as much as we do from a management perspective. And that’s where the mom and pop management, that’s why I’ve focused on the mom and pop. It’s their management style that’s different than the institutional management style.

Joe:
All we have at our, even though we’re taking, we’re buying smaller than public would buy facilities in terms of square footage, we’re, we’re still able to manage ’em the same way public does. 10 years ago you couldn’t. But today, all the, all the technology exists to be able to do that. So here’s a great example. When I buy a mom and pop facility, when I’m done with it, after like done with it, meaning after I transition it, so a week later or a couple days later, not five years later a couple within a couple days of us taking it over, you can find it on your cell phone. You probably couldn’t before. You can rent the unit on your cell phone, you probably couldn’t before. We’re gonna have you add, we’re gonna force you frankly to add your auto pay. So we put a credit card or debit card down.

Joe:
We’re, we’re not, we’re not chasing you for rent every month. It’s gonna be automatic. And then we’re also gonna, and this is just a little bit of a a, a value add too, is we’re gonna, we’re gonna require you to use either tenant protection or tenant insurance. I don’t wanna get into the difference. It doesn’t matter. It’s the same thing to us. And that’s just another little revenue pop. So it might take me from a hundred bucks a month for a 10 by 10 to $106 a month for a 10 by 10 by 10, right? So that little six bucks times x amount of units matters. It’s that sort of thing. It’s not, we don’t take a lot of people think when I teach them, like, oh, so you’re gonna take that gravel lot self storage facility and pave it? No, I’m not.

Joe:
I’m absolutely not gonna do that unless every single competitor is paved. And that’s the only way I can raise my rents and keep up. And it, and it also makes sense from a, from a an ROI perspective. Otherwise, I’m not doing that. People don’t care. They’re renting with the gravel. They’re gonna keep it gravel. We do make physical upgrades that do matter, though if it’s not fenced, if there aren’t security cameras or, or adequate lighting everywhere. We the majority of self storage renters are female. We wanna make sure that when a female drives on our lot or looks at our lot or finds one on the phone that we’re letting them know either verbally, verbally, meaning in the written word, digital written word, or visually, it’s very secure and safe at all hours of the day. You know, so it’s the gate, the fence, the lighting, the cameras.

Joe:
If that’s not there, we’re, we’re installing all that. Would you even notice? I doubt it, right? I mean, if you were a customer, you might notice there’s a, there’s a gate where there didn’t used to be one. Sure. But would you notice we put cameras in every corner so we can see every inch of the facility? Probably not. You’re not looking for that. So it’s not obvious, right? It it’s a little different that way. Our, but our, to answer your question, our value is added through management and that was just the first layer. From there, it’s, well, okay, well how do you manage your rates? So we’re using the same technology that airlines use or hotels use, right? So it’s dynamic pricing. So our now, not to the extent the rates are. You, you go on a website for a public or a q sort in the morning, you might see one rate for 10 by 10 in the afternoon, you might see a different rate higher or lower. They’re changing them hourly. We’re not changing our rates hourly. We have the technology to do it. I just, I don’t see the benefit in it. So, but we’re, we’re following theirs and we’re, and we’re, and we’re we’re keeping up at least on daily, trying to stay competitive if they’re even in our market. If they’re not in our market, it doesn’t really matter. But we’re, we’re changing our rates based on our competitors and the, and the the availability of the marketplace. So

Charles:
How do you guys usually, typically source your facilities with, you know, when that email, you said 20 years ago was written, 80% was owned by Mom and Pops obviously that’s a little smaller now, but there’s still a substantial amount of self storage and mobile home parks. You know, both of those asset classes are predominantly owned, one-off by mom and pop operators. So kind of, how do you guys source it now? Is it through brokers or is it a mix from direct to owner?

Joe:
Yeah, great question. So we’ve acquired 20 15 of them are off market. Five have come through brokers. So there’s no shortage of deals listed through brokers. And when I when I educate students, I get on every list. There’s a number of reasons to do it. I want, I want the deal flow in my inbox. It’s just not where we’re finding the most value. So we we used to call, I used to call myself. Now we have a team of VAs calling, but we’re, we’re more of a company, right, with overhead and, and a business we’re trying to grow in, in a portfolio. A lot of folks get started. That’s not who what you’re trying to do. You’re just trying to do it yourself. Maybe you wanna buy one or two, maybe that’s your goal, and that’s fine. You don’t have to be like us.

Joe:
In which case you don’t need a team of VAs. You could hire VAs, but it’s pretty simple to look, everything is almost free at this point. Information’s free you know, between AI and, and Google at this point. You can find out everything you want, including storage facilities. You know, you, you, you could, wherever you’re sitting you know, let Google know your location, just type in storage near me and you’ll see storage facilities pop up. So there’s any number of ways to find them. We use VAs. We do sometimes buy from brokers. And the VAs are, all they’re trying to do is get me appointments. I’m still the one doing the conversations with the seller or the potential seller.

Charles:
Yeah, no, that that makes perfect sense. So kinda over the last few years, it’s slowed down a little bit, I guess, over the last two or so years. But I mean, new self storage construction deliveries have decreased over the past couple of years, but an estimate still $50 million, 50 million, you know, new rentable square feet are coming online this year, 2025 alone. I mean, should this be a concern for investors? How does this affect what you are doing? I mean, you are doing construction as well. I mean, how does this change your business plan, if, if any, at all?

Joe:
Yeah, great question. National stats are important, but it to, to, to be aware of. But storage is a local business. So 50 million new, well, lemme cover the national first and what that means. 50 million new square feet is maybe 2% of the entire may maybe growing the, the entire population of square footage of storage by 2%. That’s keeping up with our growth rate. Assuming, I mean, not counting the, the, well, we have a natural growth rate and we’ve had a, a recent artificial growth rate as a better, as a way to say it, I guess. So that’s kind of keeping up with it. National, national average of storage our supply index that we look at is not applicable everywhere, but it’s important to know ’cause it’s applicable in most pa places, we’re looking for eight to 10 square feet.

Joe:
That’s a, that’s a properly supplied market. Nationally, we’re at six. So adding 50 million moves it by like 0.15%, right? It, it’s, it’s not a, it’s not a big, not 0.15, but less than 1%. So it’s not, that’s not a big mover. By the way, the reason there’s the, the, the number of new projects is slowed is because interest rates and rates the year we came through. So that just means it’s not feasible to continue. So they’re probably just paused versus just killed. But the 50 million that’s coming, yeah, it, it, it’s, it’s not statistically significant is, is the answer to your question. But if I may tie it locally, it doesn’t matter. It matters to me. If I’m in a market that’s properly supplied and you’re telling me there’s another three, four, 500,000 square feet coming, that’s gonna hurt in an undersupplied market, it doesn’t hurt. If you’re telling me no new supply is coming in my market, what do I care, right? Because I, I only care about my market, where I own, what is my market? 1, 3, 5 miles or 15 minutes of drive time, depending if I’m, if I’m rural. So my market’s very low. Storage is hyperlocal.

Charles:
Yeah. Can, can you explain a little bit? ’cause You kind of, you did it kinda like inside jargon almost. The, you threw out like, no, it’s fine, it’s the six feet six square feet, the eight square feet, the 10. I understand what you’re saying, but can you explain how that’s done? ’cause That’s a very important thing about knowing, like, if it, like you said before, if it’s if there’s too many units in the area and this isn’t feasible.

Joe:
Yeah. So it’s just the ratio of square feet per capita per person, right? So for every person, a, if a, I’ll say it this way. If a market has more than 10 square feet of available, not rented, just complete, just available storage. So that would include rented and unrented. I’m trying to be clear here. Total storage square footage in a market, if it has more than 10 square feet per person, that market is starting to become oversaturated with exception Florida 20. Why no basements, no attics, right? So that, that, that rule doesn’t apply in Florida or anywhere where there’s no basements in attics, which sometimes means mountain town, mountainous towns, and you know, whatever. New York city doesn’t apply and neither does the one three and five one mile in New York City is a, is another world, right? You’re, you’re in blocks in New York City, just as an example.

Joe:
So the more urban you get, that number goes out the window. When you get into areas where there’s a physical difference between where you and I live and the nor where the most of the country has, most of the country has attics and basements, then that number can, can, can change a little bit. You start to, you know, you take away ba you know, Arizona I think is an area of California, not a lot of basements, but they’ve, okay, well then that number doesn’t apply there either. So it, the number gets tweaked a little bit, but that’s what the number means. It’s total square footage per person. So it’s se eight, seven, it used to be seven, now they’re saying eight to 10 square feet per person. So right now, nationally, we’re sitting at 6.1, so adding 50 million takes us to like 6.25 or something like that. It doesn’t, it doesn’t really move the needle. It’s a, it’s a nice stat and a headline for for whoever wrote the article, <laugh>, it reminds me of the days where the strategic defaults when I, you know, when we lived through it, well, we still lived through it. There were no strategic defaulters in mortgage. There was the headline.

Charles:
No, I appreciate you clarifying everything and kind of how you’re looking. ’cause That helps how you’re picking markets too. And lets us know a little bit about kind of what the metrics you use. So that’s a lot of helpful information there. Kind of as we’re wrapping up here, I just wanna get a little bit of advice if there’s people out there that want to get started buying self storage from aspiring self storage investors. Can you give us a little bit of information of what you would suggest if say they wanted to go and start sourcing their own deals?

Joe:
Yeah. I, I wouldn’t it, it looks like it’s easy and it’s not hard. I’m not I’m not Elon Musk. I’m, I’m never gonna be Elon Musk. I’m not that smart. I’m just regular Joe Downs. But I’ve gotten to where I am because I’ve immersed myself through it. And I went through training and mentoring and now I, I, I, I’m, nah, I’m not even gonna say that. I, I am very experienced in self storage. I’ve been through ups and downs. I’ve been even been through some market cycles in self storage. You can get here too. But I would go through training and mentoring, and if you email me, I can point you in and right over to Scott Myers where I went through that program. Well worth it. If this is something you really wanna do, I wouldn’t recommend you do it on your own. I, I think you really do need a mentor, someone who’s gonna save you from making mistakes.

Joe:
This is, it’s by the way, an incredible business to get into right now. Low barrier to entry. You have I saw a stat the other day, I don’t know if you saw this, Charles. 2.4 million cash flowing businesses will change hands in the next 10 years because they’re owned by people 65 years and older. Yeah, at least 20,000 of them of them are stor self storage facilities owned by mom and pops. The time has never been better for and then, oh, and then you have the SBA, you can use SBA loans for self-storage. I love multifamily. I love investing in you guys as operators. I like being passive in that space. But you don’t get to use the SBA loans we do. Why? Because it’s a business. So that means I can get a 90% loan to value loan if I wanna buy a self storage facility.

Joe:
You can’t do that in multifamily or office or retailer. So that’s another interesting little tip. It lowers the barrier for most folks to be able to, to, you know, in their natural progression of, I’m a, I’m a real estate investor and you know, I flip houses. I own 10 single families, whatever I own small multifamily. What’s my next step? Self storage can be a next step for you. It’s a natural progression. And then I would also add, we’re, I think we’re still buying them on sale right now because we just came through a terrible two years for self storage and you’re buying the trailing 12 numbers. Yeah. So I think they’re on sale. They’re at a discount. Well,

Charles:
A lot of great information. Joe, thank you so much for coming on. How can our listeners learn more about you and and your business?

Joe:
Yeah Joe Downs. Belrose, GRP is our website belrose group, belrose g p.com. My email is the best way to get me, Joe at Belrose am. Sorry, it doesn’t match, but it’s Beez Asset Management, so B-E-L-R-O-S-E-A as in asset, M as in management.com. Okay.

Charles:
Well, Joe, thank you so much for coming on today and looking forward to connecting with you here in in the near future, Charles,

Joe:
Really appreciate you having me. Thank you. It was a lot of fun.

 

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About Joe Downs

Joe is a lifelong entrepreneur with ventures in securities, mortgage, hospitality, and real estate. As co-founder of The Belrose Group, he focuses on niche opportunities in the self-storage sector, leading the firm’s growth from acquisitions into development and consulting. Known for spotting “niches within niches,” Joe dives deep into lesser-known industries and eagerly shares his insights.

As CEO, Joe embodies servant leadership, fostering a collaborative, innovative culture at Belrose. A Philadelphia native, he now lives just outside the city with his wife, Dina, and their three children. He’s passionate about helping others achieve their goals and regularly speaks as an expert in the field at the Self-Storage Academy and Mastermind.

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