How to Analyze a Market for Self-Storage with Katherine D’Agostino

Neil Henderson: 00:00

Catherine D'Agostino is the founder and sensei of self storage ninjas. After selling a previous business, Katherine jumped into the storage business building three facilities from the ground up in three years. She also runs a feasibility analysis firm focused on delivering unbiased reports to self storage investors that results in facilities with high occupancy and the highest possible returns. In this episode, we talk to Catherine about how she got into the Self Storage business, how to pick a self storage market to invest in her unique plan to scale by building facilities from the ground up and why she thinks boat and RV storage is a good business. I'm Neil Henderson, and this is the road to family freedom. Before we get to this week's show, we'd like to make you aware of something we are self storage investors, we buy existing self storage facilities and vacant buildings that can be converted to self storage in the Sunbelt. We buy them with cash and some with loans. And we use private lenders who become Equity Partners in our deals, these Equity Partners share in the cash flow in the profits when we sell when we find a deal that we're considering. We call the Equity Partners and offer them a share of the ownership secured by the property. So if you've ever driven by a self storage facility in thought, I've wondered who owns those things, and you have any interest in learning more about the storage business, we'd love to chat with you head on over to road to family freedom comm slash storage. That's road to family freedom, comm slash s t o r h g and set up a time to check. We look forward to speaking with you. All right. And that thought of us Let's hit the road to family freedom. Catherine D'Agostino Welcome to the road to family freedom. Thank you for having me. I'm excited to talk to you. Yeah, absolutely. So, you know, before we get into the dig into the world of feasibility studies in self storage, how did you find yourself in the Self Storage business?

Katherine D'Agostino: 01:51

Well, so after I got my MBA, I opened a separate company in a different industry. And I grew it to about 31 employees. And it was about seven years that I had that company. And as I looked to diversify, I wanted another business, but I knew I couldn't have I absolutely could not deal with one more employee. So that's a pretty short list of businesses that are an employee happening. And so that's how I found storage. And I fell so in love with the industry. I eventually sold that company and just went into business for myself. I love I'm such a storage nerd. I know Stacy Rosetti has trademarked the storage nerd thing that I'm right there with her.

Neil Henderson: 02:40

She trademarked it. So when I say so when I talked myself about being a storage nerd do I Oh, are some kickbacks? Honestly, you might want to send her a check. Okay. All right. I'll talk to her about that. Maybe every time I say it, I'll have to say trademarks, tasers, deti. So, talk to us about that first facility, that first facility What? Well,

Katherine D'Agostino: 03:07

it took us a long, long time. First, we looked at acquiring existing facilities. And either in, we just look, I live in Nebraska. So we're looking in like Missouri, Kansas City, Iowa. And so many of the deals that we looked at didn't have a lot of upside after the debt service. So we eventually decided, you know, we're not going to, we're not going to pursue that anymore. We're going to do ground up construction. So then we started researching, like, where are we going to buy land? And how do we make that decision. And that's how I found my first feasibility consultant. And I actually had reverse studies done, which I don't know if you're familiar with those that that's when the consultant finds for you like the area to go look for land. And you go that the market is under supplied for self storage. And all you have to do is go find land in whatever that two mile radius or five mile radius, 10 mile radius, whatever it is. So I got those reports. And I was like, Oh, this is great. This solved all my problems. Now I know exactly where to look, you know, with my background, with my MBA and my background in new product development. I was like, I could do this. And I could do it even better. So while we worked on our first facility, we were going to build in, we focus on like more tertiary markets. So we were going to build in Seward, Nebraska, lovely Seward, Nebraska. There's the university there. There's a lot of business there. It's it's a growing, it's a great town. However, as we went through the process, our land was put under contract by another developer. And then when that developer wasn't able to get the zoning they need And we asked for an extension on our purchase agreement. The original seller said, Nope, I'm tired of messing with this. It's taken too long, it's been almost a year, I'm gonna sell it to somebody else. Although we sued him and we settled and we technically won, you know, you never really win. So we just that set us back a year, for one of the facilities I'm building now, that facility also needed zoning, that was 11 months with the Planning Commission and city council. So that's a hot tip, I would give everyone out there if you really want to speed up the process of zoning. First, yeah. And then just, there's a lot of other things that happened with that. I feel like everything is a learning process, but not always the, I'm tired of learning processes, I just now that I, the more you learn, the less learning processes you'll have to have. But I eventually found that that contractor that I had engaged for that facility was fully intending to pad all of the subcontractors bills and keep the difference, even though our contracts forbidden from doing that. And so then I really had to have that whole, that whole project driven, and we are building that facility with another contractor. But now it's going to cost $400,000 more, because the contractor didn't know what he was doing. So on one hand, it's a super huge plus, because that all those buildings would have just slid down the hill, there wouldn't have been any retaining walls, that would have been a huge problem. But now I also know like, exactly what type of engineering reports to get exactly what type of surveys to get. And so I feel like now that I'm on to my third facility, if you can't believe how fast it's going, because it has the zoning, we're getting the reports quickly.

Neil Henderson: 06:57

Yeah. Yeah. It's um, you know, we talked about this all the time, the law of the first deal, is that you, you know, you can do all the learning you want from books and podcasts and seminars, and educators, gurus and things like that. But it's not until you you really, you know, the rubber meets the road and you start doing a deal that you learn what you don't know. Absolutely. And then yeah, and the nice thing about it is the more the more times you do it, the less scary it gets. And you're sure, yeah, I've been through, I've been through this before, it's not the, you know, thinking back with the inspection, you know, in the first deal, it's like, oh, my God, what does that mean? The third time, it's like, okay, what's the deal?

Katherine D'Agostino: 07:40

Yeah, right, exactly. One, the great thing about self storage is that there's so much data to support your projections and the facility that you feel like, you know, once you just finally get the facility built, you know, you know, the market is going to be there. You've done all of that research. And there's all that those numbers to back it up. So yeah, definitely sticking through it.

Neil Henderson: 08:05

Yeah. So let's get some details on that first facility, how, what's the size of it? What acreage units?

Katherine D'Agostino: 08:12

Yeah, that first facility is about 27,000 square feet. So pretty small by most people's standards. And we're doing about 80, open parking boat in RV units. And it's a long, skinny parcel on a highway, it's about six and a half acres. And then our second facility is in Grand Island, Nebraska in it's almost exactly the same size, also on a highway. And it will have about 60 Bowden RV spots. And then the third one is in Slippery Rock, Pennsylvania. And that facility, we're building in two phases. So it will, the first phase is only 12,000 square feet. And the second phase is only 12,000 square feet. So right now, I'm focused on markets, smaller markets, where after we get these facilities built, the larger plan is to contact this self storage owners in the area and hopefully acquire their facilities and build our portfolio that way.

Neil Henderson: 09:19

Gotcha. So rather than trying to buy an existing facility, the first time, your your first deal, you're just going in, you're just building in the area. Now you're in the area, and now you can start scaling by just writing in the existing facilities.

Katherine D'Agostino: 09:34

Right, right. Yeah. Or instead of like, you know, a lot of my clients, they'll build in a larger market, whether it's Fort Worth or land or whatever, but then they're building 100,000 square feet. Yeah. So will acquire 100,000 square feet, but it's going to take you know, like four facilities, six facilities to get that big. Gotcha. So just a different different model.

Neil Henderson: 09:56

Yeah. What would you mind me asking what the all in is going to be on that first facility?

Katherine D'Agostino: 10:05

The first facility is about 1.6 million, the second facilities about 1.4. And the third, the first phase will only be about 900,000.

Neil Henderson: 10:17

And are you bootstrapping all of this off of the sale of your previous business? Are you bringing in investors?

Katherine D'Agostino: 10:24

The first facility I did by myself, the second facility I brought in investors. And I'm actually speaking about that this year at World Expo. And then the third facility I'm doing with a partner who's one of my investors in the Grand Island project. And so that one is working out really well, because we're subdividing the 10 acres we've bought. And we will actually sell it for more than we paid for it. And that will pay for the downpayment. So we'll actually be able to build that facility without really using any of our own money in the end.

Neil Henderson: 10:59

That's great. That's great. Yeah. So in that first facility, what type of financing did you use?

Katherine D'Agostino: 11:07

I did SBA loans on both of those first two facilities. And we'll be working with Mandy on the third one, we'll see what she comes up with. But I did 10% down on the first and 15% down on the seconds.

Neil Henderson: 11:22

Gotcha. Okay. And what drew you What drew you to those markets? I mean, you said you're sort of targeting tertiary markets, was there anything else that kind of stood out to you about those markets.

Katherine D'Agostino: 11:33

So I live in Lincoln, Nebraska. And I want to be able to visit my facilities easily and quickly these first two facilities, and then my partner lives in Pennsylvania that I'm doing the third facility with. So another thing that I really look for is growing markets. So the first facility in Ashland that market is the population growth is almost 14% over the last three years. So it's the fastest growing market in Nebraska, between Lincoln in Omaha, our two biggest cities, and it's also one of the wealthiest areas. So it's underserved for self storage. But the I think that the big key everyone should look for is you really want to look for a growing market, it's under supplied. And that's going to be the least risky proposition for you. Gotcha.

Neil Henderson: 12:27

We'll dig we'll dig more into that here in a minute. So it's drivable. It's drivable, the first two facilities are drivable for you. But they're tertiary markets that are growing. Right. Gotcha. Okay. Yeah. on that first facility with the SBA loan, they, I assume they gave you all of the money for the construction costs and everything correct?

Katherine D'Agostino: 12:51

Yep. So in both SBA loans, they will include your loan payments during construction, as well as until you're at breakeven, and you can pay those, and then they'll include your operating expenses until you can pay those. So you ask for all of that as your total loan. So like, our, our total loans would probably be about $200,000, more than I told you. But if you don't use that, then of course, it just comes off from the the principle you never drawn.

Neil Henderson: 13:24

Gotcha, gotcha. So they they're giving you they're basically allowing you to, they're basically giving you the money to pay the loan for the period that you're leasing up to stability or to to right to break even point.

Katherine D'Agostino: 13:38

Yeah. And did you know this that right now, if it was as part of this second cares act, if you get an SBA loan after February 2, and you're able to complete the entire deal, whether it's acquisition or expansion or construction, by the end of September, then the SBA will waive your origination fees and pay the first three months, up to $9,000 a month, principal and interest, so up to 27,000. And so the two caveats are until the money runs out. So that might be before September 30. And that, what was the other one? I was gonna say? So until the money runs out, and oh, they might extend it back to six months. Gotcha. That's still up in the air.

Neil Henderson: 14:26

Gotcha. So look up the second look up the deals on the second cares act. I'll put the I'll see if I link a link to that in the show notes. Yeah. Okay. Also, I forgot to mention earlier when you were talking about zoning, we interviewed a man by the name of Scott Crone, who you may or may not know, who specializes in converting old buildings, the storage, we interviewed him back on episode 77. And Scott has some great tips on dealing with the zoning departments.

Katherine D'Agostino: 14:57

Yes, yeah. So yeah. I have a client too, that he is to do entitlements for the rates. And yeah, I wish that I had known him before I embarked on that process.

Neil Henderson: 15:11

It can be it can be very political. It can be very, you know, yeah. You know, yeah, it is shocking how political it is. Yeah. The other tip that I heard from somebody, and I think it was on one of the, the clubhouse storage chats, or where some guy talked about, I forgot what he called it. He called it the Hey, y'all, where you go into the city planning department or the zoning department and you're, Hey, y'all, I'm new at this, I'm trying to, I'm trying to figure out how to do this, I've got an idea for here's what I want to do. And and basically get them to basically talk you through the process, that often you would probably have to go and hire an architect or I'm not sure who in the process would do this. They were doing it, you know, at several $100 an hour for you. And when they show up at the door, you know, a lot of times the the zoning departments gonna be like, you know, what do you want? You know, yeah, whereas, you know, if you start this kind of slow process of asking them how you do it, now they get kind of invested in you and and they get invested in your success. And and now maybe you'll have a better chance of them, you know, a proof. Absolutely.

Katherine D'Agostino: 16:31

Yeah. There's a seminar from last year's World expert Expo, that company called design House did and they're actually I believe, primarily architects, but they did a seminar on zoning, I think you can buy it for like 49 bucks. I got it for free since I was a speaker. But you, they go through in that I wished I had known this, when I started, it was like, I'm not joking, like 1000 steps to getting your zoning project through. One of them was exactly what you're talking about, you know, you go to those first meetings, and you don't give any details. And you're just like, I am just a novice, I'm a friendly person. Can you just tell me what you want? Yep, you know, and don't commit to anything, just be open to their ideas.

Neil Henderson: 17:23

Alright, so I'll try and look that up presentation from design house, from the Self Storage World Expo, I'll try and put that in the show, as well. So let's talk about feasibility studies. Let's do an exciting world of feasibility studies. Now, it's often you know, I probably once a week on some self storage forum, I will see somebody come across and go, hey, I've got this eight acres of land, and I'm thinking about putting storage on it. What do I What do I need to know? And, you know, or they'll ask something like, you know, how much does it cost to build these or something like that? Yeah. And I always come in, I'm like, whoa, whoa, what? gratulations if you own the land, if you don't own the land, hold up. I said, you know, and you ask, have you done a feasibility study a while? And right, then it's like, okay, just know, this is those are the days of build it, drop a self storage facility down in the middle of some area, and that they're going to come are over in the long over. Right? And, and I'm totally fine with trying to steer people away from making this mistake, because I think a better Self Storage operators do the better. We all are. Right? And, and I and you ask them, have you done a feasibility study? And they go, What? And you go, and then they start going well, Ah, that's how much you know. And you go well, okay, so you're going to you're going to spend a couple million dollars to try and build this, but you know, you're not going to spend 25 to, you know, 25 to 5000, for a desktop study, or or whatever, a site visit costs. I said, First, any bank you go to is going to ask, they're gonna say what's with shows your feasibility study? Right, so you're gonna have to do it eventually, anyway. But Any thoughts? Any thoughts on that? I'm sorry, I kind of rambled there. Yeah,

Katherine D'Agostino: 19:24

absolutely. Yeah, I stopped participating in a lot of the Facebook forums because it does get frustrating. But you Yeah, I mean, of course, I totally agree. And the more experienced a developer is, the quicker they are to order a feasibility study. So a feasibility study is not only going to identify all the potential risks in the market is probably going to cover several things that you don't know. And that's the I would say that's the most common thing. That I hear from every single client I do a study for is, I didn't know that. So you know, you might know a whole lot about one part of storage or one part of your market, or one part of your plan to site. But like you said, you know, if you're going to be risking two to $5 million, don't you want to do your due diligence and make sure that you're building the type of storage that the market wants and will be the most profitable or not building it at all? I mean, sometimes isn't that that's what everyone says, right? The deal you walked away from can be the best deal.

Neil Henderson: 20:42

Yeah, we, we, I went through that exact thing. Less than a couple of weeks ago, we were my partner. And I were under contract for a, an empty, Kmart, great location was in great shape. The plan was to build it in phases and try and have some drive thru storage, climate controlled. There was demand for it in the market, you know, but it came back. And it was just kind of the feasibility. We had a feasibility study, but done in the feasibility study, but came back it was kind of like, Yeah, but you know, it wasn't like, the town and the problem was the town. The population was declining in the town.

Katherine D'Agostino: 21:23

Right. And yeah, the only way that works is if that if it the market is so dramatically under supplied, then, by the time the population hits. Yeah, whatever. It's rock bottom could be

Neil Henderson: 21:36

Yeah, yeah. Just like, you know, there's there's got to be at better opportunities out there. And right, and so we will, you know,

Katherine D'Agostino: 21:43

or sometimes you see in smaller markets, if it's a one industry town, and that one industry is declining. You know, that is that's a risky proposition as well.

Neil Henderson: 21:55

Yeah. So tobacco, that was that was the one industry in this town. And

Katherine D'Agostino: 22:01

sure, yep, you see that? Or you see, like railroads or something like that? Yeah. Yeah. Yeah. So and I would say, one thing to be thinking about too, is, there might be times when you don't need a feasibility study, like if you do live in a very small town, and there is no self storage, and you're just going to be building 5000 square feet in the middle of town. That's pretty low risk. But for if you're a retailer, or if you're 10, federal and you have 100 facilities, and you have in house analysts don't need a feasibilities. But for the rest of the world. Yeah, yeah. Yep. Sometimes a beer in a napkin just isn't going

Neil Henderson: 22:45

to cut it. Gotcha. So you, you talked about a little bit about at the beginning, you talked about risk and storage, talking about what you mean mean by that.

Katherine D'Agostino: 22:58

So there's the great thing about self storage is that there's so much data available about how much supply markets can bear. And you can look not only just at that market, you can look at similar markets in that region, you can look at how the overall state is performing, and compare those numbers to the national averages. And then there's so much data available through the Self Storage demand study that comes out every three years about what type of storage consumers want, whether it's by what region of the country, they're in, what type of urban setting they're in, you know, if they're rural, suburban, or urban, and what generation they're in, you know, if they're millennial, Gen Z, whatever. And it I mean, that I think that's one thing I've heard from Self Storage developers is that they maybe they didn't know that their customer base would be primarily millennials. And maybe they thought millennials, you know, you hear this myth about millennials all the time, that they don't have staff and they don't want stuff. Well, that's not true. And they are the fastest growing group of self storage consumers. And, of course, they want stuff, maybe they just don't always have money. But they're getting there.

Neil Henderson: 24:23

They're well, and they're also I think, leading the charge with the technological revolution that's happening in storage. You know, they're the ones that Yeah, they won't touch the century, they want, you know, keep they want no key systems, you know, they don't want to have to go and, you know, talk to a manager and you know, get a contract and fill out a form that's got carbon copy, you know, press hard, they want to be able to do it on their phone. Right and, and do it within you know, you know, at least be ready to move in within the next two hours, and not the little Little, the less interaction they have with a human being the better. Absolutely,

Katherine D'Agostino: 25:06

yeah, I do feel like that used to be an easy competitive advantage that new facilities can have. Or that you could go and do value add to a facility. But now with the pandemic, it's kind of made the industry catch up to the ground breakers. So it's not now I think it's just like a baseline

Neil Henderson: 25:25

to talk to us about somebody you know, who's doing an initial competitive analysis on their own before, you know, before we get down, you know, before we bring in a pro, like myself, or some of the other feasibility study companies, which I won't mention my name out of respect for our current guests.

Katherine D'Agostino: 25:44

Well, yeah, so there's a lot of work you can do on your own to make sure you're comfortable doing a feasibility study and paying the money for it. So you can call all of the local competitors. And you know, just pretend like your customer, and see if you can go down there to chat with them their board, if they're full time, and they'll talk to you all day, you can talk to them about what unit sizes are the most popular, how many of each size they have available, what their business has been, like, over the last year, or what's really great is if, if there is a facility that's in lease up in your area, and you go talk to them, and and a lot of times, they'll just tell you, you know, we opened six months ago, and we're at 70% occupancy, you're like, oh, what I mean, the average in the industry right now is three to four years. So if they have leased up that quickly, that's a sign of unmet demand. So you can learn a lot from just talking to those facilities. And another thing you can do if the facility is outside of your trade area, you know, if they're like, five miles away, or seven miles away, and your trade areas three miles, you could just be out honest and say I want to build storage, can I take you out to lunch, like no one ever does that and self storage owners are super friendly. And they'll just go tell you everything about what it's like to do business in Lincoln, Nebraska, or wherever. I think it's important to join your local state association and go to those meetings, tracting building systems, they have those free seminars, both virtual seminars that you can attend, and then they have in person full day seminars that you can attend. You can pay by the hour to use radius Plus, it's $20 an hour and do some initial research yourself that way. I will do people's first preliminary report free, which I just use radius for. And then I'll do successive reports for 75 bucks of just to see if it's worth doing a feasibility study in that area. So the difference between doing that on your own and then having me do it is you get my opinion. But there's I know that there's another feasibility consultant that does those that you can pay for those preliminary reports, too. So yeah, there's a lot that you should do, just maybe even to know if it's worth looking for land in that area. Right. But yeah, once you if you do find a hot parcel,

Neil Henderson: 28:23

yeah, well, let's talk at a high level, kind of like the beginning stages of you know, and I can I can sort of walk you through kind of how we look how I look for potential markets, potential facilities, but you know, what's the first thing you're looking at?

Katherine D'Agostino: 28:38

Well, when you're looking at a potential market, I would first think about how you're going to run the facility. If this is your first facility, are you going to use property manager, then you can expand your search farther? Are you going to work with the general contractor? And are you comfortable managing that process from far away? Probably not on your first facility, you're probably going to want to go see it. So I would think about in terms of like, how far out you're going to go, how you're going to run the facility and how you're going to build the facility and what that process will be like, and also if you do live close, then you're just more familiar with the market and more familiar with what's going on. You know, like you mentioned with the with the tobacco industry, like there's there's still places that were tobacco heavy that are growing and if you live close to one then you'd be more comfortable knowing like, just because tobacco is not going good. This market could still be good. Yeah. So those are the first things I would think through. Yeah. So then I would think through budget, because then you know, the larger your market, the more expensive it is going to be to purchase the land and develop your facility. So and you know, that doesn't mean you should rule it out. If it's a big market that's expensive to get into, you're just going to have to think about if you don't have the equity yourself, how are you going to raise that equity? And what are you going to do to fund your facility?

Neil Henderson: 30:19

Gotcha. Okay. So you, you typically, you typically start with management, how am I going to manage this facility? Is this going to be something that, that I'm going to hire, hire an onsite manager to run? Is it something that I'm going to try and run virtually? Is it something I'm going to hire, you know, a third party Self Storage Manager to take care of which I will point out, people need to understand that most Self Storage, third party management companies are only going to go for a certain size facility. All right, you got a real? Yeah. Because it does not worth their time.

Katherine D'Agostino: 30:56

Right now? Yes, they're looking at like primary markets with 50,000 square feet or more.

Neil Henderson: 31:01

Yeah, I mean, so. So if you're just starting out and you're expecting you're going to buy a 25,000 square foot facility, that's, that's five hours away by plane. You're expecting to hire Tron jord, Haim from store here to run it for you, that's going to be a tough conversation to convince him to, you know, you, it's not 100%, you will sometimes find some self storage operators who are willing to take on those smaller facilities, but they're also usually going to want profit sharing, they're going to want to share part of the deal. Yeah. Alright. So next, you're looking at the market health, you know, just like, Is it a growing market? You know, is it a one company town? Or one industry town? You know, and what's what's the future of that industry look like? And then third, your letter that

Katherine D'Agostino: 31:51

I tell you to also look at, like, what are the attitudes towards self storage in that industry in that market? Because you know, if the municipality is feels like there's too much Self Storage already, and they're trying to like, shut down any future development, is that a battle you want to take on?

Neil Henderson: 32:09

Yeah, well, and it's also even if you don't plan to build, I would say, it's smart to call them and find out what their plan is for storage. And if they say they have no plan, like, I don't care, that's a bit of a red flag as well. Because then a chance that, you know, anybody in Texas, I said, See the state of Texas, see the state of Texas, or see, you know, parts of is outside Boise, Idaho, you know, where they're just like, gosh, sure, you got the you want, you own the land, build whatever you want, we don't care. And the next thing you know, you know, six months after you've built your little 25,000, square foot Class B facility, public storage comes in builds 120,000 across the street. So it's good to know, what the what the attitude for storage is in the market, whether you're building or buying a new office, an existing facility. So right. And then last is And last is budget, whether or not you know, are you going to bootstrap this and, you know, do an SBA loan, try and put 10% down? How much can you put down? Are you going to, you know, are you somebody who's comfortable asking for, you know, pitching your friends and family on private equity and things like that and bring in investors. Alright, so it's a good start. You are doing both indoor storage and boat and RV storage, correct?

Katherine D'Agostino: 33:32

Yeah. And so with boat and RV storage, which I'm super passionate about nit, I really do think it's where it's at for a lot of oversupplied markets or people who wanted to get into self storage that can't find a place that to build self storage close to them because it's oversaturated. A lot of times boat and RV isn't. The hard thing is that there's not as much data available, and all sorts of different customers. So you're looking at different demand drivers than you are for self storage. So whereas a self storage customer is storing, based on a need that is associated with mobility, whether it's moving or divorce or death, whatever, that's a need. boat and RV. Consumers are storing based on pleasure. They're storing based on something fun that they do. And the average RV owner only drives their rv 14 days a year and depending on the state the average boat owner only goes boating between six and nine days a year. So Wow.

Neil Henderson: 34:37

Now I have that, man, this is the hustle Jose I want to blow up on a button.

Because I because I like I was blown away when I heard you know the average. I think I heard the stat that the average Self Storage customer expects to use their residential expects to use it six months and the average person does it for over 20 For months, that what you just gave told me that is a bigger that's a bigger shocker than then that that's huge. Wow, that's crazy. Yeah,

Katherine D'Agostino: 35:08

yeah. Yeah. And until the pandemic, you know about an RV sales and in 2019, they were dipping. And they were kind of preparing for like millennials aren't interested, our industry is slowing, what are we going to do so, you know, they've never been happier for a global pandemic, the boat and RV industry.

Neil Henderson: 35:29

Because not because we can't go outside the country and have fun.

Katherine D'Agostino: 35:35

We're gonna have fun here, dang it. So But anyways, the demand drivers you're looking at are different. So you're not only looking at how many registered boat owners are in your area, and how many registered or V's are in your area, you're not going to be able to find data on expired registrations. So that will make your numbers more conservative, which is good. But you're also going to want to look at like the presence of community associations in your area homeowners associations, you're going to want to look at the municipalities, parking regulations, and how they allow people to park either at their home or on the streets, you're going to want to look at tourism in your area, you know, like if you're close to a lake or a destination, and then you're going to just overall look at, at other structural changes in in your market, whether it's like consumer behavior, or the presence of a lot of boat and RV dealers, things like that, that are just very specific to your market. So there's still data there, but it's completely different than the type of data you're looking at for self storage.

Neil Henderson: 36:51

So you know, you're typically with storage, you know, the the sort of industry benchmark, and this is very, like, this is just a rule of thumb people, you know, you're looking for, you know, a median household income above $45,000. A year with Bowden RV Are you looking for you're looking for a higher median, and yeah,

Katherine D'Agostino: 37:11

so that average, the average RV owner income is 62,000. And the average boat owner income is 60,000. But that is going to vary widely, because there are so many different types of boats in our face, right? Like you might have an aluminum outboard boat, or you could have essentially a yacht. So the type of storage you build in your market, you know, there's the fully enclosed drive thru with the electricity and wash Bay and, you know, all the bells and whistles and then there's the essentially the field with a fence. And maybe gravel.

Neil Henderson: 37:56

Yeah, one of the one of the one of the first Self Storage associations I went to had a little, you know, it was a nice little breakfast buffet, you know, we had free breakfast, you know, go and I'm in line, and I'm talking to this guy was probably, he's, he's probably 80 years old, and really friendly as most storage people are, and I strike up a conversation with him, and, and he goes, You know, I rent dirt. That's what I do. And it's the best business I've ever been in, in my entire life. I've got 20 acres out on, you know, such a such side of town. And we, you know, we just rent, we rent dirt. That's all we do. And I talked to them a little bit, he said, you know, pretty much all they did is if somebody stopped paying, they just turned their gate access off, you know, that's all you do. You just make it so they can't get through the gate. And he said, in general, he's like, you know, eventually you just came and told him like that he rarely auction things. You know, he mainly people and said, Listen, Come get your thing, come get it off my lot. Because he didn't want to deal with having to, you know, do the auction all that. But yeah, it's, I would say that you got to be careful, you know, you're going to want to find out what kind of, you know, customer you're going to be dealing with if you're going to be building boat and RV in an area, because you may it may be an area where they expect a dump station and you know, wash station and things like

Katherine D'Agostino: 39:27

Yeah, yeah. And for more expensive markets, you know, the only way to make that pencil is if you can build a premium boat in RV facility. Gotcha. Otherwise, a lot of times you can't make it work with the land cost. Gotcha. But one thing just to keep in mind with like that guy who was just renting dirt is it's not as easy to auction those boats in our base, right because they have a title. And so the Self Storage Association has a number of articles. about this, you need to, what I would recommend doing is just working with a local tow company, because this towing companies are already set up for dealing with people who abandon their vehicles and they they know the process. So it's better just to have a towing company just tow it and be like, you deal with it, then to try and auction it yourself.

Neil Henderson: 40:24

So you mentioned doing research on the RV and boat registrations in an area, do you have some tips on where to find that information and how to do that research?

Katherine D'Agostino: 40:36

Well, I pay for a database, you know, I pay for, because I'm doing them all the time, you know, you're probably the average person isn't going to want to pay two to $4,000 for an annual subscription for that information. So I would say you can get some of that information from that. It's usually the game and Wildlife Department or game and parks. It's called different things in different states. They're tracking boats generally. And then depending on the Department of Transportation in your area, they are handling registrations and whether or not they publish that RV data. Like there's a lot of places in California that publish that data, that you could get it for free. But then there's other states that don't publish it at all.

Neil Henderson: 41:28

Yeah, gotcha.

Katherine D'Agostino: 41:30

And then you're just going to need to look at like, national national consumption and apply it to your area.

Neil Henderson: 41:37

Gotcha. Gotcha. So with your three facilities, you mentioned that you've got boat and RV storage on there is do you see you also still have under you have under roof storage? as well? Correct?

Katherine D'Agostino: 41:49

Oh, yeah. Yeah, just regular self storage. And then we just have open parking boat and RV. Yeah. But yeah, one of my goals is absolutely to build like canopy and enclosed boat and RV and larger markets. And I, you can just see so many places where that's under supplied. And a lot of people have that attitude, like, you can build it as far away as you want it from town and people will still come. And that's not going to be true forever. Yeah, like it's only true right now because there's not enough. Yeah. Just like with self storage, people either want their boat or RV close to their house, or close to where they're going.

Neil Henderson: 42:27

Yeah. Yeah, people aren't gonna us. Yeah, it's, it's a customer service based business and it's retail, and they're not, you know, they're not gonna want to go far outside of their normal retail corridor that they operate in. So right. Want, you know, it's interesting, you know, one of the major value add opportunities that most Self Storage investors have talked about over the last, you know, five years or so, is you look for facilities that have that have underoos storage, but then they have RV and boat parking. Yes, and then sell more sell stores. The idea is to get rid of that boat in RV because, you know, there's, that's there's not as much money in that there's more money and under roof storage. And it's interesting to me to see whether or not that's going to become you know, whether that value add opportunities kind of kind of go away because a boat and RV demand is going to rise so high that people are going to want they're still gonna want that space.

Katherine D'Agostino: 43:25

Right? Well, yeah, so generally, self storage is always going to produce a higher return per square foot than boat and RV because the average boat and RV unit is 350 square feet. However, and this is where it can be really tough as a feasibility consultant. There are so many markets where there's certainly a demand for an enclosed boat and RV or canopy boat and RV, but there's no comparables, right? So you're going out like 10 miles, 20 miles, 30 miles looking for comparables and then you get to those comparables and there are independent facilities that have been full for three years, they haven't raised their prices for three years, maybe they haven't raised their prices for six years and you're trying to use that as the comparable. So of course when you do a feasibility study that analyst is always good to have to look at what is not what could be but you know when you're running your scenarios, your best case worst case most likely case, look at the type of facilities that are doing what you want to do and are offering the same type of boat and RV storage you want to offer. Like for example I saw this facility right outside of Indianapolis it has I think about 60 fully enclosed boat and RV units and they were renting those the smallest 130 feet $900 a month, the largest 12 $100 a month fully leased to your waitlist you would not expect that like right outside India. And then Indianapolis. And so I have a client who just is developing his facility in Fort Worth his boat and RV facility. And he's previously done car condos. So he has had a somebody column, he has an event. He's just now closing on the land, getting, you know, getting all of his plans done and everything. And he got a call from somebody through the car condos that says, You know, I need a place to stay to salt state just stole my RV. Do you have anything? He said? No, but guess what? I'm building a facility. So I'll put you on the list. And he's like, absolutely, I'll take it. And he said, Catherine, I know you said, I should try and ask, you know, because I gave him the numbers that in this study, like, this is your competitors. This is a for sure thing. But this is what I want you to set your prices at and see if you can attain them. And so I said 12 $100 for this particular unit size, and he's like, I just couldn't do it. I froze. I asked for 900. And he was like, Okay, I'm gonna be able to rent this whole facility at 12 $100. I'm like, Yes. Yeah. So I think that's the toughest thing with with boat and RV is that there's not like, a bunch of reads in the market, pushing the prices pushing the prices. Yep. So you're gonna have to push those prices on your own, and you can't be afraid to push them on Iraq.

Neil Henderson: 46:27

Yeah. Yeah. One of the other things that I've heard in a mastermind that I'm a part of, with a guy who specializes in boat, he's just bought an RV does know under roof. Love it? Yeah. He says, You got to be careful. If you're only going to do boat and RV storage, you need a lot of land to be profitable. Yeah, like you're not gonna be you're probably not going to be able to build three acres. On three acres, you're going to need 10 acres. Yeah, you know, I

Katherine D'Agostino: 46:58

always tell people minimum of five, five to 10.

Neil Henderson: 47:02

Yeah. Okay, final question, because I kind of like, I like to hear other people's opinions out there, because they vary. What do you consider to be a trade area for, you know, an urban market versus a suburban market versus an ex urban versus rural market? Or does it matter? Or does it vary?

Katherine D'Agostino: 47:25

Well, I would say it's going to vary based on the competition. But pretending that you have average competition in an urban market, like with more than 100,000 people in your trade area, then that might be as small as one to two miles. If you're lucky enough to find a pocket that's under supplied, maybe it's three miles. And then for a suburban market, it's generally between three and five miles, five miles and then on that, that would not be as common. So that population is probably between 30,000 and 100,000. And then for secondary, suburban or rural market, the population is going to be less than 30,000. And it could be up to 10 miles. But you can't it's I think one thing that people really get fixated on is drawing everything in circles and concentric circles, like, here's your radius, this is what it is. Now your your final trade areas is going to be some kind of polygon, it's going to be like the you're cut off by this lake, you were cut off by this Interstate, and you're cut off by this other town because the people from that town are not driving to your town. And so you really need to look at what your actual trade areas.

Neil Henderson: 48:54

We interviewed Fernando angelucci back on episode 76 and friendos Oh my man, Fernando, I love Fernando. I love Fernando. Yes. And he talked about they were looking at a facility I think even maybe a portfolio facilities out near Asheville, North Carolina. And he said we you know, we had it was kind of a rural market. And we drew, we drew our little, our circle, and we're like, oh, this is great. He's like, until we realized that there was this huge pocket of population that they were counting. That was like, almost a two hour drive away because you had to go around the mouse. So driving around the mountain, no, you gotta you can't just draw circle, draw a radius and say that population is ours. You got to sit there and do a little bit more calm, thinking about how are people? Yeah, how are people moving, you know, through the area. So. Absolutely. Absolutely. Well, Catherine D'Agostino, thank you so much for sharing with us today. Thank you for having me. You have you are offering you offer a free consult the first time you mentioned it earlier, but give us some

Katherine D'Agostino: 50:09

preliminary report. Okay, so if you just go to my website itself, storage ninjas calm and click the button for preliminary report, I'll do your first one free. And that's like a high level overview of the supply and potential unmet demand in the market and the consumer demographics in the market. And then I do charge a fee for future reports. But

Neil Henderson: 50:34

okay, great. Well, thanks for you know, being a storage nerd with me today. Trade now. You're welcome. You're lost. 30,021 All right, it was great speaking with you have a great day. Yeah, see you too. Have a great day. Take care. Bye. Okay, that was Catherine D'Agostino, from Self Storage ninjas calm, I highly recommend you go and check her out, take advantage of her free initial study that she'll do for you. So this is sort of a also sort of an unusual episode we, our main focus is going to be on key lesson learned. But we did talk about her first self storage facility, and she built it for $1.6 million using an SBA loan. And she brought 10% down she brought you know, so it means she really only had to come to the table with $160,000. And that's one of the powers of an SBA loan, especially when you're building as they will. They're going to fund the, you know, the construction and also a part of the operating costs while it gets leased up. So there are obviously some caveats when it comes to using SBA and I highly recommend that you go back and listen to our interview with Moe Kruger on episode 96, to get a little bit more about the caveats when it comes to dealing with an SBA loan, but highly recommend you check that out. Okay, so key lesson learned, for me here was one is, as part of your initial kind of market analysis, when you're looking for a self storage deal is to you know, I often look at it, as is that first I just look at is the market growing? But I think there's a step in front of that, which is, how are you going to manage it? You know, what are you? How far away? Is this market from you? Is it something you can drive to? Are you planning on, you know, trying to run this remotely? Are you going to hire an individual to be on site for you, you know, 40 hours a week? Are you is this going to be something where you're going to hire third party management, the kinds of facilities that you're going to be targeting to be very different based on the answers to those questions. And then next, I thought it was very interesting, you know, talking to her about RV and boat storage, you know, we most sell storage. Investors over the last several years have really kind of looked at that as a value add opportunity is get rid of the boat and RV storage and we're going to stick under roof storage and you know, we're going to add value that what value that way, but now, with the demand that is being generated with RV and boat storage, it actually might be something you want to look at keeping around or at least digging deeper into the market and see what kinds of see what the market is like. So, okay, once again, it was Catherine D'Agostino from Self Storage, ninjas, calm, highly recommend you go and check them out. I'm Neil Henderson. We're doing this all again next week. Let's hit the road. Hey, before you go, if you like the show, we would be delighted if you'd head over to pod chaser and leave us an honest review. And do let us know why you like the show how long you've been listening, and in particular, what you find really useful or entertaining. And let us know if there's anything you think we should change. Also, if you have specific questions about real estate investing, especially self storage or short term rentals, shoot us an email at info at road to family freedom calm, and we'll be happy to answer your question on the show. We might even turn it into an entire episode. Thanks for listening. We're doing this all again next week. Until then, safe travels on your road to financial freedom.