Shifting from Multifamily to Self-Storage Investments with Powell Chee

In this episode, we talk to Powell Chee about his start in real estate and why quickly he shifted into multi-tenant assets, the three main roles of a real estate syndication team, a key difference between residential and commercial lending that challenges many investors making the switch, and how to build relationships with commercial real estate brokers that last.

Powell Chee is a Los Angeles-based real estate investor who does all his investing out of state. After buying his first investment property in 2015, a single-family home in Kansas City, he came to the realization that one door at a time was not going to get him to his goals. Since 2017, Powell has partnered on 7 multifamily properties totaling over 1000 units. As Covid-19 affected the US in 2020, Powell shifted gears from multifamily and expanded his investments into self-storage. He closed his first self-storage property in January of 2021 and is operating it remotely.

In This Episode We Cover:

  • How he got started investing in single-family rentals but quickly shifted into multifamily investing
  • How he scaled from those early self-funded apartment communities into larger assets with groups of passive investors
  • Why he shifted from investing in multifamily into self-storage investments
  • Some tips on forming real estate partnerships
  • And much more!

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Transcript
Neil Henderson:first investment property in:Brittany Henderson:

All right. And that thought of us Let's hit the road to family freedom.

Neil Henderson:

Powell Chee Welcome to the road to family freedom.

Powell Chee:

Appreciate it now. super happy to be here. Thank you.

Neil Henderson:

Absolutely. Before we get started talking about self storage, can you want to get a high level overview of your journey into real estate you got started with the purchase of a single family rental in Kansas City. Correct?

Powell Chee:Yeah. So back in:Neil Henderson:

Alright, so and and you did, you went from that first single family purchase into a right into a 40 unit in Indianapolis? Correct?

Powell Chee:

Yeah, that's correct. So right after that, I was thinking, you know, I need to scale. So let me start looking at apartments and really got involved in that bought my first multifamily property It was about it was a little over a year later after my first single family house. And yeah, it was 40 unit apartment in Indianapolis. And then yeah, just kind of continue to build up the multifamily properties since then.

Neil Henderson:

Okay. And so you had you went from that 40 unit to then a 61 unit, and then you started syndicating some larger deals. On those first deals. Were you self funding all those deals? Are we being partners? How are you funding those larger deals?

Powell Chee:five different syndication so:Neil Henderson:

So I know the answer to this but I'd like to our for our audience to hear it from your perspective why you went from you know, a lot of people when they're getting into real estate go well, I want 100 doors, that seems to be a magic number. A lot of people go for, you know, 100 doors, why didn't you continue to just scale scale via short versus single family homes?

Powell Chee:

So why maybe I didn't scale the single family homes? Or was it more of why I didn't want to? Why I moved away from multifamily or why what I've done since

Neil Henderson:

Well, we'll get we'll get to why moved away from multifamily. But I just want to hear why you, you know, why not just buy 100 single family homes,

Powell Chee:

the way that I did it, and in the process of buying my first single family house, I really felt after I did it, I was pretty successful, I bought it under market value, it was appraised for higher value, but I didn't really, I really got lucky. And you know, it came down to it, I really got lucky. And you know, I made some good rent along the way, I ended up selling it to our profit. And a lot of sense, I felt like I was lucky. And I was like, Am I gonna be able to get lucky 100 times in a row. I mean, that's, that's pretty, you know, it's gonna be pretty tough. And so I was like, it's just not gonna happen, I need to get better at this. But I also know, I'm not going to count on just being able to get lucky and you know, having to buy an undervalued place. And in it, when I bought it, it appraised for more value than it was worth. And I just didn't think that I was going to be able to consistently do that. And I was not going to be able to consistently do that in one particular market, right, I was gonna have to do maybe 10 in one market, and then 10 in another, you got to hope that other market performs well. And then maybe 10 in another market. And so I was just like, and this is gonna take a lot of time, it's going to take a long time to identify him, then he got to fund it. And if I'm going to do a single family house, it's probably going to be by myself, right? It's right. So I'm not leveraging any raising of capital or anything like that. So then I, you know, eventually run out of money. So you know, you have to wait until you can build up enough money to put down a down payment. So in essence, I just thought it was gonna be too slow. Right? I got lucky. That was gonna be too slow. I just figured you know what, it really could scale up better. I think I'm gonna have to choose a different asset class. So that's what I want to multifamily.

Neil Henderson:

Gotcha. And that that first 40 unit that you bought? Do you recall what the purchase price on that one was?

Powell Chee:

Yeah, that one was 820,000.

Neil Henderson:

And it's a commercial asset. So, you know, it was it was still recourse, still probably a recourse loan, because it's under a million dollars, correct?

Powell Chee:

Yeah, bank loan. So just, you know, basically, I went to a lot of my bank contacts, and my current bank contact was like, yeah, sure, we'll lend on it happened to be that they actually, they actually already were the lender on it from the previous seller. So they're like, Yeah, well, we already know the property, and we've already had it, so we can just lend to you on it. And even though it was a new buyer, like, obviously, that worked in my advantage that the lender already knew me from a lead from a just a banking contacts, you know, perspective, and then knowing that this was new to me, they were still willing to, you know, take pics out of a risk with that sort of bet on the new guy. And, and so that was very helpful. I know, it's very fortuitous that it ended up being that does the same lender that actually was already the lender on the property.

Neil Henderson:

It's something a lot of people when they're looking to get into commercial real estate that they they sort of forget, you know, it's with commercial real estate, it's asset based, not individual based, but the bank often wants to have somebody on the team that's experienced, they're not going to typically just go Oh, you owned a single family rental, you can manage a 40 unit apartment building, yeah, here will loan you this money. So I think what really what was key for you was the already had that relationship with the lender. And the lender was already familiar with the with the actual asset, but the property as well.

Powell Chee:

Absolutely, absolutely in it. And truthfully, Attorney in the terms wise, they gave me a very, very short term, because they were like, Hey, we can't, you know, we don't know if you're how you're gonna perform on us. So I had to do well, within that very short term. And then it was like, they didn't want to give me a longer term because they said, Well, it was basically a one year term. So they gave me a one year term on this, right. Yeah, one year term. So I took it, you know, made sure that I was gonna make make all my payments for that year. Right. So you know, certainly allocated all that capital that make sure I'm paying my lender on time. But then they said, Okay, well, I said, Can you give me a longer term now that we, you know, we've established this year, and they said, Well, we can renew the loan, we'll just renew it for another year, because you don't have two years of bank, you don't have two years of your tax history yet. So after you have two years, then we can get get extended to like a longer, but more of a traditional five year term or something like that. So I had to go through to one year terms before I got that five year term, but truthfully, they've been very easy to deal with, besides that sort of early negotiation that was that they've been very easy to deal with, and it's been great. So far.

Neil Henderson:

Well, the price of being the new guy, typically, you

Powell Chee:

know, you got a bet on yourself right? out of yourself. It's like eight do what I tell anybody to go take a one year term on your, your loan, I know, I'm not going to tell you to do that. But, you know, sometimes you just got to bet on yourself and you feel like you can do it. And you know, you just got to do what you can, that's the best option you have. You take it and go for it. I don't know, that's, that's me. I feel like I'm gonna be able to do it.

Neil Henderson:

And so you you then from you know, those early properties you you funded, self funded, then you start bringing in some friends and family, then you you got into what five, five apartment deals as a general partner on the syndication side?

Powell Chee:

Yeah, yeah, that's right. So five different syndications general partner on those. And those are, you know, those are great experiences, you know, because because you're learning a lot you're actively doing now, you know, you're part of the team now, right? You're not necessarily like, Hey, this is me individually, or me as the point person. And, and this is now me, being a specialist in a certain part of running a property and meeting other people who are very, very good at what they do. And there may maybe have a different, you know, a different responsibility or multiple responsibilities then, and gaining that experience from finding How did they do this? How did they Oh, that's different from how maybe I've done in the past. But yeah, that's great. And you can see, and you can formulate those good relationships with people. And it's really beneficial overall. So in essence, you get a, you get a smaller piece of a lot bigger pie. And you know, that kind of all gets divided up and things like that, but smaller piece of a larger pie, a different type of an asset as it's a larger asset. So it's certainly a lot of experience to be gained throughout, you know, all all of those things.

Neil Henderson:

And what was your typical role as part of the general partnership?

Powell Chee:

Yeah, I would say by this time I had, my network has increased significantly, right. So when I think of apartment buildings, and commercial real estate, in general, is I feel like there's three main roles, right? There's, there's the acquisition side, there's the people that find the deal, put it under contract, negotiate the lending side of it, do the due diligence, upfront capital, all that kind of thing. They do that that's to me, that's acquisition. So that's the acquisition. The next is really the capital side who's bringing in the money, right? Who has a network to bring in money, right, we need to raise capital for these deals. And the third part is the operations or the asset management, like who's gonna run this deal afterwards? Okay, we got the deal, we raised the capital, who's going to run it, those are all very, very separate skills to have, and it's not easy to be very good at all of them. Generally, people have a strength and find out what is their strength in real estate. So to me, my strength became my cap capital side is raising capital, and that my network became very, very strong. Very, very interested in, in real estate. Very, very interested in involved in one of the deals. Secondarily, it's a deal finding. So it's the acquisition. So I would say my strength number one, capital, network side, number two is really finding the deals. Number three, that would be the third one is operations. It's not really mean, it's been like, budgeting and planning and those types of things. Maintenance, it's not really me. I'm more on the other side of things.

Neil Henderson:

And where are where are these properties? They're not in last, I assume they're not in Los Angeles.

Powell Chee:

No, they're not in Los Angeles. And so I continue to, although I live here in Los Angeles, I think are the best all over. So they are generally in fairly, I would say secondary, tertiary locations throughout the United States. So I mean, Dallas, San Antonio, Phoenix, Jacksonville, Atlanta. So those are all in addition to the previous ones I had in Indianapolis, as well. So apartments kind of spread out all over. Because Because I'm not investing in my backyard. Like a lot of people I know, concentrate on on one location, or maybe one or two geographic locations, maybe their backyard, they become very, very familiar with the area, they certainly know the area very well, they know the streets, they know the neighborhoods, they know who's a good property manager, they have a lot more local knowledge than I do. And I don't have that local knowledge. But I'm able to spread myself out and kind of cast a wider net, say, Hey, I can invest in Jackson's I can invest in Atlanta, I can invest in Dallas, I can invest in those things. So there's give and take with that, you know, I don't know, like somebody I don't know, the back of,

Neil Henderson:

you know, I don't know, you know, like some people have the back of the neighborhood, they know it very well. I'm not gonna have that particular knowledge of one particular city, I'm gonna have sort of a like a wider, a wider view of, you know, all those cities. It is another thing to remember when people are getting started out, they you know, they may be sort of learn about syndication The first time I know, this was kind of my, my experience was you Oh, syndication, you know, I'm gonna run off and I'm going to do it all myself. And, you know, from finding the deals to, you know, to try and figure out what the business plan is going to be to the operations to finding the capital and all And I ran myself into the ground. I mean, it's just, it's just syndication is very much a team sport. How did you go about getting to know or building that team?

Powell Chee:

You know, it took me a little while, it took me a while to do that, because so for the first couple years of doing multifamily was really by myself or with, you know, a small group of partners. during these times, though I had started meeting a lot of people and like I said, my, my network had increased significantly from people who wanted to invest to people who were already investors to people who are already syndicators. Now, just because I know, you know, a syndicator does not mean that you're necessarily going to be able to partner with that person, right, you have to be able to bring some value to that team. So a lot of it was telling the team is like, Okay, well, finding somebody that finding a syndicator that you relate to, well, somebody that you feel like you're on the same wavelength with, right that you have the same sort of pace with that, you have the same idea, the vision, right of the of the property with, and that's not always you, I know that it's kind of something that people is going to say, but you know, you can sometimes you can get involved with people that are very good people, but but for some reason, you guys just don't, you know, interact as well. Or maybe you just don't, you know, you just don't like each other as much, you know, you're cordial and things like that. But it just, it doesn't mesh as well. So to me, it's like, I want to find people that I want to be around, and I want to hang out with a lot and I want to learn from them, they want to learn from me that I can bring them value. And then that's the second part of it is really finding those people and then bringing value to them. Right? In my case, I was saying I can bring value because I have a certain network of people, but I also have, I can help on the due diligence side, and find the deals and underwriting piece. But I can also I know a lot of people and we can bring in some capital to the, to the deal, right? So it really that was what you know, that's how I found people. And it took a little while it's not something that you just kind of say, oh, that person syndicator. And I, you know, I want to partner with you. And they say yes, and you know, I'd like in you're off and running, it takes a while because you gotta realize you're going to be in this deal for seven years, you know, or so you're going to be in there for seven years, you're gonna have to, like, talk to these people hang out. So you want to, you know, be around people that you think that you want to have this seven year relationship with, right? So you want to be very selective. And I would say that, I got a lot better at asking those questions. But the harder questions upfront, the and you want to get good at that. So if you're trying to partner with somebody, you want to ask those hard questions early on. And, and that was something that I started picked

Neil Henderson:

up as the more and more that I gotten involved with, with those teams, you know, you bring up such a great point, and not just about partnerships, but also about raising capital, is that if you're bringing someone in on a deal, if just as a passive investor, you got to realize that that's going to be a business rule relationship that you're going to be in with that person for at least the next five years, probably. And there are people that I've had conversations with, and there are people that I know, that are eager to invest, and I wouldn't invest with them. Because I know, we don't mesh well. You know, it's just not a good fit. And, and I don't want to, I don't want to be you know, I don't want to be taking calls from that person, once a month for the next five years. It's something very, very important if you are going to be getting into a business relationship with someone and when you are raising capital, that's what you're doing that you keep in mind that this is somebody you're going to be dealing with, for possibly yours.

Powell Chee:

Yeah, exactly, exactly. It does. You know, like, at first, I think when people are jumping into some of the business relationships or partnerships or raising capital, anything, you kind of like get a whatever I get, you know, like, I'm so happy to get something you know, but truthfully, you really, really should be a lot more selective of who you're going to who you're going to bring on who you're going to partner with. Because it becomes a burden, it becomes something of like, man, I don't, I just don't want to do like, I don't want to ask that person that because they get mad every time I asked them this and then or they never get back to me and you have these frustrations with people. And that's just not who you want to continue to work with. Right. So you don't want to get involved with them from the very beginning. So yeah, having those early conversations, those early questions, I will tell you like one thing that I used to ask a lot of the syndicators when I was getting involved with them was kind of about the hard questions that didn't really have a great answer to there was no great answer. There's no, you know, I could give you the just straightforward answer that anybody can give you. It was it was more about okay. So if we're, you know, if we get caught in a situation, right, we got caught in a bad situation. What are you going to do in this? What do you what do you do in this situation? It's about situation. You know, you shouldn't have done this or we shouldn't have done that or you crossed over into what I felt was my boundary, whatever, something like that. What do you do to rectify That situation and then you just kind of want to hear from them. What are they thoughts? You know, if their thoughts are? Well, well, I think we should take care of yourself. Or if it's more like, well, I don't think it's a big deal, then you're kind of like, I don't know, if that you have that problem comes up, I'm not, I don't think this person is the right person to solve that problem. But if they have a solution of like, I'm more for you. So if that really messed up, or you know, what our situation is more about a relationship, so I'm going to fix it. And, and I will make sure that you are taken care of and as with as we your investors taken care of, and if it hurts me, that's okay. I'll just kind of take the blame for that. And then I'll just make sure that you guys are okay, that's kind of like, rather here, then, well, we'll deal with it at that time, or that doesn't come up. We don't ever have that happen, you know, those those kind of answers,

Neil Henderson:

things are always going to happen. There's always going to be mistakes, there's going to be Unknown, Unknown, Unknown unknowns that you're going to run across. And, and that's where that's really where you really, really find what kind of people you're dealing with. I've known syndicators that have had deals go sideways on them. And, and their first priority is to make their investors whole. And that really is what it's about, you know, because you, there's always another deal. If you poison a relationship with an investor, that's a much bigger deal. And it's a much longer tail on that. So I always encourage people to to find somebody you trust and find somebody who has has maybe taken their lumps as well.

Powell Chee:

Yeah, great advice. Absolutely.

Neil Henderson:

So let's talk about why you shifted from multifamily into my favorite asset, which is self storage.

Powell Chee:under contract in October of:Neil Henderson:

Okay. So talk to us about that first deal. Where Where was it? What was the purchase price?

Powell Chee:

Yeah. So in this case, this is in Baton Rouge, Louisiana. Right. And I would say what I did also is, I didn't really tell a lot of people that I was looking at storage because I my whole background is multifamily. All my investors are multifamily there. I've been we've been doing multifamily this whole time. And we've been doing larger syndications, right. They're used to hearing this minimum $10 million project right, you know, 10 to $20 million projects. And I was like, I don't want to bring in all of my investors yet. I don't know if storage is really the way to go. They say it's easier to manage. I don't know that I need to. I need to find this out for myself. So you look at my history. It's more of like Okay, let's try to find something that I can either do by myself or just have a small group of investors. So I brought over a small group of investors, mostly friends and family again, and people that have invested with me before, I said, Let's go take down a small deal. Alright, let's go take a smaller deal and find out about storage really well, you know, kind of get some track record before we start telling a lot of people about it. So, deal size. So it's 175 units, it's 20,000 square feet, which I mean, you know, storage, it's not huge, it's not tiny. It's, it's kind of in that middle range. 675,000. So that was a good price. I was like, I'm happy with that price. Especially when you're used to, you know, trying to raise, you know, millions of dollars, you get 675,000. Okay, that sounds great. And so yeah, that was the kind of, you know, just the initial numbers on the property felt really good about it. And, you know, I was able to put it under put under contract, raise the money pretty easily. Just because, you know, like I said, it's not gonna be a huge rage for us. And we had a lot of people that were interested, even though I was not telling a lot of people, I still had a lot of people that were interested in investing, and they, they liked storage. And, you know, just kind of went through the process. I would say the hardest part about closing the deal ended up being the lending side of it, right? Because the lenders, I thought were going to be very, like, Hey, you did a bunch of multifamily. And you're involved in the syndication? You've done all this? Yeah. So you know, we understand and you can, you know, will lend to you, it was more like, well, you haven't done anything in storage. And we don't know that you can do anything in storage. And I was like, Well, okay, yes, we are going to buy a value add property. So it's not going to be 90%, full at market read. Now, this is going to be somewhat of a turnaround, right? There's going to be a project. And they're like, Well, you've never done this in storage before. So we're don't feel that comfortable lending to you. And I was like, really well, okay. I thought it would be a little more open, I thought there would be more multifamily lenders that were interested because I reached out to mostly multicap people, I reached out to them first, Mike, those are the contacts I had, I thought they would be a lot more interested. And at first they were but they all said they were and then the lending sort of dried up really quickly. I was like, they're not that interested, they just telling me they are just gonna hear the deal. But they're not I have to go find storage lenders. And so it was a whole different process. So I would say that was the biggest learning curve and the sort of the biggest obstacle, not a huge obstacle, because it could certainly get you can really overcome it. But that was the I would say the the most difficult thing that that we ran into,

Neil Henderson:

really? How did you solve that? Ultimately, ultimately, you you had to reach out to some other lenders, but how did you assuage their concerns over your lack of experience?

Powell Chee:

I did what I think is the best way is that I just raised the capital, I found, like I know people, so I reached out to a private lender, and I said, Hey, I'm about to go to another lender and pay them this much. And, you know, pay them this much the closest deal. And I could pay you it's not that obviously it's not a huge amount, because we're talking 675,000. So in terms of lending size, it's not gonna be a, you know, I'm not asking for a huge loan, right? So it's not out of the ordinary, I guess, to, you know, the for that amount. And so I thought people, so I thought somebody, they're like, yeah, I'll entity you. They know me, I have a personal relationship. They're very familiar with the property they visited. They understood it. So they're like, Yeah, I like it. I like what's going on. I like this. So I'll just I'll send you the money. And then, you know, we'll just go from there. We'll just keep it I'd like a shorter term loan. So under five years, and we'll just keep it under five and refinance. refinance me out. Now they get the money back. So

Neil Henderson:

how much money? Did you have to come to the table with how much down?

Powell Chee:

I had to come with? Probably about 30. I would say probably about 30. Maybe, maybe the higher the 35%? I can't I don't remember exactly. But like 35% down. And that

Neil Henderson:

was off of a capital raise. Correct. Friends and family?

Powell Chee:

Yeah. Okay. Yeah. family?

Neil Henderson:

Well, again, you know, it brings up a great point, which is that, you know, commercial lending is asset based, but again, you know, it comes down to experience or relationships. And you know, you you didn't have the experience, so you ended up having to leverage your relationship with an existing lender. If you if you didn't have that relationship with a private lender, what do you think you might have, what would have been your next step?

Powell Chee:

My next step, I would have gone first I would have gone to conventional bank. So I would have went to a local bank and got the lending done there. Right. So I could have got a, I don't know, five year 5% 20 year amortization, either partial or full recourse type of loan right from from local bank. So I think it could have been like that. I could have done that. If it would have Came worse to worse, I could have just got a hard money loan and close it with a hard money loan. And then again, plan to refinance that out in a couple of years. But yeah, so those are my two options. And it's really the conventional bank, hard money loan, or and then I decided to go with a private lender instead, you know, a lot easier. I mean, it's a lot easier, a lot faster. And when it comes down to it, it's really between my investors and people in my network and and say, my private lenders, people that I know personally, I'm like, Who would I rather have make some money? My friends? Or an institution? Yeah. I mentioned, like, you know, gotcha, is choice.

Neil Henderson:

So it was a bit of a, you said, it's a little bit of value add is a little bit of a turnaround, what, where, where was the opportunity?

Powell Chee:

Yeah, so the major opportunity, I think, and this was really the the management side of this property. So property itself, and we took it over was 70%, physically occupied 65% economic occupancy. So significant gain, there are gains to be had right there. Right. No insurance didn't have any insurance. On any other tenants. They did have an on site person, although that on site person, in terms of the management of this, sometimes you take over mom and pop type of properties. And this was this was one of them, would you take it over and the way they managed it, they just had a, they had onsite manager, but then onsite manager was only there, half day, so part time, like one to four, Monday through Friday, couldn't rent on their website. So you go to your website, still information, but there's no ability to rent, phone calls are only taken from one to four, Monday through Friday. So if you're not renting from one to four on Monday through Friday, you're basically don't have a chance to rent, right? There's, there's no online service to do that. So for us, it all comes down to the management of that, right? We, we don't need an on site person, you know, it's not we, so we eliminated that payroll costs, right. So we don't have that we are able to get a good website or working functional, aesthetically pleasing website, something that and then we have a call center, right. So we do pay for the call center. So we have those things that basically increase the hours that somebody could rent the unit also increase our presence. And that's a, you know, that's how we're kind of handling the property. So our strategy really, is to go completely 100%, unmanned. So anybody can rent a unit from their phone, or from calling the call center, and get a unit get a gate code, go right in, and we have a lock for them, like sitting inside of their their unit, they grab that lock, they put it on, they're good to go, they you know, they've paid with a credit card, they sign the lease digitally. Good to go. So that's, that's what our plan is. So increase the increase in occupancy. So they increase occupancy, add things like insurance, cut down on payroll, and, you know, reduce some of the costs for just the overall expenses on the property. So you don't need water, electricity very low, you just need reducing amount of utilities.

Neil Henderson:

Well, what I love so what I so love about storage is the number of value add opportunities, there are I mean everything from, you know, adding insurance to just, you know, professionalizing management, professionalizing your marketing, reducing the friction between, you know, customer and, and a purchase decision, you know, I mean, it just blows my mind that somebody has been operating a facility for however many years and then we open from one to four, Monday through Friday, you know, when somebody's shopping for storage, they're going to pick up the phone, or they're going to pull their pull out their phone and, and browse. And, and they're trying to make a decision right then and there. It's not like somebody's looking for an apartment, where the they they're like, they're going to keep looking, they're going to call and they can't reach you, they're going to go to the next one that's, you know, a mile down the road. And it's just, it blows my mind that that, that people try and do business this way.

Powell Chee:

Yeah. And, you know, with with COVID happening and everything, it's just increased the amount of like, acceptance of things being unmanned and not meeting somebody in the office. So for us, it kind of fits all that perfectly for, you know, what our strategy is and, and yeah, you can find properties that are, like you said, you know, that you think that efficiency in their management can be certainly improved and that can really help your bottom line. That's that's a great thing and storage. Absolutely.

Neil Henderson:

Gotcha. Is there is there any room to expand or is it landlocked,

Powell Chee:o we have anywhere from maybe:Neil Henderson:

And how would you, you know, if you were starting from scratch, and you sort of did you I mean, you had some experience dealing with brokers in multifamily. How would you go about building relationships with brokers?

Powell Chee:

Yeah, that's good. That's a great question. So one of the, one of the things I always tell people is that, you know, you need to take the relationship, very serious. And usually, the way to do that is to be very fast with your communication. And, and give them you know, you have to, you have to respect their profession, they're they're trying to sell, and they get paid when they sell a property, right. So, and you don't want to delay things. So that means that they send you a property, you, you want to get back to them as fast as you can. So within 24 hours, you want to get back to them why you do or do not like the property or what you need to see more or why you want to pass on it, and why you want to move forward with another deal. So I would say, respecting their profession and understanding that, hey, they're there. They're there to help you, and they're trying to help you get a deal. And you need to take that you need to take it seriously that, hey, when they send you something, even though it's not what you want, you don't just go dark on them, and never say anything, you want to get back to them within 24 hours and say, Hey, you know, truthfully, it's just not my ideal, the way that we're going to manage it, it just doesn't seem like it's gonna fit. It's probably a little small for me. The second thing you got to ask it always is, but what else do you have? Like, what's the other property? What else do you have coming up? What's a, you know, off market that you have? And so you can kind of dismiss that first one, at the same time that you're telling them, Hey, I'm interested in something else. So it's not just the conversation of, I don't like your stuff. You know, what you said to me as junkie and it's in it's overpriced, and hang up the phone? And that's it. It's like, you know, like, let's continue the conversation. I don't have to get emotional about it. You don't have to get emotional about it. Either. I'm not going to buy that property. What else do you have? let's let's let's work on something else.

Neil Henderson:

Well, it's such a good point, and so many, and I'm guilty of this myself, somebody sends me a deal. And I'm like, doesn't work for me. And I don't say anything. They just say send it to me. And I don't reply back. Hey, thanks for sending me that deal. Thanks for thinking of me, that here's why here's why I'm not interested. Because what that one, it keeps the relationship going. And it also gives them a better idea what it is you're looking for. And it keeps you keeps you top of the mind for when that kind of deal does come along.

Powell Chee:

Yeah, absolutely. Absolutely. And then, you know, like, it just finished it with the second part of like, even though that's not what I'm looking for this, you know, what else do you have? You know, show me something else? What else? What else? Have you heard that that's coming out? And then you could talk about those deals as well. Gotcha.

Neil Henderson:

So you're going on man with this facility? What kind of you've got to have some boots on the ground to handle your unit turnovers pretty minimal but there does need to be somebody to put locks in the deals in the in the units and you know, if somebody's you know, you got somebody to put over locks on if there's not paying What are you doing for boots on the ground?

Powell Chee:

So we do two things, I guess for boots on the ground. First thing is that there's somebody within our team that is boots on the ground that they live, you know, within 100 miles of the of the facility, right? So somebody our team and then that person is going to be boots on the ground to watch over kind of what's going on now. They're gonna we have some projects like the expansion or the Talking to the city about, you know, widening the perimeter of our fences. So we have people that are on our team that do that. They're not necessarily putting locks on, they're not cleaning out lock, you know the units or anything, we hire a maintenance staff. So we contract out a maintenance person who will be there to, that's their job. Their job is to, hey, you know, what, once a month, they go through and you know, these ones are all laid out are paying, they go overlocker, right? This one, these ones moved out, they go there, they check the unit, they sweep it out, they pick up garbage, they let us know if Hey, the light is out, these lights are out or you know, something happened. Somebody hit the fence, and it's dented here or anything like that. They let us know. So I mean, just recently with all the freezing cold that went on in the in the sort of the South. So our maintenance persons told that say, we have pipe burst in our office. So there's a water leak in our office. Well, fortunately, we're unmanned. So what do we say please shut off the water and shut it off at the main and don't we don't need water anyway. So you know, just you don't need to fix it, just turn it off. Right. And so that's what we that's what we told there. But yes, I mean, that's, you do want to have somebody there that is going to be addressing those and be there you have some eyes on the on the property? And yes, you'll want to contract that somebody out to do that.

Neil Henderson:

Yeah. What was it that attracted us to this particular deal? What was the opportunity that you saw?

Powell Chee:

You know, it kind of fit a lot of the things that I want, right? It wasn't a huge deal, right? It was kind of in that moderate size, it wasn't so small that I would would have to manage it myself. Right. That's not what I wanted, I wanted something that I was gonna pick up. Now, there's 50 units, and you know that I'm gonna have to manage myself, because you can't pay for third party property managers too small. But it's not so big that they biting off more than I could chew in terms of raise from a bunch of people who are used to me investing in multifamily. And they're wondering, Well, why are you investing storage now? Why What's going on? You told us storage, multifamily was great for cutting all these years. Now. You're telling me storage? You know, so I didn't want to. So it wasn't too big, wasn't too small. It had value out. Right. So it wasn't a property that's purely stable. And there was no upside, it had actually a great amount of upside. The area. So Baton Rouge, Louisiana, I mean, you know, is I would say it's like a hot market everybody's trying to buy there. It's not Dallas or anything. But it's it's top 100 city in the United States in terms of size. So it was a good sized city somewhere that I could apply it to fairly easily. And felt comfortable because it was inside of a good area of Baton Rouge. So it's like an up and coming nice city of Baton Rouge. And so feel good about that. And also, its competitors, there's not that many competitors within that three mile radius, right? So you look at the square foot per capita, one of the major things that, you know, I look for is like, what is the competition level look like, and the square foot per capita for that area, for this property was about for, like, Is it for so with the national average being around like seven and a half, this is significantly under under supplied in that area. And knowing that it's growing even more with nicer, nicer houses, nicer neighborhood, this makes us feel better about being in there. And then just like getting out of the price point that we're getting out, when you're getting it under, I know we got it, like 30 to 30 something dollars a square foot, right in terms of like competition level, someone's gonna have a hard time coming in and buying it and building something for under $30 per square foot. So you're limiting about, you know, the amount of a competition that you know, could come in there and start to, you know, sort of dilute your your population. Gotcha.

Neil Henderson:

So, what's next? You've got the one deal under your belt, you're you're working towards stabilizing that. Are you looking to acquire more? Have you acquired more?

Powell Chee:

Yeah, so yeah, so the process is right now. So I would also say I shifted a little from syndication, so I'm not necessarily syndicating anymore, and not necessarily looking to syndicate inside of storage. I have my, I would say criteria or properties that are in that one to $3 million range. And that in that one to $3 million range, I know that I can within my network can bring in joint venture partners, and we can joint venture this deal. And I can have enough joint venture partners that we have enough capital to take down these one to $3 million deals, I can do it with about, you know, a small group of us and, and it could be a lot tighter of a lot tighter of an operation because everybody knows each other, and everybody's involved. So I would say that nowadays, my network is not just passive investors, right? It's not just Hey, I got a bunch of passive investors and they and they all just want to invest passively. They don't want to do anything. My network isn't that anymore. My network is really people who love real estate people who have, you know, multifamily single family multi level all different types of real estate, they want to be involved more. So they want to actually be involved in what's going on some of the some of the decisions, some of the the planning, they want to be involved early, they want to get involved in the due diligence, they want to hear about the contract, we want to hear about everything that's going on the property management, they want to learn more, right, these are all people, and they also have some capital, right. And so I'm bringing these people together, we're all going in and buying these one to $3 million properties in a joint venture, not a syndication, and then I'm giving them a lot more exposure to the actual deal. So when you ask him like, what, what kind of deals are what's what's happening next, I actually have to, I got a, I got executed Li on a deal yesterday, so I'm working towards a deal. And that was, that was a bigger deal. So that two and a half million dollar range. So I'm actively working on getting a PSA and getting that deal under contract, and, you know, working towards that, and then I got another executed Li this morning. So I have another deal that I'm working on to announce about that. And that was sort of one and a half million dollar range. And so actively working on that one. And a lot of the people that are involved in my deals, they get involved from the very beginning. So my, even though I'm the first one, a two and a half million dollar one, where I got executed, like right now my team has already set, I already have my team, because they already they've already been involved. And they already like they're, they see the contract negotiation, they're already like their understanding about the you know, what's going on with the property. So they get involved very, very early on which in a lot of other deals, when you're kind of like a co partner or a JV or, you know, co GP or anything, it's really tough to get involved that early on. And so that's, that's something I'd like to do is bring, bring those people up. So I would say that, you know, try to expose all people to as much exposure to the deal as possible, as well as teach them and have them gain experience. So that if they want to go do this on their own, hey, that's great. I'm not, I'm not here to stop you from doing it on your own, you can go do it on your own, you picked up some skills, you picked up some experiences, you picked up good contacts, to go just do this on your own. If you like the way that we operate you like us, then, hey, we can go do more deals together. But, you know, that's kind of that's so that's the plan, so eager and excited about two other deals that, you know, these, you know, I don't want to I don't have under contract yet, but executed Li so I'm moving towards that. And, yeah, you're, like be part of these, you know, put together these teams and and get out there and, and excited about, you know, executing our plan with these.

Neil Henderson:

So I want to ask two more questions. Before we wrap it up, I want to dig a little bit deeper in how you structure these JV partnerships. Because I think that, you know, I think partnerships is such a powerful tool. But they're also they're a double edged sword. And I'd like to sort of get your read on how you go about structuring it. So that I assume you're doing this with people who you're friends with? How do you stay friends?

Powell Chee:

You know, I've never, I've never had that issue, truthfully. Because a lot of people also like, Hey, you know, you invested your family isn't that kind of, you know, a little kind of awkward, maybe you have these kind of weird things, you don't want to talk about one thing with them. I truthfully, I've just never had that just never come up, I so I would say I've overcome that problem. Because my family has always been very open and very wanting to be with each other. And if it's money and investing, and it's all about the family, not necessarily but whatever, you know, I didn't get my 5.3% I should have got, you know, I should got 5.3, you gave me five, but you know, it hasn't really been that way I feel with my friends. I mean, the way that we're investing, I just feel that like we're as open and transparent as really we can be. And we have the hard conversations again, upfront. So I'm telling them that there are certain things that you you're you're going to do, you're going to good experience for your your you're involved in. But you don't have to do that. Understand that I'm not asking you to do that. Because either you're going to get paid for it, or you got to get more equity for it or anything. It's more of like, hey, this can give you more experience, but understand my team itself can handle that will do it. But if you want to if you want to gain more experience, let you know, you can take on this task and and do that. Now you don't have to like and i and i don't make anybody you know, have to do it. But at least from an understanding point of view upfront, they know that, hey, this is really just for me to gain experience on an actual deal that I'm in, that is alive, that effects has a great effect on the property that I'm investing in. I don't have to do it. You know, if I don't have time, the Pels team will do it. But he's asking me to give me some experience now, knowing that I'm not necessarily like, going to do it because I'm going to get paid more or because some there's equity down the line or I'm getting part of this money. It's not that It's really like, hey, there's this, you know, and they know that up front. And you get in these kind of cloudy situation, if you get cloudy situations like, well, I thought I was getting paid. And you told me to do this. And you know, what? Why am I not getting you know, money for that why to then it's kind of like, you didn't have those conversations upfront, to let people know what the situation is, and give them a choice of what to do. Right now, you kind of waited till the end, you have it. Now you have awkward conversations with people. So maybe that's the way that I try to make sure that we're still friends, right. And obviously, upfront, I am friends with all these people. And I try to let them know, honestly, what's going on and involved early, whether it's good or bad. You know, sometimes this went bad. This is good, or, you know, let them know what's going on, so that they're involved. And it's not a big surprise. You know, for either or misunderstanding.

Neil Henderson:

Gotcha. Okay, so this is your this is your full time job, pretty much. Are you do you have a nice time

Powell Chee:

to job I do. I have a day job. My day job. So I just all around my day job. Alright, so

Neil Henderson:

how much time would you say your Self Storage endeavors now or taking you per week?

Powell Chee:

Oh, let's see. I would say I wish I could give you a straight answer just a definite answer. But I would say anywhere from 15 ish, maybe like 15 to 20 ish,

Neil Henderson:

somewhere around there. hours a week.

Unknown Speaker:

Something like that. Gotcha. Okay.

Neil Henderson:

All right. Final question. This is one we've been trying to ask all of our guests, if you had $50,000 that you had to invest in the next 90 days? Where would you invest it? And what kind of return would you be expecting?

Powell Chee:

I kind of feel bias and that I feel like I'd invested in my deals. But I would invested in my deals. I'll just say that like, okay, and you could put Asterix there. He's biased. Okay. What I would say is like, the storage deals that I'm I'm in, and I'm still in multifamily deals as well. However, what I'm looking for are what are what I call homerun deals. And the way the way that I define a homerun deal is a deal that I can comfortably project that I'm going to be able to refinance this property within three to four years, and return 100% of my investors capital. Okay, that's what I consider a homerun deal has to have enough value add in order to do that. Now, I am not finding those deals in multifamily that often they're very hard to find. Now, I mean, I think you could have found more previous years. But right now, it's pretty difficult to find that multifamily. I'm finding more of those in storage. And so if I had $50,000, to me, personally, I'm thinking, Okay, well, I put it inside the steel, I feel very comfortable that within three to four years, there's gonna be a refinance, there's gonna be a return of 100% of my capital, plus, there's going to be distributions along the way. And if I'm inside of this deal, and we refinance in four years, and we hold on to it for another 10 years, then basically all those returns, you know, I don't have any more money in the deal. It's kind of an infinite return game right at that at that point. So that's what I think is kind of like an awesome, you know, like kind of Outlook. Now, I would say, even though, kind of going along with it, even though I am looking for those types of deals, I do not show that on my pro forma like that my pro forma of my investors and they know this, they I'm a very upfront with them, like, I'm on my pro forma, I'm not going to show you an infinite return, right? Because I'm not gonna say that's what I'm projecting. I'm going to show you a straight 05 year sale, no refinance, so that you can compare this deal to a multifamily deal or retail deal, whatever it is over zero to five year sale, straight sale, what the return looks like, if you're comfortable with those numbers. Okay, we're gonna try to hit better. And we think we can calculate project that we are going to hit better, but at least we feel like, you know, we should definitely be able to hit these these numbers in a five year straight sale. So yeah, I don't know. Hopefully, I know, I got around a couple different pages there. But yeah, that's what I would invest my 50,000 Oh, and

Neil Henderson:

I guess there's no, there's no wrong answer. I love I love your answer. And I get it is now one of my favorite questions, because I'm getting such a variety of answers from people. And, and my answer also would be, I would invest in my own deals. But I think you there's a great point you bring up to his which is about not promising that refi You know, that's, that's not something you want to do. There's too many things that can happen. You know, if it happens, that's great. You know, you're gonna you're gonna do it, you're gonna have an infinite return if we're able to get all your capital back. But don't don't go in promising that to your investors.

Powell Chee:

For sure, for sure. And yeah, we're very, very, you know, we want our investors to be excited and very excited about the deal but not excited about trying to Hit does this particular numbers feel like hey, this, you know, these are the five year straight sales numbers, you can take a look at it feel like if you're comfortable with that, and compared to what your other options are. You're excited about it. And you know, we can move forward if if, you know, but don't count on the, you know, the the 100% refi. Right now, that's pretty much it's definitely, you know, like a, that's why I consider it a home run, right? Yeah. Gotcha.

Neil Henderson:

Well, Powell Chee, thank you so much for sharing with us today. If any of our listeners want to reach out to you and find out more about you and what you're up to what would be the best way for them to do that?

Powell Chee:

Sure, I would say, you know, they can email me so my email is pal at multifamily masters with s.com. Because email me there, you can become friends with me on Facebook, I would say, if you're friends with me on Facebook, it's just my name Powell ci there's, there's I don't think there's any other policy on Facebook, which is, you know, there's billions of people out there. So search for me, pal G and then you can write me a message in there, it's probably a faster way than email. I just get inundated with so many emails that start me to respond to every every email instant, instantaneously. It's a lot easier for me over instant messenger or those type of things.

Neil Henderson:

Okay, great. Well, thanks again, Paul.

Powell Chee:

All right. Appreciate it. Neil had fun. Thank you very much. Okay, that

Neil Henderson:

was Powell key from multifamily masters.com, I encourage you to go check him out, if you have an interest in storage. So for me, the key lessons learned here was that you experience matters in commercial real estate, you know, you can, it is asset based. And so a lot of times you're not having to put your, your credit on the line, you know, it's but it's it. Also, lenders gonna want to see experience, whether you're doing multifamily or storage, any kind of commercial asset, they're, they're making a bet on the asset, but they want to know that you're going to take good care of the asset and that you know what you're doing. So, either build relationships with lenders who trust you, or come to the table with a really good business plan. I encourage you to research, you know, Self Storage business plans, or find, find a partner that's got experience and find a way to, you know, bring them deals. And that's really, that's how you're going to assuage the the nervous lender, knowledge he, again, he, he spent a lot of time once he decided to make the shift, he started just digging into storage did, you know he got a hold of every free piece of content that he could he paid for a bit of a mentorship. And I would say the key piece of knowledge is sort of what I just talked about, which is that even though he came to the table with a lot of experience doing multifamily, a lot of lenders didn't want to talk to him, you know, or wouldn't move forward on a deal, because he didn't have experience in self storage. And he was trying to buy facilities that needed a bit of a turnaround. And if you know on the lenders are going well, you got no experience turnaround of a self storage facility, so we're not gonna lend you the money. And he had to leverage his relationship with a private lender in order to make that deal happen. So money on his self storage deal is a $675,000 purchase. And he had to come to the table with about 35% down and that was all from friends and family. So I don't know exactly how much of Paul's own money he invested in the deal. You know, he was able to leverage his experience and and in order to get into that deal, and that's often what you can do with with syndication time. He said he still has a W two job, and he devotes about 15 to 20 hours a week on his self storage endeavors. Location, obviously, he lives in Los Angeles, he invests all over the country, and his storage deal is in Baton Rouge. So I think with the right team on the ground, the right boots on the ground, you can do this long distance. I just urge you know, urge caution. You need to it needs to be the right deal. And you need to have the right, the right team in place on the ground. Okay, once again, that was pal Kai from multifamily masters calm. We thank him for his time. I'm Neil Henderson. We're doing this all again next week. Let's hit the road. I hey, before you go. If you liked 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 liked 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 So 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.

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