Tim Puffer – Self Storage Investor in Lansing, Michigan and Managing Member of Focus REI, who also has experience in the insurance and risk management industry, talks to Neil Henderson and Brittany Henderson, the hosts of The Road to Family Freedom podcast. Tim discusses how he transitioned from house hacking to investing in self-storage, how he learned and found financing, and what an average day in his life looks like to keep business running smoothly.
Neil Henderson 0:29
Are you going to make it for the interview question mark? Greetings friends and families. I’m Neil and I’m Brittany, you’re listening to the road to family freedom podcast. Our guest this week has a background in the insurance and risk management industry. He jumped in real estate in 2016 purchasing a duplex as a house hack. After coming face to face with the realities of toilets, trash and tenants, he has since transitioned to self storage. He’s part owner of one facility and as a few more in the works, Tim puffer Welcome to the road to family freedom.
Tim Puffer 1:35
Hey guys, thanks for having me. Happy to be here.
Neil Henderson 1:39
Silence my phone and take care of that. So Tim, tell us a little bit. How do you recall an aha moment for you when it comes to real estate in general?
Tim Puffer 1:52
I think it’s, it goes back to where a lot of real estate investors get started. So read and register Poor Dad. I mean, every time it’s it’s that’s just what it was it one of my best friends lives in northern Michigan and he kind of got into real estate as an accidental landlord with a condo. And he kept trying to get me to read Rich Dad, Poor Dad. And I’m like, No, you know, out of college, I don’t need to read anymore. And you Well, that’s that’s the thought process of a lot of people unfortunately. And so eventually said, Okay, you got this real estate income coming in. That sounds great. And so I finally read Rich Dad, Poor Dad. And that was the big aha moment like, whoa, whoa, you know, I can’t work a day job for the rest of my life and expect to get to the level of success that I want to get to. And, you know, reading that helped me realize that and help me jump into real estate and get my real estate license.
Neil Henderson 3:03
So, you started with a house hack, correct? Yes. Was that first that was the first real piece of real estate you ever bought was that for the first investment property?
Tim Puffer 3:14
first investment property first piece of real estate was actually my wife and I bought a used mobile homes to live in. So that was our first foray into owning a piece of real estate. And you know, that wasn’t going to set us up for long term success that we didn’t keep buying it those individually. But yet, the house had go was derived from reading Rich Dad, Poor Dad getting the real estate license and we decided we wanted that passive income coming in. And so we started looking for properties that were listed on the MLS using my real estate license and couldn’t find anything. You everything was either overpriced, they were really in really, really bad shape and or just weren’t in the right neighborhood because with having the forethought of wanting to do a house hack, I needed to feel comfortable with my wife walking our dog at night. And so we need to mesh a few different things to make the property be the right one on top of getting the correct rental rates and not having the numbers look good. And so not finding anything, we decided to do a handwritten thank you card campaign which is kind of different than most things so people do to just you know, like yellow letters or things like that. I like love psychology so like people love to be thanked for something and it doesn’t matter what it’s for. And so doing, doing a nice thank you card and you know, first line is that thank you for taking the time to read our letter, and then going into Hey, we’re looking to purchase a duplex we we drove by yours. We really liked the property and If you have any interest in selling, please contact us. And we only did about 20 of those. And we had a 75% response rate on those things, just being really specific and in our targets. And so we were able to talk to a couple people and find one in a really good neighborhood, near Michigan State University, and in a great neighborhood and got a for a very good price. We paid 118,000 for it. And which is at the time was significantly under market, but it needed quite a bit of work done to it. So it didn’t have that component where it didn’t need any work done to it. We had to renovate the unit that we weren’t renting completely and before being able to rent it out.
Neil Henderson 5:53
Brittany Henderson 5:54
What kind of how much rehab did you have to put into it?
Tim Puffer 5:57
So we we did a pretty much everything and we did all new windows. on new flooring we did LVP and the kitchens luxury vinyl plank for the listeners who aren’t, aren’t familiar, and so LBP in the kitchen, living room, the lower level because it’s a it’s a bi level, unit and carpet in the bedrooms, all new countertops, cabinets, new back new central air, everything other than the other than new drywall.
Neil Henderson 6:33
Gotcha. And what do you recall what the total rehab costs were.
Tim Puffer 6:40
So with that unit, we were in for about 20 grand. If you count, we recently renovated the unit we were living in to do the house hack and we were in for that one about 16 grand
Neil Henderson 6:57
gotcha and so on. About 36 grand Did you come in with Did you buy it for cash or did you put financing on it?
Tim Puffer 7:08
Oh, I wish we bought for cash. Now we actually did a FHA three and a half percent down. Great, great way to get started with a, you know, two to four unit super way to get started. And actually we got into it taking a pretty big risk. We had a little bit of money in a 401k from a prior employer and I use that money as the down payment. And then we put a lot of the rehab expenses on zero percent interest credit cards. And once we got the you know, rent it up, we went out and I was able to get a HELOC on the property and pay those credit cards off and then have the he bought with interest only payments on that.
Neil Henderson 7:54
Okay, don’t try this at home kids.
Tim Puffer 7:57
It’s a lot of things. Tools, but you need to have a plan for you. You can’t just go out and get it and expect it to work, you have to have a foresight and how the plans going to work and make sure that you’re actually getting the properties getting a good rental rate if you’re doing this type of house x situation to where you can pay that, that payment off every month. Gotcha.
Brittany Henderson 8:21
And credit cards can be really advantageous way to get some extra points in different things, but you have to be able to pay them off. Yeah.
Tim Puffer 8:31
Be great tool.
Neil Henderson 8:32
Yeah, as long as you understand the short term debt, you know, it’s sort of get in and get out. So you’re all in at about 120,000 purchase price. So about $160,000 purchase price plus rehab. Do you? Have you had it had it appraised? We obviously had to have a price to get the lot correct.
Tim Puffer 8:56
Yeah, for sure. So we actually, this past April was, it was Three years of us owning it. We actually just sold it a couple weeks ago. So we, we sold it for 175. Okay, so Yeah, a little bit of profit and you know, at the end of the day we were able to live you know, rents mortgage free for three years with videos of the other unit paying for it. So the mortgage was about 1200 bucks a month and our rents on the other side was 1200 bucks a month. So we were living for it for free other than paying utilities. Yeah,
Brittany Henderson 9:28
yeah. So now Yeah, it gives you an opportunity to put that money elsewhere. Right save it and then move on. So even if you broke even is probably
Tim Puffer 9:40
for sure. Makes sense. So that’s thing when I got my real estate license, I did try a little bit to be a regular you know, realtor, and but I kept wanting to tell people to to to buy a duplex and how sack is their first property and then using cash flow and they use the cash flow from that so by their own personal A lot of people
Brittany Henderson 10:03
Neil Henderson 10:04
know, it’s so interesting, you know, you have to have the right mentality people you know, there’s so many people that are just like no I, you know, I could never do that I don’t want roommates i have i’ve cousins of mine in San Diego. I love you cousins who are listening. And we were talking to their parents this last weekend and they’re all none of them are in the market. And they’re in their late 20s because the markets so hot around and they want to buy a place but none of them are willing to have roommates.
Brittany Henderson 10:33
We could be like you do you know, you get a place that has a lot of rooms and then you bring in some roommate right? You know, you kind of get flexible and none of them are well I don’t know if it was none but there was at least one that specifically was like nope.
Tim Puffer 10:48
Now you can you bring on the right roommates and you suck it up for a couple years and really, you set yourself up for good long term success doing that. Man, yeah.
Brittany Henderson 11:02
Um, so what what lessons did you learn from that first duplex as your first property? Tons of lessons learned from that
Tim Puffer 11:09
skill skills as well, because during during the renovation, we did a lot of the work myself. So I learned how to paint, lay flooring, put in cabinets. So I guess one of them is discipline while having a full time job. That’s a big one because you’re waking up at five in the morning, trying to do real estate stuff, maybe get a few things done on the unit, and then go to work at eight o’clock and come home at five, go right back to the unit and do more work until 1011 at night and then wake up the next day and do it all over again. And so keep making sure you’re not just doing that one day. And that’s it for the week but doing it consistently so that you you get things done and aren’t falling behind and you making a payment that you don’t have any income coming in to make for you. So disciplines huge when when doing something like that, especially if you’re going to do a lot of the work yourself and you get a lot of sweat equity in the property. Focus, focus and discipline kind of go hand in hand, really focusing on tasks that you’re doing and not getting distracted with with other things. And which is hard for humans. We’re, you know, we’re like, you know, squirrel, you know, you see you see a squirrel off in the background. And so really focusing on your task at hand, getting it done, and then moving on to the next phase of the project and not getting bogged down and the future stuff.
Neil Henderson 12:42
So you were pretty much DIY the whole way you’re doing yourself rehab, and do yourself landlords. Correct?
Tim Puffer 12:49
Yeah, yeah, exactly. Which which is which is a great way to start out and save, save property management fees, doing it that way. You’ll learn a lot lot of stuff skills and you know, strategies with with doing that stuff.
Neil Henderson 13:04
Gotcha. Would you do it again?
Tim Puffer 13:07
If I had to start over? I think so. I think so. I mean, it’s it’s not easy. It’s not easy but it’s the things in life that are worthwhile aren’t easy, nothing’s handed to you. You got to go out and go out and get it if you if you want to want to achieve anything so i would i would definitely do it again and you know, relearn all the lessons and the all the other pains that go along with doing a rehab for three months straight while working a full time job and then being a landlord and having to deal with the complaints and all that there. You know, that’s a part of it, but it’s it’s worth it in the end, pushing through those obstacles and helping you get to a better place.
Neil Henderson 13:55
Did you have any kind of a construction or handymen background at all or was it all how’d you how’d you? How’d you do? It had to learn how to do it.
Tim Puffer 14:08
YouTube, just watching watching a little bit of YouTube and honestly just doing it, I mean, if you want to get things done, you gotta just take action and go do it. You know, it wasn’t a great painter by by any stretch of the imagination prior to doing that, but now I’m a pretty good painter and and actually I, I enjoy it. I can I can cut a room in with a paintbrush in about an hour now. It’s it’s pretty a therapeutic for me put some music on and really get going. So yeah, just getting out there and learning and acquiring the skills and doesn’t matter what age you are or what background you have. You can acquire whatever skill you want and it’s out there for free. Most of it is nowadays there’s literally zero excuse for not doing something you want to do or learning in Me fame to help you achieve your goal. Yeah.
Brittany Henderson 15:03
So how did you go from house hacking to self storage?
Tim Puffer 15:08
So you know, all the good that comes with owning a duplex there’s also bad so we had a 2016 it was March of 2016. We had a small little water backup and in the duplex, the washer line, you know, overflowed a little bit. Okay, awesome. Got that taken care of. But that happened and I had to rip up the LVP la in the lower level bathroom and relay tile myself. First time doing tile turned out pretty good. YouTube videos again. So did that and then a couple months later in May, the toilet down there backed up. Whole lower level. All the LVP that I laid, spend a week lane, ripped right up, ripped it right up and get back at it all. dried up, cleaned up. And we’re just waiting on tile to be laid and I had a contractor do that was that was a lot of tile delay, and I’m not that skilled at La tile. So pay somebody else to do that. During this time we we had purchased, Mr. Landlord, his package to kind of help us automate and get better processes and doing the rentals because the plan was to buy more rental properties at that point in the past weekend to some apartment buildings and things like that. And so we went down to his conference in Cleveland. Well, while they’re in between classes, get a call from our tenant, you know, super upset, just not happy with anything. You, hey, we can’t use a whole lower level. This is this is bull crap, like, Hey, we’re contractors are busy. You know, we’re just waiting on them. It’s all cleaned up. Everything’s good to go. The drain lines taken care of because we had to have that what’s called jetted. So what they do is they go in with high pressure water, and they will essentially smooth out the cast iron piping. And so we had to pay for that to be done, which was four grand to have that company. So and that’s not a no easy expense to swallow there. But, so I had to calm him down. And I’m like, Man, this, I don’t want to multiply this by 20 or 30 or 40, depending on how big the apartment or whatever is. And so just so happen. The next speaker was Scott Meyers at the conference, and my my wife looks at me and, you know, for all you husbands out there, listen to your wives. They’re they’re pretty, pretty brilliant. Wife, my wife looks at me, she says we should do that. I say, yeah, I think we should. It’s very similar. in evaluating apartments. There’s certain you nuances to it, but you’re still looking at cap rates, cash and cash IRR. You’re looking at all that stuff. And so we finished listening to him speak and bought his course. And that’s how we got our start in that and going down to Indianapolis to to his three day class and, you know, hearing firsthand on the industry and getting some real first hand knowledge.
Neil Henderson 18:23
So for those who don’t know, Scott Meyers is the Self Storage instructor. I won’t call him a guru because I like I’ve got more respect for Scott than
Tim Puffer 18:32
Yeah, I absolutely agree.
Neil Henderson 18:34
He’s a genuine guy. And he knows this stuff about self storage.
Tim Puffer 18:38
Neil Henderson 18:40
So how did you find that first Self Storage deal?
Tim Puffer 18:46
So again, taking action, so taking Scott’s course and going through it and what’s great about Scott’s course is also is what’s great about Scott’s course is that it gives you enough to get going. It doesn’t give you everything it doesn’t lay out step one, step one, a one, B one see, there are certain things you got to figure out for yourself, which is what keeps a lot of people from getting started as they want their handheld and, you know, the, the whole process done for them. But Scott’s course gives you a ton of information to be able to get going and then so just following that and cold calling facility owners certain cold calling facility owners in my area and found a couple who was looking to retire and so build a little rapport with them. And I see was mostly again my wife, she was the ringer and getting the deal done, because if it was an older couple who had spent, they had a business there prior and then they built this self storage buildings and so myself and my wife coming in they It kind of reminded them are we reminded them of them and when they were starting a business together and so I think that really made a big difference and being able to purchase that facility from them.
Neil Henderson 20:16
So it didn’t we didn’t get it by mailers and like that you literally just were just cold calling. Owners
Tim Puffer 20:23
rep, just cold calling. And I didn’t get too far, which is pretty, pretty great. I didn’t get too far into my list before finding them. So I still got quite a bit more to get through. doesn’t happen very often. That’s, that’s pretty, pretty rare. So I’m very thankful that we were able to find that and you know, thankful to them for letting us purchase it because they didn’t have to sell to us. They could have sold anybody they wanted to.
Brittany Henderson 20:50
Yeah. Can we can you tell us a little bit more about that facility? What you know, the units, square footage, that kind of stuff?
Tim Puffer 20:58
Yeah, for sure. So it’s 108 eight units, and that it is about 28,000 square feet. And there’s also well was but we’ll get there about a 3600 square foot office building and a 1200 square foot pole barn on the property when we purchase the place and be the office building had three commercial tenants in there. And then the pole barn was also leased out when we purchased the facility. And it sits on five acres.
Neil Henderson 21:33
Gotcha. Do you want to can you tell us what the purchase price was? Tomorrow?
Tim Puffer 21:40
Yeah, definitely. Definitely can. So we purchased for 1.3 million. Okay.
Neil Henderson 21:46
And that’s, did you did use a SBA loan to acquire it, did you? You know, how much did you have to put down?
Tim Puffer 21:59
Yeah, so Actually, this is before still pretty young into doing commercial real estate at that point, we I had no idea too much about an SBA loan. So we actually did conventional financing. So, you know, for this deal, you know, I was able to find a great business partner on it, and I had built a prior relationship and brought this deal to them. And not asking for capital because you can’t just go up to somebody and say, Hey, I need money. And so I, you know, brought it to this an investor, you know, friend that I knew and he said, Hey, you know, what do you think about this deal? He took a look at it and he said he thought it was a great deal, which just helped validate that I thought, my research into it, and he asked me what I was going to do for capital and then that’s where I said, You know, I would need some capital to get this deal and so we we partnered on on the deal to get into it. So we put 20% down on it and did a conventional loan. got really great terms. There’s some great local lenders out there with some great terms, we were able to get a 20 year amortized loan with 10 year term, which we were able to, then we wouldn’t have to re underwrite or anything, we could do another 10 year term at whatever the current interest rates were at that point.
Neil Henderson 23:28
Okay, so then there’s not a balloon payment, you just have to renegotiate the Right,
Tim Puffer 23:32
right, exactly. We’d have to just go to the whatever the current i interest rate was, which we were able to get into it for 4.65% at the time.
Neil Henderson 23:44
Gotcha. And I’m you’ve, you’ve done some work on it. So requisition was 1.3. Did you have to raise any capital to be able to do any renovations Things like that.
Tim Puffer 24:01
So when we took over the property, it was a nice value add deal and the fact that the prior owners weren’t managing it in a sophisticated manner. So we took over the place we created a website, we we raised the rates at the facility to increase the value. And so but by doing that, and creating some of these efficiencies and increasing the value by raising the rents, we were actually able to pull out enough capital to fund our expansion that we just started on this past week, where we’re going to be adding a 9200 additional units and 15,000 additional square feet, which will get us to about 43,000 square feet at the facility. Gotcha.
Brittany Henderson 24:51
So you taking over the like the barn and stuff or is that just
Tim Puffer 24:57
what barn it’s gone. It’s gone. Yeah the barn the barn and the office building are completely demolished Yep. So that’s we had where those two buildings stood we had about an acre because generally in self storage Oh non climate control building you can get about 15,000 square foot per acre, sometimes more depends on your setbacks and everything like that. So
Neil Henderson 25:22
and are these going to be all non climate control?
Tim Puffer 25:25
Yes, they’ll be all non climate control.
Neil Henderson 25:28
Your your partner, did your partner have any experience in self storage business before he started this? He
Tim Puffer 25:34
did not. He did not his he is has experience in apartments, apartment buildings. So he’s been in commercial real estate for 15 plus years and, you know, cut his teeth in residential where a lot of people do get their starts and moved on to apartments and has done quite a few deals and apartments here in Michigan. Gotcha.
Neil Henderson 25:58
How’d you meet him?
Tim Puffer 26:00
So, like a meet everybody I just cold call people essentially. He’s got a Michigan focus podcast. Well, was Michigan focused, but he has a lot of people on his podcast called the rental property owners Association podcast here, Michigan and listen to the podcast and loved it and I knew he was pretty local to me. So I reached out to him and we went out to lunch a couple times and just cultivated a relationship from there. That’s great. It’s awesome.
Brittany Henderson 26:32
What everyone should do, yes.
Tim Puffer 26:35
A lot of I feel like a lot of people are afraid to talk to other people. And it’s like that’s one of the great things about life is talking to other people and building relationships and not yet not expecting anything out of it like I don’t know. meeting him. I didn’t expect anything out of it but to talk real estate because I liked real estate one of the Learn More I didn’t get into it to for him to help me raise money or lend me money or Anything like that, it was like, hey, I want to learn more about real estate and talk about it and see in doing that, see how I could help him as well. And not only just take information because you gotta, you gotta, you gotta give to, to receive.
Brittany Henderson 27:15
Yeah, a lot of people who are farther ahead are totally excited about helping other people or even just talking about what they’re doing. Because those around them have probably already gotten bored of it, you know, that aren’t that are like their friends and family. So it can be a great way to get in with a mentor or just even just have someone that can share experiences with you. You know, so that you’re not lonely in your space.
Tim Puffer 27:42
Right? For sure. Well, and then at the end of the day, too, there’s there’s enough real estate out there for everybody would, on whatever level you want to be at. If you want to own, you know, two properties or 100. There, you can do it. It just comes down to what level of execution Do you want it No operate at
Neil Henderson 28:02
Yeah. Was there any issue with because he since your partner brought so much capital did he also is it mostly his name on the loan and because sometimes some commercial lenders when there’s a investor that comes in that’s a such a large portion of the downpayment, they’ll basically make them sign on the loan. That was that something you experienced at all?
Tim Puffer 28:31
Sorry, no, you cut out there. Okay. restate the question, please. So
Neil Henderson 28:37
sometimes when, when you bring in an investor we’re getting hang on we’re getting internet internet connection is unstable. So yeah, one second. Let’s wait for Can you hear me okay, though.
Yeah, I can hear you now. Okay. All right.
Neil Henderson 28:51
So, a lot of times when you bring in an investor who’s such a large part of the deal, the bank will require them to sign I’m alone. Is that was that your experience here?
Tim Puffer 29:04
Yeah, yeah, we he signed up alone and my myself did I did
Neil Henderson 29:08
okay. Was it non recourse or recourse?
Tim Puffer 29:11
It is a recourse loan. Okay. All right.
Neil Henderson 29:15
Okay, sometimes I like I like to dig into those details sometimes a lot of people
Tim Puffer 29:19
Yeah, for sure. And I think, you know, some people can get a be afraid of a recourse loan, but you know, yet the downside is if you things go south, they could come after your personal assets after disposing of the asset, you know, selling it, but that’s why you make sure you can’t run there’s no guarantees, but you do your due diligence to ensure that it’s a good deal and you have good, good cushion and good margin on it. So lower the likelihood of that happening and, you know, it just comes down to there’s risk in your life every day you ever risk getting into a car and you know, risking your life doing that. So you got to Pick and choose where you want to do it.
Neil Henderson 30:02
Brittany Henderson 30:03
So do you have onsite management? Or is it an automated system?
Tim Puffer 30:09
security cameras? That’s right. Yeah. That was so we started out because we didn’t want to just stop onsite management. You know, cold turkey is our, the prior owners were there from a nine to five every day of the week. And so we didn’t want to just stop that. So we started out having my wife there for four to six hours every day. And we got a month in are like, nobody stopping in. Because we had set up our website where people could run a unit online, or they call in and could run a unit. So we said, Why are we doing this? So we just you after about a month and a half, we said we’re just going to go completely automated and off site and we’ve been that way Ever since going on two years now and have had no issues whatsoever, well, people can go online with their units and call in rental units, we have occasionally we still have to run out there, we have to leave below units got a nice leaf blower to clean out the units rather than sweeping it much quicker. And, you know, go out there to check on things and see if there’s been any move outs and anything like that. But there’s no one site management and we’re going to will continue that with with the expansion.
Brittany Henderson 31:32
So you’re really not spending a lot of time on on working in or on the storage facility.
Tim Puffer 31:41
Yeah, other than, you know, making sure you know, the occupancy stays at a level where we want it and the rental rate so that we’re in line with the competition and it was cleaning the units and things like that. It’s not ton of time doing that. I mean, it’s been more time lately in the last year. Four months or so doing, actually even more than that getting everything worked up for the for the expansion and all those, the civil engineering and the site work and the general contractor. But in general, when you have something that’s stabilized and an automated you’re not spending a ton of time, me keeping the property operating efficiently. It goes back to having systems in place. You have your systems in place to help you make that happen.
Neil Henderson 32:30
Do you have an onsite kiosk? Or are you just relying on the website to handle lease ups?
Tim Puffer 32:37
It’s it’s just the website. And I’m of the opinion and there are people who may say otherwise, but I’m of the opinion that I don’t. There’s not much benefit of the kiosk. There’s a group out in North Carolina, who I’ve talked to you and I’ve talked with the owners out there and they are real big into tracking things and only 6% of their rentals. happened after chaos. And they have 10 plus facilities. Wow. And so when you’re looking at paying five grand or more for a kiosk, I don’t know if the ROI is there when people will go to the kiosk and instead of renting out the kiosk, they’ll stand in front of the kiosk and take out their phone and run to you. Right in front of the kiosk. So it’s, I think it’s a cost that’s unnecessary when people are going to use their phone or their iPad or their laptop or just call in to rent a unit. And when people call in, if you actually answer your phone, you’re going to beat most of the competition out there because there are a lot of businesses that won’t pick up the phone.
Neil Henderson 33:46
We interviewed Michael Wagner back on episode six and that was exactly what what you just said exactly what he said. He said everybody has a kiosk in their pocket. Yeah, and he’ll have his smartphone and this in this day, and Age, you know, you don’t really want the customers who are who are going to have to, they want to have somebody behind the desk,
Tim Puffer 34:10
Neil Henderson 34:10
lease it up for them and give them a lot you don’t really want honestly you don’t really want those kinds of customers because those are the kinds of customers that cost you probably more money than you make to high maintenance.
Tim Puffer 34:22
Yep, yep. I got a great example recently where we strayed from our process. And we rented a unit a lady wanted to meet to run a unit to see the unit and wanted to pay cash. And my wife has a great heart and Lady out there and and did that and we’ve had nothing but issues with this lady since then, with Oh, the the doors broke while the doors broke because you stuffed it full and a bed hit the back of the door and knock it off the track. And so that happened we had to fix that and then Just recently she was in the auction for the lien process. So we knew she was way behind on her rent and everything. And so by straying from our process, we created a headache for ourselves. When we know sticking to the process, we’re going to have a less likelihood of having those headaches, because it’s proven to not create those for us. Yeah, yeah.
Brittany Henderson 35:25
So um, maybe we can talk a little bit more about your system. So you said the phone calls. Do you have like an answering service that works with you?
Tim Puffer 35:34
Yeah, not currently. We don’t we’re going to implement that in the future. But right now it’s, it goes right to my wife and she answers the calls. Okay. So because we have quite a few people who branch out right off the website, and, you know, the other people who will call in and she’s able to answer and get the units rented for us, but as we grow, were to have a nice, third party call center kind of handle that handle the overflow calls for us that way, we’re not missing any
Neil Henderson 36:04
gotcha. How many calls would you say you get, on average a week?
Tim Puffer 36:13
say we’re getting probably three to five a day. So 15 plus a week, you know, then that varies, you know, a couple people who might just have a question on who’s a current customer, but a lot of people inquiring about unit rates and sizes and, and things like that, or if, you know, technology is great, but you know, things can happen will try to rent a unit online and the system kicks them out or something like that. So answering questions, but by doing that, from that as well,
Neil Henderson 36:40
gotcha. So it’s a they’ve got to bring their own lock. Correct.
Tim Puffer 36:44
So we like to do things at different Neil, from our people in our marketing where we do, we’ll give them a free lock. And so what we do is people can’t get into the facility until they pay online or over the phone. That point they’ll get their codes put in the keypad to get into the facility. So we just put their free lock into into all our vacant units. And then when somebody rents it, they can move right in and don’t have to worry about a lock because it’s a benefit to the customer one because they’re getting a good lot. And to it’s another benefit to them and the fact that by having the the good disk box on there, they’re much much harder to break into because you need an angle grinder in order to get those open. And it takes quite a while whereas some of the just the regular, no master locks you can buy everywhere you can just slip those pretty quickly and then get right in so it’s a good security measure for them as well.
Brittany Henderson 37:48
That benefits you cousin makes you have good happy customers who be yes good happy reviews. Going
Neil Henderson 38:00
So what does what does the day in the life of self storage investor currently look like?
Tim Puffer 38:08
home well for me, you know, working my day job and insurance right now, but you know, in between that it will be before that starts in the morning, you know, looking over, you know, see make sure the facilities operating where we want to and then you looking for more opportunities for purchasing existing facilities or developing other sites or, you know, just out there trying to hunt and find the next the next deal and that’s in the morning before work and that’s on lunch. And that’s after work doing that and there’s no need to say there’s not a lot of TV going on and and our household just because it’s, you know, every now and then we will but it just takes time away from finding more deals and getting to the level where we want to be at
Um, I don’t know.
Neil Henderson 39:08
So what are you working on now you’ve got the expansion of the current facility that you’re working on. And then you mentioned earlier that there was also Was there another deal that you’re working on.
Tim Puffer 39:23
Now working on a couple deals one we’re working on is a ground up development of bacon personal. And we’re actually in the middle of selling that personal we got it all entitled for self storage and got it all designed and we’re going to go ahead and flip that and you know, been working on it for a little while so it’s, it’s nice to get a get a little nice deal like that under the belt and go out and find another one and Other project I’m working on kind of in the beginning stages of his conversion project. And so that’s that that’s a fun trying to work on that navigate that because that’s a that’s a really large project and a lot of moving parts.
Brittany Henderson 40:13
What’s the conversion from Is it like a warehouse store,
Tim Puffer 40:16
it’s a it’s a retail store. And so it’s a 30,000 square foot building currently and we’re going to have to raise the roof on it literally. Gonna have to raise the roof about 16 feet to get the the clear space on the inside that we need to get three levels of self storage.
Neil Henderson 40:37
You want three levels
Tim Puffer 40:39
we want we’d like to have more budget were restricted by the municipality of course. But yeah, three levels is what we’re going to max it out to get the the net reasonable, square footage from the building. That helps the deal make sense because in general, you can with a conversion or climate control building, you maintain 75 percent efficiency. And so what that means is that if you have a 10,000 square foot building, you’re going to be able to get 7500 Square net rentable square feet of storage units from that.
Brittany Henderson 41:13
Are you Are these units or facilities all near you? Are you looking at things all over the country
Tim Puffer 41:22
but currently they’re all in Michigan. So I’ve been able to which is nice been able to find opportunity here in my, my home state and it takes Nothing’s more than a couple hours away from me. So there, there are a lot of places where it’s tough to find deals, but that can involve getting the creative and looking outside of maybe what you’ve been looking at before to try to find deals and maybe looking at different sized markets. And you know, if you’re looking in, you know, a secondary market, try a tertiary market or try a different secondary market that maybe has slightly different metrics than what you’re looking at before to find deals.
Brittany Henderson 42:03
Yeah. Do you think that you’ll go outside of Michigan at some point?
Tim Puffer 42:07
I think so I’ve been thinking about that lately to find some more opportunity and stay on the track of what I’ve been looking at here in Michigan and finding those similar opportunities like that with similar metrics and demographics and other states.
Brittany Henderson 42:25
Yeah. Once you get sort of, you know, for, like, let’s say, for the facility that you currently own, you know, when all your new stuff goes in, and you get everything sort of outsourced? Do you feel like you could, you know, go somewhere else for a while. How long do you think you could be away from the facility and have it still be running? Really, without you? Yeah.
Tim Puffer 42:49
So as long as we keep our systems in place, and we theoretically we could move out of state and have somebody local And to go and clean out units and wash the facility for us and do all that. And even take it a step further from now, there are security cameras you can get now where it’ll send you an alert whenever there’s any movement. So we could implement that and take it a step further to be able to really be away and not have to be in the same city or even the same state as the facility and have it run efficiently. And that would be without hiring a third party management company as well. Just with the size of the facility we have and having a systems in place, it affords us the opportunity to potentially do that if we wanted to.
Neil Henderson 43:42
Do you are there is the facility open? 24 hours?
Tim Puffer 43:49
Yes, yep. Okay, we have 24 hour access, some facilities will charge four hours between, you know, 10pm to 6am. But, you know, in general We don’t have that extra costs there for the customers. Gotcha.
Neil Henderson 44:07
And when you purchased it, was it stabilized? Or was it? What was it? Like? What was the occupancy? Like? Did you have to do any lease up things like that?
Tim Puffer 44:20
No, no, it was 100% full and we took it over, which was, which is great as a buyer, which is very great as buyer. So I see that and I see okay, there’s room to raise rates here. Yeah, that’s where a good good value add opportunity lies with being able to do that because you can come in day one and, and and raise the rates on people. And, you know, it’s not to be be a jerk or anything raising rates on them. But generally, in those cases, those people haven’t been getting a great deal for 234 510 years from the prior owners because they just, they were afraid to raise rates because they’re always scared of People gonna move out. And that just doesn’t happen. Because, you know, if you raise somebody 10 to $20 on a storage unit, that’s not enough to make them rent a truck on a Saturday generally and stuff.
Brittany Henderson 45:16
well, and especially if you’re also keeping with what’s current in the market, you’re probably you know, they’re not going to find that deal again, anyway, what they had,
Tim Puffer 45:27
right, right, exactly. So if you raise them and keep them, you know, right at what the market is, or just below, they’re not going to move out. Yeah,
Neil Henderson 45:37
well, and the power of commercial real estate too, is that just that $10 raise, you know, makes, you know, increases your noi by you know, let’s say $120 a year and then you divide that by the cap rate and you’re looking at, you know, if it’s like a eight cap and I’m sitting here doing math and public, you know, you’re looking at a substantial amount of money looking at Yeah. 60 Six to $8,000 in value of the property. Absolutely. Well, I love that that’s, that’s such a great facility start off with because certainly so many first time Self Storage owners are trying to come in and they’re finding a facility that’s really distressed from day one. Right? And they’re, you know, they’re they’re trying, they’re having to turn around and that’s a real challenge. Whereas, you know, you were fortunate that you came in, it was already stabilized, was operating. It just had some great value out.
Tim Puffer 46:35
Neil Henderson 46:38
Great. So, um, did you have a question,
Neil Henderson 46:43
So what advice would you have for someone who is, you know, maybe a little bit of a tired landlord, maybe they have sort of started off down the path of small multifamily because they were Brandon Turner say what an amazing, amazing thing it is. And now they’re coming face to face with the realities of tenants trash and toilets, and they want to explore Self Storage, how would you recommend they get started?
Tim Puffer 47:15
I think they gotta figure out what exactly they want to do, because they couldn’t evaluate their situation and decide to keep doing small multifamily, and that’s the best route to go. But if they decide they want to look at something different to get started in self storage, I mean, doing Scott Meyers course, even if you’re not going to go out there and be the hunter and search for deals yourself just to get a good basic upfront understanding with great content. And then you turn that into finding somebody else who’s investing in self storage and doing the upfront work and you can invest with them via investor forum. That can be a great route to go. If you’re if you’re sick and tired of your storage or your apartment buildings, you know, now’s a good time to possibly sell those. And you do 1031 exchange and those into a self storage facility that somebody else’s went out and found and vetted and, and things like that. So I think that could be a good, great route to go for somebody. But if somebody wants to go out there and find the deals themselves, again, their can’t speak highly enough of Scott’s course, and the support and the actual education that you get from going to his three day course. And I don’t get paid for saying that either. It’s just I think very highly of it.
Neil Henderson 48:39
I have some experience with Scott and his team as well. And I can also speak very highly of them. They’re really they’re good people. So if you have the means then by all means, get some education before you you wait into this.
Tim Puffer 48:54
Neil Henderson 48:56
Well, Tim, thank you so much for sharing with us today. If our listeners want to Get to know more about you is there what’s the best way they can reach out to you?
Tim Puffer 49:04
I’ll give people a couple ways when we like a choices. So LinkedIn, I stayed decently active on there, love meeting new people on there. People can reach me at Tim at focus, dash Rei com, feel free to shoot me an email. Definitely respond back to people. And I think those are the two best ways to get ahold of me. Be you have quickly responsive to people.
Brittany Henderson 49:35
Okay, awesome. Thank you so much. It was really pleasure to talk to you.
Tim Puffer 49:41
That was great. It was great.
Okay, we’re going to stop the recording. Don’t leave.
Neil Henderson 49:49
Well, that was Tim puffer of focus Rei. You can find him again at Tim at focus dash Rei com. It’s great talking to him. Always love Talking to self storage owners. And reformed small multifamily. Nice. So was there a key lesson that you learned from this interview?
Brittany Henderson 50:13
Um, I think one of the key takeaways that I had was just to just jump in, I think that’s something that he seems to be pretty adept at is just kind of, say seeing something that he’s interested in and going for it. And then also, I guess, like being okay with pivoting, when you figure out that that’s not really what’s working for you and just kind of jumping to the next thing. So obviously, he’s solidly in this thing now, but you know, it was it was interesting to hear how he kind of just like Okay, get started with the, you know, house hack, and then once they kind of decided that wasn’t right for them, they got right into it and, and that probably lent them some, I’ll say luck, you know, for both of those things. They call it Did the hell them thank you letters to he said the only the only got like 20 people on the duplex and had like 75% turn What? And then, you know cold calling self storage facilities and getting someone pretty quickly within the first small amount of people I can’t remember what he said but it it made me want to cry.
Neil Henderson 51:23
Yeah. It’s not normal.
Brittany Henderson 51:27
It’s not normal usually have to like send letters and do all these things but it’s fantastic because they because they kind of jumped in and they sort of had that momentum behind them and really, you know, were able to move forward quickly, which is fantastic.
Neil Henderson 51:44
For me, it was hit when he was talking about their self storage system that they have an unmanned facility and they they sort of need a very specific kind of customer and once they win Straight away from that specific kind of customers where they got into trouble. Yeah. And that’s I think it’s important to remember whether or not your your businesses tenants or self storage that you know, the kind of tenants that you want, and you train them. Yeah. And don’t stray from that.
Brittany Henderson 52:18
Yeah. Well, I mean, that’s why you do applications when you rent an apartment or something like that, that they want you to. They want to know more about you, you can’t really do that with a self storage facility. So you have to do that by the system that you use. And, you know, if people can’t get through your system, then they don’t need your product. They don’t deserve your product. No. Or they’re not resourceful enough. You know, like, if that’s really something that they want to do, then they’ll figure out a way to make it happen without having to go around your system
Neil Henderson 52:53
Brittany Henderson 52:54
He A lot of it was just sort of like you said, jumping in As far as self storage specific specifically, he did the Scott Meyers three day course and, you know, had lots of great things to say about that. And I know you’ve done that as well. So and I think that kind of goes back when we talk about things a lot of it’s like find a mentor, a class podcast, I’m sure you know, he obviously listens to podcast because that’s how he connected with the person that is his business partner on his current facility. So you know, talk to people, listen to podcasts, take classes. He also
Neil Henderson 53:38
watched YouTube. Oh, yeah. With a dry rehabber and landlord he basically just watched YouTube.
Brittany Henderson 53:46
Yeah, yeah, the information is out there. Um, alright, so money do do we want to talk about the storage facility? Yeah. So how much did that take?
Neil Henderson 54:01
Well, it took it was a $1.3 million facility, they put 20% down. So that’s $260,000. He didn’t really talk about how much money he brought to the table. It was sound like it was mostly his partners money. And judging from the, how large their how much money they have from that, from their small multifamily, and when they sold it, they I don’t think that necessarily, I don’t think those funds came from that. So I don’t think he came in with a huge amount of money. But, you know, he, he was creative. He had a deal. What he didn’t have was the money. And when you have a deal, but no money, then you need to go out and you need to find somebody that’s got money, and you don’t necessarily you’re not going to just go to them and say hey, can you give me money? You’re going to have to give up part of the deal. Yeah, and 100 percent hundred percent of no deal is worse than 50% of a deal
Brittany Henderson 55:04
yeah yeah and we know obviously know their terms but it sounds like it’s kind of a silent partner situation sounds like they run the facility exclusively so they’re just the other person’s the money man which may mean that they take a smaller cut I’m so Yeah, all right and then time time How much time does he spend? Or do they his his wife
Neil Henderson 55:33
your wife manages the facility sounds like mostly
we didn’t get into an exact
Brittany Henderson 55:40
no I mean I would say probably, I would guess is probably a couple hours a day would just be my guess but it’s over the course of a day. If they get that phone system and they’re not like fully have it like managing at them like where she’s answering the phone all the time the they prompt to be very little like if they once they outsource stuff It probably comes and goes because like you said, like he said he has to they have to clean out the facility. Sometimes they have to do some different maintenance. So if they have like a maintenance person and you know the outsource the calls and and help sort of situations they’ve probably not spend a lot of money a lot of time excuse me on
Neil Henderson 56:21
one. I remember when we talked with Michael Wagner back in Episode Six, he talked about something that was he had just, I think, handed over those duties. Answer the phone to a call center. Because he said it’s really key. You want to pick up the phone when somebody calls? Yeah. You want to pick up the phone when somebody calls. And because if you don’t pick up the phone, they’re just going to pick up phone call the next Self Storage down the road. And so that’s It’s really key. I would I agree with you, I think probably a couple hours a day, I’d say probably around 10 hours a week. Yeah. And and part of that is just looking for new opportunities.
Brittany Henderson 57:11
Yeah. Yeah. So all right. And then is it location dependent?
Neil Henderson 57:17
I would say, right now, I would say yes, a little bit. But we know that self storage can be done if once you get the systems up and running. It can be very location independent.
Brittany Henderson 57:34
Awesome. All right.
Neil Henderson 57:36
Well, that was Tim puffer again, thanks. Thanks for listening. Thanks for your time, Tim. And thanks for listening. Let’s hit the road may
- Key Lessons Learned: Just jump right in and learn while you go and be ok with pivoting if things aren’t right for you. Remember who your ideal type of tenants are.
- How did they acquire their knowledge or what knowledge did they need to acquire? A lot of what Tim learned was by doing and watching YouTube. He also took the Scott Meyers 3-day course.
- How much money did it take to get started? The storage facility cost $1.3 million and required 20% down, which came to putting about down $260,000. He didn’t discuss how much of that amount he specifically contributed.
- How much time does it take now? Tim’s wife manages the facility. Neil’s and Brittany’s guess is probably a few hours a day spread out over the course of a day.
- Could they do this strategy from anywhere in the world? Right now it is a little bit location dependent.
What you’ll learn about in this episode
- What was Tim Puffer’s a-ha moment about getting into real estate?
- What was the first piece of real estate that Tim bought?
- How much rehab did Tim have to do and what was the total cost?
- Did he buy that initial property cash or with financing?
- What lessons did he learn from his duplex investment?
- Is there anything Tim would do differently if he was starting all over again?
- Did he have any construction or handyman background before he started?
- How did Tim Puffer go from house-hacking to self-storage?
- How did he find his first self-storage deal?
- Tim gives a description of his self-storage property.
- What was involved in the financing of the self-storage facility?
- Did he have to raise any capital to cover rehab costs?
- Did his partner have any experience in self-storage?
- What was Tim’s experience with a recourse loan?
- Does TIm utilize onsight management or automated management?
- Does he rely on his website or does he use a kiosk?
- What does a day in the life of a self-storage investor look like?
- Does he think that he will go outside Michigan at some point?
- How long does he think he could be away from the facility and still have everything working smoothly?
- Is the facility open 24 hours?
- When he purchased it, was it stabilized?
- What advice would he have for a retired landlord?
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