The Storage Investor Show

From College to Self-Storage Development: The Entrepreneurial Path of Stevie De Gala

• Kris Bennett • Episode 76

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Description
Stevie De Gala, a senior at BYU and owner of Lone Star Stowaway Storage, unravels his fascinating journey in the storage industry. Stevie shares his story of transforming family land in Gilmore, Texas, into a successful storage facility through good decisions and a bit of seller financing.

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Speaker 1:

Hey everybody, welcome to the Storage Investor Show. My guest today is Stevie Degala. He is a senior at BYU, the owner of Lone Star Stowaway Storage and a team member at Cactus AI. Some of you guys may know I had Tyler Sellers from Cactus AI on a couple of months ago. They've just launched their underwriting tool. Go check it out. We'll have a link in the description below. But, stevie, thank you so much for being on the show. Of course, thanks for having me. Let's talk about your deal, lone Star Stowaway. That's what I wanted to kind of focus on in this episode is just that one deal. It's the first one you have and I think, guys and gals who are listening to the episode, some of you guys want to get into storage. I hope that this episode will be kind of an inspiration for you and understanding Stevie's story and how you got into the business.

Speaker 2:

So, stevie talk to us about that deal. When did you close on it and just what was the process of finding that first location? Yeah, so my facility is in my hometown of Gilmore, texas. So we were looking for existing facilities for six months, just talking to all the owners, but we couldn't find anything that was available. So me and my partners I am partnered up with a couple of cousins decided to build and develop our, our facility because there wasn't anything else. So, yeah, we started looking for land. Luckily, I had some family land that we built it on. So my grandpa owned the land and he seller financed it to us.

Speaker 1:

Oh, nice man. Okay, how many acres is it roughly? So just a single acre in a great location in town so yeah, okay, and how many units or square footage, roughly?

Speaker 2:

Yeah, so 130 units, and they're sitting right at 10,000 square feet.

Speaker 1:

Okay, nice, and that's actually pretty good, pretty good size. And when did you guys complete the construction on?

Speaker 2:

it? Yeah, so I was. I'm still in school at BYU, so last semester I actually moved down to Texas so we could get it developed. So last fall we started working on okay, finding the land, getting quotes for building, and it just opened in May. So we started building in January and opened up in May.

Speaker 1:

Okay, that was a pretty quick timeline there. That's good. I know it's not that large, but still it's a decent timeline. Can you get delayed on stuff like that and that whole process? Yeah, it's pretty tough. It's pretty rough sometimes. We'll jump back into that here in a second. So you just opened up it's what? November 2024? So you're saying you just opened up earlier this year, in May, just a few months ago, correct? Yes, sir, okay. And then how has the lease up been going for you guys so far?

Speaker 2:

It's been great. We hit 67% occupancy as of yesterday and, yeah, we're rolling, so we're hitting our milestones. Obviously it's not as fast as I'd like it to be, but I can't complain, we're hitting numbers.

Speaker 1:

Hey man, in six months to be 65, what was it? 67%? Yep, yeah, It'd be. A 67% occupancy is not bad at all. What's your guys' rough? I know it changes a little bit maybe depending on how you're doing your lease up strategy, but what's the rough average rent per foot right now?

Speaker 2:

So we're sitting at about $97, so give or take that. So we are in a rural market. Our town has 5,000 people inside the city limits and then about 12,000 outside in the county.

Speaker 1:

So smaller market, but yeah, no, no, that's fine. So about 97 bucks for like a 10 by 10, something like that. Is that right?

Speaker 2:

Yeah, so ours is half and half. So climate control, non-climate, so ranges from 130 to down to 60 for smaller units.

Speaker 1:

So on average there, okay, hey man, that's actually not bad at all, given some of the rents in some markets. I've seen them as low as like 20 bucks a month for like a climate control 10 by 10, so like literally like going in rate. So that's pretty low. Um, what you guys are doing is great there. So okay. So lease up is going well. Are you guys self-managing the property?

Speaker 2:

yeah, so we have a lot of the software in place, so we have the Nokia system so we can do everything remote with storage. But yeah, I'm kind of run it remotely. I'm up in Spokane right now actually because my wife just started law school, but I take in all the inbound calls and help with the customer service. And then my cousin who's down there runs the operations. If anything needs to be done on site, okay, got it. So he's the boots on the operations if anything needs to be done on on site.

Speaker 1:

Okay, got it. So he's the boots on the ground. So if something happens, he goes and fixes it or whatever. Has he had to do much at this point, since it's new, a new build, or?

Speaker 2:

no, not, not much. The biggest thing is just keeping the the grass trimmed right now, so and and spraying for some spiders, but nothing too crazy, yeah it's funny, uh, when we bought some stuff that had gravel.

Speaker 1:

uh, you just don't think about it when you're looking at it, cause if they put it down fresh, it's, it looks great, you know. But then, uh, in the winter months it's fine, cause nothing grows. And then I'm over here in North Carolina, so the winter months, nothing grows, and then summer comes, spring, and summer you got weeds coming up all over the place. It looks horrible, uh. So trying to keep all that trim down and obviously, like you said, keep the insects and all that uh at bay, can be a full-time job at sometimes, at least in the summertime.

Speaker 2:

So yeah, oh, yeah that humidity is no joke.

Speaker 1:

It's crazy, man. You get like three foot weeds in like a week or whatever, and it's like what is going on over here. So, uh, okay, so you guys manage it that way. How was it doing the? That's interesting. You guys have the no key locks, like you guys actually built it with the no key locks in place, the Bluetooth locks, okay.

Speaker 1:

So for the listener that doesn't know, or whatever, what is a no key lock? It's basically a Bluetooth lock, just like I said, on the door you have like what they call the hasp, like the latch, that like locks the door in place. You usually put like a lock, like a physical lock, in one of the holes and it keeps your unit safe. With the no key lock it's all Bluetooth. So you have an app on your phone, you walk up to the lock, just like at a hotel, where you put your phone up to the door and it unlocks your hotel door. It's the same concept you put it up to the door of the storage unit and it unlocks your roll-up door so that you can now get into the unit. How's that no key lock been for you guys? I know that could be. The complaint has been whether it's true or not, they're expensive and they can break or you know there's there's just some technical issues there. Have you guys found that? I know it's a newer build, but what's your experience been like so far?

Speaker 2:

No, we, we haven't had too many issues. It does get a little difficult for older clientele just because it is on your phone and if your Bluetooth is turned off it won't work. So the biggest thing has been kind of onboarding that and just making sure everyone knows like, hey, bluetooth's got to be on, but functionality it's worked great. We haven't had too many issues with the software too many issues with the software.

Speaker 1:

Okay, what's your? What is your rental process? Like, do you guys have a kiosk or is everything online, like with a QR code, or just a website Like how does that work if somebody wants to rent a unit?

Speaker 2:

from you guys? Yeah, for sure. So everything's online or they can call in. Obviously, our facility isn't big enough to be able to pay someone to be on site, so there's no office at the facility. But yeah, it's just all online. We use storage and have a phone number, so everything can be done virtually.

Speaker 1:

Done that way, Okay, and you're taking all the inbound calls. You said right.

Speaker 1:

Yep. So anybody calls with a question, you answer the phone for that, okay, perfect, that's good experience. Actually, you answer the phone for that, okay, perfect, that's good experience. Actually, a lot of people don't have that experience or do acquisitions or development and they kind of miss that disconnect between, or they have a disconnect between underwriting a deal or looking at a location versus the actual management of it. So that's a good experience. Do you guys have a gate, like fencing, the lighting and all that, or just pretty? Is it just open?

Speaker 2:

uh, oh no we definitely have wrought iron across the front to automatic gates. It's super secure. We have all the lights, motion sensor, the AI security system, so everything's top of the line. Just to make sure, since we aren't there, that everything's secure as possible.

Speaker 1:

Okay, got it. Talk real quick about your tech stack. So you mentioned you have security. What security are you using right now as far as the cameras and all that?

Speaker 2:

So we just had a local guy do it. I don't know the exact brand, but we use LTS Connect so I can monitor everything. That's the app we use to monitor. So I don't know the specifics, but it's a cool system. It has sensors so if a car pulls up, a person pulls up, we can just bite it, kind of like a ring doorbell, just like a ring camera.

Speaker 1:

Okay God, I get those alerts multiple times as I'm doing the podcast sometimes. So A ring camera, okay God, I get those alerts multiple times as I'm doing the podcast sometimes. So, okay, so kind of like a ring camera, but it's not a ring camera. You have an app that you can access there. What's the keypad software that you guys are using?

Speaker 2:

So no keypads, it's all the Note D1 system. So it's got like a little round button that has a light on it. So no keypads or anything like that. It's all Bluetooth, even to the doors going inside of the facility.

Speaker 1:

Okay, so you're basically using the no key hole system there, which is great. You mentioned storage as the property management software, correct? Okay, and then for your website to rent online, are you using a particular website developer for storage or how does that integrate with your? What website company are you using? And then how does that integrate with your? What website company are using? And then how does it integrate with your um?

Speaker 2:

management software? Yeah for sure. So we'd have the. We just went through storable just so everything would integrate real easy. We're actually in the process of checking out cubby. We've heard great things about them so we might transition over, but storable was great. That's who I mean, the facility we checked out the first time. They check out the nokia stuff loved the storable and storage side so we decided to go with them okay, great.

Speaker 1:

Yeah, storage integrates really well with all the uh, um, remote management software etc. So, and I did have uh matt engfer from cubby on uh the podcast as well, so he's a couple episodes, several episodes ago, but if you want to learn more about their system, check that out. Anybody who's listening can check that out. Okay, so that's. Do you guys do? Do you try to capture reviews or get reviews from tenants and that sort of thing? If so, how do you go about doing that process?

Speaker 2:

Oh yeah, the biggest thing is Google reviews Anyone who's getting into the space. Oh yeah, the biggest thing is Google reviews Anyone who's getting into the space. I mean, visibility is everything, especially on Google. So we send out an incentive every couple months for newer tenants to if we're giving them a good experience that they'd leave us a review we give them had too much turnover just because we are newer. But for those tenants that do turnover, we send them an email and ask them if they had a good experience with that. So that's how we gather reviews.

Speaker 1:

Okay, got it. That makes sense. Yeah, that was a tough thing for us sometimes to gather good reviews and obviously have those outweigh. Sometimes You're going to have bad reviews, it's just a matter of being in business. But you got to have at least a good number of good reviews to back up the services you're offering. How did you guys, going back to the deal location, all that? You couldn't find a deal to acquire, which that is a problem for a lot of folks, and so just for the market as a whole, it's sometimes hard to find something that makes sense. So you had briefly mentioned that you got this land from your grandfather. Is that right?

Speaker 1:

Yeah, so we bought it from my grandfather, so he had acquired the land a long time ago. Okay, got it. And then you said he seller financed that to you guys. Is that right?

Speaker 2:

Yeah, so the way we financed the deal we seller financed, we got it seller financed for the land and then we got our construction loan through a local bank.

Speaker 1:

Okay, Got it. So you went to the bank. So you got the land seller finance went to the bank. What was that process like with the bank? Did you guys like qualify as partners, like you and your cousin, or did you have to bring in somebody else to help you qualify for the loan? Like what did that look like?

Speaker 2:

So yeah with that. So obviously, with me being in school, I financially would not probably get approved for that by myself, but luckily my partners and my cousins had had a history with that local bank specifically and with the being in such a small town like relationships are everything so they were willing to work with us and get that financed. So we actually use the land as the down payment, so collateral for the for the down payment, so collateral for the construction loan.

Speaker 1:

Perfect, and how much? What was the loan amount?

Speaker 2:

total yes, it came out to just around $750,000. $750,000? Yep.

Speaker 1:

Oh, that's not bad Okay.

Speaker 2:

No, not bad at all.

Speaker 1:

Yeah, the local bank, and then for the land itself, what did you guys sell the finance? What was the price on that one?

Speaker 2:

Yeah, so we paid a pretty penny for the land. For our market we paid $175,000, which I know doesn't sound like much, but for our area it was probably overpriced. But the terms on the back end were great and, yeah, Grand A didn't give us to it for free.

Speaker 1:

What were the terms like? So anybody trying to structure like a seller finance deal, Is it just like a interest only payment? Is there a principal and interest? Is there like a balloon payment at the end? Is there a term limit on it? Like, how does it look? Yeah?

Speaker 2:

for sure. So the seller finance for the land, so it was 175. We make an annual payment, so that gave us kind of a buffer window to get up and rolling, and then interest rate is a point under prime, so they did do us a favor with that. So it was my grandpa's land but it's with a cousin, so it was kind of like a family company and it's just a 15-year note on that and all we had to do was pay for the survey and the closing cost on that.

Speaker 1:

Well, that's pretty simple, and you guys hired a local attorney to help draft all that up for you guys.

Speaker 2:

Well, my mom's an attorney, so got those free of charge. So luckily she was willing to help us.

Speaker 1:

That's hilarious man.

Speaker 2:

Okay, good.

Speaker 1:

Well, otherwise you'd probably get an attorney involved and get that all recorded and properly. So, okay, very good, that's a. That's a good deal, man. So what made you want to get into storage? This is obviously a lot of work, you know. Going through the entire process of doing all this, what made you want to get into storage?

Speaker 2:

of doing all this? What made you want to get into storage? Well, I've always been interested in real estate, but especially in my home market. I didn't want to rely strictly on appreciation to make money and that's why I found storage so interesting because, as anyone know who's watching this like the business side drives the value, so it is a real estate. You get a lot of benefits on the real estate side, but operations and business is what drives the value of the asset. So I fell in love with the business side.

Speaker 1:

How did you first hear about self-storage? Because I mean, obviously you're at BYU, you're looking into ways to invest and all that. Where is the first place you heard about self-storage? Because people don't usually start there, yeah.

Speaker 2:

So I was actually working on a project. So my major is in entrepreneurship. So with that major it's great if you know what you want to do but you're not going to have any job offers going out of school like if you were in the accounting programming finance program. So I was actually working on a project. I have a history in project management for an electrical company. I was working on something like that for using connexes for construction sites and kind of storing tools and stuff. We were having issues on that business side and I ran into a bunch of self-storage operators and started interviewing them to get some data and really just kind of opened my eyes to that and then obviously started watching AJ Osborne on YouTube other stuff like that and started interviewing people. But that's how I got introduced. It was very lucky. And then I talked to my cousins and they had been looking at commercial side anyway. So kind of merged there.

Speaker 1:

Hmm, that's interesting man. So AJ Osborne, he's got the book, a couple of books out now, I think, but obviously YouTube videos and there's a few other folks out there as well that provide that education Scott Myers comes to mind, mike Wagner, et cetera. So, yeah, there's a lot more information than when I started in the business there was just Mark Helm and Scott Myers.

Speaker 1:

I think that was it there, you go and we wrote the book out and that was it, man. So there's a lot more information now. I just saw on LinkedIn before our interview. I hopped on to do whatever and they were running an ad. No, it wasn't an ad, it was a post from AJ on LinkedIn. He's going to have a conference here or Charlotte. I live in Charlotte, north Carolina. Very nice, we'll see what's the next steps for you. Are you looking for more deals? Are you trying to do more development? Obviously, you're in school right now working at Cactus AI.

Speaker 2:

What's the next steps for you Immediately, short term is to get the First facility stabilized. We're almost there. I fully intend to have that thing stabilized by the spring. Obviously we're getting the slow season in storage, but by spring we'll have that thing stabilized. The portfolio, I think long-term uh, those are my goals is to have a portfolio of self-storage. Uh, who knows, maybe start a fund, go and acquire, but yeah, kind of open to everything right now. But still with Cactus it's kind of all in the same business, so just making relationships with that.

Speaker 1:

So yeah, how's, uh, what's your role at Cactus? So just making relationships?

Speaker 2:

with that. So, yeah, how's what's your role at Cactus? So I help with the underwriting, so help show and present the tool and then help with customer experience, like kind of do some I used it and given suggestions on that, but yeah, Okay, great, that's awesome man.

Speaker 1:

And then we're looking at this deal itself, like is there anything you would have done differently on the deal, now that you've kind of gotten through the hard part of it?

Speaker 2:

five by tens than we probably needed, and I think it's that's. One thing I would change is that I think if I would have interviewed more people and talk to more folks in areas like ours, we would have learned the unit mix a little better. But can't complain, we got the deal done and we're doing decent.

Speaker 1:

So Do you mean you would have gone with larger units? Generally speaking, Exactly.

Speaker 2:

We would have gotten rid of some of the five by tens and built larger units.

Speaker 1:

Can you take out some of the dividing walls in there and, uh like, store them in one of the units?

Speaker 2:

Yeah, so we're actually in the process of, uh, probably doing that. Right now we're getting some quotes to see how much it would be to put the doors in and whatnot, but Okay.

Speaker 1:

Well, that's good, yeah, yeah, Because you can take out the dividing piece there and then kind of make them into a 10 by 10 or a larger unit if you need to. So I mean, obviously the rent per foot doesn't do as well, but that's okay Because you know you have a tenant, right, exactly who's paying versus an empty space, which is not good. All right. Any advice to newer investors who want to get into the business? Obviously, yours is a little bit different, with family connections, et cetera, but still, you know what advice would you give for someone trying to get into the business?

Speaker 2:

Great question for for anyone looking to get into the business, I think. Just find someone who has done what you're looking to do and ask them to lunch. I think that's the biggest thing that I found the most success in all my endeavors by doing that just trying to model people who already have achieved what I'm trying to achieve and obviously I'm in the beginning of my self-storage career but asking a lot of operators what they're doing, how they're seeing success and you can learn a lot.

Speaker 1:

Yeah, 100% man. What would be a good investing resource that you'd recommend for folks? Resources as in, like in books, podcasts, conference, it doesn't really matter, just something that people can kind of use to help build their knowledge base.

Speaker 2:

Oh yeah, so I'd start off. I like AJ's new book I the second version, cause it talks about post-COVID. I think that's a valuable resource because I was kind of hopping in right when the bubble was happening. So prices inflated, demand inflated due to COVID. But between that and I would try to go to social events, like any association lunches, and I think those are great because a lot of the people who are members have been in the industry throughout many cycles and they have experience on how to navigate good and the bad times A hundred percent, man.

Speaker 1:

I think that makes a ton of sense, getting involved, having a network of folks, because sometimes you get discouraged too. Like you said, you looked for deals for six months and couldn't find anything and try to figure out what's the, what's the next step here? It doesn't. You know, this is more difficult than I expected. Acquisitions is hard, man. Looking for the next deal is hard. Everything worth doing is hard. So I think we covered a ton of ground, man. How can people get in touch with you, stevie, if they want to find out more? Just pick your brain. You know those sorts of things.

Speaker 2:

Yeah, so LinkedIn is real good and you can find me, stevie dugal, and then starting to hop on instagram uh, storage, stevie, so you can find me there and then. But yeah, I mean I'm not not too hard to find. So if you look me up on any of the platforms, you'll find me perfect, I'll have those links in the description.

Speaker 1:

Stevie, thank you so much for being on the show of course.

Speaker 2:

Thank you, chris.