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The Storage Investor Show
Anesthesiologist Turned Storage Investor: Ryan Brown's Unique Journey
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DESCRIPTION
Ryan Brown traded his successful anesthesiology career to become a self-storage investor. In this episode, he shares how and why he made the switch, how he raises capital for deals, and the operational challenges they've faced.
ABOUT OUR GUEST
Ryan, a former anesthesiologist turned real estate entrepreneur, co-founded Turnbull Equity and is passionate about cycling, church, and surgical mission trips to Africa, with a goal to build a hospital in rural Kenya.
https://www.linkedin.com/in/ryanbrownla/
https://www.turnbullequity.com/
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Hey everybody, chris here with the Storage Investor Show, hope you guys are doing well today. My guest is Ryan Brown from Turnbull Equity. They have about 1,700 units of self-storage almost 220, a little over 225,000 square feet net rentable square feet. He is the principal and co-founder of Turnbull Equity. He's looking for deals in the Western US. We will talk about kind of the markets and acquisitions and a number of other things but Ryan, welcome to the show.
Speaker 2:Thanks, chris. Excited to be here, excited for the opportunity.
Speaker 1:Yeah, man, I want to jump in real quick. Usually I don't do this, I try to jump into the content but I wanted to ask a little bit about the background. So on your bio it talks about you being a former anesthesiologist and then turned self-storage investor. Can you kind of give us a little bit on that and what made you change from that? Because obviously anybody hearing that is saying, well, that's a very lucrative career. What made you go into the self-storage business full-time?
Speaker 2:Yeah, absolutely. It gave me a lot of my momentum and where I am today. So a little background about me. I grew up on lower income in a trailer park. My dad never finished high school. My mom just raised me to study hard, go to school and my whole life I wanted to be a commercial airline pilot.
Speaker 2:Long story short, I had an injury my freshman year of college. I was studying aeronautical science. Anesthesiologist put me to sleep. I was like what an awesome career Kept me alive, kept me safe and just he was a cool guy. So I just made a pivot Freshman year in college, said I want to do anesthesia.
Speaker 2:That created this long journey to where I started studying, doing what it takes to get there, and then I finally finished my training just before I turned 31. I got a doctorate in anesthesia. I finished at Rush University outside Chicago, um, practicing as a nurse anesthesiologist. I got hired on as faculty at USC in Southern California, came on as faculty. I had a clinical role. I did a little bit in the role as teaching as well in the academic space and I just really been driven towards numbers and math naturally.
Speaker 2:And then it was a natural transition to go from putting someone to sleep, to buying cell storage units pun intended, but you know, what happened with that was I was really drawn towards numbers and real estate and, long story short, we got some traction early on through my business partner who's a friend from undergrad.
Speaker 2:We had this business plan that we wanted to take to the next level. We both had solid careers that we're working in, but we thought if we can really scale this, there's opportunity here that we're going to be grateful for in the future. We bought our first facility as a pieces while we're both working full time. It was 82 units, very small, and then, after that 82 unit acquisition, we quit our careers, went out to sea essentially, and burned the boat and said we have to figure this out at a high level. Fast forward. We're nine locations in, seven in California, two in Oregon. We're closing another two right now, one in Washington, one in Oregon, so we'll be at 11 in the next 60 days and really it's the goal of just growing the portfolio and being the best owner operator that we can be, primarily on the West coast. We love California, especially Oregon and Washington as well.
Speaker 1:On that 82 unit, that first deal. What year roughly did you guys close that deal?
Speaker 2:That was about 28 months ago, so late summer of 2022 was our first acquisition and we quit our careers. I think we closed that in July and we quit our careers in like September.
Speaker 1:Wow, so you guys literally burned the boats. So you don't go, you don't do anything with the anesthesiology medical background right now.
Speaker 2:Yeah, yeah, so his his backgrounds in tech and me with my healthcare background. You know I was working a lot. I was doing about 50, 60 hours a week. There was spread out faculty at USC but then it also went to private practice. I was doing classic surgery in LA County and things like that and little surgery centers but it was taking up all my time and the tax rate in California is so high and I knew there was something out there and kind of little backstory about why real estate or how did I get to that point? I knew that there was opportunity in real estate from bigger pockets and things and kind of my trajectory was put the patient to sleep, as long as it's safe and smooth, at the surgeries four or six hours.
Speaker 2:I'm reading a lot of times and I realized I wanted to own real estate. So I bought my first triplex in Los Angeles County in Long Beach and when I bought it COVID had a hit and interest rates were extremely low. I had a great career. So they offered me a mortgage at two and a quarter percent, fixed for 30 years. It was a vacant three unit building and I didn't know much about the fundamentals of real estate but I said, hey, can I get the rate lower and they're like, yeah, it's called buying points. And I said, well, let's go lower. I said, how much can I buy? And we, you know, look to the numbers for getting fit, 50 basis points left. And they said we've never issued a loan over a million dollars, fixed for 30 years under 1.8%. It was a 1.75 where I was going to lock that and that was my first experience with just debt in real estate, what it can do.
Speaker 2:I bought the building fully renovated and vacant and the rents per square foot were really high. I'm getting about $5 a square foot just in rent rates. I got it vacant so I could set what the rates were. But I didn't know how to be a landlord. All I'm really good at is pharmacology and physiology.
Speaker 2:So I called up my one of my best friends, colby Nelson. He's my partner, asked him and his wife hey, how do you be a landlord? You know where do I get a lease agreement? What are the things I need to be aware of? And through our friendship and him mentoring me, just like basics of being a landlord.
Speaker 2:That's when we cultivated. We work well together on the business side, not just on the friend side. So he brought his tech background and I bring my just analysis and I think I'm driven towards math and people and, you know, cultivating the vision and sharing it with others and we just, you know, wised up and said if we're going to do it, let's go all in. But him and I both had significant incomes at the time, like high six figures, and then we took it to zero to say we're going to create something bigger. We're not here to get five or 10 facilities. It's from from the very beginning. Our thesis was a model that can be replicated at scale. You know, when we have multiple tranches in our business plan and the first tranche would be 200 location.
Speaker 1:That's amazing. Man On that 82, I mean there's so many things in there. I want to go back to the 82 unit real quick. But before we do that, what made you go? What gave you the spark? I'm just curious, what gave you the spark to go into real estate? I know you mentioned I could sit down and read if the surgery was going well, but there had to be something going on inside, because usually you could just make decent money, put it into ETF or index fund or whatever and just kind of coast and be okay there. What made you say, hey, what else is there out there as far as real estate is concerned?
Speaker 2:Absolutely Great question. So I was also big in index investing and reading about that. The founder of Vanguard, jack Bogle. I read his book, which is, I think, common Sense, on Mutual Funds, so I was really big into that, understanding it. What does this actually look like when you play it out over 10, 20, 30 years?
Speaker 2:And I'm not trying to jump too much over the place with stories, but tied with my reading through this process, managing money and I don't have a finance background, nor did I grow up with wealth or background from like my parents training me either, is I, at the same time, was really involved with surgical mission work. So I would go to Kenya every year, every other year, and we would do anesthesia in rural Kenya, on the Yukon border, and this is in the middle of nowhere, and it also gave me this perspective of true poverty and how privileged and blessed we are. So I'm navigating this great income how do I invest it? But also how do I give back and just serve other people in a way that also gives me a lot of value and gives back. And the reason I tell that story about Kenya is because every year I go back there's always a shortage of supplies. You know, there's about 30 of us in the surgical team. That goes over. We spend three, four weeks there and we always need more supplies. We always need equipment that's breaking. We're doing surgery in like shacks, literally. Like sometimes we have electricity, sometimes we don't. We're conserving the oxygen, we're conserving the drugs.
Speaker 2:And I started to think about like well, how much do we actually need? Because when you think about long-term infrastructure, we need an entirely new hospital, we need an inpatient hospital. We fly in for 30 hours to get here and then we have to caravan over, so we need an airport as well. And then, talking with a healthcare architect and I said what does that actually look like? The price point is massive and I realized I can invest in an index fund for the next 30 years, but I can't fund a 50 or a $75 million inpatient hospital.
Speaker 2:So that started having me think about more than my career and salary and bigger than myself, and really thinking about people and scale, about building a profitable company that ultimately can funnel into philanthropy, and that kind of gave me the spark of yeah, I could have a comfortable life and I did in a sense like house, car, you know, and then trips on the weekends and things, but I guess I just have a drive and ambition to do more than that and so, combined with that philanthropy and experience in Africa, combined with my desire to just grow and be the best version of me and also loving other people, it created this like a ecosystem where I aligned with my partner and it was just like clear cut, let's go see if we can take this to the moon.
Speaker 1:That's fantastic, man. I think guys, if you guys are listening because you you are listening as you're listening I hope that it helps us think beyond ourselves. So it's funny, we will get back to that 82 unit deal here just in a second. So hang with us. If you're trying to get some tips and all that kind of stuff from Ryan, we're going to get to all those things here in a second.
Speaker 1:But I got a friend of mine who does they basically rescue people from human trafficking and I was just with him last night. Actually we was doing a little fundraiser thing and we were chatting a little bit and telling me some stories. I won't get into them here, but telling me some stories of folks they've rescued and they're legitimate, like they have a safe house. They have a couple of safe houses actually. Uh, I mean, they're legitimate.
Speaker 1:So they just had a big uh gala or gala last week to raise money. They had the DA there, et cetera, talking about the work that's being done in the um, cooperation between the city, county and this organization within this area here in Charlotte, and uh, it's just fantastic and it made me think about the bigger picture. You know, like, what else can we do? Can I do things as far as storage investing is concerned, raise money, and a part of the proceeds goes to help this organization rescue people obviously mostly women from sex trafficking, which I think is fantastic. So, to think beyond ourselves, it does help us kind of get out of our for me at least, helps me get out of my shell and wanting to put myself out there more so that I can be more bold and pay yeah, give me money, and part of that goes to helping these folks as a cause that I truly believe in. I think if we can all do that in some way, whatever the cause is, it does help us see a bigger picture of impact, et cetera. So that's fantastic.
Speaker 2:Yeah, I love that perspective, you know, because also, when I think about business and growth, one of the things with my partner and I's background is we had these great careers, so we didn't get into this just to be like self-sufficient and have money.
Speaker 2:It's just an end goal. And I find it interesting when I've met with like potential equity partners especially big institutional funds and things One of the key questions they ask is like what's your guys' end goal? And that's where I have a lot of confidence in because we're not just trying to have this massive exit and think that'll equal happiness. You know, I really don't believe that. I believe that the best things in life are people and having this long-term perspective of us improving and benefiting others as well, reminding people of their value and what they bring and honoring that, whether it's customers to investors, to employees, and so it just gives us the foundation to where we have a lot of confidence going forward, knowing that we're not just trying to get to this massive exit of a financial number, but it's growing this business that everyone can benefit from, that everyone's honored and valued and that we all just kind of elevate together to the next level.
Speaker 1:Absolutely 100% on the same page with you there. So for the listener and the audience, who does want, who do do want or who does want, a few tips and tricks and all that. Let's talk about the deals themselves. So the 82 unit deal what made you guys, I guess, talk about that location? What kind of got you interested in that one? Because it sounds like maybe you could have gone a little bit bigger and some people recommend you go a little bit bigger on the in the very beginning. But what piqued your interest in that 82 unit deal?
Speaker 2:Yeah. So it all had to do with testing our thesis, because we didn't know how to raise money. I didn't even know what the term syndicator was or general partner, general sponsor, even though I became one and so we realized we have this thesis which is very tech driven, this unmanned remote managed model which I just read about, I heard about, but we were believing more and more in and, as we started to look at self-storage, we probably looked for not that long, like it was four, five months and I got a call from a high school friend who's a realtor and he said hey, ryan, I got this small storage facility. I know you were talking about it, would you be interested? And we said, yeah, absolutely. So this was not like our ideal perfect cookie cutter facility, but ended up being great for us.
Speaker 2:It was an idea to test our thesis, and so we bought that first one together and added all of our you know, quote, unquote technology playbook, which is really straightforward the access control, the website, dynamic revenue management, the security cameras, and thankfully it was already in a good condition and we realized, with good debt and, you know, good customer communication, that we could really drive returns and our NOI. And so, starting that out, you know it was a lot of us being sharing the calls and that's grown to where we now own our own management company, we own our own call center, so we're very much becoming the goal of being the expert operator of all our facilities. We don't just allocate capital, we raise capital, we place in the assets that we own and then we manage it all in-house, so pretty much have a close hand on everything going on in the business. That's excellent.
Speaker 1:So with that smaller deal you guys run an unmanned or remote management model and you mentioned some of the things that are website rental, management software et cetera. Can you talk real quick about I know it's not your forte, but your tech stack in general and what you guys are using to manage your facilities?
Speaker 2:Yeah, absolutely so. It starts out with our property management system, which I've used a lot of different products from easy storage to storage. Right now, our whole portfolio is on a newer management software we're really happy with, which is called Cubby Storage, and from there we utilize. How can we service calls reliably? How do we know how good the quality of the calls are when someone calls our facility? How many rings till it gets picked up? Kpis, tracking, all that that's where my partner is excellent at, and so our tech stack includes our management software call, which we use for our call center.
Speaker 2:We use flack, we use monday mondaycom and these are all intentional because we could have had this tech idea to build this like proprietary software, but that was never our goal. What what we want to do is we want a homogenous portfolio with off-the-shelf tech stack that we can put a bow on it, that, should we ever exit, we don't intend to sell our assets, which we can talk about later also, but it's something that someone can underwrite, analyze and see very clearly how we do it. It's not rocket science and we're also not trying to be, you know, an influential tech company. We're just bringing technology in a very basic way to an archaic, you know old school model which we believe self-storage is highly fragmented and our mission is really just consolidating that fragmentation.
Speaker 1:Okay. So you guys implemented all of this tech into that first deal and it seems deals like that, that size I don't know what the rents were when you purchased it, but they can be a little skinny, you know, as far as the amount of income, extremely skinny, yeah. So, but you felt confident. You know it's okay off on the first deal. I'm not saying it has to be a home run, it doesn't have to be, but, like you said, you test your thesis, like were there any issues that came up as far as implementing the technology to run things remotely?
Speaker 2:Yeah, absolutely so. This tech stack I just described to you has kind of been developed over the course of the year that we've tweaked and added. Like we weren't using air call back, then we're using a service called open phone. And then also we kept on the onsite manager when we brought the ADT unit as we're testing our thesis, changing our signage and things, and I remember like it was yesterday, um, and she sends us an email and she says hey guys, I'm too busy, this isn't working out With the change of ownership.
Speaker 2:We were expecting her to hopefully be with us long term. She says I'm done, these are my two weeks and I remember that feeling of impending doom, like 82 units, everything we worked for it's all down in flames. How is this going to operate? I remember thinking no one's going to be on site for three days, no-transcript, another manager who wasn't in the office five days a week or did we want them to be and try and navigate. Okay, how can we rent from the call center e-signature, lease agreements, photo ID, manage, access control, things like that, so that just sped up everything. And so you know, two, three weeks after she was done, everything was remotely managed and we had our tools in place.
Speaker 1:Is that facility nearby where either of you guys happen to live like? Were you able to get there in a day if you needed to, or was it?
Speaker 2:oh, absolutely no, it's further away, it's, it's on the oregon border. I'm down in los angeles, colby's in san francisco, so it would be one way, minimum six hour drive, you know, and for me I'd have to fly in. So it was fully, you know, very remote, and even when you fly into it takes most of the day. Oh wow. So, you guys, you guys, so it was fully, you know, very remote, and even when you fly into it, it takes most of the day.
Speaker 1:Oh wow, so you guys took a big leap there to go for 80 plus a little 80 over I can't talk 80 units roughly and to run it remotely and kind of figure it out. Sometimes it's best to just kind of jump in and, you know, kind of get it figured out, like build the airplane on the way down. Yeah it's a heckling. In this case, it kind of forces you, in other words, to do things you wouldn't normally do in a shorter period of time.
Speaker 2:That's great man.
Speaker 1:So where are you guys looking tonight? You've grown obviously. We mentioned earlier at the top of the episode a little over 1,700 units, 225,000 plus net rentable square feet, 225,000 plus net rentable square feet. You guys have grown Now. We also mentioned that you guys are looking for deals primarily on the West Coast. Those are markets that other folks look in, but a lot of people kind of shy away from that and they look at other places. Full disclosure I'm originally from California, up by the San Francisco area, so I love the state. However, I know it can be at times not quite business friendly. What makes you guys feel good about investing in a place like California or some of the West Coast states, whereas other folks may not want to be there?
Speaker 2:So we like to kind of do what's not, I guess, as common or popular, like the markets we buy in are hyper-specific. The type of facility is very specific and, being born and raised in California, it's something I'm familiar with. Most of the neighborhoods, most of the towns grew up driving through, it's easy to get around rather than the Midwest or the East Coast. And having the goal of getting this homogenous portfolio and what do I mean by that? We look up to McDonald's a lot, so your experience with McDonald's is similar when you get a Big Mac, whether you're in Florida or Seattle or in Europe. And we want to bring a repeatable, scalable model to self-storage.
Speaker 2:So when I look at a facility, I think does this have multiple floors? Does this have elevators? Does it have seven entry and exit gates? Because those are things we want to avoid, like ideally single level, drive up one to two entry and exit gates, max less than 65,000 net rentable in a corridor throughout the West Coast. You know I love the West Coast, I've lived in all the West Coast states. I used to live in Seattle, lived outside Eugene, oregon, grew up in Northern California, lived in Southern California and so expanding this portfolio kind of linearly is the goal, and tax implications are really unique in California with Prop 13,. Understanding taxes on the real estate is specific, which I like Helps with my underwriting, and so it's just something that we're really comfortable with.
Speaker 1:That makes a ton of sense because you guys, like you said, you live there, grew up there and you feel good in those markets. So what does other folks feel quite as comfortable in? That makes a ton of sense. So how do you guys approach some of the market research? A ton of sense. So how do you guys approach some of the market research? So, obviously it helps to know the areas and the markets generally speaking, but do you guys use any particular software like Radius Plus or Trackq or whatever, to help you do market research?
Speaker 2:Yeah, I've used both those and currently we're using StoreTrack. Storetrack is a great product but really when we look at a market we're specific on some key metrics. So I want the five mile radius to be less than 150,000 in population, even ideally less than 100,000. I want the net rentable square footage to be less than 65,000. We can go as low as 10,000, but our sweet spot really is like 20 to 40,000 net rentable, because we also see that who is our competition? We don't want to compete against institutional money on deals. We're not trying to buy in place four to five and a half cap rates. We really see a lot of value of buying at a strong basis, adding our management and then getting a strong unlevered yield on cost, which is a big underwritten item that we focus on. And so once we have these metrics in place, when we're looking at a market, then I think, well, what's the competition? What's the development? Are there for new facilities? What's in the pipeline? Think about that.
Speaker 2:And then what's the current occupancy of a facility we're buying? Call the managers at the other facility. I'll fly in and physically go and chit chat with them because I like people and you learn so much from them. Like, hey, I'm buying on the street, how you doing? My name's Ryan and you just get to know a lot about the market and things like that.
Speaker 2:So that's a lot of our due diligence talking with planning, talking to the competition, seeing what is the current occupancy and what is our practical upside that we can realistically achieve. Being sensitive to our unlevered yield on cost, be assured of our basis and where the direction of the population growth of the community, why do people rent here? And we look at a lot of metrics that apply to our model, which is part of our vision, is like smartphone utilization in America. What's those rates? Cashless payments, rural county migration all these things add into our thesis of why we're very optimistic about these smaller markets and how we manage these types of facilities the way we do these smaller markets and how we manage these types of facilities the way we do.
Speaker 1:That's fantastic. I'm curious. You mentioned yield on cost. You mentioned some of these other metrics here. What are some metrics that are non-negotiable for you guys? Is there a minimum yield on cost? Is there a minimum, whether it be population growth or income level? You did mention some of the other metrics you look for, but what else is important when you guys are looking at a deal?
Speaker 2:Absolutely so I like to project out 10 years. I look at are we starting in year three at a 9% unlevered yield on cost? Now I'm not buying it that obviously a lot of times. But what am I doing to get there and is it practical? I remember when we were first getting into this business and learning it and was unfamiliar on operations, I would call people and I would hear various different things. Covid just went through we're pushing 10% annual rent rate increases. Thankfully I never bought into that and I was projecting it but I would say very conservative rent increases of three to 4% year over year. What's our property tax increase year over year? And that's part of talking to the tax assessor's office in the specific county and understanding are we projecting conservatively and then looking at when all this boils down to? Noi like, how accurate are we being? So I want to hit a 9% unlevered yield on costs.
Speaker 2:We're very driven by cash on cash. One of the things about our model is all of our investors to date when we go and raise equity is we're very big on tax-efficient cash flow. I project IRR because it's so common, but I don't like IRR. Nor we as a firm have we been driven to perform on an IRR basis. One of the things we align with our investors is long-term cashflow tax efficient. So all of our equity at this point has had a minimum 10-year commitment. All of our debt is fixed straight and long-term. Usually our terms are like 10 to 25 years. There's one asset that's the exception to that, but everything else has 15-year notes. We're avoiding maturity risk for the foreseeable future.
Speaker 2:So now how can we just optimize and perform? And when I'm performing, what am I reliably doing on an expense ratio? If you look at historical data 2022, the national, I think operational expense ratio of just storage in general is like 41%. We can consistently on small facilities, which we're proud of, run low 30s. If I have a bigger facility so we're talking 40,000, 50,000 net rentable we can be in the 20s reliably on an expense ratio. But on the small stuff, like 1212,000 to $14,000 at rentable, I'm under 35% on operational expense ratio.
Speaker 2:And that is key for us because it's hard to buy right also. You can buy right but if your operational expenses are blown out, it's pretty tough to drive NOI and drive where you're going to bring the asset. Ultimately, our goal is not to exit, not to sell. It's to cash out, refinance, stabilize long-term debt. Currently we get recourse loans with minimal to no prepayment penalties going into the asset. So then, add value operationally primarily, we will expand if the opportunity is there, but we love operational add value. Operationally primarily, we will expand if the you know opportunity is there, but we love operational add value.
Speaker 1:Where do you guys get the financing from? Are you guys using loan brokers, or is it local banks, credit unions? How are you guys finding financing for some of these deals?
Speaker 2:All the above. So we'll do loan brokers, which are excellent. We'll go to the local community bank or credit union. We'll go to the seller directly. So we have a little bit of everything. So I have a credit union debt, I have bank debt, I have seller finance debt. Seller finance is the way my favorite, but obviously not always available.
Speaker 1:But obviously not always available. Yeah, 100% Okay. And then when you're going in, I'm thinking about the person who's trying to find their first deal and they love the concept of an 80 unit or like 100, under 100 units roughly for their first deal that year one. Sometimes the underwriting is the hardest part, right To feel comfortable and understand that your numbers are okay or are they off or whatever. What gets you comfortable. I know that you have a 10 year hold. You look at some of those things a few years out, but when you're going in maybe you have to do a little bit of a value add or, you know, paint some stuff or whatever. How do you, how do you get yourself feeling comfortable, like what are the risks in year one and how do you kind of mitigate some of those things so you feel good about the deal going in?
Speaker 2:So I always update our pro forma based on our portfolio and I would also recommend someone doing their first location. Experience and mentorship is huge. I didn't just read a book and write up my pro forma. I went out to other owners, to brokers, and I asked them hey, will you look at my analysis? What am I missing? What do you think? And also getting to know them, which has helped me immensely in my career of who do I call.
Speaker 2:When I run into at today, I would say that the 80% are there, but it's the last 20% that's key, that you really need to be sensitive to. And so things like a fair expense ratio, growth year over year. I used to underwrite utilities expenses and insurance expenses the same. I've learned better, I don't do that anymore. Understanding insurance pricing where you're located, the risk of premium adjustment there, because it could very much be 5%, 8%, 10%, and so hedging that and then, at the same time, being conservative with your rent growth too. So there's all these, I guess, specific items that aren't confusing. It's not rocket science, it just takes attention to detail and discipline. And then with mentorship, it's something anyone can do, absolutely, even if you haven't done one before, you can reach out to people like myself. You can reach out to people far more sophisticated and smarter than me that can look at your projections or encourage you to who to talk to, whether you're projecting property taxes or utilities and things like that Perfect.
Speaker 1:That is super helpful. Let's pivot real quick to raising capital. So you guys are doing, you know, bringing in outside capital, outside investors, retail investors. How are you guys going about raising capital, Do you guys? Is it a lot of social media? Is it a lot of friends and family? How are you guys approaching that whole process?
Speaker 2:Yeah. So, like I mentioned, when we first got into this, I didn't even know what the term syndicator was or sponsor. So one of the things that just happened almost naturally is just friends and family and connections, when everyone that I worked with had heard that I was like quitting my career. It's rather odd or strange or kind of insane. They work so long and you are burning this all down, this. You know W-2 salary and sense. But they also saw, like my drive, my fire, my excitement, and so I started just sharing what we're doing hey, we want to bring this tech stack, we want to be ultra focused on one. We're not doing multifamily, we're not doing car washes, we're only doing self-storage and how we navigate this business.
Speaker 2:They started to believe in and support me and it started with smaller checks. It started with 50 to a hundred thousand dollar checks which grew from referrals and now every time we do a raise, it's very much not social media. This is my first podcast. I don't do much of any social media and it just came from friends of friends, and then referrals. And what was special is I noticed that once our template started working and repeating those, investors were excited about the monthly dividends, the reliable cashflow, the performance and they would reinvest. So oftentimes I would say 60, maybe 70% of our deals are just repeat investors and then we're slowly adding new ones to each deal and then they opt in repeat as well.
Speaker 1:That's fantastic man. So yeah, you mentioned this is your first podcast interview. Appreciate you being on and sharing the story. Of course, so do you guys. As you guys anticipate growing if the goal is to reach I think you said before tier one or tranche one was 200 stores or so Do you envision a time where you have to go out and go beyond the familiar circles and, if so, how would you guys approach that? Is it like through a newsletter or would you do more podcast interviews or how would you kind of handle some of that process?
Speaker 2:Yeah, I'm open to everything. To be honest, you know, we recognize that we're very retail investor based, because when you go to institutional capital they don't really align with oh, let's ignore IRR, let's do 10 year hold. They think very differently, and so I meet with a lot of different investment groups. I've met with pension funds, I've met with family office, I've met with people at conferences, and so right now we're just retail investor-based, but we're also open to exposing us to take it to the next level. That needs to also be tied with our pipeline and deal flow, because, let's say, we could raise a 25 or a hundred million dollar fund. Can you deploy it effectively? Also, because what we're doing is we're in the grind, aggregating properties that are easily identifiable or with willing sellers.
Speaker 2:It's hard to do it at scale. I can't just write a $20 million check in on this portfolio unless I want to, you know, to have an unlevered yield on cost of three or something which doesn't work, and so that's just been something we've navigated regularly. So, meeting with family office, going to family office conferences, meeting with friends that recommend other people in their business A lot of doctors invest in our group, friends from USC. They're friends, but at some point to really get to that tranche size of the equity, you need to raise it unless you have a huge amount of retail investors, which is what has got us to this point. It's working great, but it's really finding a heavy-handed exclusive equity partner where we have a couple very high net worth investors which come into all of our deals. It's also finding like a family office. I think would align well with this, with our thesis, our strategy to take it to the 100 million mark.
Speaker 1:That's perfect, man. How do you guys structure deals for your partners? Is there a certain you mentioned earlier on that you're looking for a specific cash on cash? Cash is very important to you guys. What do you guys tell investors when they invest with you guys Like, I understand, hey, there's a 10-year hold, but what else goes along with?
Speaker 2:that.
Speaker 1:What can they expect?
Speaker 2:So what they expect when they sign up with us is we do our underwriting, we get on a call with them, usually one by one, because my goal is really for investors to align with our vision. So I think if someone is expecting a big pop in their return in two years of sailing off into the sunset, we're not the best place to invest that capital. So, sharing tax-efficient cashflow, building the snowball of wealth, and really to do it to get their capital back and still share ownership. So when we start an LLC, we have shared ownership with our investors. Even when I get their capital back to them, they're still sharing ownership in the entity and so having them understand that.
Speaker 2:And then what I offer is 90 days after close of escrow as soon as 60, we start our cashflow distributions, which means we have to buy right. I'm not buying and hoping I hit something in nine or 12 months. We're buying at a good basis to where the cash flow is there and I can start monthly distributions within 90 days and those roll monthly and we close our books by the 10th and I send out distributions by the 20th. Now, on top of that, up to this point, we also do a waterfall structure where it's a preferred return and a split. The preferred return ranges 6% to 8% and the split is usually 70, 30. These are all changed a little bit based on the deal, based on the investor appetite and things like that. And you know it makes us align to where I am incentivized to get their prep met right out the gate so I can share in my upside, which is my promote or my split.
Speaker 1:That makes sense. Do you guys do any sort of acquisition fee on the front end, or is it all based upon the performance of the deal over time?
Speaker 2:We do so. We usually have a fee between one and a half to two and a half points, depending on the deal and the size Our management fee because, like I told you, we own the management company that services our property I would say it's kind of trending towards 6%. Nationally we stick to a 5% management fee and then occasionally we also do an asset management fee as well.
Speaker 1:That ranges from one to two points votes uh and grow the company, especially if you want to grow uh to that 200 facility grow uh grow 200 facility goal and beyond.
Speaker 1:Uh, I want to ask real quick on uh, if you, if there's someone out there maybe that feels a little bit intimidated because about raising capital, what would be some advice you would give to them? Uh, because you know, sometimes people feel a little awkward asking for money from people, even though sometimes the people want to give you money. It can be little bit intimidating. What kind of advice would you give to someone in those shoes?
Speaker 2:Yeah, I would just start out with having a very clear plan and what you want to do, the direction and how you're going to do it. Even if it's your first deal, have a really clear business plan. It's the same way if you're going to get debt from a bank they have to know that you are thoughtful and intentional and you have a plan with what you're going to do with the capital. Now, when it comes to raising private capital from the investor base, that's one thing that I almost feel is just how I'm wired. I like people, I like conversation, I like storytelling and I also have a lot of excitement and passion about what I do, and I think that comes across rather authentically.
Speaker 2:That one. I'm not in this because I'm trying to get a fancy house and a nice car, because I would have stayed in my former career. I'm doing this to really grow and be the best business owner, the entrepreneur that I can. You know and this comes out in a lot of ways I'll be going to cocktail parties or events. You know events in Los Angeles and someone oh, I kind of heard about self-storage, so I'll just chat them up, let them know what I do, give them my card and that's happened frequently to where, oh, let's get on a call, how quickly that snowball can roll and investors can come your way. With just having an articulate vision, being not shady and being honest and transparent, people can sense your values and what you're all about. It goes a long ways. And then you know, I think the conversation can naturally lead to you want to partner on this deal, you want to try this opportunity out together.
Speaker 1:That's fantastic man. Yeah, so it sounds like it's a natural progression within a conversation, not a kind of a salesman. Salesperson, oh, 100% Approach to it. Yeah, okay, very good man. Let's wrap up the episode with a couple of final questions here, just a reminder to you guys who are listening check out our sponsors in the description for the episode. I recommend what I know like and use or have heard from other folks, so check those out to help keep the lights on and pay the bills. All right, guys, let's pivot. Ryan, real quick, talk to us real quick about a low point or a tough time in your career, and what did you learn through that process?
Speaker 2:Yeah, one of the lowest points for me through my self-storage career in particular was scaling really quick and when we went from, we basically six X ourselves overnight. So we went from 200 units to 1200 units like overnight when we bought a very large portfolio. And one of the things about just being a founder and growing is getting to know yourself and how important it is how you operate, how you think, and I'm very type A oriented with my anesthesia background. I don't go into surgery fingers crossed hoping it goes well. I know exactly the pieces of the surgery, the key points, the physiology of the patient, their background, their history, and so it's always this adage I like to repeat, which is proper planning and performance prevents, or proper planning prevents piss, poor performance and so doing that. But then navigating to storage and I can't have the answers for everything in third year I could. There's a beginning and there's an end, and then I take into recovery. In business there is no end, it just keeps on going.
Speaker 2:And so being in the management side and customers and growing a thousand customers overnight, I was like losing my mind, from gates to emails to text messaging, and this is just to highlight how solid my business partner is and why we complement each other so well. He basically recognized this in me that I was losing it emotionally. You know, I couldn't keep it all together because I needed to have my hands on everything and it wasn't perfect. And a low point was we lost power to this town where we own five locations. The gates weren't working, the cameras were down, customers came in contact with us and I was like losing my mind. And we got through it. And then he said Ryan, I know what your skillset is, I know what my skillset is. I'm removing you from the management side. And that was like so heavy and so hard and he literally did. He removed me from Slack, he removed me access from the cameras.
Speaker 2:But looking back, it was something that was so discerning and thoughtful and just complimented our partnership where he's like you're good at certain things, go do those. You know you're going to die by the time you're 40. You keep it up to this phase. And he took over the management. So that was a low point where I was just I broke down, took over the management. So that was a low point where I was just I broke down. I was like, if I can't have my hands on the management I don't know what to do because that's where I do it myself is like I need to have my hands on everything and know how done perfectly, and then you know I just need to step back, trust other people, trust his management skills, and then I go chase deals, equity debt, which is what I like to do 100 man.
Speaker 1:That is fantastic. If you could give yourself some advice younger self, your earlier self, uh, some advice, what would it be?
Speaker 2:keeping an open hand about how you navigate challenges in life, because my default is I'm really good at making a fist. I I'm the biggest critic of myself Bigger, faster, stronger, more but really being, I guess, patient and more gentle to yourself. I feel like I can relate to other people in that way, but I don't relate to myself in that way. And having an open hand that very little is in your control. Big picture we don't know what's going to happen tomorrow. What is in my control is having self-control of my emotions and my thoughts and being more intentional about how I monitor and manage that. Because when I'm grounded and I recognize my value and then I'm loved for who I am, I can love others better and I can relate to others and care for people better, from customers to employees. And it's just really starting out with identity and not thinking I need to achieve or do something to be okay for that. I'm okay right here and now.
Speaker 1:That's fantastic. Man, can you give us one resource that you think would be great for or good for the folks to check out? You mentioned earlier on that it's good to have a mentor or people that you can reach out to. Is there any particular book person conference that you attended or partook in that was really helpful to you, that you recommend to folks?
Speaker 2:Yeah, similar to what I was just talking about of just being able to be present. There's this book by Fritz Grupe, who's a national home builder, and he wrote this book called Enjoy the Ride and it's talking about the value of friends, family, business and how to stay grounded through it. And he has an amazing story over 40, 50 years of building a massive company to where he's had huge loss, but through it is just to enjoy the ride. And it's the title of the book which is really encouraging for me and it's just something that I highlighted, like, even in his darkest moments, it's just being faithful to your values, to knowing that you're going to get through this and, at the end of the day, the best things in life are people and it's each other that makes this ride worth it.
Speaker 1:That's great man. How, ryan? Uh, how can people get in contact with you if they want to learn more? Uh, or that's great man, ryan, how can people get in contact with?
Speaker 2:you if they want to learn more or invest with you guys or just have a conversation no-transcript.
Speaker 1:No-transcript.