Funds on Fire
Welcome to Funds on Fire, hosted by Devin Robinson—a seasoned fund manager with years of experience launching, managing, and scaling multiple successful investment funds. Devin has also helped numerous entrepreneurs ignite their own fund ventures. This podcast is your go-to guide for mastering the world of investment funds and capital raising.
In each episode, Devin dives deep into the essential aspects of fund management, SEC compliance, and strategic capital raising, sharing the insights that have powered his own success. Alongside solo episodes filled with practical advice, you’ll hear from top fund managers whose funds are truly on fire. These industry leaders reveal the strategies, tactics, and stories behind their remarkable success.
Whether you’re an emerging fund manager or a seasoned professional aiming for greater heights, Funds on Fire delivers the knowledge and inspiration you need to take your funds to the next level. Subscribe today and turn your financial ambitions into a blazing success!
Funds on Fire
Building a $260 Million Self-Storage Portfolio before 34 w/ Fernando Angelucci's | Ep. 7
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The self-storage industry represents an extraordinary yet often overlooked investment opportunity that combines recession resilience with operational simplicity. In this illuminating conversation, Fernando Angelucci shares how he built a $260 million self-storage empire across 24 states before turning 34 years old.
Fernando's story begins with Brazilian immigrant parents who taught him the conventional path to success: education, corporate job, retirement. But after reading Rich Dad, Poor Dad at 16, he chose a different direction. Despite completing his engineering degree, Fernando immediately jumped into real estate, first flipping houses and wholesaling contracts before discovering the transformative potential of self-storage.
What makes Fernando's approach revolutionary is his willingness to skip the traditional "stair-step" approach to real estate investing. He discovered that adding a zero to your deal size might only increase difficulty by 10% while dramatically improving access to capital and financing. This counterintuitive insight helped him scale rapidly from single-family properties to nine-figure portfolios.
The numbers tell an astonishing story: while wholesaling 70 houses annually netted about $1 million, a single self-storage wholesale transaction generated $2 million with a fraction of the effort. Fernando's portfolio now spans 56 deals across 24 states with 822 investors participating in his ventures.
Beyond the impressive metrics, Fernando shares practical wisdom about structuring deals, raising capital without expensive broker-dealers, implementing automation through AI, and creating tax advantages for investors. His coming $25 million fund represents the next evolution of his business, allowing larger investors to participate while maintaining the principles that drove his initial success.
Whether you're considering your first investment property or looking to scale your existing portfolio, Fernando's journey offers a masterclass in strategic thinking, capital raising, and wealth creation through commercial real estate. Ready to transform your approach to real estate investing? This conversation might just change your trajectory.
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The Overlooked Asset Class: Self-Storage
Speaker 1What if I told you that one of the most overlooked asset classes in real estate is actually one of the most scalable, most recession resilient and least stressful investments you can make? In this episode of Funds on Fire, I sit down with my good friend, fernando Angelucci, an intentional leader, a world traveling operator and a guy who quietly built a $260 million self-storage empire across 24 states, all before turning 34 years old. We're diving into why self-storage might just be the perfect entry point into commercial real estate, how Fernando structured his funds to attract over 800 investors, his playbook for wholesaling self-storage deals to the tune of $2 million paydays per deal, and the mindset shift that helped him leap from single family deals to nine figure portfolios. And here's the part that hits different. Fernando's the son of Brazilian immigrants. He's not just playing the game, he's redefining who gets to play.
Speaker 1This conversation is real, tactical and packed with gold for anyone looking to raise capital, build their investor network or scale into bigger deals without losing their soul in the process. If you're serious about launching a fund or raising capital the right way, tune in. Dive into this. It's going to help you a ton. Make sure you hit that subscribe button, drop a review and let's diversify Wall Street together. Now let's dive in.
Speaker 2I'm 33. I'll be 34 this year. We did one transaction, one wholesale transaction, on self-storage on a two property portfolio in North Carolina and we made $2 million. We have about 822 investors. Feel free to give me a call. My number is oh, that's my real number. You can call me. You can text me.
Speaker 1Welcome to Funds on Fire, the podcast that ignites the passion of investment funds and capital raising. Here we turn the complexities of fund management into clear, actionable steps that drive results. I've invested into diverse real estate across the United States and managed thriving funds, and I'm committed to transforming lives through the vehicle of investment funds and helping others to do the same. Join me as we document the journey of scaling businesses, raising capital and impacting tens of thousands of people around the world. My name is Devin Robinson and welcome to Funds on Fire. Welcome, fernando. I am so excited that you are here Before.
Speaker 1Like Fernando, I'm just going to tell the people about you just a little bit of what I know my experience to be of you, because I think, fernando, you are probably one of the most genuine people I've ever met and like one of my favorite people in the world, partially because, like we, you and I don't talk often, and that's. That's okay. You are busy gallivanting around the world in Brazil having the time of your life also doing really massive and great things, but the thing that I love about you is, anytime we're together, we talk, fernando, you are extremely present and extremely intentional, and I think those are things that you see very few and far between in this world nowadays, and I love it and I think I even talked to you and mentioned it to you that you are so dialed into a conversation. You've got a notebook ready to take notes and you're a guy that's right, and you're a guy that anybody can learn from. Anybody would be honored to be around.
Speaker 1But you have this really cool demeanor of just humbleness and authenticity, that where you know you can learn from anybody, where I'm like, let me just sit in your shadow and learn from you. You're there and present and wanting to learn from other people, and I think that has played massive, massive dividends in your business and the success that you're having, and I can see it from a mile away. And so, for anybody listening, prepare yourselves, because this is going to be a fantastic conversation. But I just had to preface it because I just I enjoy you and who you are, who you are as a friend and what you're doing in this world. Man, so super thankful, fernando. And so, while we're at it, I would love for people, for people to know from your ears or your mouth who you are, like, what you're doing right now, because you spend some time in Brazil some time in America, and you're doing a lot of different things. Well, one major thing in a lot of different ways, so it's really cool.
Speaker 2Yeah, yeah, so I'm a self-storage sponsor and developer. In the last six years almost seven now We've done 56 deals across 24 states, amounting to about $260 million in self-storage assets. We have a few different strategies, so you know, I always want to monetize every lead that comes in. So not only do we, you know, buy and hold them, we buy and expand them, we build them from the ground up. We find old, you know big box retail like Sears buildings and Kmart's and turn those into self-storage. And then, obviously, we have a pretty robust wholesaling platform for deals that are great, that just don't fit our buy box criteria, for whatever reason. We go ahead and we sell those off to other self-storage operators. And then, of course, our passive investments opportunities we have about 822 investors in our various funds and single asset syndications that we also provide not only great tax benefits but downside mitigation and social stewardship.
From Engineer to Self-Storage Entrepreneur
Speaker 1Nice man. Self-storage, I think, has become a really hot topic, probably within the last. What do you think? Like four years, four to five years, maybe longer than that, but I would say it really was. You know, you got into multifamily, you did these things, but then all of a sudden self-sorge got this really cool resurgence of everybody now thinking, oh, I don't want tenants, trash and toilets, I want to dive in and do something. That is, that I can either come in value add, I can automate, I can make sure that it's, and then like, honestly, just reduce the like, increase the margin by reducing overhead, automating it and then just making it a lot simpler. And so I would love to hear for you, like, what's your experience been in this? What have you seen in the industry? And then, what got you from investing in real estate at 23 to now pivoting like to your pivot into self-storage?
Speaker 2Yeah, absolutely, you know. I think you're right. Self-storage has been around, for you know, since the 80s in any real size. But where it really started to catch fire was when, you know, money Magazine started talking about it and Fortune Magazine started talking about self-storage. You know, about 10, 12 years ago, you know, right before the economy was really starting to come back on its feet from the great financial crisis, is when we kind of saw a large shift of capital moving away from traditional alternative assets such as multifamily, single family homes, retail spaces and moving more into the less habitation-based real estate realm. So you're talking about your self-storage, your mobile homes, your industrial properties. So that's where I think we really saw this large resurgence and you could tell by the cap rates that these things were trading at. So prior to this period, it wasn't uncommon to buy self-storage at a 12%, 13%, 15% cap rate. And then, as it started to get more attention from these large private equities the Blackstones and the Bill Gates of the world when they started getting involved into storage, then you saw the compression of the cap rates, going down to eight, seven, six, five, even some cases four or 3% cap rates, depending on what part of the market you're in what part of the metropolitan areas're in what part of the metropolitan areas that you're in? So that's, I think, where I saw the main resurgence coming in, and I think it's just a lot of people, a lot of investors. After the great financial crisis, they were having trouble with tenants, toilets, trash, the three Ts that I never want to deal with again and they saw this asset class, where you have customers, not tenants. Everything is guided by lien law or auction law, as opposed to tenant landlord law. So the state's compiled statutes, the state law, is already written into your favor as an owner of self-storage.
Speaker 2And then the ability now, with self-storage has always been a laggard when it comes to adopting technology. Right before we started recording, you and I were talking about using AI in almost every feature of our business, every part of our life, if possible, and what we're starting to see is self-storage operators investing in new technology, bringing the asset class into the 21st century, which includes using AI. So we use AI in our business. We could chat on that a little bit more if you'd like. But not only that, but also just automating the facilities. So the ability for first, the vendors had to come to provide the types of products that we were looking for Once they came in. Then competition had to come in to drop the price for those automations. And now it's very easy to automate a stabilized facility to have no personnel whatsoever, which is crazy to think about, that. You can run an asset with no employees at the site physically.
Speaker 2And then, on the last piece of which I can expand on, how did I come from coming out of school, bright-eyed, bushy-tailed engineer, and then my journey over to self storage. So you're, like you prefaced, I am in Brazil right now. The reason for that is both my family, on both sides, are from Brazil, so I'm down here visiting a lot of my relatives that haven't seen in, you know, 20 plus years. And what's been great about being down here is that it's really caused me to focus on building the business, not being in the business and how to create those automations, how to create those processes and procedures so that it can run less with me in the day to day, and just having me work on the strategic pieces of the business and doing the things that I love, which is raising capital and structuring debt. Those are the two things that I just I really love.
Speaker 2Kid of two immigrants from Brazil. I was taught that you go to school, you get good grades, you go work at a fortune 50 company for 40 years, you retire with a pension and then you won right, but unfortunately for my parents. When I was 16, I read Rich Dad, poor Dad, changed the way I looked at the world, all of a sudden decided that I did not want to go down that traditional path, went through the whole schooling, got my engineering degree and immediately started flipping houses and flipping contracts for houses, so wholesaling houses. I started building up a nest egg of cash. Then I used that to start buying rentals, because I heard that passive income is the way to get wealthy, but the thing that they don't tell you about rental properties is that it's not passive at all. That is the opposite of passive. Yeah, exactly.
Speaker 2So very quickly in 2016, we decided to me and my partner, steven Ware, we decided to begin the sunsetting process of our four other real estate businesses, selling off all those habitation-based real estate assets and then moving into the self-storage space. And the way that I did it is how I move into every new asset class. I first start by selling deals, because if I can get a deal under contract for less than a competitor that's been doing this for 30 years and then turn around and sell it to him at a markup for him to assume my contract. That means that A my underwriting is good. B I'm getting deals at better prices than the big boys, so that's proof of concept. So we did that from 2016 to 2018. And in 2018, we decided to finally start building up portfolios and bought our first self-storage facility just outside of Chicago, and since that day, we're up to $250, $260 million worth of storage.
Speaker 1That's fantastic, One of the things that blew my because. Fernando, how old are you?
Speaker 2I'm 33. I'll be 34 this year.
Speaker 1Yeah, 33. Because I remember when we met gosh four years ago, three or four years ago.
Marketing for Capital: 822 Investors Strong
Speaker 1I remember you being like, yep, I'm going to build this thing to 1.2 billion and sell it to BlackRock, and I was like this guy's insane, that's awesome. And like the, the ambition that you had, the drive that you had, but also the focus that you had, like laser focus on that, to know what that goal would be. And then I think you said by like 2030 or 2035 or something like that, and so the focus that you had to do that was really, really awesome for me, because I think the transition on different asset types, especially for people that come out of single family into something else typically it's multifamily, but there's a massive, I think a massive mindset shift and limiting belief shift that has to take place for you to go oh yeah, I can go from single family two to $300,000 properties to $200 million in self-storage unit. So I would love to hear just for you, even just like we're going to dive a little bit deeper on this is it's just like what did that?
Speaker 1What did the mindset shift have to be like for you? That had to take place for you to realize, yeah, totally, this is attainable for me and underwriting this is not as difficult as I thought it would be, or it is difficult and it's going to take some time. What was that process like for you? Even for me, selfishly, as I'm thinking of different asset classes to move into and raise capital for and things like that.
Speaker 2Yeah. So you know, we primarily were in the what I'd call like smaller habitation-based real estate, so not really commercial habitation real estate, so commercial, I would consider an apartment building over 24 units or more. Then you're really playing like in a larger space. We always played below that 16 units and below. And the way that I was able to start shifting my mindset is just like you said. Usually I thought there was like a stair step that you had to take. First you start with wholesaling houses, flipping houses, then buying some rentals, single family homes, then trading those up into a you know apartment building that's got four units, and then a couple of those trade them into a 16 unit apartment. But what I found out by going and investing in my education, by going to mastermind groups where we met originally you and your great partner, what I realized? That you don't need to take the stairs. You can take the elevator up. So instead of having to take each one of those steps, just go straight to the top and start working on larger deals.
Speaker 2Because what people don't tell you is that every time that you add a zero onto your deal, you think that it's going to get 10 times harder to do. It's actually the opposite. You add a zero onto your deal and all of a sudden it becomes maybe only 10% harder to do, but it becomes easier to raise the money, becomes easier to get the debt. Those are the things that make real estate investors successful. If you know how to raise capital and structure debt and in the end of the day, when you're going to investors and trying to raise $50,000 total for a deal, you're going to be in a certain class of investors, versus when you have to go raise 5 million or 25 million. Now you're talking to large check writers that are able to help you grow, instead of you tap somebody out and now you've got to go find somebody else. Same thing on the debt side. You try to go to a bank to get a $100,000 loan to flip a house on the south side of Chicago. You're going to have a really hard time. No-transcript that to someone that wants one of these class A assets. There's tons of those types of buyers and a lot of money chasing those types of assets.
Speaker 2So that was the biggest mindset shift to me was that you don't need to stair-step and add an extra $100,000 each time. Every time you're trying to level up, try to 10X it or 100X it, because that's going to be a lot easier and at the end of the day, you're going to make a lot more money for a fraction of the amount of work. So here's a perfect example when we decided to just on the wholesale side of the business of the two, right when we were wholesaling houses, we had to wholesale like 70 houses a year to maintain a good lifestyle for me and my partner you know that was we were probably netting about a million bucks right On the on those 70 houses. We did one transaction, one wholesale transaction on self-storage on a two property portfolio in North Carolina and we made $2 million. So do you think that that $2 million was 100 times the work of doing 70 houses? No, it was one-tenth the amount of work of doing the 70 houses, for making double the profit on one transaction.
Speaker 1Yeah, which just makes sense, and it's the whole. Dan Sullivan, 10x is better than 2x, kind of mindset and way to go on that and that's. I think, uh, there's a lot of times where there's this mental block that's like, but is it really better than 2x? It's that means it has to be way harder, and so I'm I'm so interested because, like even for for me, so what is even just if we mentioned just like a couple ways, because let's say, somebody's wanting to get into wholesaling, wholesaling, self-storage, what are the steps? Like Like where would they go? Would they go on Crexie? Are they looking at LoopNet? Are they looking at where? Are they looking to kind of go in and negotiate this? Or is this going to be something where they're driving by, they see some distressed on the side of the road and they call the sign. You know, like what does it look like to be able to wholesale a storage unit?
Speaker 2So you know, it depends on how much volume you want to do so, because we're a high volume operator. We do all the strategies. But if you're just getting started out and you have a limited marketing budget, where you're going to get the best deals? The deals where you're going to get the largest fees are going to be the deals that don't show up on the data list that everyone else, like myself, is buying, right? So there's something like 60 to 70,000 self-storage facilities in the United States, but every time I go buy a data set for every self-storage facility in the United States, for some reason it only shows up with 39,000, 40,000, 2,000. So where are those other 30,000 self-storage facilities? Well, they were either classified wrong, or they're recently built, or they're still considered farmland, or the land use classification codes are incorrect. Those are the deals.
Speaker 2And then maybe they don't have websites. They have no Google Maps presence. It's something that's just been there forever. The owner's been sitting behind the counter for 20 years. Those are deals that you make a killing on because A we're in a digital world, so if you don't have an internet presence, you're already losing so many leads as an owner, which means that you can come in and pay them a fair value based on what their existing NOI is so easy to get it under contract and then immediately wholesale. To somebody like myself who's a professional, that can, within a couple months, double the revenue of one of those facilities just by implementing AI to make sure that we're raising rents on everybody appropriately that they can pay it. And then it also scrapes all the competitor data to see what they're charging so that we can be in line with the market. So driving for dollars if you're just starting out, is going to be your cheapest source of marketing and it's going to be the type of marketing that's going to give you the highest assignment contract fees.
Strategic Debt and Tax Advantages
Speaker 1Nice, well, very cool, and now we've got so much that I want to talk about, but I want to make sure that we can get through it, because you are giving so much gold and this is incredible. Now you mentioned which is insane you have, and I think it's a good testament to how much trust you've built up, how much work you've done, how much marketing you've done, probably how much even your systems are set up to be able to nurture these relationships. You mentioned that you have 822 investors, and correct me if I'm wrong, but the majority of the deals that you've been doing have just been single asset syndications up until kind of this point, which we'll get into soon. But for you, man, what has been the main catalyst for you to be able to go and raise from 822 investors? I think everybody listening is always like I want to find more investors, I want to find more investors, I want to find more accredited investors or high net worth individuals or institutions. And so what were some of the things for you as you went out to raise capital that showed to be a really good strategies and was consistent for you? I want to take a quick second to talk to you guys about something that could completely change the game for you.
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Speaker 2Yeah. So you know, when people start a real estate business, they think that they're just starting a real estate business and that's all they need to do. That's completely wrong. What you need to do is start a marketing business, and you need to start multiple marketing businesses. So you need to create one marketing business just to find sellers. You need to create another marketing business just to find buyers if you're going to be wholesaling. You need to create another marketing business to find investors if you're going to be doing syndications. So that is a completely different business unit that requires its own set of resources, its own set of time and employees.
Speaker 2So we had two options when we started raising capital. There is the route of going through broker-dealers, which is someone that has a series license that can sell securities. The problem with that is typically the fees that these brokers charge are insane. For every dollar you raise, they're taking up the 12 cents of that that you have to pay them. So now, instead of raising a million bucks, you're going to have to raise 1.2 million just to cover their fees, on top of the returns for the investors. The second problem with that is a lot of these broker-dealers. They don't want to work with you. Unless you're raising something large like 25 million plus, they don't want to work with you. Unless you're raising something large like $25 million plus, right, they don't want to deal with somebody that's only raising a million bucks. And if you do find a broker that's willing to do that, the fees are going to be even higher because it's a high-friction business. Those types of investors that those brokers are bringing you are going to be what we call institutional or sub-institutional investors family offices, wealth management companies, private equity. Those types of investments, however, those type of smart money, they're very carnivorous when it comes to how they structure deals where, basically, you as a sponsor have to take 100% of the risk and they get to basically keep 95% of the profit profit and they'll throw you a little bit of change just for saying, hey, you know, good job.
Speaker 2The other route that I saw was to which is going to take much longer time and it's going to need years of preparation is to build up a funnel of retail investors. He's going to be your, your basic accredited investors, you know, million dollar net worth or higher. They make two to three hundred,000 per year for the last two years, depending on if they're single or married. There's a lot more of those type of investors out there Now. Their individual check sizes are going to be much smaller. So, as opposed to family office cutting you a $10 million check, these guys may be only cutting you $50,000 to $100,000 checks, but if you have 800 of them, then you can raise the same type of money that you would if you had a family office coming in dictating all the terms of your own deal.
Speaker 2So what we did is decided to start a multi-channel marketing approach. And this was all Steven, because Steven's the marketing guru of our company. I don't know how to do anything. I'm just the face on the radio. Right, yeah, I got a face for radio.
Speaker 2So what he decided to do is okay, let's figure out a way that we can utilize social media and also get onto the main stages of these very important conferences. And the way to do that is you have to start slowly building up a track record. So, just like we're doing right now, we're talking on a podcast. I'll do a one-hour podcast. Then we'd send those to the editors. They'll chop that one-hour podcast into almost 700 pieces of content. Those pieces of content will go to separate social media channels, so YouTube, facebook, linkedin, twitter, instagram, tiktok, and then we'll repurpose those and then send those as look at how good of a speaker I am or how great of a company we are to talk about these topics. And then we send them to the conferences. And then, all of a sudden, now the conferences start booking us.
Speaker 2And then what do we do? We record those conference speeches, package them, chop them up, send them back to the higher level podcast, the next level of podcast. That had, let's say, 10,000 or 40,000 listeners. And then you keep rinsing and repeating. And then the nice thing about this is, very quickly, over two to three years, you have so much you have literally hundreds of hours of content about you and your business that it builds almost instant credibility. They already know what your track record is, they already feel what your personality is. If they like, know and trust you, it's very easy to find how to contact them or how to contact us via website, phone numbers, et cetera. And then I have investors. Now that they'll call me and the very first thing they say is Fernando, I know we never talked, but I feel like I already know who you are because I listened to 20 hours of your podcast. So like it takes a lot of that work out, and then it also helps me automate the capital raising business.
From Syndications to Fund Structure
Speaker 2So that's the route that we decided to take was to stay with the retail investors, the people that truly need these types of investments. Right, you know, because some big private equity firm that has $10 billion in wealth, you know what's an extra billion for them. They're already super rich, but someone that, let's say, just broke over the accredited investor threshold they may not be rich by any means, right, and they're still, you know, probably got a W-2 job, they're still grinding and they're still saving for retirement, and this is a great portfolio balancing asset, because maybe they already have a lot of money in a 401k in the stock market we saw what has happened to that over the last month and maybe they have an alternative asset that you know. They put 10% of their wealth into alternative assets like self-storage, and those deals may double their wealth every three to five years. So that's the route that we decided to go, with the marketing channel that we decided to use to find those individuals.
Speaker 1And that's incredible man, and I think that's a really good testament, because then they show up, they know who you are and since they know who you are, it's significantly easier to raise capital from them because you've already built that like that no like and trustability factor with them. Because they've seen consistency, they've seen dependability, they've seen you perform over and over and then you probably have a level of transparency and vulnerability in that message as well, to where they feel like, hey, he's not perfect but he's doing a really good job and we're seeing that consistently. That's awesome. Now, part of that, so that that's half of it right. So, like it's attracting the investor to you.
Speaker 1Now, how do you attract? You mentioned that. You mentioned that you, you like raising capital, but you also love structuring debt, because I think if you're going to structure debt, one you want to have key strategies for reducing tax liabilities for your people, but then also maybe maximizing the profit, the returns and the profit margins that you have. So how, when you're talking to these investors, how are you structuring and appealing enough one historically syndication or offering to them that allows them to kind of want to come in? How are you doing that?
Speaker 2Yeah. So you know, the biggest thing is that we have a very clear message, we have very clear core values, and that is that we provide self storage investments that focus on downside risk mitigation, tax advantage and social stewardship, so that appeals to a certain type of investor. So I'm already kind of pre-qualifying the investor before they even call me right. The second thing is that the reason I like structuring debt is because I'm an engineer, I'm a numbers guy, and actually during my single family career when I was getting denied for loans, I actually went and worked for a lender a good buddy of mine, mike Gamble, over at Wintrust, to see how to structure loans the right way so that there's no red flags. The second you submit them to underwriting or processing and I found out that not only you know there's the black and white boxes that you can do for loans, but then we have a lot of mutual friends that they specialize in seller financing and once you start learning about the world of seller financing, literally it's like the world is your oyster, because the way that you can structure deals, down payment you know CapEx as a part of down payment, tier-stepped rate increases, no interest, dollar seconds behind a first construction loan. I mean, there's so many ways to get a deal done and that's what was limiting me before was you know it was either this price works or it doesn't work, and that you're not looking at the whole financing package to see how much am I paying in interest over the time, that I'm paying this price for this asset. And then what you realize is, once you're able to look at both sides both the financing side and the purchase side together now you see a lot more levers that you can pull where, like, okay, I can actually offer higher price than all my competitors, but then that you'd have to carry some terms because I'm going to need to get better interest rate from you than I can from the banks, and that's how I'm able to pay you more and also allow you to collect interest on top of that. So there's some super interesting ways to structure debt, not only from a seller financing perspective, but then also using it as a package with traditional financing like banks or credit unions, and having the seller participate in some type of way on that debt structure to lower the risk and liability to the bank and lower the risk and liability to the seller and you. It's a win-win-win situation, three wins around the board.
Speaker 2The second thing is tax liability. So right now, what we've learned is before we focused when we were first starting to raise money. We're focusing on the return, and that's great. The return's always going to be there. But what you realize is that if you want to raise money, you need to find people with money, and people with money typically have a problem of wanting to keep more and more of their money and less and less to taxes. So how do you start structuring deals in a way that you give them the most tax advantage way to make an investment and to make a return on investment?
Speaker 2So there's a few things that we use. One of the things that's pretty standard in the real estate space or at least I think it's pretty standard is to separate the asset from the goodwill case, or at least I think it's pretty standard is to separate the asset from the goodwill, Because self-storage is a business. You can buy the property itself, the buildings itself, on one contract and you can buy the business itself, the goodwill, on another contract, and that can lower your property taxes, that can lower your taxes on the sale, that can lower the taxes to the seller. Then we also will use cost segregation studies. So cost segregation because of the 2017 Tax and Jobs Act, it allows you to segregate your asset. So, for example, this table is not going to last 39 years for depreciation purposes. These roll-up doors are not going to last 39 years. Maybe that's five-year property, that's seven-year property, that's 15-year property and anything below the 20-year property threshold you can all take in the first year.
Speaker 2So if you have an investor that just is, for some reason, just had a liquidity event, he's sitting on a bunch of cash and it's still in the same tax year, he knows that he's got a big tax bill coming up. Well, you can say, hey, mr Investor, not only can I give you a good return, but what if I can wipe out that whole tax liability that you have coming from? That last sale that you did Makes it a lot easier for them to say, yes, I'd like to give you some cash, right. And then the last thing is, you know, obviously focusing on that profit margin, you know we want to make sure that we are offering a risk-adjusted return. So if you're making 8% in the stock market and that's supposedly supposed to be a lower risk asset, or you're making, let's say, 4% in a CD, which is very low risk, or you're making 3% in a treasury bond, which is almost risk-free, we have to compensate for the risk that comes with an investment of real estate which is extremely illiquid. You can't just sell it tomorrow if you need the cash. So that's why we always try to focus on putting our returns especially our internal rate of returns is kind of how we measure things so that not only does it make sense for them to take maybe some money out of those risk-free assets and put into alternative space, but also is going to beat a lot of the people that are competing against us for those same dollars, like a multifamily syndicator or a mobile home syndicator or a retail syndicator. So we want to make sure that we're at the top of the market, we're providing value for our investors, we're structuring our debt properly, we're making sure that we're taking care of the tax liability. And then the last piece of that is not okay. Let's say you got the money now You're done, right. No, you're not.
Speaker 2Then comes the hard part, which is investor relations. You got to take care of your investors. You have to make sure that you're answering all their questions, you're giving them monthly updates or quarterly updates. You're providing all the financial documentation that comes along with that. If anybody has questions and they all have questions they need to be able to reach you quickly.
Speaker 2I can't. I'm a limited partner in a lot of syndications and I can't tell you how difficult or how how painful it is when I have a question that I need answered and maybe there's a timeline and I can't talk to anyone. Maybe I talked to some gatekeeper, a secretary, but I can't talk to anyone that actually has knowledge or power over the issue that I have. May I have to go through all these chains and then all of a sudden, six weeks later, someone gives me a call back and they say I have 10 minutes. How can I help you? That's just something that's not a good way. It's not being a good steward of your investor's capital and your investor's time. So the investor relations, or IR, is an extremely important part of building out a capital raising funnel.
Speaker 1Yeah, for sure, and I think that's a big part because it's part of the experience, right, Experiential investing I think that's what also will separate you from other people is when they have these bad experiences. Well, they don't want to do that anymore. They want to go to somebody that's going to give them the answers. But then also, even if people lose money, as long as they feel like they're informed, they're communicated well with, then they feel significantly better about investing with you a second time or a third time. Because you communicated, you were honest, you were transparent, then you continue to do that.
Speaker 2But when you stop communicating with people, that's huge yeah so we've never been in a situation where we've lost investor capital, but I'll give you a situation where I have been in a syndication as a limited partner and basically the doo-doo hit the fan this one syndicator.
Speaker 2I have to praise them. They did extremely well because once they were aware that, you know, things were not going well, they started giving us daily updates. Every day, we had a new email with a video that explained here's what we did today to try to, you know, get ahead of this problem. You know, at the end of the day, I did lose, you know, a significant part of my principal, but I did appreciate the fact that they, they were giving me daily updates when things were going bad, because then I didn't have to. You know, I wasn't sitting around twiddling my thumbs saying, hey, what's happening? What are you guys doing about this? Every morning I'd wake up and there was an email in my inbox telling me exactly what I needed or what was was going on to for them to try to recover as much of my principle as possible.
Speaker 1That's awesome, man. That's incredible. It really is. Now, one of the things I think it's really interesting, fernando and I don't even think you know this, but like one of the big reasons why I started this podcast, or I started funds, or what we do with funds and how we try to help people to launch them, is, I don't know if so, there's $82 trillion worth of assets under management in the United States right now, which is crazy, and private equity hedge fund real estate $82 trillion worth of assets under management.
Speaker 1Only 1.4% of that is managed by minorities, women and immigrants, and so it's really cool that somebody like you a parent or sorry, you got two parents that are immigrants right, we fit in that 1.4% that are immigrants right, we fit in that 1.4% of assets under management of that $82 trillion. And so, as you're starting, I know that you're moving into the direction of starting a fund, so you've been doing syndications and now starting a fund. What's that journey like for you and what's kind of had you in the position to go? All right, I want to switch up from moving into single asset syndications to starting a larger fund, where we either package and thing these up or holding them in a larger fund, raising capital at a higher level to hold them in a larger fund. What made you make that decision?
Speaker 2Yeah. So there was two major things that occurred that brought me to that decision. The first is that we were taking a lot of our single asset syndications and we were putting them into portfolios to sell them as one piece. But the problem on the back end was that each individual asset had different sets of investors and different sets. So let's say you have a seller that comes and say I'm going to offer you 40 million for this package of 10 properties and then you say, okay, well, I need you to break down that $40 million purchase price into and apply them to the actual properties themselves. And sometimes they're like no, and then you have to do that. So then how do you make sure you're being fair? So you have to create an entire mythology methodology to make sure that all the investors are getting paid what is appropriate based on that portfolio. And if that portfolio has mixed assets, let's say, some are brand new because certificate of occupancy, some are stabilized and some have value add potential still left in, but then it gets even more complicated. So that was number one. Number two is that now that we have a pretty long track record of success, a pretty substantial amount of exits that shows profitability, now we have investors that are willing to work with us, that are larger check writers. So, instead of the, you know, I think our average check size across all of our investors right now is like $113,000. That's the average.
Speaker 2All of a sudden now we have people saying, hey, I want to invest 5, 10, 20 million. And I say, well, I don't have any deals that are big enough to do that, because you know, a self-storage facility let's. You know I, let's say I build a class, a state-of-the-art facility, multi-story, in a hot market like the one I'm doing in in Lawrenceville, georgia, right now. Hmm, you can only build a self-storage facility that's so large you can't, you know, unlike, let's say, multifamily, where you can build a $400 million apartment complex. Self-storage doesn't work that way. So, you know, at the largest I'm building, it's going to cost me 16 to $18 million to build. That's the largest right. And then I'm going to get 70% of that from a bank, which means I'm only going to have to raise four to five million bucks. I'm never going to have a deal that can take a $20 million check all at once.
Speaker 2That's what I realized, is, once I've started getting these large check writers like these family offices, these private equity funds, saying, hey, we understand your premise, we understand you don't like the traditional way of doing deals with family offices. We like your track record, we're willing to do the deal how you structure it, but we just need you to be able to outlay a larger amount of capital all at once. I said, okay. So then my only option now is a fund strategy where, instead of me doing 10 to 20 assets all as single syndications and then selling them as a portfolio anyway, might as well just do it all in a fund and then sell it as a portfolio, and then the fund is going to account for everything. It's going to be a lot easier to track dollars. If we sell a portion, if we don't sell a portion, that all goes back into the fund and then goes pro rata to the investors, and then it also allows us to take larger checks.
Speaker 1That makes it much better. And then, are you looking more on the 10-year time horizon, on something like that, then at that point, so then you don't have the single asset you're going to package it all together and then, in 10 years, have some sort of liquidity event where you're selling it to a BlackRock or something like that. Is that the goal for you?
Speaker 2Yeah. So looking back over the last like 50 and change deals that we've done it's like 54 deals that we've done what I realized is that we don't have a very long hold period. Our average hold period is about three years and four months roughly. The shortest it's ever taken us to do the entire strategy was 13 months and the longest it's ever taken us was just over four years. So I don't need that much time, and the reason for that is because of the diminishing returns curve, or the Laffer curve as some would call it. If I can buy an asset that is not at stabilized value, or I can build an asset from the ground up in the first couple of years is when you see this massive increase in value. Then over the next, like three to 10 years, you're getting very little or even negative return on your time. So that's why we like to use the internal rate of return calculation, as opposed to some of these syndicators that are trying to hide the fact that their deals are going to take a long time. They'll just use a cash on cash return or an average annual return.
Seller Financing and Future Opportunities
Speaker 2That's not a proper way to look at money, because that doesn't take into account the time value of money and the loss of opportunity costs and inflation of the cash, which we're starting. You know, we had a lot of inflation after COVID. Now we're starting to see some more inflationary pressures with the tariffs et cetera. That's coming down the pike here. So I don't think our fund's going to be like a 10 year horizon. I think it will be a seven year max. So probably like a five year fund with a two year exit period or one year acquisition, five year value add and then a one year exit acquisition, five-year value add and then a one-year exit period, something like that. But I think seven years is more than enough time and most likely we'll exit all those assets beforehand. If any of, if 100% of the other assets that I've done to this date have anything to say about it right, what's your like?
Speaker 1what's your target raise amount? Are you looking for like that? Are you talking? Do you have a target AUM that you're trying to get to at that point?
Speaker 2Yeah, so this is just going to be fund one. We're going to keep doing a series of funds, so I wanted to start small just to learn the fund environment. We're raising right now between 15 to 20 million a year just on our single asset syndication. So I figured fund one let's just do a $25 million raise and then, once it's closed, we'll close it. We'll do all the assets and then we'll sell them off and then, once we're done raising for fund one, we'll start raising for fund two and, depending on how fund one goes, maybe we go up to 40 or 50 or 100, depending on how comfortable we feel on the acquisition pipeline that we can outlay.
Speaker 1Nice man. I'm excited for you. I know that's going to be fantastic, especially with what you've got going on Now. I'm curious because you and I have been in CG Collective Genius together. We've been a Raise Masters together For you in raising capital. Have you found that being a part of these masterminds or something like Raise Masters has dramatically or not even dramatically, but has just helped you to understand how to raise capital from investors or how to underwrite properties or move into these different aspects? Where has education played a point? Because I know you have great educational free stuff for people to come in and learn. How does that play a role in what you do?
Speaker 2Yeah, one of the things that my parents instilled in me since I was a little kid was the importance of education. Now they were maybe thinking of a different type of education, but that's not how I took it right. They usually are Right. So the way that I look at it is you should be putting a set percentage, a fixed percentage of your revenue per year towards education and we'll just start realizing let's say it's 1% for ease of numbers what you start realizing is just by being in these types of rooms, that's going to raise your revenue, that's going to raise your net worth, because you're networking with people that are doing what you want to do. That may be three, five, ten years ahead of you and you'll be able to take things that you wouldn't be able to find anywhere else. So, for example, I started just by reading books. I'm a voracious reader. I read two to three books on my Audible per week week, usually things having to do with real estate, business negotiation, etc. Very quickly from these books you start seeing that there's some book writers that have masterminds. So then you start going on the masterminds. Then, at these masterminds, you start really rubbing shoulders with people that are doing what you want to do and these are, and you that you learn things in masterminds that you won't be able to learn in books.
Speaker 2Just because of you know the format of a book, you can't ask a book. Well, how about in my specific situation? What would you do? And then there's a lot of you know, unfortunate to say. There's a lot of information that people just try to keep secret because they don't want to.
Speaker 2You know breed competitors, and the nice thing about masterminds is it's usually a closed space. You usually have to sign a non-disclosure agreement before you even show up to the mastermind and you get to hear things from, like, the real level. Here's what it's looking like on a day-to-day. People will open up their P&Ls, show you their books so that you know they're not just you know bullshitting, you blowing smoke up. So it's, I would say, the reason I mean truly, to use a word. It has been dramatic the value that I have gotten from going to masterminds, going to conferences around not only general business building, but masterminds on raising capital specifically, masterminds on self-storage specifically. So I think it's required. I think it's required If you want to become big at all in any asset or business, you need to be a part of mastermind groups.
Speaker 1Yeah, I think so too, man. Okay, two last things, and where can? Because I know you. I mean, if you want to share that, I know you have some core resources for people wanting to learn about self-storage as well. Where can people find some of that?
Speaker 2Yes, I always tell people there's two ways to get a hold of us. You can go to our website, which is ss Ecom so pretty simple website address. There. You could find us on all social media channels by going by literally typing those same thing in there S S, s E. But if you're more of an active listener, you want you know your speed of implementation type of guy. I always give out my personal cell phone number on these, so feel free to give me a call. My number is area code six, three zero, four zero. Oh, that's my real number. You can call me. You can text me. Even Text is even better because I can respond even faster. So 63040.
Speaker 1A man of the people. I love it. And this is called you know we call this podcast Funds on Fire. And what's got you fired up heading into 2025? Is it a deal, a trend that you see in self-storage, maybe because of the election or in lieu of the election, or a new presidency or a new market? What's got you fired up heading into 2025?
Speaker 2Yeah, you know we've been building up our acquisition departments robustly and our guys are so good now at the seller financing deals that we're getting deals in. 50% of the deals that we're putting under contract have a seller finance component to it and that has just been really raising profitability and lowering risk for our investors. So that's going to be exciting going into 2025 because of the fund that we're launching. So we're launching the triple SE, a diversified self-storage fund one. So that will be out here probably in the next 30 to 60 days accepting investments. And then also we are gearing up to sell our third portfolio. So we'll be selling 10 assets across the Midwest in a portfolio. We're putting it out to the market between $43, $44 million. So we'll exit a lot of our investors out of that. Hopefully that'll give them enough space to then invest into the fund or, if they want to stay in the single asset syndication side, they can do that as well.
Final Thoughts and Contact Information
Speaker 1Nice man. Well, I appreciate you and your time. Super thankful for your friendship, man. And yeah, thank you. I appreciate you, man. I hope you have a fantastic day. Enjoy Brazil. I appreciate you, man.
Speaker 2I hope you have a fantastic day. Enjoy Brazil. I appreciate it, devin, and if you ever want to do a part two and you want to get a little bit more, you know, in the weeds with some of this stuff, I'm more than happy to come back.
Speaker 1We will, don't you worry. That'd be awesome. Thanks, man. Wow, I hope you enjoyed that. I have a quick favor. If you've been enjoying the show, there's one simple way you can support us, and it's by hitting that follow button or that subscribe button on the app you're listening to. I want to level this podcast up in every single way possible, bringing you more value, incredible content and guests and new strategies. Following the show and leaving a quick review goes a really long way in helping us to grow and continue to deliver top tier content. It's the only free thing I'll ever ask you to do and it makes a bigger impact than I can possibly put into words. So thank you for being a part of this journey and I'll definitely catch you on the next episode, To great success and greater impact. Peace.