MFREE 126 Full Episode with Ryan Gibson: Are You Reading the Flight Plan or Guessing the Destination?

Host Shalon “Hutch” Hutchinson interviews Ryan, former commercial pilot and now CIO at Spartan Investment Group, on how elite investors think about risk using aviation principles like checklists and the ability to “set the parking brake” and walk away. Ryan describes transitioning from airline flying and single-family rentals to building a self-storage platform with about $1B in acquisitions and becoming the 29th largest operator, driven by better “ROI on life” and a desire to help high-income professionals invest passively. They discuss Spartan’s 700-item due diligence checklist, key passive-investor risks (especially supply/demand and debt), why projected high returns can underperform, and a diversification framework (10/30/30/30). Ryan explains managing downturns by renegotiating expenses, adding revenue streams, and using local “marketing energy,” plus technology and AI for extended hours, investor reporting, and AI call handling.

00:00 Elite Risk Mindset

01:19 Pilot Rule Buck Stops Here

02:53 Flying Bug and Family Trips

03:32 From Cockpit to Capital

06:13 Why Self Storage Clicked

07:37 ROI on Life Explained

10:56 Due Diligence Checklists

14:11 Passive Investor Risk Focus

17:51 Diversification 10 30 30 30

19:56 Concentration vs Diversified

22:10 Decisions Under Pressure

22:50 Cut Costs Backstage

24:29 Protect Frontstage Service

24:49 Scrappy New Revenue

25:09 Marketing Energy Playbook

26:24 Spartan Brand Origins

27:09 Values Driven Culture

28:34 Employee Ownership Model

30:47 Tech Enabled Operations

32:26 AI Reporting And Calls

34:27 Education People Action

35:51 Focus Round Rapid Fire

38:11 Communicate With LPs

39:29 Debt Risk Explained

40:33 Defining Success Today

41:34 Connect And Closing

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Email me at:
hutch@hsquaredcapital.com

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Transcript

Speaker 0:00

Wah Gwan all you Multifamily Enthusiast. Welcome to another episode of the Multifamily Real Estate Experiment Podcast. Today is an episode we're gonna talk about how elite investors think about risk, and let's pull those. Experience from an aviator. And as you know, I've been in aviation maintenance for 20 plus years now, right? So I'm well familiar with the checklist and some of the risks associated with, working in maintenance. But however, our guest today, he's on the other spectrum of aviation. He actually fly these things where I maintain it. You take them out and, he do great things with it, whether it's transporting people, cargo on and so forth. All right. So today's conversation is definitely surrounding things that you as a passive investor, and if you're an operator, listen to this. Well, you need to be talking about risk, not avoiding it, not chasing it, but understanding and before it costs you. So our guest today brings a unique perspective. He's a former commercial pilot where mistakes is not tolerated because it comes as a great consequences. And now we serve as a CIO at Spartan Investment Group, overseeing investment decision across real estate assets. Ryan, welcome to the episode today, brother.

Speaker 2 1:16

Thanks for having me. Appreciate being here.

Speaker 1:19

Yes, sir. Ryan, I love to ask my guests a deep question before I start and today the question I have for you before we start by is, what principle from aviation guides how you make investment decision today?

Speaker 2 1:30

Yeah, I would say that, I always remind myself that the buck stops with me. I can set the parking brake. I don't have to take the airplane or accept the airplane. And I know that everybody that, cares about me in the operation supports that. So as an airline pilot, I would have to make sure that everything was done to my liking and my comfort level had to be very high before I actually accepted an airplane or took passengers, under my wing, right? Yes. And so I think what stands with me today is as a business owner, the buck stops with me as well. So I know that I can set the parking brake and refuse an airplane or not do a deal. At any time, and it's all within my control, and if I don't feel comfortable about something, I can stop it. And I think that principle has been drilled into me as an aviator for, over 20 years, that, you don't have to go fly. You can always fly another day. And, We'll eventually get to our destination, but let's do it as safely as we can.

Speaker 2:26

that's a good one, man. That's a good one. All right, You went from flying right plane to, to now a steward of capital in real estate. Becoming a pilot is a challenging and daunting task. And a lot of times it's a passion for people, right? Where once you start flying and you start exploring the skies and you'll get to expose to the freedom that comes with being out in thin air or whatever, right? that's something that people love and they continue. They would never wanna stop doing that. What aspect does, does pilot in play in your life today?

Speaker 2 2:57

Yeah. I still fly for fun, you know? Okay. First and foremost, you know, you can't get the fly once you get the flying bug, as you know.

Speaker 3:03

Yeah.

Speaker 2 3:03

it's impossible to get rid of you. You love being around airplanes, you love being around helicopters or whatever. You love being around aviation. you never shake it away. So what I like to do is I like to take my airplane, and take my kids airplane camping. Okay. And so fly all over the mountainous area of the Pacific Northwest and, go to some really cool places. And I, you know, it's fun'cause I get to share the passion that I have for flying with my kids.

Speaker 3:25

That's good, man. That's great exposure. seeing the line from a bird's eye view, the. Now a hundred percent. Let's,

Speaker 2 3:31

yeah.

Speaker 3:31

Yeah. Let's talk about that, man. What was the transition? What caused that transition? Because look, most of us when we think about pilots, then we're thinking about well educated, well committed people, right? focus the detail oriented and, you know, also a high income. What caused the transition from piloting to more, working for yourself and become a steward of capital?

Speaker 2 3:55

Yeah, so I, you know, it all goes kind of back to kinda who you are, right? And I ended up selling Cutco knives in high school to pay for all my flight training. And when I got out, I got hired at the airlines very quickly and, you know, the means to the end, right? That selling the knives and learning sales and learning how to build rapport with people and the excitement about closing a deal or closing a sale, really carried with me. And, when I got to the airlines, I was super excited. I mean, I was 21 years old flying a jet. And, who had it better than me? and I love the airlines, but sort of quickly realized that, I had a 45 year career now of doing kind of the same thing. And, I was bored of my layovers pretty quickly. And so I just, my mind was racing about how to be an entrepreneur and yeah, what I could do, right? And so you start listening to podcasts like this one, listen to thousands of episodes, listen to webinars, read books, things like that. And you kind of fall in love with the fact that, real estate really attracted me. The fact that you could buy an asset and it could produce income for you while you were there or not there, or awake or asleep. That was really attractive to me. So I kind of went down this real estate road and, the self-storage thing came up because, I was buying. Single family homes in every layover that I had. Right. I did what everybody thinks they should do when they get into real estate, which is you go buy a bunch of single family homes. And what I realized is, yes, I was making good passive income and I was, the deals were doing pretty well, but I wasn't getting a really good ROI in my life. And, I was spending a lot of time chasing around, my property manager or finding, dealing, finding new properties and things like that. And the ROI wasn't really that great'cause I was a high income earner and I wasn't really making much more, spending time there versus just spending time flying an airplane. And it dawned on me that a lot of people that I flew with, and a lot of other pilots and high income earning professionals really wanted to have real estate exposure and have it in their portfolio, but the work that it took was kind of eclipsed the payoff that they would really benefit from. I became passionate about starting a company that has a vision to help investors invest passively into real estate and benefit from our due diligence, right? Our ability to go and execute. And I just saw this massive gap of opportunity where people wanted this stuff in their portfolio. They just didn't want to become a real estate professional to do it. Gotcha. Yeah. so that was kind of our vision and it transitioned into self storage because. Of scale, right? we looked at all the different industries and when we were first building some of our new developments. I was actually going through a big life change. We had a growing family. I just had our first daughter and we were gonna sell our house and move to another house. And the real estate agent came to me and said, Ryan, if you're gonna get top dollar for this house, you gotta move all your stuff outta here. You gotta freshen the place up a bit. And I was like, well I haven't bought my new house yet. And she said, you gotta get your stuff outta here. You get it out. So I went, I put it in a self-storage unit and I was like, oh my God. In a million years I never thought I would be a person that uses a self-storage unit. And it was funny'cause. We put it in there and of course things took longer than, as they always do, and we kept that unit for too long. And what I realized is that no matter what is going on in the world, people are using self-storage because they're going through life events. Divorce, downsizing, relocation, things like that. And I thought, what an awesome industry. So I researched it and we built a huge platform now a billion dollars of self storage under management, and we're the 29th largest operator. And, really kind of backbone. That experience that I had of, oh my God, this self storage industry is incredible and it's easy to own, easy to evict, easy to maintain. So we went for it. That was kinda the transition. Yeah.

Speaker 7:27

Our audience are in for a treat today because, billion dollars worth of real estate is definitely no joke, man. Building that from the grown up some, literally sometime from the grown up. Yeah. So let's talk about that transition, man. You're going from aviation. Into, a sector that sounds like it's more so of filling your timeline to ensure you can maximize your income, but you also said you was not getting the return on your life. Can you dive a little bit more on that, your ROI On life?

Speaker 2 8:00

Yeah. I, I think when somebody invests in something it should be passive, right? Okay. And you should get very clear around what you. Are intentional about, right? So if you're gonna buy single family homes, you have to really define what success looks like first. Correct. So if your goal is to, buy 50 of these things and start a big business and be really active, fine if your goal is to buy one or two, I think you should write down what you're expecting to get out of those houses. And for me, I didn't really do that. I just thought, oh, I'm gonna go buy this house in Philadelphia, this house in Cleveland, this house, Make the three or$500 a month and if I collect enough of these, I'll have enough income to replace a job. But what I really realized was, when you actually have your name on the title of a house and you sign on the loan and you find the property that's your property and anything that goes wrong with it, you're the asset manager and you're the one making decisions. Yes, you can have a property manager, you can do this, but you're the asset manager that, that means that you're making decisions on, the tenant renewal. What repairs to make on the house, how often to go there, the loans, getting it refinanced, whatever it might be. And so I feel like for me, that just wasn't a good ROI, because I was spending. Too much brain damage for the dollars that I was earning. And lemme give you a great example. Like a, an airline pilot can pick up an extra trip and make five to$15,000 extra cash on a four or five day trip. And so when I thought about, all these rental properties that I've gotta chase around for the income that they were producing. It just wasn't a good ROI, I could go do what I love and but what I know though is when, whenever I flew with somebody, I would be talking about what I do with self-storage and they'd say, I've always wanted to own a self-storage facility. And I was like, yeah, you and everybody else, right? Actually you can own a self storage facility with me by investing in the project alongside of us. And then you don't actually have to go do a lot of the work. And a lot of people say, I like self storage.'cause it's really hands off. It's like, no, it's not. And I think that's what people think in real estate is that things are hands off. You just buy it and you set it, forget it. But you still end up becoming this asset manager of decision making and deciding and the agony that goes in. And it's really, you go home and you just want to unplug and be with your family and it's like. Now I gotta call my property manager back. I've gotta deal with this decision. I've gotta put more capital into the deal. Whatever it is, that's not passive investing that is active. And I think that's where the ROI was sort of going down. gotcha. For me on my Yeah,

Speaker 10:26

no, that, that is good, man. because my single family home is, is simple in for the most part. Until you start, Placing value on what you're actually creating, right? So what is this? I'm getting all these things, but what value is it adding to my life? And also what is it taking away from me with a, with the time and effort? And also sometimes the liabilities that come with the single family home, right? Because if it's empty, someone has to pay the mortgage, right? Yeah. yeah. yeah. Yes, I totally understand what you're talking about. Now let's talk about that transition brother. going from aviation to now, taking a pre-flight checklist and now having a due diligence checklist for, to purchase a self storage. Talk about some of those, transferable skills. So to help our listeners who may be a military veteran, right? Accredited investors who may also own a small business.

Speaker 2 11:18

So I think if you're an aviator, you'll understand this. We have like a quick reference, checklist, right? For emergencies, you pull it out and it's got the, for those that are not in aviation, you pull it out and it's like engine failure. Here's the four things you need to do, right? So I think you gotta think of these things in buckets. Like when you buy a self storage facility, you're gonna have your quick reference checklist that's gonna give you the things that are absolutely critical. Like, these things have to happen, right? Property inspection. You're gonna have to have a title search. You're gonna have, some type of environmental study done on the property. You're gonna have to find a lender like these things are gonna happen, right? The other checklist over here is the expanded checklist, right? You open up the manual's gonna go super deep into a lot of detail.

Speaker 11:58

Yep.

Speaker 2 11:58

And so that's kinda like a real estate, right? You're gonna have your top line, like really important stuff. And then you're gonna have kind of a subsection of lots of little things. We have a checklist of about 700 little things for a deal. And some of them apply and some of, and just like flying, some of them apply, some of them don't apply. Correct. If we're doing a takeoff in icing conditions, then we need to have certain things apply in the checklist. If we're not taking off in icing conditions, we, these things don't apply. Right. So you have a lot of things in your manual, but you may not be using them all the time based on the deal that you're doing. Yeah. So this is just like aviation and so we've, over the years. I developed this checklist and refined it to what really matters, right? And I'm happy to share that we actually wrote a book and put the, due diligence checklist items in the due diligence book. And happy to share that with your listeners. And, I think that's really become important and foundational to keeping everybody on the same page to make sure everything got done and you didn't miss anything. And the one last thing I'll add to that is don't be afraid of your checklist getting larger, right? You're gonna. You might start with 30 items and then it grows to 50, then it grows to 75, then it grows to a hundred. People think that due diligence is finding everything wrong. I actually think due diligence is what you don't find. And that's, and then it's what you discover, when you buy the property and you realize, oh, I didn't think about that. And then you're like, okay, let's add that to the checklist for next time. And so next time I'll know that thing happened. It kind of goes into your experience bucket as well.

Speaker 13:24

Yeah. Facts, because I see that on the fly line as well. when we do maintenance. See,

Speaker 2 13:29

yeah.

Speaker 13:29

We are not, in a lot of cases you don't eliminate the risk 100%. But if we can identify it right and we can quantify it, then it helps us to manage it better. And then we can make those risk decision, whether it's, fixing the aircraft, flying an aircraft, or, being a steward of capital with doing due diligence on, on properties. Now, a lot of people, they understand that aspect of it, right? So with over, close to a billion dollars in, you guys over billion dollars or close to billion,

Speaker 2 14:00

We're right around that depending on the cap rate you put on the portfolio. Okay?

Speaker 14:03

Okay.

Speaker 2 14:03

We've acquired over the years, a billion. by purchase price. So depending on, where we are, we've sold some properties, so it's about a billion dollars.

Speaker 14:11

Yes. with those level of due diligence, man helpers help our passive investors, to understand a little bit deeper what goes into that?'cause a lot of them, they focus on returns, right? they have this shiny object syndrome, or they look at these shiny returns where people are over promising and under delivering o of returns, right? Where do you think, based on your experience in approximately billion dollars in asset, under management, where should a passive investors start if they want to consider, storage as a vehicle for their invested capital?

Speaker 2 14:44

I would say what keeps us up at night all the time in any storage deal is supply and demand. Okay. Because if you, the biggest thing that can swamp a deal is you have too much supply that comes into a market and you can't achieve your business plan.'cause you can't raise rents, you can't get occupancy. I think that's number one. As a passive investor, you might just want to have that conversation with your sponsor about that. And of course they're gonna tell you whatever story you want to hear. let's just be honest, right? And I think debt is probably the number one thing in real estate that you can get wrong. And I think we all kind of learned that over the last five years as investors is, floating rate debt or debt that can adjust or cap rates that can get burned through, or rate caps, I should say, can really mess up your deal. This has been true for forever, right? For hundreds of years. Over leveraging or having too much debt on a property can really mess it up. But I think as a, I think as a passive investor too, when you mentioned returns and I wanna address that

Speaker 15:36

right?

Speaker 2 15:37

Returns in my single family homes were way better. As a percentage than my self-storage deals that you could passively invest in, right? I could make more as a percentage, right? If I put a dollar in, I could make maybe 10 cents more per dollar than I could do on my passive deals, right? And you may think, I can make better returns on this over here, but again, the ROI ON life isn't there because now you're doing all the management, the headaches, the asset management that goes into those deals. And so you're not counting the time that you're gonna spend. To get that return on investment. And I think that's what people, a lot of people miss. I'll tell you, some of the best deals that I've looked at that had the highest rate of return projected, have done the worst, and some of the lower rejected returns, projected returns have done the best. And so I think returns are kind of goofy. I just kinda look at who is the sponsor. What is their experience, what have they done, how do they communicate? are they vulnerable about things that have gone wrong? because here's the thing, guys, if you're talking to a sponsor and you say, tell me about a deal gone bad. And they say, we've never had a deal go bad, we all know that's baloney. We have all messed these deals up and that's what makes you stronger and makes you learn from it, right? So I think kind of having a good conversation around realities that you're investing in an operating business that has, yeah. Eyes and lows and demand and supply that impact your returns, I think is a really good conversation to have with people. And just be straight about it. Know fully what you're getting into.

Speaker 17:07

Yeah. you 100% spot on, man. Now you invest in a sector where, there is a lot of folks who invest there as well, however. What we do in the multi-family space is it's easy for people to understand because they live there. A lot of folks that they live there, right? they have lived in an apartment, so they understand right now.

Speaker 2 17:28

Yeah. Yeah.

Speaker 17:29

You work around a lot of high income people that, they got shares from the company that, that they work with. They have long-term retirement plan and at some point they start looking for diversification. And in real estate itself, we can build in diversification and see a lot of people, they talk about diversification, but they don't always do it. What does real diversification look like as someone building wealth through real estate in your experience?

Speaker 2 17:59

Yeah, I have a simple methodology that I Prescribe too. The 10, 30, 30, 30 rule.

Speaker 18:06

Okay?

Speaker 2 18:06

So 10 30, 30, 30, 10% of your net worth is in liquid assets, cash and cash equivalents. The next 30% of your money, kind of your first line defense should go into managed money, stock bonds, mutual funds, traditional assets, right? Things that you can liquidate that are in the market, that I call those managed funds. The next 30%. Are gonna go into hard assets that you control your house, your rental properties. Maybe you invest in a building or something that's, a little bit more passive that you can decide to sell. You control those assets, those hard assets, right? And that could be in things like debt funds too, that come with redemption or things like that would fall into that bucket. The last 30%. Get some exposure passively, truly passively to some real estate. Outside of the things that you have bought on your own or like outside of a restock, right? And so those are things like syndications, right? Like investing with an, well-established operator who manages multifamily assisted living, self-storage, things like that. So to me, that makes a diversified portfolio.'cause now you're doing a little bit of everything and you have that liquidity in case you need it, right? You should, you have your money in a money market account or Right. You have your money in stock bonds, mutual funds. You have your money in real estate that you can sell, right? Hard assets that you can make a decision on and call back something with redemption. And then lastly, those syndications that are truly 100% passive. So that's how I think about diversification and a lot of really smart, some of the wealthiest investors, billionaires that work with us are in the same boat. They're kind of investing that way.

Speaker 19:43

Yeah. Yeah. And we'll see the same, I get the Tiger 21 reports from time to time. That actually shows that breakdown of some of the wealthiest people in the world, especially in America, how they're allocating their funds with true diversification. Okay. Still on diversification, brother. You know some, if someone have say five deals,'cause look, owning a market or getting really granular and to understand a market and the different pockets that are successful in a large, MSA. it is important. So what is your experience if someone owns five deal in the same with the same operator in the same market, same asset class? are they diversified or just concentrated in disguise.

Speaker 2 20:27

And when you say the same market, like they're all in Dallas, let's just say, right? They're all in Dallas. All the same market. Yeah, I would say that, I would zoom out and say, okay, how much of my net worth is tied up in that operator, right? because it might be meaningful to understand okay, if I have a million dollars in 10, I'm just making this up, 10% of it is in this, with this operator in this market, right? Yeah. So like, how does that. Shape up in my 30, my 10, 30, 30, 30 bucket. now that 30 per, that last 30% that I talked about, which is like syndications and passive real estate. That now, basically, 10, most of that is now with that one operator in that one market. But if I have a billion dollars in net worth and I've got, maybe a million dollars set aside for. For this market. Yeah. Then probably doesn't matter. So I think it probably depends on your overall total exposure. Gotcha. Like I would never take a majority of my net worth and put it with one operator in a market like that just seems silly. But I would, I, it would depend on your overall percentage of your net worth is what my answer would be to that. And I would probably limit that to 5% of my total net worth. The absolute most with that operator in that market. I don't think it's, I don't think it's bad to, go all in with one operator. And I don't think it's necessarily bad to go all in and on, a region or a market.

Speaker 21:50

Right.

Speaker 2 21:50

I would just make sure that you've spent time with that operator and you have given it some kind of time to marinate and like really make sure you've got. You're working with somebody who is really good and I would invest slowly over time with that person, is my approach to that.

Speaker 22:08

That is great advice, man. I appreciate that. So lemme go back to the aviation equipment. in aviation, you're trained to make decisions on the pressure. You, earlier you talk about your emergency procedures, eps, that breaks things down. Parade rest of the actions that you need to take in a case that are unexpected, right? So in real estate, the pressure shows up a little bit different, right? How do you make. Discipline decision when you experience a market shifts deal that goes sideways or the assumptions that you make breaks.

Speaker 2 22:40

Yeah, I think in a market where you don't have the revenue that you need to be successful,

Speaker 22:45

right?

Speaker 2 22:45

You have to attack the p and l, the profit and loss statement. So you gotta right, attack your expenses. And you gotta be careful, right?'cause there's two different types of expenses in my mind to cut customer facing, front stage backstage, right? Stuff that the customer's gonna see and feel and impact you. And then you got stuff backstage that nobody cares about, right? Yeah. customer doesn't care that you cut your bank fees this month or your customer is not gonna care if you, renegotiated your utility expenses. But one thing that everybody has to know is that there's no such thing as a fixed expense. Everything can be renegotiated. Your utilities, your payroll, your subscriptions, your technology costs, all these things can be renegotiated, right? And so don't ever think of, you'd be surprised, call up your vendor and say, we're on hard times and we need to renegotiate this contract. And you would be surprised and, work with them professionally and. Openly and things like that. But yeah, you can renegotiate these things. You can cut a lot outta your p and l. And outta your expenses, and the customer won't even know it. That's some one thing that we've done. We actually just switch, we just did a bunch of this stuff, right? We switched our utility payments to credit card, which gave cash back, which flows to the properties. We've,

Speaker 24:00

okay.

Speaker 2 24:00

Done things like changed our treasury platform, right? Where it saves money every month we've done, just a number of backend things that the customer doesn't really notice, right?

Speaker 24:11

Okay.

Speaker 2 24:11

So do as much as you can at that as possible, right? Because the customer's not gonna see it. Call your utility company, you call your utility vendor and try to renegotiate your utility contracts. Your trash, water, electric are kind of your main, utility vendors, right? Can you do a deal with Waste Management or Republic Services and get it wrapped up, right? And then you got the customer facing stuff, right? You gotta be careful about, right? If I cut my staff, will the customer not be there as much or grow revenue enough? So you just have to be articulate about that. You gotta be, make sure you're not. Cutting so much muscle, right? And you know that you're gonna lose revenue, like that's really bad.

Speaker 24:48

Correct.

Speaker 2 24:49

And then I would say like, get scrappy. One thing we did this year, we added truck parking, services to our facilities to do lay down, and that could be like a new revenue source. We stood up on our own insurance captive to take more of the tenant insurance split with, so there's a lot of things you can do in a market. And This is something that I love to talk about.

Speaker 25:09

Marketing energy. It's interesting

Speaker 2 25:11

market marketing energy. The best analogy I can think of, you know, Brooks Running club, right? Brooks? Brooks shoes, right? Running the running shoes. Yes. They're not as big as Nike. Right? And they're never gonna have the budget of Nike to compete with Nike. They don't have, you can say, oh, you know, we're never gonna have the money to, Nike has to pay these athletes. And, but they have more marketing energy. What I mean by that is in every community that they are in, they might put a new pair of shoes on a cross country coach and say, Hey, we're gonna have you have a pair of shoes, and the conference country coach is gonna love the brook. And then he is gonna tell his team, Hey, you should try. Right? So that's marketing energy, that's getting local. And getting really boots on the ground in a market. Gotcha. And so you gotta have more marketing energy.'cause we know we can't outspend public storage or extra space or cube smart, but we have more marketing energy than them. We throw things like Miss Oregon came to, our facility gave away a kayak. We had a farmer's market. We had people come to our property to, to rent units from, like the Chamber of Commerce and things like that. Right? Yeah. We have better marketing energy than other people. And there's no way to outspend that. You can't outspend community. And so I think these things are critically important when your back is up against the wall, to think of those like three things that you can do within the deal. Yeah.

Speaker 26:23

Okay. Let's talk about the Spartan brand brother. What is this Sparts and brand?

Speaker 2 26:29

Yeah, so it all started, with it started with Michigan State, right? And, my business partner Scott, he's an army guy, and, he went to state and, we did our first LLC and we were flipping a house and, what are we gonna call it? Let's call it Spartan Group in investment group, LLC. And that'd be cool. And, and then we started getting investors and we, we became Spartan. and then we were like, okay, we need to change the name. We can't be named after our alma mater. And, it was like. Everyone's like, why we love the Spartan brand. You guys stand for grit and due diligence and making the right decisions over the easy, wrong decisions. And, everything that you guys have done so far has a culture around being a Spartan. And, and so it just, it really flourished from there. We have, grit is our values and our values are defined by growth, respect, integrity, tenacity, and transparency. Okay. And so that's been like really embodied in what it takes to be a Spartan. And our team knows, we have a culture code. We are all about, doing the right thing, being communicative, with our investors and with our key stakeholders doing what we say we're gonna do. And that's been like transcended into everybody that works here in fact. Whenever we interview people, we grill'em on the values. We say, Hey, which value do you like the most? Which value do you like the least? which one do you least identify with right? when you're thinking about our five values. So it's become a big part of who we are and a big part of our ethos for sure.

Speaker 27:52

And how does that, translate into your storage facilities?

Speaker 2 27:55

Yeah, I would say that, there's a bunch of different ways, right? So lenders like working with us because if there's a problem, we tell'em right away. Okay. We're very transparent. Our employees, there's no holds bar anywhere. A store manager will talk to me like my business partner does. My business partner will talk to, we have a very open, we don't have time to, there's no sacred cows, there's no holding back. We have a fee, we have a weekly survey that we look at every week. We respond to all the topics on it. And what this means is this means that you get people who wanna work for you. And what that means is you get better performance at the properties. we have more buy-in. We're one of the only companies out there that I can think of. There's a couple that I know of, but we actually give ownership to everybody in our company.

Speaker 28:40

Interesting.

Speaker 2 28:42

Part of every deal we buy, our employees own a percentage of it. So they are benefiting from the investment just like I am and just like Scott is. And so they want this thing to succeed and they're bought in. So we have, it's an employee owned business right at the end of the day. And we align our incentives with our, with the performance of the assets. And so when you get that, you get a culture that wants to perform and produce. And it's kind, it's hard to match that. And I think that's what's really fueled our growth for the last, decade.

Speaker 29:12

How challenging it would be for you to explain that. How do you get your employees to become owners? What does that look like?

Speaker 2 29:18

You talk to'em about it every single day.

Speaker 29:21

Okay.

Speaker 2 29:22

You say things like, for every dollar. That you can save an NOI. Is$15 a valuation and 20% of that goes to the employees. Right? So do the math. Every dollar you save is actually benefiting you$3. So how incentivized are you at this point? You're pretty incentivized. Now here's, now let me teach you, let me make sure you're educated, or let's hire the best people who already know this stuff. And align them with the team and help lead the team. We want to build leaders that know how to execute. We also know we want leaders that know how to, that know real estate, right?

Speaker 29:57

Yeah.

Speaker 2 29:58

And anywhere we can save, we have incentive alignment. And I think it comes out when we have profit sharing or when we sell an asset and there's a payout of, the, to the employees. I think that's a, it's a, it's something you've, you can't just say, oh, here's our policy, here's our compensation plan, or whatever, and walk away from it. You've gotta remind people what's at stake here for them individually, right? And so we set our BHAG and our big hairy, audacious goal. Yeah. To, have we wanna create wealth for a hundred thousand investors and for every Spartan employee. And we don't define what that means because everybody's got a different way of looking at wealth. That meant be more time off. More time with a family. A lot of our store managers might be just buying their first house, right? Might be buying a car. To, becoming a millionaire, whatever it might be. Everybody's got a different version of that, but that's what we really support at in the business at Spartan.

Speaker 30:46

That makes sense, man. Now look, storage. Facilities. A lot of folks when they go into the business, they're focused on how much can they automate a lot of things where if they can eliminate all employees on site and put AI and different ways of checking out things and purchasing things on site, one, they can save on the expenses. How is Spartan, doing the traditional storage facility, and how are you improving that towards the future using AI and certain other features?

Speaker 2 31:19

I love this question. Yeah. We're one of the only operators right now. There's a, there's like maybe one or two other ones that uses a technology that doesn't require a physical person to be at the store. Now, don't let anybody fool you, like you need employees to work at your self storage facilities. They're critical. To the success of your assets. But they might be out in the back working with a customer, sweeping on a unit. They might be sick that day, but they might be at another property. But all of our stores have a sensor on the door when it opens. There's a screen when that pops up, a real person in the store every day. Not many operators are doing this. I know. What's cool about it is it actually allows us to open earlier, because we have stores on the East coast. And our people on the screen are actually inside of our storage locations, and they open up stores on the west coast. You know when they get in at 9:00 AM they can open up stores on the West Coast at 6:00 AM So our open sign turns on, our lights come on, our door unlocks, and people can actually rent units. So that's super cool. That's not ai. That's just really good technology that exists inside of our stores that helps us win in markets. Because now we're on open and Google longer and things like that. But on the AI side, I would say that we are, everybody knows we're in a major shifting environment Where AI isn't necessarily replacing employees, but it's supercharging them. With tools and resources. And so some of the things that we're doing, like our data warehouse that has all of our occupancy storage data is going into an a closed AI system that helps us write. Better analysis about how our properties are performing. Okay. Instantly, within seconds, it'll read the p and l, it'll read the occupancy summary data. It'll look at the market rents, it'll look at what's going on in the market, look at some of our inputs. Pull the real data all together and give you an analysis that is world class. it's like it came from an investment banker in, New York City or something. It's incredible what it does. And that actually we use that for our investor updates now. And so now, we used to spend so much time looking at all these things and trying to make a best judgment and then write a summary to our investors. Now we have like world class investor reporting that's flowing right to our investors and we're really democratizing data.'cause it's hey, what should we share with them? Let's just share everything with them, Yeah. This is everything that we see. It's so easy to put together now. So that's one big thing. I would say on the operational side, what's really saved our investors expenses at our properties is we used to have a call center, right? We used to pay a facility used to pay as much as eight or$900 per month for a call center. Because we'd have to pay fees to a call center to, to run it. It's all done AI now. It's really good. people can call in and it sounds like you're, maybe after like a minute you figure out this isn't even a real person. This is ai, but this is, I'm getting exactly what I wanted. I just wanna know, what do you have available and what's the cost and when can I move in? How do I book a unit? All these things are done on AI now. It's, and so we don't have that costing, that$800$900 a property is gone. And so these are huge, impacts to the organization overall.

Speaker 34:25

That is good, man. That is good. Man, ask you this one last question before we get into the focus round, so if somebody's listening to this podcast and they'll, they want to become serious investor, and they want to use. Storage. As a pathway, right? What do you recommend to be one mindset shift that they want to make immediately in making a full commitment in this, investment sector?

Speaker 2 34:50

Super easy, approach.

Speaker 34:52

Okay.

Speaker 2 34:52

Education, people, action. So you need to go get educated. You need to find the right people in the space, which usually comes in your education journey. And then you take action. So education, ISS, SSA are two organizations that you can get a ton of education on how to be a self storage investor or how to get into the space. They have a trade show. The trade show is actually this week in Las Vegas for ISS and they have a ton of resources and knowledge. So you need to get educated number one. Then you need, when you go to these events, you need to meet people. You can't just go to the classroom and then run home and go to your hotel room and go to bed. You get, you need to like get in front of the people who are doing it. You need to get in front of lenders. You need to get in front of, storage owners. You need to get in front of brokers. You need to get in front of the people who are actually doing it, and then you need to do stuff, something about it, right? Like you actually need to take action on what you've learned and who you've met and put it to work, right? So I always say it's education, people action every day of the week.

Speaker 35:48

That, that is great. That is great, brother. Thank you so much, man. I wanna get into the focus round, which is a, it's an acronym of, five letters. What do you do now to replace your airline adrenalin, of flying?

Speaker 2 36:01

Yeah, so I have an airplane that's kinda motocross, like the dirt bikes, that Okay. Fly in the sky and go off big jumps. I kinda have an airplane that's kinda like the motocross of aviation. I like to say it, it's a back country airplane. It's got big tires, big engine, and it gets into places that people can't, drive to sometimes. We land on dirt strips. Mountain strips and, back in the country. And that's just a pure joy, pure adrenaline, awesome way to live life. And it's, these are like a thousand foot strips, 1500 foot strips that it's exciting to fly in and out. Some tree lines on each side. Whew. So that type of flying it's more exciting than the airlines, I'll tell you that much. So airlines are cool, but like that is like some real flying. That's something I really enjoy doing with my kids and my family.

Speaker 36:43

That is cool, man. What opportunity change your trajectory?

Speaker 2 36:49

I would say this, I wouldn't say there's one thing that changed it, but I would say that you gotta be positive with people and you gotta be around people that are gonna encourage you, the chip on the shoulder thing is interesting, but you kind of realize after a while that. You're not angry at those people. You're just like appreciative of those people, for doubting you. Because you, they, you probably gave them a reason to doubt you. You probably projected confidence that was low or you, they got used to your habits of always kind of saying this thing that you never really did. That's the haters, right? They come out and they say these things and it's they're probably looking at you going, dude, every time you talk about doing this new thing, you never do it, so I'm just gonna tell you that you're not gonna do it. So you're probably projecting that. So I would say, having an immense amount of, self-reflection on kind of just being positive and right. Being around people that are encouraging of what you're doing and realistic about who you are, I think is really important. And I just, I've been fortunate to be around people that. Have encouraged me and been, really helpful in framing who I am and whether it be good or bad, you know? And I think you gotta listen and take those cues, but yeah, positive people make a huge difference in your life, and that's kind of who I hang out with now. Yeah.

Speaker 37:56

We could have a whole podcast just on that topic right there, because there's so many people that are up in their feelings and they're not taking the time to really analyze the way they're showing up and the value that they're providing. So we can have a whole conversation in that. A hundred percent. So let's talk about communication brother. What is one thing that active investors should, communicate better

Speaker 2 38:19

To our passive investors, you mean? Yes. Like active investors. What we should, yeah. I think people need to just frame the situation, which is you're taking a significant amount of money, an LP or a passive investor, and you're giving it to somebody and you're not getting any liquidity, right? So you're kind of putting all that money with somebody and saying, here you go. I have now relinquished all control from this hard earned money and good luck. And the operator needs to communicate with care, knowing that is the case, that they have been vulnerable with you to give you the money, and that it's it's basically stuck with you until you sell the property, right? That's the deal. And so it's not like Charles Schwab or Morgan Stanley where I can go onto my portal. And see exactly how I'm doing in the stock market. Click a button and that money comes back to me within 24 hours. So you need to communicate, you need to be transparent, you need to be available for these people, so that they can feel the confidence and the reassurance,

Speaker 39:20

right,

Speaker 2 39:21

that you're doing the best thing possible for their money. And I think that's completely reasonable as an LP to expect that.

Speaker 39:27

Yeah, you are correct.

Speaker 2 39:29

Yeah.

Speaker 39:29

What do people misunderstand the most about risk in real estate?

Speaker 2 39:35

Debt.

Speaker 39:36

Okay. Yeah,

Speaker 2 39:38

debt is the most misunderstood, thing that I think people can get their arms around. I think loan documents drive a lot of risk. What are the covenants? What are the clawbacks? What are, what could happen? What, what is the bank testing? How often fixed rate floating rate, interest rate? expiry what happens? Just there's so many things that, that the debt introduces to the risk, right? I'll give you a great example. There's one property I bought, no debt on it. It's done perfectly fine through all this mess. You know why?'cause there's no debt on it. I don't have a loan. No one's gonna take the property from me. Yeah, property taxes if I don't pay though. But that, those, that's, of course, that's obvious, right? But the lender can screw everything up. They can take your property back and you can really lose your, the lender is your number one investor and they have all their control, right? When things go bad, so I would say that you lending is really misunderstood and I would spend a lot of focus on understanding the mechanics around your loan. On a deal.

Speaker 40:32

That's good. Yeah. That's great advice. Now, Ryan, with transaction over a billion dollars in real estate brother, what does success look like for you today?

Speaker 2 40:43

Yeah, I would say that, one of the things that we're really focused on is just being operationally excellent, you know? Knowing that you can go into a market and that you can increase NOI 20%. Just by doing what you do. And I'm not talking about relying on the market to do it, but I'm talking about taking over any property anywhere in the United States or the world and knowing that injecting our DNA into it makes it 20% better. Otherwise, what do you really have? You're just doing what everybody else does, and buying and hoping that the market's gonna push up your rents. Or overlying on the occupancy. So I think you need to have an engine in your operations that actually can be more efficient right outta the gates. And I think that to me, once we know we what with a hundred percent certainty that we can do that.

Speaker 41:31

Right?

Speaker 2 41:31

That's what success looks like. Yeah, man.

Speaker 41:33

Thank you so much for that man. Ryan, thank you so much for joining us on this podcast and dropping pretty much a masterclass on us, brother. Thanks. That was good stuff. Very controlled in the way you deliver that, and I trust that our audience, our listeners got some real good golden nuggets from the things you share with us today. Now, if those said listeners want to get in touch with you, what is the best way of them getting into your ecosystem?

Speaker 2 41:58

Yeah, you can email me, ryan@spartan-investors.com, or you can go to our website, spartan-investors.com. And if you're an airline pilot or a pilot or you just wanna hear more about our, education, we have a podcast and it's called Passive Income Pilots. It's on iTunes, stitchers, and things like that. So if you want to, you listen to our show, we have a show every Tuesday. I would love to, have another listener join us.

Speaker 42:22

Yeah, I am an avid listener of that podcast. Oh, nice. You guys. Nice. Okay. Cool guys. Yeah. you and Tate is magical together, man. All right, listeners. Thank you for sharing or spending your time with us in this podcast. A trust that you find a lot of value for it because listen, in aviation, you don't guess your way to safe landing. You prepare for it. An investment is no different. Discipline always beats excitement, structure beats emotion. And clarity beats confidence, So thank you for spending your time with us, and as usual, always look for ways to own more of America, which is not just about real estate, it's all about ownership of your life, ownership of your finances, ownership of the legacy that's you are creating by being a great ancestor. Until next time, I'm Shalon Hutchinson, also known as Hutch, the Marine Investor out.