How and Why to Start Investing in Mobile Home Parks and Self Storage with Paul Moore — Script

This is a Full Episode transcription from Episode 28 of Life Worth Chasing, you’ll find the timestamps next to the speaker.

You can find show notes: https://medium.com/p/d981d9929440/

Chase Maher: (00:00)
What is up homeys. Okay. Today I have a very special guest to say that I’m excited about. This show is an understatement. I have the co founder of Wellings capital, a real estate commercial investment fund that invests in mobile home parks and self storage. I met this gentleman at the bigger pockets real estate conference. I really enjoyed his keynote. We spoke after his keynote. We jumped on a call. He actually offered to jump on the podcast and you don’t have to ask him, which was pretty cool. And we went over everything. Mobile home parks and self storage. We went over his seven step process to get into commercial real estate investing. Uh, we went into why self-storage and mobile home parks are going to beat multifamily investing over the next five years. Um, how to sell your storage facilities and mobile home parks to institutional investors. Uh, we went over the five things that make mobile home parks and incredible investment in the four things to look for before investing in self storage. If you’re interested in commercial real estate or you’re interested in, uh, these asset classes, um, I highly, highly recommend listening to this episode at least once, maybe even twice. But please welcome to the show, Paul Moore of Wellings capital. Paul, you’re actually the third guest in a row that I’ve had on the show from the bigger pockets conference and you were actually a speaker. The other two I’ve met during lunch hour at connection hour and you know you are my favorite keynote of the entire weekend. Oh man, thank you. Yeah, I really appreciate that. I really went to the conference with a goal in mind of connecting with commercial investors, learning about commercial real estate. It’s the field that I’m most eager to jump into and I just really appreciated you sharing your story, sharing your failures, sharing your successes. It was just very interesting. We talked a little bit after you were kind enough to jump on a call with me and now here you are on the show man, so I appreciate it.

Paul Moore: (00:40)
Oh, it’s great to be here. It’s a real honor to be on the show and so thanks Jace. I, I’m eager to talk to your audience today.

Chase Maher: (00:47)
If you had to share a little bit about, you know, who you are and what you do, just so that the audience can have a little bit of an idea of who they’re hearing from today.

Paul Moore: (00:56)
Okay, great. So I got an in engineering degree, which was my first mistake. And then I got an MBA, which was not a mistake. Went to corporate America with Ford motor company in Detroit. And I found myself over and over trying to start a business on the side and I realized I must be an entrepreneur at heart. I didn’t know any entrepreneurs. And so I began pursuing that path. We started a company that just everything worked perfect and at 33 sold it for about $3 million and thought I was really smart. You know, I w I went into a place where I started investing. I thought I’m an investor now. And um, actually I was a speculator. You know, investing chase is when your principal is generally safe and you got a chance to make a return. And speculating is when your principal is not at all safe and you’ve got a chance to make a return. Investing is based typically on having assets that produce income. Okay. And speculating is when the price of the asset is not really tied to a set income stream or not really stable. So I was doing a lot of speculating. I made some money, I lost a lot of money. I uh, I, I will tell you a story later if you want to hear about how I went deeply into debt and jumped back out. But just to bring you up to today, I went through about 10 different, actually probably 12 different phases of real estate investing from flipping a rental homes, flipping waterfront lots, made a ton of money in that, lost the money in a to building houses from the ground up, doing a subdivision D jumping into commercial about nine years ago, getting into ground up multifamily, I wrote a book on multifamily since then, expanded into self-storage mobile home parks, wrote a book on self storage that bigger pockets publishing is supposed to publish in the summer of 2020. Just, I’ll tell you in summary, what we do is a lot of people want to get into commercial estate, but they’re confused on where to start or who to trust. It seems ominous and hard to understand where, what the entry point is. Wellings capital, my company provides a front door or an on ramp for investors to get into a commercial real estate investment. We vet all the best in class operators and we place there one investment. We spread it out over in this case over 30 different assets to give them diversification, risk, adversity, recession resistance and great returns and tax benefits. So that’s a big mouthful, but that’s what we do now.

Chase Maher: (03:39)
Yeah, that’s amazing that you went through so many different types of investing and now you’ve really landed on something that you, you seem to be extremely passionate about. Obviously very knowledgeable about and you really had me gravitate towards it in the sense of the mobile home parks and the storage facilities. But. You know, I was curious and I wanted to ask you, when we were on our call, I realized that you were more in the realm of running a fund rather than actually managing the assets or you know, making the acquisitions. And so I wanted to ask you, how come you made the decision to be on the financial side rather than on the asset management side?

Paul Moore: (04:18)
Yeah, so we were managing a multifamily property a couple of years ago. It’s a large property and I realized that, you know, the operations side was harder than I thought and we had a team of people, but the operations people on our team weren’t as strong as I thought they were. And of course when the rubber met the road was when we start having problems, which every problem property does and they really didn’t know what to do. And so it really caused a ton of soul searching. Well, chase, around that time, I read a book that almost all of your listeners have heard of. It’s by Gary Keller and Jay Papasan called the one thing. And it convinced me to narrow my focus. And I thought, I really want to narrow down, I just really want to do one thing really well, which was basically deal with investors. I help them place their capital and I don’t really want to be an operator. And about that time I looked outside a multifamily multifamily at the time of this recording at least chase is extremely overheated and though there was a chance in five years we’ll look back at today and say the prices were good, it doesn’t look that way and prices are there all time record high. So we started looking out at self storage, mobile home parks and if you like, I can later or now jump into why we love those asset classes. But we looked at ourselves at that time and I was going through this again, this the sort of soul searching and realized, you know, I wouldn’t invest with Wellings capital. I wouldn’t invest hundreds of thousands of dollars with our company with no track record, no team that’s done this. I mean, especially at this late point in the cycle. And so we started thinking, you know, we’d be better off to find great teams and invest with them. And that’s why we did that a couple of times and we decided diversification should be part of the mix. So we decided to open the fund.

Chase Maher: (06:24)
That’s amazing. I definitely want to chat about why to get into mobile home parks and storage. That’s something I’m super interested in and I want to chat. You mentioned a seven step process to get an a REI, but first I’m curious, when you were going through those 12 different types of investing, was it all peaches and roses and you made a ton of money, then you jumped into commercial and everything went great? Or did you go through some, some trials and some, some fire to get to where you are now?

Paul Moore: (06:52)
Well, let’s put it this way. I’ve got a podcast called how to lose money and now it’s a wealth building podcast. But we talk to investors, entrepreneurs, business owners who have had pain and failure along their path that have helped them be molded into the person they are today to be so successful. And so yeah, we had a lot of pain along the way. I mean, for example, like I said, I had a million and a half dollars in the bank in 1997 at age 33 and I had two and a half million dollars in debt. Exactly 10 years later. So yeah, there was certainly some pain along the way.

Chase Maher: (07:29)
And just out of curiosity, how did that come to fruition? I’m sure you could talk for hours about it, but I’m just curious how you went from one and a half in the plus to two and a half in the minus. Was it just some unluck along the way or uneducated decisions? Like what really was it that sort of flipped it upside down like that?

Paul Moore: (07:47)
There were a number of things and including investing in a, in a big piece of property in the blue Ridge mountains, we bought a 120 acres in the blue Ridge mountains. We tried to set up a nonprofit and of course nonprofit is a good word for it. And, um, we, um, we invested, you know, some money in that. We also made a w we also gave a good amount to charity, which I’m thrilled that we did that. I’ve never regretted that. We also speculated on some things. I mean, I invested with a guy from Charlotte, North Carolina who was getting through giving us 3% return on our money per month, 36% a year with this mysterious options and currency trading scheme he had come up with, well I think he’s on near number 20 now, almost of his 153 year prison sentence. He still won’t tell the 2000 investors where he hid that $18 million.

Chase Maher: (08:42)
Wow.

Paul Moore: (08:42)
Yeah, we, so we had invested with him and it’s somebody else that, and those were real speculative lessons that were, you know, really painful. Uh, I invested in oil and gas and lost money in that made money. I made of thousands in waterfront, lots flipping lots. But you know, when the downturn hit, I was holding like nine or 10 waterfront lots and that was pretty tough. So I went into November. It was exactly 12 years ago, November of 2007 and I have this morning practice of meditation and I, I’ve done been doing that for 34 years now, I think. But that one morning I just had this conclusion, I need to do something really radical here. My partner just quit and signed all the properties over to me, said, I can’t pay half this interest payment anymore. We’re still good friends by the way. Uh, I didn’t know what to do. And so I came to this conclusion, this really strong impression, this one morning, what would George Mueller do now? George Mueller was a 19th century guy who lived in England and he housed 10,000 orphans over the course of his life. He raised almost, we believe it’s almost half a billion dollars in today’s dollars. And he never asked one single person for money. We never did a fundraiser. He just did it based on these really strange methods. So I thought, what would George Mueller do? And I thought, well, you’d probably do something really radical. And so I went to my friends who told me I needed to declare bankruptcy and my family, and I said, Hey, we’re going to give our way out of debt. Interesting. And that’s about the silence I got back from them because that was a real bizarre thing to do. Anyway, we started giving really aggressively, January 1st, 2008 now keep in mind, chase, we had no idea we were about to plunge into the darkness, the great recession, we assume the little bumps we had gotten in 2007 were already the worst of it. We had no idea it was going to get much worse, and so we started giving aggressively. Four weeks later, I had this light bulb moment where, which I think was connected to the given and this completely revolutionary idea for how to subdivide some of my land, which was not dividable. The County approved it, surprisingly, which they admitted they’d never approved anything like this. And I was able to sell four of these five expensive waterfront lots that were the biggest drain on my finances for a large profit, right in the height of the great recession. And, uh, 13 months later we were completely debt free.

Chase Maher: (11:18)
That’s incredible. That’s a phenomenal story. We have some polar opposite similarities in that exact year. I’ll share with you that in a second, but what I’m hearing from that is you took a massive debt load and instead of taking, I don’t want to say the easy way out with bankruptcy, but the normal way out, you became resourceful. You figured out what you could do with what you had. [inaudible] just, I’m sure worked extremely hard and got creative and, uh, you know, there’s, there’s a similarity there with a lot of people that I’ve, I’ve heard of that, uh, get their out of debt, the creative, the resourceful way rather than taking the bankruptcy route and are polar opposites similarities. I bought my first rental property June, 2008. Wow. I was 18 years old. Uh, I was selling cars and I figured why not just buy a house that my college buddies could live in? It was house hacking before I ever even heard the term of house hacking. Right. And um, yeah, I had no idea about real estate markets or any of that and I learned a lot from it. I’m sure very similar to you learning a lot from your successes in that year. I learned a lot from my failures in that year and instead of, you know, short selling it or anything like that, I still have it to this day. It’s kind of my first Guinea pig, which is pretty,

Paul Moore: (12:35)
where is it?

Chase Maher: (12:36)
It’s in Norfolk, Virginia.

Paul Moore: (12:38)
Really? Okay. No, Norfolk took some big hits during the downturn but they bounced back, right?

Chase Maher: (12:44)
Yeah, it’s bounced back. I’ve got good amount of equity now and its cashflow in like a, like a true monster. So it’s actually a pretty good one now. So for somebody that may not have gone through the 12 different types of investing and they’re looking to get started. Now I understand you have a seven step process to get into commercial real estate. Could we go through that a little bit?

Paul Moore: (13:06)
Yeah, so a lot of people, like I said earlier, are confused how to get into commercial real estate. They want to get into large multifamily, they want to make the transition from duplexes to a hundred apartments or large self storage or mobile home parks and they don’t know how to get in. So we’ve come up and this is in my self storage book that’s coming out from bigger pockets, seven separate paths to get in. And since I don’t have notes in front of me, I probably can remember six of them. We’ll see. So path number one I call stacking now Brandon Turner came up with this term stacking is, well I’ll just give you an example. I met a guy in Arlington, Texas, which is a Dallas suburb. In 1993 he got $1,000 bonus from his job as a mechanic and he went out and bought a duplex. Somehow or another, he talked to bank and the letting him do a duplex for $1,000 down. It was only $27,000 in 93 somehow, and he fixed it up, rented it out and sold it for our 25 or $30,000 profit. You turned around and bought a fourplex, fixed it up, rented it out, sold it, and he, you know, made a profit and he bought a five or 10 Plex and then he went up from there. When I met him in 2015 he was selling an $11 million 132 unit apartment complex and moving on up from there to a, I think a $16 million one. And so that’s stacking. It’s the hardest, longest I would guess, most painful path. But it’s almost sure to work for almost anybody if they want to do that. If you want a book, although this book doesn’t talk about stacking specifically, the concepts are all over the book. It’s by Steve Burgess, the complete guide to buying and selling apartment buildings. So path number one, path two would be being a deal finder. No, I don’t recommend that at this moment in history. But being a deal finder would be linking up with a syndicator or a, you know, large deal maker and saying, look, let me go out and look for the deals. And then you either do direct mail or a phone calling campaign or drive around or you know, meet with brokers, you know, whatever it takes and you drum up deals and then you take the deal to the operator and say, look, I’m not a realtor. I don’t want a commission. You could get a commission if you’re a realtor, but I just want a piece of the deal and I want to hang in there and learn the business from you. Can I come to your office and walk through the whole thing with you? A step three or excuse me, path number three would be similar, but it’s a lot more dangerous and it’s a capital raiser. Now, capital raising right now has become a cottage industry, but the S E C has been pretty vague in their comments about it, but they’re not positive. And so you cannot raise money for other people’s deals unless you’re a principal in that deal. And so there are work arounds a lot of people are using right now, but bottom line is figure out a way to raise capital for other people’s deals and either get a commission. Again, if you’re legally licensed to do that or if you’re a principal or get a piece of the deal and again, hang in there and say, look, I don’t even want money. I just want to hang around and learn the business from you. And becomes such a valuable asset in these, on this path number two or three that the company wants to hire you and begin to pay you. Path four would be win the lottery, get a, get an inheritance, get a huge buyout at work and take your millions of dollars and just invest. Just jump in at a high level. Now, if you do that, I highly recommend you get a big team around you. I realize this as a for very many people, but B, being an active syndicator, just jumping right in. Get a property management team, get an asset management team. Be really careful. Do what you need to do to protect yourself and get great people around you. That’s not for very many people. Now step are, excuse me, path number five is a little similar and that is if you have some money, and this is actually probably my favorite path. I talked to people. Basically it’d be being an active passive or a passive passive investor. And so what I mean by that is this, if you’ve got some money to invest or if you have a well-paying day job, let’s say it or a dent, you’re a dentist or a doctor or a lawyer or you make a lot of money on your day job, stay focused on your day job, stay focused on your line. And then basically find a group, spend some time to vet a great operator or a great fund manager, invest with them. And then after you’ve taken the to vet them up front, the sum total of your effort, we’ll be walking to your mailbox to get your checks and your quarterly reports. And I really think many, many people who are spending nights, evenings, weekends, vacations, trying to find a house to flip or build up a small rental portfolio would be so much better if they did this. I asked them all the time, why are you working harder than you need to to make less? Then you could. So that’s the path I would recommend a lot of people go down. Path number six is get a job. Well, your audience doesn’t want to get a job, I’m sure, but a few people should consider the possibility of getting a job as an asset manager, a property manager, a commercial loan broker, or a commercial real estate broker. Those are four great jobs to work your way into the industry, to get the jargon down, to get the math down, to make contacts, do a great job, and you’ll get a chance someday when you’re ready to be an investor yourself. Path seven would be to get a mentor. They’ll get a mentor, has two sub pass, one is an actual mentor where you walk into, let’s say a a great real estate syndication company in San Diego or your town. And you walk in and say, look, I’ll work for you for free. I’m really good at whatever Excel or SEO or whatever it is, and you offer your services for free to them. And then you say, but I would love to learn the business and just hang around you. Now if you’re so good, if you’re really, really good, they won’t there. If they’re good people, they’re not gonna, you know, they’re not going to use you for free for very long. They’re going to start paying you and you might become a really valuable employee and learn the skills to become, you know, a partner someday. And the other sub path under this seventh path would be to get a paid coach. And we all know about paid coaches. Now they typically run anywhere from 10 to 50 a thousand dollars. I’ve paid $25,000 for a paid coach two separate times in my career. And they were some of the most profitable things I’ve ever done because I learned so much and it paid off in groves, uh, afterwards. But so those are the seven paths that I see to get into commercial real estate.

Chase Maher: (20:15)
Those are phenomenal. Paul, I really appreciate that. I definitely resonated with several of them. If you don’t mind, if I could just recap them just to confirm that I have them all down properly. If there’s anybody listening, they could, you know, here it for a second time. So starting number one, we’re talking about stacking. So that’s, you know, maybe buying a duplex, living in one side and then after about a year or two living in it, selling it, doing a 10 31 exchange into a fourplex, having that couple years, 10 31 into an eight unit, then into a 16 unit. Then maybe in a 32 or 45 a unit and then just going bigger and bigger and bigger from there. Number two would be a deal finder. This would be what a lot of us call boots on the ground where you’re going around, you’re networking, you’re finding deals, you’re finding opportunities for the people that have maybe the knowledge and the money you’re, you know, doing sort of the grunt work of finding them, the deals, learning how to underwrite deals for somebody that wants to be a deal finder. Because this is a realm that I’ve spent a lot of time and I would highly recommend understanding what types of deals the people you want to find deals for or looking for so that you don’t become what we call, you know, time-wasters where you’re just wasting the operator’s time by sending them deals that don’t make sense. Number three, a capital raiser starting a fund. This is something that Paul is extremely knowledgeable and so if you’re interested in this, I’m sure you could follow Paul, read some of Paul’s books as number four coming across a huge amount of money and building a team. This would be somebody that might be pretty savvy in business and they kind of have some knowledge. You could probably tie number four and number seven together and start something really strong. Number five would be active, passive or passive passive. One note on this, Paul, I really, really agree with you. There’s a lot of people in my audience or in my friend group or my network that are making a lot of money with e-commerce, Shopify drop shipping and they always tell me they want to get into real estate and I always tell them instead of you going out and doing it and failing super hard, doing what you’re a pro at, keep doing what you’re amazing at and just give your money to somebody like that Paul or give your money to somebody like myself on certain flips that I do where I’m looking to raise capital and and have that more active passive approach. So I really liked that. Paul. Number six, get a job in real estate. The four that you mentioned were commercial broker, commercial lender, property manager, working for an asset manager, and then number seven, finding a mentor. Those are really phenomenal steps. Paul, thank you very much. So if we were going to transition now into the type of asset class that you are really keen on, it sounds like you’re not super hot on multifamily. When I heard your talk, I got to say I was a little crushed because I’m currently stalking right now and I’m like, man, maybe I’m stacking in the wrong asset class. What would you, you know, we talked about it a little bit on the phone, but if we were just supposed to, uh, if we were, you know, supposedly going to have that conversation again or quickly review the asset class that you are super hot on and how to get into it, what would that be?

Paul Moore: (23:25)
Well, I want to be clear, I wrote a book called the perfect investment about multifamily investing. So I still really believe in multifamily. The problem chase is that 93% of multifamily properties above 50 units are owned by companies, corporations who have typically run most of the value in the value add opportunities out of those. Now there’s a situation and I, this is the first podcast I think I’ve ever said this so clearly on because it’s just dawned on me this week, how powerful of a situation where it, there is a situation right now where there self storage and mobile home parks and there may be others I don’t know about have a a lot of mom and pop operators on the selling side and a lot of institutional buyers on the buying side, but the problem is there’s a big gap between the two. Okay. Mom and pops typically don’t have a website. They just, you know, had the, if you’ll bill, if we build it, they will come attitude. They typically don’t maximize the value. For example, a self storage place might have an acre or two or 10 you know, vacant that they just do nothing with or they park our V’s on so that they’re, the mom and pops don’t maximize in any way. They don’t, they don’t have you holler Penske, you know, which is a huge value, huge to almost every self storage facility. Now on the other side, you’ve got these institutional buyers they’re looking for to write large checks and they don’t do that with the mom and pop. And they’re looking for a stabilized assets, assets that already have all the value already built into it and they’re just looking and they’re willing to pay a premium for that. So the perfect situation right now is for an operator who’s willing to bridge the gap. That would be an operator who will go in and pay a fair price to many of these retiring mom and pops by these mobile home parks, self storage facilities and upgrade them, stabilize them, add, you know, maybe add capacity, add the you hall or a parking, you know, paid parking area, whatever it takes and get them super stabilized, put a portfolio together and then allow someone like Sam Zell to come in and pay a premium for these stage, this portfolio stabilized assets. And when I’m talking about a premium, I mean it is a serious premium just in some cases to sell to an institutional investor like a writ or a life insurance company or a pension fund. And so that opportunity is what we’re taking advantage of right now. It won’t be there forever. I mean I am stunned by the prophets that some of the operators were investing with are getting, I mean I’m talking about people doubling or even tripling the equity on many of their deals within one to two years. This opportunity won’t be there forever. That that was an opportunity. There was opportunities like that in multifamily but they’re few and far between these days so those are some of the, that’s the strategy we like. I haven’t drilled down on why I love mobile home parks and self storage yet and I can do that if you want.

Chase Maher: (26:41)
Yeah, I am. I am like super interested in hearing that and I bet there’s people listening right now that are like, yes, please tell me what I should be focusing on so let’s just jump right into it. Why do you love them so much?

Paul Moore: (26:53)
Okay. I’ll summarize these in if anybody wants to get more information, I can provide you with a special report you can send out to your listeners.

Chase Maher: (27:03)
Paul, we’re going to link exactly how the listeners can get these special reports. I’ve read both of them. They’re phenomenal. We’re going to link those in the show notes.

Paul Moore: (27:12)
Okay, great. Thanks. So mobile home parks, it’s the only asset class we know of that has a shrinking supply and an increasing demand every year. Now there’s about a hundred less mobile home parks than the year before every year and there’s only 40,000 in the country we believe, and about 90 44,000 about 90% are owned by mom and pop owners. Yet there’s a huge hunger from people like Sam Zell who offloaded 23,000 apartment units and is now a eagerly snatching up mobile home parks. You just paid 50.3 5 million for a mobile home park in the Everglades. It’s really rare to get one that large 612 lots. And so the, usually they’re buying things that are stabilized in a portfolio fashion, but, and then he write a 10,000 people a day are turning 65 chase, but unbelievably six out of 10 have $10,000 or less saved for retirement. Now, a lot of them have home equity though, and they’re willing to trade in that home equity for a mobile home and a two to $500 lot rent per month to lower their expenses and enjoy their retirement. That’s legit. There’s also an affordable housing crisis in the U S you know, almost all the apartments and homes built are, you know, expensive class, a AAA plus whatever. And uh, it’s really hard for people to find an affordable housing and a whole lot of markets. And so mobile home parks are the perfect place for them to go and think about it in a recession, people are downsizing and they’re often downsizing into a mobile home. If they can’t afford mobile home park lot rent, they’re typically going under a bridge. And so it is the lowest rung on the housing ladder. And so it’s a catchall for a lot of people who are in temporary or longterm tough situations. And one other thing about it is that it’s very hard to leave a mobile home park. I mean, if I go in and buy a mobile home park and lot rents are $50 below market and I raise the tenants lot rent, $30 this year and maybe 20 next year to get it up to market, well they’re probably not gonna spend $5,000 to move that mobile home down the street to save 30 bucks a month and 10,000 maybe if it’s a double wide. So the tenants are very sticky. Now I will want to, I want to put a caveat here that doesn’t mean we should take advantage of the tenants. Quite the contrary. We should be trying to give them the best value we can at a fair price. Now self storage has a little similarity. Tenants are very sticky when they’re downsizing and a bad economy, they’re downsizing from a 4,000 to a 2000 square foot home or a 2000 square foot home to an apartment. They need a place to store their stuff and they can do that for a relatively small price in a good time. Like now people are filling up their Walmart or Amazon cards and they need a place to store their stuff or run their business out of their own. You know, if someone has the Shopify business you mentioned, so there’s a lot of reasons that self storage is very sticky. If I’m renting a thousand dollar apartment to you and I raised the rent by 6% you’re basically contracting with me to pay $60 more a month for a year. You may not want to pay that $720 but if I raise your rent on a storage unit, I’m renting you for $100 a month. If I raise that by 6% you’re probably not going to take a Saturday, get a, you all get your friends together to move your stuff down the street to save $6 a month. Especially when you’re on a month to month lease and you’re thinking, am I going to be there three more months anyway? And of course three years later you’ll probably still be there. So self storage has done very, very well during the recession and since the recession, mobile home parks have as well. I do believe however chase in the next recession, self storage in certain markets that are overbuilt, we’ll have some pickups. I don’t think mobile home parks will have any at all. And just real quick, I have a couple of notes I want to ask you about, but you piqued my interest. How would I know or how would we know which Marcus, how could we analyze her project? Which markets are overbuilt? I go through four or five criteria in my special report and in the book that’s coming out, but a couple of high level criteria. Number one, the average where feet of self storage per person in any given radius in the U S let’s say pick a three mile radius in a suburban area, draw a circle, three mile radius and you can count the number of men, women and children and you can count the square feet of storage and there should be approximately seven square feet of storage per person if you’re running around average. So if you go in that area and you look and there’s 12 square feet of self storage per person, like I saw a deal in Colorado recently, that’s probably overbuilt. It’s probably not a place you want to be. But if you go into a like a place around Minneapolis where we are actually investing in a ground up self storage and there’s one or square feet of self storage in a three mile radius per person, then you’re thinking, Hey this is under supplied. This is a great place to be especially, and this is my second point. If the zoning laws prohibit new development or make it very, very hard for new development. The third criteria is you want to be on a large main road with high vehicle count. You know like let’s say 10 20 40,000 cars a day would be great. And then a fourth criteria would be you want to be very visible on that road, which is kind of obvious. And then the fifth criteria I’d mentioned is you want to be in a generally decent too high income area where people can afford the luxury of self storage. You definitely don’t want to be in a below average income area.

Chase Maher: (33:32)
Amazing man. You’re dropping some serious knowledge here. I really appreciate it. Two of my favorite things that I found when I was looking at mobile home parks and self storage was one which is common with the both of them is expenses are relatively low. You know with multifamily you told me a horror story about a plumbing issue, but you have all kinds of maintenance issues and the, you know, every time a tenant turns over you have interior cosmetic issues. But with mobile home parks for the most part, you’re really owning the land and leasing that out. There’s not much maintenance and your owning usually 30% or less of the actual mobile homes. So the expenses are very low in both of those. Can you, you know, confirm or deny if that’s true.

Paul Moore: (34:18)
Yeah, so the goal chase is to own no mobile homes. In fact, every good operator I’ve ever talked to feels that way. I realized there are small segment of people out there that still buy mobile homes and there is a model to do that. I really thank that. Almost everybody I’ve talked to, including me, I’ve owned four mobile homes in my life and they were three of the four were the biggest disasters of any asset I’ve ever owned. So I don’t recommend owning the home, but the cost is relatively low. The cost to manage the dirt, if you will, in a mobile home park is average 3.6% of revenue. Okay. And that’s the capital expenditure. I should be clear.

Chase Maher: (35:04)
Are you reading this right off of one of your, uh, your investments P and L reports?

Paul Moore: (35:09)
I quickly flipped to my, a mobile home park special report. That’s why I put my glasses on here. So awesome. 3.6% capital expense. And that, again, you’re talking about dirt, Gates, fences, some electrical connections, some, you know, utility connections, a clubhouse, sometimes a pool, 3.6% capital expense as a percentage of revenue. Self storage is only maybe percent higher at 4.7%. Compare that to multifamily at a whopping 12.2%

Chase Maher: (35:48)
amazing. And then to wrap us up. My favorite, I like like these little, they’re probably not even that significant but sometimes I just wrapped my head on like little cool features of an investment just cause I’m an investment nerd. But self storage, I love how you mentioned because the, the cost to the tenant is so low that if you raise the price six or 10%, it doesn’t really impact them that much. But in terms of your P and L is the owner and an investor, it increases your margins significantly. But also you can be putting there, there are lease payment month to month on a credit card, which is one of the only asset classes that you can put it on a credit card, which makes it even more sticky for the, uh, the tenant to not cancel. Is that true?

Paul Moore: (36:35)
You know? Yeah. We, we invest with a company out of Georgia and they were, they were talking to a doctor one day and they were telling them that they use credit card and ACH debit card and the guy looked alarmed and he said, Oh my goodness, I’m going to invest with you. And Chris, my friend said, what now? He said, well, I just realized I have a self storage unit. It’s been hitting my credit card for seven years and I just forgot until just now. And that right after that we went down to um, uh, where was it? Somewhere in North Carolina, Raleigh, North Carolina. And we met with a mom and pop owner. We were considering buying their facility. We didn’t, she said, she kind of proudly said, I don’t nasty around with credit cards or debits or bank stuff. I just take cash and checks and we’re saying good, good. You know? Yeah. Um, so that’s another, uh, you know, some symptom of a mom and pop. They don’t have, you know, good financial things in place and they don’t do that. They say the funny thing about self storage is you want to be in the front of everybody’s mind and the community until they become a tenant and then you want them to forget that they have their stuff there.

Chase Maher: (37:49)
That’s amazing. I love that. So Paul, if you could just share, because we’re going to link it in the show notes and we’re wrapping up now. Share the title of you said, I know you have a book already out, you have a book coming out and then a couple special reports that we’ll be linking in the show notes.

Paul Moore: (38:05)
Yeah, you bet. So I have a book called the perfect investment and basically it’s how to achieve a multigenerational wealth as a result of the historical shift to multifamily housing. I’ve got a book that’s tentatively called, the book on self storage with bigger pockets publishing. I have a PDF of that complete, but I don’t think I can share it yet because bigger pockets is about to publish it. I’m working on a book with a couple friends called Warren Buffet’s rules for real estate investors. We’ve got about 14 chapters out of 30 Don Morgan. James publishing has already agreed to publish that book, so we’re excited about that. That should be coming out in 2021 and the special reports, our special report on mobile home park investing and a special report on self storage investing.

Chase Maher: (38:59)
Incredible. And Paul, the name of your podcast is a wealth building podcast called how to lose money, how to lose money. That’s such a good name and what is a way that somebody could follow you if you know they’re going to subscribe to your podcast for sure. But as it Facebook, Instagram, YouTube, LinkedIn or just by email, what, what do you prefer?

Paul Moore: (39:21)
Yeah, I mean the best way for people to reach out to me would be at our website, which is Wellings capital.com. That’s w E L L I N G S C H P, I T a L Wellings capital.com. And if you want the resources I just mentioned, you can get those by putting a forward slash resources on the end of that. Uh, if you want to follow me on bigger pockets and pretty easy to find.

Chase Maher: (39:49)
Awesome. Well, Paul, I really appreciate it. It’s been one of my favorite episodes. Thank you so much for taking your time and coming on the show. And, um, I know that the audience is going to really enjoy it.

Paul Moore: (39:59)
Thanks, chase. It was a real honor to be here.