149: Self Storage Investments with Jacob Vanderslice

According to industry experts, storage space is in high demand, and it's expected that the self-storage industry will grow in size and demand as the years roll by. In a detailed conversation with Jacob Vanderslice of VanWest Partners, a top-notch self-storage operator, the intricacies of this booming industry are delved into. Starting with a pivot from multifamily units to self-storage, Jacob underscored the potential profit margins and emphasized the gravity of meticulous expense and income management. The evolving role of REITs, with the mention of significant mergers involving giants like Life Storage and Public Storage, formed a key discussion point. Jacob also touched on the importance of additional revenue streams, such as tenant insurance and late fees.

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[00:00 - 10:26] The Resilience of the Self-Storage Market

• Jacob got started in real estate investing in 2005/2006 and has been unemployed in real estate ever since
• VanWest Partners launched their first fund in 2019 and is currently on their third fund with 40 facilities, 18,000 units, and 3 million square feet
• The pandemic greatly boosted the self-storage sector in 2020 and 2021
• Current market trends show a decline from those peak years
• Economic ups and downs both fuel demand in the self-storage industry

[10:27 - 21:31] Strategic Investment in Self-Storage

• Jacob's firm focuses on two main strategies: developing new projects and enhancing under-managed facilities, particularly those run by smaller operations
• By transitioning from third-party management to self-management, Jacob's firm achieved a 40% increase in net operating income within a year
• Jacob advises investors to analyze the supply ratio in the self-storage market and to understand local rent rates and demographics
• For potential investors, Jacob emphasizes vetting the track record and transparency of the sponsor or partner, stating it's as crucial as the asset class itself

[21:32 - 28:53] Inside Self-Storage: Mergers, Revenue Insights, and the Philanthropic Heart of VanWest Partners

• Jacob highlights the merger of Life Storage and Extra Space, reshaping the self-storage landscape
• He underscores the importance of various revenue streams in real estate, including tenant insurance
• Jacob cautions against trusting predictive models too much, sharing personal business challenges
• Philanthropically, Jacob endorses Big Brothers Big Sisters and celebrates Denver's Craig Hospital Foundation's work

Quotes:

"The model always lies. The model will tell you whatever you want it to, and the deal never goes like the model says it will. It either goes better or it goes worse." - Jacob Vanderslice

"So much of the value creation in commercial real estate investing is about controlling expenses and growing top line revenue which equates to net operating income growth." - Jacob Vanderslice

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