Self storage has historically gotten a bad rep for being on the low end of real estate holdings, and while there are still more mom and pop highway storage facilities than ever, professional real estate investors recognize how partnering with operators in ground up self storage development present a bounty of opportunity for interested real estate investors. In this discussion, we cover the finer details and important questions to consider when rating this asset class against others onsite with my good friend Arthur Hood.What's happening, Arthur? Not a lot. Good morning. I appreciate you going to the extreme trouble that you've gone to to create this opportunity for you and I to speak to one another. That was easy.It was easy.I already have the office, soyou know, we got the space. We've got the opportunity. And we definitely havethe topic today. But Arthur, before weget into the topic, I want to frame theconversation for you around this avatarthat we've created named Stuart. Stuartis a character that we dreamt up torepresent the investors that are mostlikely watching this program today. Andmost of them listening have built somewealth in the stock market, but they'vegot capital gains. They definitely havetax exposure. and they're starting toask a very basic, simple, but incrediblyimportant question. Where does my moneygo next? So, today we're going toexplore an asset class that you are justan absolute expert at, and it's quietlyoutperformed like almost every otherreal estate sector for decades. It'sself- storage. So, Arthur, man, likeyou've structured more money in thesekinds of transactions than I can evenkeep track of. Do you have you keep arunning total ofI I started to look at it one day. Ithink just over between lifetime oftransactions probably just over abillion dollars.There you go. There you have it. So wewe'll just clarify that was a B billionover a billion dollars.Not a million.So that's industries but yes.So let me let me just ask you like so wesaid right like this this group ofpeople they're sitting on a stack ofRSUs right they've got the opportunityreally to create some leverage from theincome that they've created that'slargely sitting dormant sowe've in the capital shift what we talkabout a lot is this idea of needing tochange the way you think so that you canchange the way that you invest. So fromyour perspective when people arestarting to explore real estate as aninvestment vehicle like what's the firstbig mental shift that they need to make?Uh the the the first big mental shiftanyone needs to make especiallyswitching to a real estate investment isthat it's not a true liquid investment.There is a somewhat of a cost to get in,cost to get out as far as selling transor selling a property, buying aproperty, but long-term you're going toget depreciation, the ability to useleverage, which you really can't use inthe stock market unless we get intoleverage and a bunch of high riskinvolved in that, right? So you can do those items is thebiggest shift is if you've got a milliondollars in stocks, if you want a milliondollars in cash, you can have a milliondollars in cash the next day wired toyour bank account by day two. You can'treally do that with real estate.However, you can still get liquidity,but you have to borrow against your realestate. But then that's a that's atax-free transaction.And that, ladies and gentlemen, is whatmany of you are after. So, if thatcatches your attention, you're going towant to pay close attention to the restof what we're going to talk about today.So, a lot of times, uh, Arthur Stewartas a character, he's got a mentalconstruct that he needs to break downbefore he or she can really make thischange that you're describing. So, whatdo you think is the one big belief thatinvestors are stuck with that keeps themrooted in the stock market and reallynot considering what we're talkingabout? I think the one of the thingsthat keeps people rooted in the stockmarket is just the ease. It's click of abutton. They don't have to think or doanything. Real estate seems complicatedfrom the outside if you've never done itbefore. However, for me, I'm a lot morecomfortable with real estate. It's ahard asset. I can touch it. I can feelit. Um, regardless of what happens tothe US dollar, it will be paid for insome form or some currency. So, if thedollar was to ever just crash and burn,real estate will trade in some form of acurrency, gold, it doesn't matter, butit'll it'll maintain its value.Amen. And if you haven't givenconsideration to that thought, there's afoundational aspect for you to reallyspend some time thinking about uhputting into your favorite AI engine toreally spend some time in self-discoveryaround what this process might look foryou, but look like for you, but there'sdefinitely something to be had when itcomes to this. All right. So, myth isbusted, but let's talk about the actualasset class of self- storage itselfbecauseI've I've watched some of your othercontent, you have some reallyinteresting perspectives on self storageas an asset class. So, when the listenerwhen the watcher first hears selfstorage, for me, I can remember when wefirst were considering this asset classwhen you were talking about it and wekind of wrote it off. It's like whywould that be an interesting or valuableasset class? So for your perspectivelike why does that reaction cause peopleto miss that opportunity?I think a lot of it's because whenpeople think of self storage they thinkof the old rollup doormakeshift building on the side of thehighway in a small town, you know, 20miles from where they live. They don'treally see the new generation 5 climatecontrolled facilities that look like a amedical warehouse. They're beautiful.They're done very well. Concrete floors,stainless steel in the walls,everything's climate controlled. Andthey also don't realize, you know, ifyou live in an older home, um, youprobably have a fair amount of closetspace and some attic space, but if youlive in a newer home or an apartment,the builders were never reallyincentivized to provide a lot of spacethey weren't going to get a premium for.So, there really isn't that much storagein a lot of new in new places. and andpeople on, you know, in their 30s and40s and younger and older all havehobbies, whether it's hiking, kaying,skiing, working out, whatever, bikeriding. So, everybody has things thatthey don't have room to store at homeanymore, especially if they live in anapartment or a smaller starter home.They've got to have somewhere to storetheir stuff.Absolutely. And what we've noticed ishome ownership from firsttime homebuyers, it's taking them longer andlonger and longer to actually be able tobuy their first home. So, they've gotsome more disposable income in manyinstances because they haven'tnecessarily found themselves pressuredinto saving for a down payment justpurely out of belief that they're notgoing to be able to be a homeowner.Secondarily, we're starting to see a lotof build directly to rent product that'shitting the marketplace, which is justgoing to be a continuation of whatyou're talking about as far as thebuilders not really being incentivizedto create storage space for the peoplewho are moving into that produc...
