Self-storage brokers, one of the most important things when dealing within the storage world. What’s up everybody, welcome to Self-Storage Income. And today we are talking about brokers. You’re in storage, maybe you have a storage facility, maybe you don’t have any and you’re trying to get into it from the first time. You’re prospecting, maybe you’re doing direct marketing, you’re doing all of these different avenues. Well, brokers obviously are one of the main avenues. But before we get into this, you gotta like, you gotta subscribe because that is the currency of YouTube. It appeases the YouTube gods and man, it really helps me out, so I appreciate it. Within self-storage, brokers are very unique. The reason being is self-storage, particularly its value and associated value, is very much predicated on two things, overall market demand and operations. So when we work and look with brokers, brokers make you or break you. And this is really, really important. Now, I’ve worked with a handful of brokers, but at this point, most of my deals came from brokers. Even if they were off market, they brought it to us. They have been the greatest resource for our company to grow, but also knowledge. When I got started in self-storage, I didn’t really understand self-storage. We didn’t understand all the mechanics of it. I got the fundamentals, right? When working with a broker, one of the problems that a lot of people have is, first of all, I don’t know what I don’t know. So a broker needs to be an ally and an educator. We expect brokers to have insight knowledge. A lot of people depend on them and lean on them, especially when dealing with expense ratios, revenue potential, and what is currently happening with that asset under contract. The other part that brokers play, which is vital, is actually getting that deal across the line, all of which brokers have been amazing and incredible to work with. I had a deal, I put up a conference for our employees to do training meetings up in the mountains. I get a call from a broker that I’d worked for for years. Answer the phone, I’m like, how’s it going? He’s like, great. Hey, I got this deal. It’s off market, it’s about to go on market. Told me basically three things, size, location, and why he thinks it is a rough, good deal. Said, great, send me over the documents. Let’s get it under the contract. This is the power of building those kind of relationships. The brokers in self-storage that get it are worth more than anything you pay them. And this is the big difference. Because self-storage is so specific on those two items, you really need to understand what’s happening within the market, future, present, past, as far as demand occupancy goes, what we’ve seen in rate history. You also really need to understand the competitors, so the competition, the operations, who’s being successful, who’s not, and why. This is a deep dive. This is the difference of being successful when acquiring a facility or a portfolio or anything else. Now, let me make this clear. I own over 2 million square feet of storage across the United States. We’ve been in this since the early 2000s. We’ve built, converted big box stores, office buildings. We are looking at where we should go and where we should buy. A really important thing that our business has been predicated is, I don’t care so much where it is as if it’s a good deal. I would rather go farther away for a good deal than close for a mediocre one. But this brings in another problem. There’s problems with going far away. You’re not there, you don’t understand the market, and this can be a big deal. That’s why a lot of people choose to go closer, especially for the first one. Because even though it’s mediocre, I wanna learn. We’re looking at going far away or entering in new markets. We bring in all these unknowns. This is one of the most important things with brokers. They bring in and gap our knowledge and understanding of that market and that asset. This is the biggest help when we’re moving into markets that we don’t understand. I may not see a proposition value, and I need the broker to tell me and to help me understand that market. So if we are predicating a lot of the decision-making on the brokers, you can obviously understand the importance of them, right? We get the information, we verify, check, do our own research. I’m not saying depend on anyone blindly. That’s just dumb universally. You never do that. But still, they’re gonna tell you things you don’t know, and they’re gonna be able to access, and we need to trust that information. So the quality of brokers and self-storage is just so important, probably more important than any other industry, because of the nature of the operations and demand and the value presentation. There’s lots of things going on in storage and storage markets. All right, when interviewing brokers, what should you ask? Interviewing brokers and understanding them and choosing the right one can make you successful or it can break you. The first step of interviewing brokers has nothing to do with what they have for sale. I tell people, you don’t go talk to a broker and say, hey, you got anything I can buy? Or hey, do you have any good deals? Worst questions you could ever ask. Well, to some people, all my deals are good. Others, 50% of them may be bad. I don’t know, what’s a good deal to you? What tools do you have? What experience do you have? What can you bring to the deal, right? So it’s important that not only you know the broker, but the broker understands you. So some of the questions that we like to kick right off the bat, what storage markets are you the most knowledgeable about? Let’s say you have all these markets of these regions of the broker. Which areas are you really knowledgeable about? What is your history within self-storage? Well, I met Bob and Bob has a storage facility, so now I’m gonna sell it for Bob. Okay, that’s great, but then I probably wouldn’t rely very much on what that broker has to say. That means he just stumbled upon it. Somebody gave him an opportunity to sell the asset. It doesn’t mean he knows anything about it. It doesn’t mean he specializes at all. That can be very dangerous for you. I can’t tell you how many storage deals that we’ve seen from brokers that approached the valuation like it was a single family home. And we have brokers out there that says, well, nationally, we normally see that you pay $20,000 a door. What? It doesn’t even make sense. That’s not how we value storage, right? So understanding what their experience is, knowledge is really, really important. The next thing we like to know and really dig down in is I wanna see what the broker’s philosophies are within the industry and the asset class. So I like to ask questions like, where do you see the market going? Why do you think self-storage is hot right now? Why do you think storage did good during the recession? What caused it? What are the downfalls? These are all questions that I wanna know. I’m trying to get inside his head and understand that if his philosophy around storage is the same as mine, that will dramatically change when he’s telling you a value proposition if you don’t agree on the basic value drivers of the asset in the industry. Next thing I wanna know is I wanna understand his awareness of the competition in those markets. I’m not in those markets, right? So the markets that you know and understand, tell me about the competitors. Now we’re talking philosophy, we’re talking about understanding of assets, understanding of general markets. I’m not talking about a specific project yet. So, okay, well, in these markets, everything, tell me about the competition. Does he know? Has he researched? Can he tell you if there’s pros or cons? This will give you a huge insight to the amount of homework that he’s done. And if he really understands when he’s giving you projections and things like that, if that can play out. Next thing I want him to tell us about this market is what new developments are coming. The reason being is I wanna see if he knows if he’s even done the research or done the work. So let’s say that a broker is selling you a project and he has all these performance or matches that you’re gonna be able to charge higher rates. And this guy only has 85% occupancy, but you can get 95% occupancy. Anytime they say that, I say, well, why can I? If he couldn’t do it, why can I? The point is I know why I can make an asset be successful or not, but how does this broker know if I can? If you’re just saying it’s there, but he’s not achieving it, you gotta give me some reasons why. Because you’re trying to pitch it and sell it, right? So are you just selling this thing or do you actually have reasons what’s going on and what’s happening? The one thing that we do, as you’re asking these questions and you’re digging into their knowledge and understanding the markets, I’m going and researching all of this. Normally, before I ever talk to a broker, especially if it’s about an individual deal, I already know everything about the market, but I still ask all these questions. I wanna see if they do. I wanna see where I need to dig into more of my research because of what has been put out, there’s a lack of fundamental understanding. I don’t want it surprises. I don’t want it to be unknowns. We also wanna know their overall experience. How long have you been in self-storage? Why are you in self-storage? Why did you choose to sell this asset? How long have you been doing it? What’s your track record? Give me your history, right? If he is selling a large indoor climate controlled facility in a city that has 150,000 people, has he ever sold an asset of that size in a market that size? Tell me about three, four other storage deals that you sold. If they are all 10,000 square foot facilities and there’s only two of them and they’re in cities with 3000 people, I’m gonna be very concerned about what I’m reading in that asset, because he’s never done it before. As you can see, you may have rolled into this video saying, well, I need to ask them for P&Ls. I need to ask them for tax history. I need to, which is, yes, of course, that’s all good and dandy. But for the most part, I expect brokers, especially good ones to know all this, which we have another video, which you can check out. And that’s questions during due diligence and the documents that you need to know. That’s a really good video. That is a list out of all of those things. But I have to understand if the broker can deliver, negotiate, and understands what we’re trying to achieve with that asset. There’s some brokers that we have a good relationship. And at this point, I’d almost buy anything that they brought my way. I know the markets they’re in. I know their understanding of the markets. I know they are on board with me on value proposition. We understand pros and cons. We sit down and all my discussions with brokers that we use a lot don’t have anything to do with individual products. That’s not what we talk about. We sit down and we talk about markets, what we’re seeing, what we’re understanding, right? When we’re talking about an individual deal, it’s because they send me a deal and say, hey, we have this deal. It’s a great one. This is why. I can trust him. He trusts me. He knows what I’m looking for. So he can go out and find exactly what I’m looking for and cater it to my needs. If brokers don’t know what you want, if they don’t understand the market, then people are spinning their wheels. He’s sending you stuff and saying, hey, I got this deal. Do you want to buy this? That doesn’t help anybody out. Brokers is both educational and opportunity. And you got to view them that way. If you want to learn more about self-storage, you can check out the number one self-storage podcast, Self-Storage Income. We go over everything. We go over numbers, management, markets, and invite the best in the industry as guests. Links in the description. Check it out.