On self-storage strategy, getting my first client, and my investment philosophy
Buying individual stocks is stupid
Hey friends,
I hope you all are having a great week! I had a great weekend. New Jersey finally lifted the mask mandate, so it’s safe to say that bars are finally back at the Jersey Shore.
Welcome to the 2 subscribers who have joined us since last Wednesday! Join 428 curious folks by subscribing here:
This week in stuff I accomplished…
On self-storage…
Connected with 2 brokers
Connected with 3 possible lenders
Shut down a deal that was producing 12% cash on cash (I’ll explain later)
On Austin Inc…
Narrowed the scope of my core service (email marketing)
Began working with my first client (my good friend who owns a Crossfit gym)
On investing and financial freedom…
Developed a budget to help me manage my finances (I’m giving it away to all of my subscribers here for FREE)
Learned how to leverage money in your retirement accounts before retirement age
Explored why individual stocks are terrible investments
Alright, I feel like I have a lot to talk about, so let’s just dive in.
On self-storage
This week was eye-opening; in a good way. We passed on a deal that was generating a 12% cash-on-cash return. Why? Two reasons; the owner did not own the real estate and we couldn’t figure out a financing strategy that made sense. Let me explain…
Self-storage is a great investment because you can own real estate (an appreciating asset) and a business. Real estate makes it an appealing investment for banks and investors and the business gives you an opportunity to make more money and add more value.
With the property we were analyzing, the owner did not own the real estate. He had a landlord. This meant that the landlord could raise rents eventually and totally screw us. For these reasons, we realized financing would be much more difficult. We also consulted with a few lenders, and they told us that it’s much more difficult to secure a loan for a storage facility without real estate than one with real estate. For those reasons, we were out!
Besides passing on what seemed to be an amazing deal, we made some great progress in building relationships with some of the best brokers and lenders on the east coast. However, after analyzing our first deal, we realized we might need to revisit our strategy.
Previously, our strategy was focused on building relationships with brokers and having them help find our deals. This doesn’t make sense. We are looking for our first storage facility, and we don’t have cash on hand to lock it up. Anything a broker is sending to us, he is sending to other investors (most of which have the capital to deploy on hand). The bottom line is, even if we had an amazing broker who was bringing us good deals, we wouldn’t be able to move nearly as fast as our competitors. Therefore, we are changing our strategy. Moving forward our plan is to…
Identify a market that makes sense
Create a list of all the self-storage facilities in that market
Cold call 2-3 facilities every day
This strategy gives us a competitive advantage over other buyers. While other buyers are relying on brokers, we will be contacting owners directly, therefore getting to the deals first. That way, if a deal makes sense, we will have time to negotiate and set up financing.
After a few months in the self-storage game, there is one thing that matters; securing that first deal. We are working hard, we are learning a lot, and we are going to get it. It’s just taking a bit of time.
On Austin Inc.
Great news. I landed my first client! I am going to be helping him create a funnel that converts free class takers to full-time members.
Don’t worry. I’ll share my journey and learnings and all that stuff here.
Stay tuned.
On investing and financial freedom
FREE budget tool for financial freedom
Last week, I developed an excel sheet that tells me how much money I would have per year, per month, and per paycheck, if I maxed out my 401(k), maxed out my Roth IRA, and saved around 10% of my income. I figured I’d be left with nothing, but I was pleasantly surprised that that was not the case.
Get your FREE copy here.
I’ve already shared it with 3 other subscribers, and it’s really helped them out. If you have any questions about how to use it, or how to modify it for your specific financial situation, I’d be happy to help out. Reply to this post with any questions!
How to leverage your retirement funds, before retirement
Did you know there is a way to personally manage your retirement funds? I didn’t… It’s called a self-directed IRA. Self-directed IRAs allow you to invest your 401(k) contributions or Roth IRA contributions into your own assets; real estate, cryptocurrencies, small businesses, etc.
So, instead of throwing your retirement money into a mutual fund, you can invest it into something you may be more confident in. For example, if I knew that investing in a self-storage facility could net me 25%, compared to the average 7% from the S&P 500, I might consider investing in the self-storage facility.
This is not something I am considering doing (at least not yet), but it is something interesting that I will definitely consider in the future.
Based on my research, you should not invest in self-directed IRAs unless you are confident that the assets you are investing in will give you a certain return. Typically, self-directed accounts have higher fees as well.
I’m currently working on putting together a post all about self-directed IRAs, but for now, check out this link for more information.
Stop picking individual stocks
If you’ve spoken to me about investing, you know I think picking individual stocks is the single stupidest thing you can do. I am working on a full blog post about this, but I’m going to share a tidbit to tell you where I am coming from.
If you want financial freedom, the first thing you need to do (for most people) is max out your retirement accounts. If you’re like me, invest your retirement accounts into index funds. Read my last post to learn more about my specific asset allocation.
After you’ve maxed out your retirement accounts, THEN AND ONLY THEN, begin exploring other investment vehicles (probably not investing in individual stocks). Why? If you’re like me, you want to make the most money you can with the least amount of risk. Picking individual stocks is too risky. Why?
To make a smart investment, you need to understand the value drivers. To understand the value drivers, you need to understand the business. To understand the business, you need to understand the leaders. To understand the leaders, you need to know them better than they know themselves and their business.
You tell me… Let’s say you were considering investing in Tesla. You need to ask yourself…do you know Elon Musk personally? Do you know how he operates under uncertainty? Do you know who his network is? No. You don’t.
It all comes down to understanding the person who is running the business. If you know them, you know how the business is actually performing. The news will tell you to invest in Amazon, Netflix, etc. Why? Because the more it moves, the more they can trick you into buying more, the more publicity they get. The more publicity they get, the more money they make.
Investing in the stock market holistically is a great idea. Investing in the stock market individually is stupid.
More on this in later posts...
Wrapping it up
Damn. Well, now I’m all fired up about stocks. I can’t wait to dive in and share more!
Thanks again for tuning into another post. I appreciate every subscriber so much. Email me or DM me. I’d love to get to know you all.
Have a great week and talk soon,
Austin