REAL ESTATE

Financial Independence at 29 by Quitting Rentals to Invest in THIS


Do you dream of building a real estate empire and reaching financial independence but stop short due to the tenants and toilets problem? The irony wasn’t lost on twenty-nine-year-old Dillon Leonard when a renter accidentally burned the roof off one of his properties. This incident, along with several others, prompted him to explore self-storage investing as a way to escape residential rentals while still allowing him exposure to real estate.

Knowing little to nothing about this often-forgotten segment of the market, Dillon sought expert advice by taking local self-storage owners out for coffee. He soon took action on a 12,000 sq. ft. property for around $300,000 and tripled his investment in a year’s time. Encouraged, he scaled his portfolio over the next three years and now receives approximately $70,000 in gross monthly revenue from 800 units!

Dillon’s self-storage success story has allowed him to build a team and implement systems to run day-to-day operations. Not yet thirty, he now enjoys options that many twice his age wish they had, including potentially retiring from the fire department, spending more time with family, and leaving a property package as a legacy. Tune into this episode to explore the nuts and bolts of the self-storage industry as well as the inspiring mindset realizations that Dillon has experienced in his journey!

Ashley:
This is Real Estate rookie, episode number 414. How does a house fire lead a full-time firefighter to fire? That’s financial independence, retire early by age 29. My name’s Ashley Care and I’m here with Tony j Robinson.

Tony :
And welcome to the Real Estate Rookie podcast, where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today rookies, we have Dylan Leonard, a Kentucky firefighter who is no stranger to entrepreneurship from flipping cars in high school to GC in his own home to owning seven commercial properties all by the age of 29. Now, this new dad gave up residential real estate investing and took millionaires out to coffee to learn how to really grow his portfolio. So Dylan, welcome to the Real Estate Rookie podcast. This sounds super impressive, brother, and we’re excited to dig into what you’re doing to retire before 30.

Dillon:
Thank you guys for having me. I really appreciate the opportunity to come in today and talk about financial freedom and how my journey’s unfolded. I’ve been in several different things over the years and it’s kind of been a good journey. So I’m excited to kind of share that story and all the experiences that kind led me to where I am today.

Ashley:
Yeah, and I understand you had a transition from residential where you wanted to get out of it. What was that kind of nail in the coffin that you wanted to completely avoid and stop investing in residential real estate

Dillon:
To pinpoint it directly? There was one incident in particular, which was a apartment fire I had the day before, actually Valentine’s Day in the middle of an ice storm. And I had already kind of been leaning, getting out of the space. I did mainly c and d kind of commercial properties in the Louisville area, but I had one tenant in particular, I have worn multiple times, more or less that we didn’t want to have a fire due to some issues she was having pushing stuff up against the heater. And she kind of drove that nail herself on February 13th, whenever she burnt the roof off of a fourplex I had.

Ashley:
Oh my gosh. And so this was something that you were aware of and gave her notices to pull stuff away? This was an ongoing thing.

Dillon:
So the area, this was C and Dcon class properties, she kind of was one of those people that would sleep until about two o’clock in the afternoon. And on one day in particular, I had to go make a repair and she had pushed up a hamper against a heater and it was pretty much melting the side of this hamper. So I had actually woke her up and was like, Hey, this is what’s going on. And given her four formal notice and was like, we can’t, this is going to lead to fire. And about two weeks after that, she successfully pushed a couch up against the wall against that same heater and burnt the roof off of that.

Ashley:
I am hoping everybody was okay. Nobody got hurt in the fire. Oh,

Dillon:
Absolutely, yeah, no, everybody was fine. It kind of caught me off guard because her boyfriend actually had called me and said, Hey, Mimi’s kitchen’s on fire. And I was like, okay. I was like, how bad is it? And he’s like, well, you probably need to come down here. And then middle of the ice storm, I decided I was going to make it the drive down there. Wife wasn’t very happy about that anyway, and I had called one of the fire departments or one of the houses close to that that had some buddies on that fire engine and I asked em, I said, Hey, what’s kind going on down there? And yeah, they burnt the roof off, so went down there, sure enough, I mean they torched the whole thing. Everybody was completely fine, but it turned out to be a lot worse than what I thought. And that was kind of a turning point where I decided no more toilets.

Tony :
So what happens next with your portfolio, Dylan? You said the worst day of your investing career. Just give us the high level of where it kind of goes from there.

Dillon:
Yeah, so I mean at that point in time, it was all mainly small single family houses that had turned into Multifamilies, the monopoly. I had cashed in more or less my houses for hotels. In this case it was mainly four plexus brick buildings in downtown Louisville. So at the time I had three when this fire happened, there had already been a lot of issues with several different tenants, especially in that class between, I had one tenant that would be the nicest guy in the world to my face, but every about night around two o’clock, he’d drunk text me and just kind of berate me. But the next day we were best friends again. And then I also had another tenant that had moved into a unit and then decided to rent it by the room and do a little bit of arbitrage, but she was renting it out to homeless people and then taking and using our laundry facilities to run kind of a laundry mat.
So after kind of a series of events in that kind of realm, doing the c and d, I had to do that to get my feet under me because I mean, I’m blue collar, everything we’ve done is kind of stacked on top of each other. And we rolled money from one project into the other all the way back from me flipping cars and taking that money into houses and then into multifamily. So after that happened, I kind of decided, I was like, I want to stay in real estate. I enjoy this asset class. I don’t want to do anything that has tenants or toilets. So I started investigating at that point actually selfs storage and commercial properties. And I think about two days after the fire, I had actually posted for the first time on Facebook who knows anything about self storage, and that’s kind of where I started diverting my attention was into commercial properties.

Tony :
Well, Dylan, I’m excited to get into this. I always say if I buy something outside of short-term rentals or hospitality, it’ll probably end up being in self storage. So I’m excited to hear about the deal you found after this terrible experience with your house burning down. And we’ll get into that right after. A quick word from today’s show sponsors. Alright guys, welcome back. We are here with Dylan who was telling us how a fire and some crazy tenants were, what forced him to leave residential real estate investing. So Dylan, before the ad break, you mentioned that you posted on your Facebook about, hey, who knows anything about self storage. I guess walk us through that transition of how you went from tenants and toilets to self storage.

Dillon:
Yeah, so I was lucky enough that there was a couple guys in Louisville that were pretty heavily investing actually in self storage, George and Jay Bowman, both of which do a little bit of self storage and also Airbnbs here in the Louisville area. And I’ve always had this model that for me, the cheat code has always been, not necessarily, I mean I’m a big book and podcast person, but find the person in my market who is doing what I want to do and just invite them out for lunch or coffee. And that’s always been one of my things. I’ve joked I bought more millionaires coffee than they’d ever, the return on investment on that has been exponential compared to what I’ve bought. Margaritas and Mexican food, which everybody seems to love. If you invite a millionaire for tacos and tequila, they’re definitely going to come.
So I’ve done that multiple times and I was fortunate enough to kind of run into a guy that kind of just gave me the lowdown like, Hey, this is what we’re doing in self storage and this is kind of the numbers you’re looking for. So I got a real kind of quick crash course. I was lucky enough, I had kind a vacation plan too, so I bought every book that there is on self storage and read them all on vacation, which sounds really impressive, but at the time it was three and one was a 50 page pamphlet. So I read everything I could about storage and decided to just jump right into it. Luckily, one of my skill sets I had built on the ComeUp was wholesaling. So I took that same kind of wholesaling machine of finding off market deals and pivoted that towards self storage and was really fortunate to kind of hit a home run right out the gate.
I actually had two storage facilities I had found in about a 30 day period. One of ’em was 4,000 square foot and the other one was 12,000 square foot. I found the 4,000 square foot one first about a week before the 12,000, and I actually wholesaled the 4,000 square foot one and generated additional capital to roll into the 12,000 square foot one. So my cost basis going into that one was ridiculous. I think all in with repairs, we bought it for 2 75. We were all in for about 300,000 rates were about 20% of where they should have been in over a year. I had an appraisal done in that same property, appraised for 965,000. So I more than tripled the value in less than 12 months. So

Ashley:
Dylan, tell us about your first deal of finding self storage. Can you break down the numbers for us real quick?

Dillon:
Yeah, so the first one that I found, it was 12,000 square foot. The one that actually acquired, and like I said, all in was about 300,000. So I mean the price per square foot was well below replacement costs. And anytime you can buy anything well below replacement costs, especially in storage, as long as your market can hold it, I mean it’s a screaming deal. So

Tony :
Dylan, just really quickly, I just want to clarify that for folks that aren’t familiar with that phrase, what is replacement cost and what do you mean by that? Yeah,

Dillon:
So replacement cost is essentially, if you break it down, it’s exactly that. If in today’s dollars, what would it cost you to build that property? So most storage with me kind of doing a lot of my own general contracting, I could build a pretty good BC class property for about 40 to $50 a square foot. So in this case we picked it up for less than half of what it would cost me to build the same. So I mean, if I can buy something way cheaper than what it would cost me to actually build it, I mean it should be a pretty good deal right out the gate because it should always appraise for at least what it would cost me to build today.

Ashley:
And you did this one seller financing?

Dillon:
This one I actually bought, let me see here. This one I bought outright. And the reason being is because I knew that I could refinance this one roughly in a year, and we did, we pulled out a large amount of money, about 400,000 that we then rolled into other properties. So I kind of did a commercial bur on this property.

Tony :
Dylan, I think you touched on this a little bit using your wholesale skills, but how did you actually find and identify this property

Dillon:
When it comes to self storage and commercial assets? What I’ve realized is that especially in self-storage, it’s a consumer facing business. So there’s a retail side to it. Somebody’s got to answer the phone in order for the business to operate. So I mean, when it comes to self storage, the easiest way to get ahold of the owner is just a call and because somebody has to answer that phone. And what you’re looking for whenever you’re trying to buy a self storage facility for your own investment is mom and pop. You’re looking for somebody who picks up the phone and they’re there in the office every day and they’ve done it for 60 years and they just don’t know what to do as far as their exit or they’re tired of the actual operation of the business, but that’s what you’re looking for is mom and pop.
You’re looking for the person who actually picks up the phone. So I mean, that’s really where we pivoted with that. I started building a list. A lot of it was good old driving for dollars or virtual driving for dollars where I would take a map and draw a five mile circus or circus circle around the Walmart there and kind of find all the facilities that are within that radius. And then I would take and skip trace those or just call the number that’s directly on the sign out front and have a conversation with the owner and just tell ’em what I was looking to do. I was trying to get into that space and wanted to make an offer and it pans out pretty well. At the time the state wasn’t hitting nearly as much as a lot of states are with self-storage, but we got a really great response by just picking up the phone and calling the number that’s on the sign.

Ashley:
So Dylan, you purchased this property with cash that you had and now it’s time to refinance, and this is your first self-storage deal. What are some tips and tricks to rookie investors maybe wanting to do their first self storage deal to actually get that bank financing? I would imagine self storage financing is very different than going and buying a duplex and trying to get financing on it. Yeah,

Dillon:
It is in a lot of ways because self storage, the way I see it is actually a business with a real estate component. So a lot of times you’ll hear guys in the self storage space kind of call it a product. In a lot of ways, self-storage is a product, it’s a 30 day lease, but what you’re looking to do is answer all the questions for the bank way in advance of the time they have them. So when I present something to a bank, I think of every single question that a bank could come up with all the way down from debt service coverage to how vacant I can go and still cover my loans. And then I take that to the bank and I make a formal presentation. Even if they don’t ask for it, I’ll make a PowerPoint and just outline everything. And one of my strategies, and it’s always worked for me as far as securing financing, is to give way above and beyond what’s asked of me because in my opinion, if I look in experience because I’m young or that’s kind of the stigma, if I go ahead and I spend all this time putting them a package that they can’t have any questions because I’ve thought about everything, then it just makes me look polished that I have this whole presentation and I can say, look, I can buy this thing, it would cost me 50 bucks to build this per square foot.
I’m buying it for 25. I can go down to 30% vacancy or 30% occupancy and still pay your loan. And as of right now I’m setting at 70, 80%.

Ashley:
Yeah, that’s a great point is to putting together as much information as you can ahead of time and also getting it in a timely manner to the bank when they’re asking for this or when you’re sitting down with them, if they do have questions responding quickly, that’s great advice to give them more than they’re actually asking for because there are always those follow-up questions and it’s like, geez, I just went through a whole list of questions answering now there’s more and more. Because really most of the time you’re that middle person of the actual loan officer between you and the person actually underwriting the deal and it’s just the middle man going back and forth, back and forth. So talk more about the difference between buying a business with a real estate assets versus actually buying rentals. What are some of those differences? I mean,

Dillon:
One of the big things I would say for storage versus rentals is just unit count. Now, I mean as far as your price per entry, $300,000 for 97 units was my first more or less property that I had purchased. If you were to compute that into how many units you could buy per se in multifamily for 300,000 in my area today, you might be lucky to get four. So I mean one of the big kind of differences right away is tenant base. When you’re looking at a storage property, you’re looking at a property that has multiple 10, probably a hundred, at least a hundred tenants is what you’re really looking for. So instead of one unit going empty and you’re losing 75 to 50% of your occupancy, if you have a hundred units and you lose one person, you lost 1%. So I mean that’s a big thing is the diversification across tenants in storage versus single family is that you have a much higher pain tolerance of who can move out and you still be able to make cashflow.
It’s a lot more predictable, it can be slower. The average rental for us in self storage that we’ve seen over the past four years is at least 18 months. So I mean, we know when somebody’s coming in, they’re going to spend at least a year and a half with us, and it’s very predictable. There’s very kind of common trends that are in storage as far as time of year with your rentals or seasonality. So I mean a lot of it for storage in particular compared to residential rentals, it’s evaluated on a cap rate because this is an asset. Your comps are a little bit different because there’s not going to be as many properties in the area. So you’re really going to be looking for market metrics as far as how much storage can go in that area, how much storage is in that area, and then your competitors too, because unlike regular residential rentals where rentals.com or apartments.com, you’ll see the rental rate for an area with a tool like Rentometer or Rent Rental Menter, I always get that messed up. We’ll

Ashley:
Link it in the show notes.

Dillon:
Yeah, that thing. Yeah, so I don’t have to use that much anymore, but I always mess that up. But in storage, you’re looking for comps, you’re looking for who is your comparable person in the area and what are they renting a unit for, and can you rent it for more because you’re offering a premium or a better product? So in a lot of areas that I actually invest or third markets or third tier markets that are rural markets, and we’re the market leader because our big differentiator is that we use tech to allow people to rent 24 7, whereas the typical mom and pop, you had to meet them if you got them on the phone to begin with to get a rate, and then they had to unlock the unit. Whereas with our systems and processes, you can rent a unit instantaneously and get in the door. So offering convenience is another way to increase revenues kind of in that realm as well. So I mean there’s a lot of similarities, there’s a lot of differences.

Tony :
Dylan, you touched on the tech piece, and I want to really drill down deep into that because we interviewed AJ Osborne back on episode 340, and AJ talked a lot about how he was able to take a self storage facility and just by integrating some things like marketing websites, digital payments, et cetera, he could increase the revenue. But before we do, one thing you also mentioned that I want to talk about is the cap rate. And I think that’s one of the biggest reasons why we’re looking to get maybe a few more commercial properties under our belt as well is because the control over the value of the property is so much higher with commercial than it is with single family. And if I buy a single family home, even if it’s a great rental or short-term, the value of that property is always tied to comparable sales.
So what are the other three bedroom, two bath selling for in your neighborhood? And it doesn’t necessarily look at the revenue that’s generated by that, but when you buy a commercial asset, a boutique hotel like what we bought or a motel or a self storage facility, you’re obviously a big commercial multifamily as well. It’s always based on the net operating income and the cap rate. So as a quick example, let’s say that a commercial property has a hundred thousand dollars in net operating income. So all of your income minus your expense except for your debt service, that’s going to be worth 1.7 million bucks. And say I doubled the net income and I go from a hundred K to 200 K, I just doubled the value of the property to 3.4. Even if everything else in the neighborhood is still selling for the same, I just doubled the value of my property. And you said what? You tripled the value of this first one in a year, is that what you

Dillon:
Said? Yeah, the first one we did, we did exactly that. I mean, when we took over, all the units were the same 10 by twelves, and I think they were renting for 30 to $40 a month, and the market on that unit was at least a hundred dollars. We raised them all to 75, which was 75% of what the actual market demanded. And I think in the end we only lost about 20% occupancy. But when you run the numbers, I mean we would’ve had to take and almost go down to 40% occupancy in order to just maintain the amount of revenues that were coming in before because it was so depressed compared to what the market was. So I mean I bought it at 300,000. I would say it was probably worth that from a cap rate perspective. And then a year later, the same unit that they were renting for $30, the market standard is a hundred dollars and we’re a hundred percent full through the summer.
So that same property 12 months later appraised for 965,000. So I mean more than three x what I have bought it at. And then I was able to pull out a large portion of about three or $400,000 in cash, and I was still able to cashflow from $5,000 a month on one property down to $3,000 a month, but now I’m setting on $400,000 in cash, I can go buy more properties with. So I mean it was a grand slam on this first one. I kind of got lucky, but my strategy has always been quality over quantity. And that’s kind of what I hunt more or less is trying to find that one that is kind of that unicorn property that we can take the revenues way up and still be fair. I mean the people there, of course they complain. I’ve been there for 20 years and I’ve never had a rent raise. And I said, well, that’s why you’re getting a rent raise is because you’ve been there for 20 years and you’ve never got a rent raise. But we still offer them the same unit at a discount over the street rate. That’s what we’ve always done. If it’s worth a hundred dollars at the street, we’re usually renting it to them for 75 to $80, which is still more than fair. I mean, it just is how the industry is.

Ashley:
Well, Dylan, it seems like you been, you’ve had incredible growth with your portfolio and when we come back from the short break, I want to talk more about how you were actually able to do that and what are some things rookie investors can consider when wanting to get into self storage? So we will be right back after this break. Okay, you guys, thank you so much for sticking with us. I hope you take the opportunity to check out our show sponsors because just like you guys, they make this show happen. So we are back here with Dylan and Dylan. I am so curious as to what can a rookie do to actually start evaluating self storage? So right now, where are you at now and what was the timeframe from starting? What has been that growth like? Let’s set the table there.

Dillon:
Yeah, so I mean whenever I first kind of got into the self storage space, the very first one that I had bought was actually in July of 2021. So from then to now, we’ve really grown the portfolio. The very first property was that 12,000 square foot and 97 units. As of today, we actually have 800 units, 128,000 square foot spread across seven locations. So it’s really grown. I would say a lot of that has to do with an unhealthy obsession with the industry. I really love self storage, so I kind of all day live and breathe trying to find deals. I’m all about the hunt, but when I first took over, I was doing everything. And I’ve been very fortunate from the standpoint that whenever we got into storage, I found a really good deal. And then after that first initial one started looking, and I mean I had a drought for a year.
I turned my entire attention to getting rid of all of the fourplexes and trying to find more self storage. And I didn’t find anything from July until actually October of the following year. And then back to back between October and actually it was September to October, I closed a 38,000 square foot, 250 unit and then another 90 units that was 8,000 square foot that we expanded. So we went from 1200 units or 1200 square foot up to, oh gosh, what would that be? 60,000, 70,000 ish square foot and went from 97 units to almost 400 units pretty much overnight or actually a little bit over 400 units. And then I ran into a new problem, which was that there was no way with me being a firefighter that on the first of the month when rent was due, I could take care of 400 customers who were calling me because their credit cards jumped.
So I remember in particular one day I was at the firehouse on the first and I was like, ah, this’ll be fine. I’ll just get to the phone calls when I can. Super busy day. And I missed 72 phone calls. So I decided at that point it was time to build the team, and that’s when I started bringing in people to automate and delegate certain parts of the businesses. And that’s when I hired somebody to take over my phone calls and started working on the parts individually. So today it’s very different than when I first started. I mean, I was accepting cash payments and having to cash checks and call people and respond to emails. Nowadays, I kind of handle more of the financial side of the business and make sure that everything is operating smoothly. I’ve got a wonderful lady who takes care of all of our phone calls.
She’s fantastic. If she ever disappears, I’m going to have to go all hands on deck to find another person to answer the phone because we’re currently at 800 customers and there’s no possible way I could do that and run everything else. And I’m actually at a position now that I’ve hired somebody to help me with acquisitions, which in the beginning, I mean the first four years, there’s no possible way I could have done that. But it’s one of those things with all of my ventures, I started small and I learned how to do that, and then I kind of knocked over the next domino and kind of kept doing that until I got to a point that I could figure out what I’m doing. But the point of all that is that I took action to progress and I took small steps. I mean, I made giant leaps, but I prepared myself for those leaps by taking small steps that compiled on each other. So I mean, for any new investor, just getting out there and learning everything you can is very important, but taking action is the absolute number one thing that they need to do.

Ashley:
So Dylan, there was a time in your life where you’re working a full-time job as a firefighter, you are getting rid of your four units, your multifamily properties, and you are trying to source deals for self storage. What are some time management tips you can give us as to how you were able to balance all of this and how were you able to do that and make the time for all of this to happen?

Dillon:
Balancing is a complicated word. I wouldn’t say that I’m very good at balancing it necessarily. I bucket my time more or less is the best way to kind of do it. I’m very those people that whenever I focus in on something, I have to give it a hundred percent of my attention or else I’m not proficient in that. So a lot of it was just putting in the extra hours and stuff in the beginning. I mean, in the beginning I was working the fire department schedules 56 hours and then probably another 40 80 in the storage side of things. But as I kind of learned how to build systems and processes to replace what I had to physically do, that offloaded a lot of it. Nowadays I’m kind of at a point where I’m able to hire out and delegate certain things. But I mean that’s a big thing is taking portions of the business that somebody else can handle better and finding a system or a process that somebody can kind of take and take that over.
And the other thing is just not being afraid to ask for help. I’ve always been kind of a self doer, but once you get to a certain size of portfolio, there’s just no possible way that you can physically do all of the work yourself. And you have to rely on people and build teams and put trust in people. And kind of my thing, just being in the fire department and being in emergency work, I’ve always said people don’t surprise me. If they don’t let me down, then I’m actually surprised. So just knowing that people are always going to fall short of your expectations, but finding ways to put system and processes in place that they have something to fall back on in building SOPs so that you can hand off certain tasks, I think is a large portion of it. But I mean, in the beginning it was a much different model.
At the firehouse, I’d make runs all day and I’d taken set at the computer. Our free time was after eight o’clock. After eight o’clock after all the house chores and all the runs and everything were out of the way, then you’d have time to kind of do whatever you would want at the firehouse. So I spent a lot of my times from eight to 2:00 AM just doing what I had to do in the beginning. But I mean, that kind of grit built a foundation that allows me now to take those same systems and processes and build ’em into SOPs or standard operating procedures that I can hand somebody a checklist now and say, Hey, this is how this operates and this is what I want you to do. So I would say in the beginning time management was not good for me. When I was home, I tried to be home. My wife was very understanding. I mean, that was a fantastic thing. Now we have a baby who’s nine weeks as of Oh,

Ashley:
Congratulations.

Dillon:
Yeah, thank you. It’s our first child and it’s a big difference. I’ll say I’m super fortunate that I put those systems and processes in place so that I can now enjoy this portion of my life.

Ashley:
Tony had a very similar circumstance too, where he spent a lot of time building those processes to be home with his baby. Yeah,

Dillon:
Yeah. It’s the best thing you can do

Tony :
Laying that foundation so you have the time to take it where you want to take it. Now as we’re wrapping up here, Dylan, there’s two quick questions I want to hit with you brother first, and I think this is a question that probably a lot of our rookies who are listening are asking as well. But to go from zero to 800 self-storage units in a relatively short period of time, how were you actually funding all these? Was it all just kind of recycling that same capital and doing the burr, or were you getting seller financing? Just quick 32nd on how you were able to finance those?

Dillon:
Yeah, 30 seconds. I mean, it’s a variety of structures. It’s a mix of owner finance, sub two, and bank financing and burr. I mean, essentially I just built out the toolkit and every time I would look at a property that I thought could work, I would figure out which tool to deploy on that. So multiples of our properties we bought, then we took and fixed, we refinanced and then took and rolled that money into other properties, which would be Burr and then other properties. I was luckily enough to do an owner finance structure on where my biggest one that we ever bought, actually the 38,000 square foot one, the owner had owned it for multiple years and wanted to leave essentially the proceeds of that to his kids, but his kids didn’t want to run it. So I created an owner finance structure with him where they would have an assumable note and we put down 5% on $2 million. I gave him a hundred thousand dollars and locked in a 5% interest rate for a 10 year period because unfortunately, I love this man to death, but he’s like, I’m not going to make it 10 years. So he’s like, that’s why I want a 10 year plan is so that my kids can assume the note. So I would say listening to your sellers, yeah,

Tony :
It sounds like it’s been a variety, Dylan,

Dillon:
Just listen to the sellers. It is a variety, but the sellers will tell you what they want out of a deal, and you can use that information, whether it’s owner finance or cash upfront to give them what they want and get what you need in response.

Tony :
So one last question for me, Dylan, is can you give us an idea of the cashflow the business is currently generating with those units?

Dillon:
Yeah, so across 800 units, our very first property was bringing in $3,000 a month. Nowadays I collect a little bit over $70,000 a month in gross revenues. Now there’s a lot that goes into that obviously. I mean, that’s mortgages, operations. We pay people to actually run our physical locations. But I would say overall, a pretty good kind of general rule of thumb, the owner in the end should probably click, I’d say between 20 and 25% of whatever your gross is. So I mean, for me, that started off, like I said, just no money. And nowadays I’m at a point where I’m probably able to clear if I wasn’t reinvesting the money, probably between 10 and $15,000 a month in comparison to what I may at the fire department. That was a third of that. But I don’t collect that much either because I continually reinvest into the business.

Ashley:
So what does actually fire mean to you as far as leaving your job, being part of the fire community as to financial independence, retire early, what is next for you in that realm?

Dillon:
I think fire for me is really all about options. And it’s a lot about mindset. For the longest time as everybody is, they set these dollar goals of where you want to be in revenues, and then once you hit it, it’s kind of like cresting a mountain. It’s like now that I’m at the peak, there’s another mountain way off in the distance, and was this what I really wanted to do? So I think laying a foundation of what you’re trying to accomplish in your life and then working towards something great, but there’s also a very big portion now that I’ve at that level that I have to figure out what I want to do next. And for me, I really enjoy the acquisition side, so I’m going to continue to grow the business, but the people who work with me, I’ve given a lot more to them.
I’m kind of giving more to charitable causes and kind of diverting my energy into what I want to do next is more kind of a family approach and giving back to those people that have kind of helped me get to this point. So I mean, money isn’t everything and it’s hard to say when you’ve reached a point. People on the opposite side of the spectrum who are trying to make rent, I mean, is a completely different thing. But I’ve been in that position too. But I think there’s a deep spiritual, I am kind of one of those wee woo dudes that you have to find joy more or less in something outside of your financial ability. And for me, at this point in my life, it’s going to be able to be able to focus on my family and educate my kids and future kids. So I think a lot of it’s just kind of setting goals of where you want to go, but also understand that life is a continued journey. There really is no end. The only end is death. So you have to continually set goals for yourself, whether it’s financially or spiritually. I mean, there’s always going to be a next mountain to climb. And the sooner you realize that and accept it and make peace with the fact that you’ll never be at the top of the mountain, I think the better.

Ashley:
And that definitely comes into your personality too, as as an entrepreneur especially, it can be so hard to actually feel like you’ve reached the top. It’s just you keep wanting to do more. And it’s not that you always want more, but it’s just like there’s always so many opportunities and doors to go through and hoops to jump through that sometimes you just can’t stop that climb either. But I’m curious, Dylan, as you’re trying to grow and scale your business, what does your buy box look right now for the next type of properties you want to kind of tackle In the self storage realm?

Dillon:
Yeah, it is actually reduced. So that’s kind of an interesting thing is once you get to a certain level of business, you can kind of be more picky. In the beginning, if I could find something that cash flowed and it was 50% storage and the other 50% was apartments, I’d consider it. But I’m at a point now that the portfolio has grown to a point that I don’t necessarily have to do the next deal I want to, and a lot of that is that I want to grow the business and it’s an option for me. So now my buy box is completely different because I don’t have to make the deals to create that freedom for myself. Now it’s about growing a portfolio that I have a plan for. So I don’t plan to ever exit, but in the beginning I just find anything that flowed.
Now I’m looking for a very specific type of property between 15 and 50,000 square foot because that’s kind of the size that I can operate virtually without having to have staff on site. I like ’em to be in third tier markets where I can be the market leader. I stay out of your first tiers. For me, it would be Louisville or Lexington where your public storage and all your big players are, because I mean, they’ll squash you any day. They can just get money way cheaper than you ever can. So you want to be a market leader in a market that you can essentially control. So that’s why I go to third tiers. I used to look for anything 5,000 square foot or more, 15,000 square foot plus is kind where I’m at now just because of the cashflow and the amount of effort it takes to turn a property, it generates the amount of revenue that I want to see per it.
Plus also, it’s all packaged together. All of my facilities are in a certain size range. And when I ever decide to exit way down the road, which I don’t have any intentions to, I can take that package to a certain industrial or kind of a REIT level investor and say, Hey, I’ve got 30 properties in this state that provides this kind of return, and I’ve got the operations in place. I just need your people in these seats in order to take this over. So I’m now building a package, a portfolio that could be sold if and when I ever decided to because they’re all kind.

Tony :
What exactly does your due diligence look like within that buy box, Dylan? What are some things rookies should be looking out for as they’re under contract and vetting a deal?

Dillon:
For me, a big one, and I mean this can be, I don’t want to say taboo, I’m trying to find the word necessarily, but I have to be cashflow positive when I take over a property because it’s kind of like AJ Osborne will say that index of stupidity, if it’s making a hundred dollars a month and I’m a pretty good operator, that means that I shouldn’t be able to do anything that’s going to mess it up bad enough that I’m going to lose money for me. So my minimum is I want to make a hundred dollars a month on a property, but I’m looking for really the growth in revenues. I’m looking for a property that everybody else in the market that is not a grade A level operator is renting a 10 by 10 per se for 75 bucks and they’re renting it for $40, and it was really hard to get ahold of them because they don’t answer their phones.
So I’m looking to go into a third tier market where everybody else is not doing online rentals where everybody else is not using the tech piece. I’m trying to find the person that doesn’t answer the phones, the mom and pop that are tired of operating, then I’m going to buy for what it is, it’s a fair price and buy it somewhere hopefully between an eight and a 10 cap on that property. Even making a hundred dollars knowing that I can take and go in and become the top operator with that same property and take those revenues, the hundred x or well a hundred x or double the revenues. So I’m looking for big upside. I’m looking for value add properties that I can come in really from a management perspective and take a tired asset where somebody’s not properly running it and put my systems and processes in place that’s going to bring it to a grade A asset. Yeah.

Ashley:
The last thing I want to touch on here is your systems and processes. So you had mentioned SOPs and hiring a team. What are some of the first processes that a rookie investor should put in place when they’re buying self storage?

Dillon:
Honestly, there’s kind of a cheat sheet on this one. A lot of your systems and processes will actually fall back on what your state lien law is. So that’s a big thing that you need to know when you’re going into is that each state is different on the way that they handle liens and auctions on units that are delinquent. So that’s the first thing, is understanding what laws are applicable to storage in your state. Outside of that, once you understand what laws you have to follow, it’s really based on more of your customer service. So like our website portal, we use a system called Easy Storage Solutions, which is offered through storable. People can go on there and rent a unit, they can make payments on their account, they can take and add insurance products. So we have a very customer front facing centric kind of and friendly approach where it’s a very easy rental process.
And then on the back end, all of our notices follow the leann Mall. So once you understand what you have to follow from a legal perspective, then the outside of that, you can really kind of build out how you want to approach a customer from a customer service standpoint. So we have text to open gates, we have, they can call or text our office, which is really convenient. And over time, we’ve trained our tenant base. About 80% of ’em actually text us versus calls, which is a much easier way to communicate and also gives us a record of all our communications. So I mean, outside of what you have to do, it is really up to you how you want to operate.

Tony :
I’ll have to look into that because the motel that we just bought, there’s actually I think 18 storage units on the backside of the property, but we have no idea who stuff this is. No one’s ever come by and years, the onsite staff doesn’t know. So we’re thinking about revamping that. So I appreciate you sharing the tech. We’ll probably need to look into that,

Ashley:
Tony. It’s like a hidden gem, like, oh, by the way, I bought this motel and Oh yeah, it has self storage too. We literally, we’ve talked to all your motels so many times and now you’re just like, oh yeah, just in the corner over there. There’s 18 storage garages.

Tony :
We just haven’t done anything with it yet. Like we’ll just handle that issue after we go live. But now that we’re live, we want to get it up and running. So I appreciate you dropping these little gems for me. So I guess one more question from me, Dylan. We talked a lot about the cash cashflow you’re generating and this journey you’ve been on. Do you have a sense of when you might actually put in that notice to go full-time into your real estate business?

Dillon:
I’m a third generation firefighter. So stepping aside from emergency work, not only am I stepping aside from a job, I’m also stepping aside from a way of life and an identity. The fire department, especially Louisville, is very paramilitary. So when you go in, I mean they strip you in a lot of ways of your identity. You become firefighter Dylan. So it’s been a mental journey to kind of allow myself to separate from no kind of level, but with my daughter. I mean, just being here now and just being able to spend that time with my family, probably in the next two to three months, I’ll end up actually leaving the fire department just because I’ve gotten to a point with the revenue, having that time with my family and being able to be there for them and focus on what I’m doing and what I enjoy doing full time. As much as I enjoy emergency work and I’m stepping aside from that persona, I think it’s what’s best for me and my family moving forward.

Ashley:
What a great way to kind of close out the show here. And I think that is so important as to think of what that actual worst case scenario is, and when you’re taking those risks and is it really that bad? And the risk can be so much more rewarding, especially when you do realize that worst case scenario, you can start over and it won’t be as bad as you think it is, or what other people are telling you how bad it could be. So Dylan, thank you so much for coming onto the show today. We’re going to put Dylan’s information into our show notes. If you’re watching on YouTube, it’ll be in the description. If you love the show, make sure you please leave us an honest reading and review and follow us on your favorite podcast platform and on YouTube. I’m Ashley, he’s Tony. Thank you guys so much for watching Real Estate Rookie.

Tony :
This BiggerPockets podcast is produced by Daniel Zarate, edited by Exodus Media Copywriting by Calico content.

Ashley:
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony :
And if you want to be a guest on a BiggerPockets show, apply biggerpockets.com/guest.

 

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