The Top Investment Opportunity for Consistent Cash Flow with Sam Wilson

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Episode 21 • 2nd October 2023 • Truly Passive Income • Truly Passive LLC

Sam Wilson: 00:00:41

We're putting in eight years into exactly what we're doing right now. I don't see any deviation from that really at all.

And that's kind of fun to be finally in that position where it's different ways you guys do storage, but you're doing just storage. That is going to serve us really well.

Neil Henderson: 00:00:56

Welcome to the Truly Passive Income podcast. I'm Neil Henderson.

Clint Harris: 00:00:59

And I'm Clint Harris.

Neil Henderson: 00:01:00

Our guest today is Sam Wilson from Bricken Investment Group.

Sam is an active investor in self Storage, parking lot, multifamily apartments, RV parks, single family homes, laundromats, and he's the host of the how to Scale commercial real estate podcast that has over 800 episodes. And I just can't tell you how I'm impressed by that number.

Sam holds his bachelor's degree in business finance from the University of Memphis and his real estate license in Tennessee. In addition to his years of real estate experience, he also has diverse business ownership and management background.

Sam's current focuses presenting nationwide investments opportunities for his personal investors portfolios. Sam, I have to tell you, when I woke woke up today and I saw you on my calendar, I was like, today's gonna be a good day. I get to talk to Sam.

Sam Wilson: 00:01:46

we know each other back from: 2017

Of course I had the pleasure of meeting you here this past March at the best ever conference. So likewise, the feelings are the same. Always great to connect with you guys and your team there in North Carolina.

I'm looking forward to this as well.

Neil Henderson: 00:02:03

t the best ever conference in: 2017

Sam Wilson: 00:02:14

Bingo. You hit it right on the head.

Neil Henderson: 00:02:16

Yeah. And like all of us, we sort of drank from that fire hose of the best ever conference and sort of learned, oh, you know there's another way.

This syndication and just operating at scale.

And you guys, I have to say that it's been great to watch you guys on this journey of scaling and continuing to grow and having some curve balls thrown at you, which we'll get into. But I love your guys story. I always point out to people that you and Elizabeth were at lunch buffet table.

That changed the course of my life where I met my current partner Eric Hemingway and sort of got enamored with self storage. And it's a turning point in my life and I always remember it. You were There. And Marco Santarelli is a turnkey operator.

Sam Wilson: 00:02:57

Isn't that funny, man? How you can plan and you can work your fingers off.

And it's those little tipping points that you just can't predict necessarily that it's like, oh, that was an instrumental shift in direction, that of course you teed yourself up for it. You bought your ticket to the conference, you showed up, you put in the work to get there. You didn't know what was going to come of it.

I think that's the fun thing in life. You know what? I don't know. I don't know what I don't know. But we're gonna go see how this works out and then there you go.

So, yes, I remember that lunch very explicitly myself. Yeah, it's fun that we can look back on that because I don't remember a lot of lunches, but that one in particular stood out. So it's kind of fun.

That the high point for both of us.

Neil Henderson: 00:03:31

Yeah, absolutely. So from the high volume house flipping after that best ever conference, what was next for you?

Sam Wilson: 00:03:39

Yeah, so I stayed on the sidelines. I really just went to learn.

I mean, that was kind of in the early days of I didn't know what syndications were, I didn't know how raise capital, I didn't know anything. I was just grinding out. Like you said, high volume house flipping, especially here in the Tennessee market.

It meant I spent a lot of time at Home Depot in Lowe's and a lot of time on the phone running crews all over the state buying foreclosures, and it was just madness. So I did nothing, honestly, for the first year.

We went to best ever the second time and I said, look, I'm already bald, so I can't lose any more hair. I'm just tired of what I'm doing and I gotta find something that's gonna be my next asset class. And that ended up being parking. We met.

I actually listened to a guy there on stage talk about parking and I'm like, bingo. That is the exact opposite of what I'm doing right now, which is where you buy the asset. You plug in an operator and they run it.

And then your phone doesn't ring and you get an ach into your bank account once a month. And I'm like, that's it. That's the promised land. We're going there.

Neil Henderson: 00:04:34

That's the one. Well, and the show's done. Congratulations, you're a wealthy man from parking. That's the end of the story, correct?

Sam Wilson: 00:04:40

It is. Man, I made Billions on that and I am out baby I don't wish that were true I love the life of I lead.

ng, which was Great. This was: 2018

That made the parking numbers become harder and harder. Kind of your gold mine or service lots in central business districts.

Late: 2019

to: 2018

it all the way to January of: 2020

That was not the plan to sell them off. We just got ridiculous offers on them, sold them all off.

Neil Henderson: 00:05:39

Good timing.

Clint Harris: 00:05:41

Yeah, you thread the needle on that one.

Sam Wilson: 00:05:43

Threaded the needle, right. And so divested of what we owned. And then the pandemic happened and it killed parking.

So I'd spent about two years researching markets, traveling all across the eastern half of the United States. I can tell you back of my hand, almost every city in the eastern US Outside of like New York City and places like that, because I did. We just didn't.

Weren't buying in those, but traveled to all of them, mapped every parking lot in every single city and like knew the owners and had the list. And then the pandemic happened and just kick parking right in the teeth. I mean, think about it.

Nobody's going to ball games, nobody was going to events, nobody. I mean, airport parking died even. This is going to sound bad, but your gold mine lots are surface lots next to the jail.

Because the turnover on those lots, okay, it's eight bucks to park. I mean, people come on Sunday afternoons for their one hour visit and the turnover on those lots is just constant. Even Jailhouse park went away.

Like, okay, so the lots that were the most dependable, which is sad, a sad state, sad commentary on state of affairs, but even those died. So it was like, okay, you can't underwrite them because there's no operating Revenue banks and sellers still want development prices.

So the business kind of just died right then and there. We didn't own anything. Luckily, we had actually passed on a huge portfolio just before the pandemic.

I just didn't feel right about it for some reason or another, which I can't say it was intuition or what, but we didn't buy that portfolio. And yeah, I had to shift gears when the pandemic happened because it's just parking died.

th of: 2023

But I just didn't have the time to wait out a year and a half for parking to return. So I had to kind of shift gears and exactly what we did.

Neil Henderson: 00:07:14

Well, it's an important lesson for anybody who is operating at scale and working with investors and even for LPs is that all the planning and underwriting and doom casting in the world can't save you if the world just completely changes on a dime. As our good friend Joe Farless often says, invest for cash flow with low interest, long term debt with adequate cash reserves.

And even then, I'm not sure the adequate cash reserves would have helped you if you had bought a massive portfolio parking lot.

Sam Wilson: 00:07:45

It really wouldn't have. No, no. We may have let ourselves dry on that portfolio.

And again, you know, like everybody else, I'm sure you could have worked out terms with the bank and just said, hey, I'm sorry, the world is a different place right now. But I'm glad we did not have to have those conversations.

Clint Harris: 00:08:00

So I want to ask you about. Your biography is amazing and you've done a lot of different investing on a lot of different levels.

One of the things that you probably wouldn't remember, I was at the Best Ever conference two years ago in Denver and I connected with your wife Elizabeth, and had quite a few conversations with her because I owned a property management company at the time and we were pursuing buying a laundromat and at the time she was owning and operating a laundromat and was an unbelievable wealth of information. You and I didn't get a chance to connect very much there. But anyway, I connected with her and it was incredible.

And the story of what you guys had invested with along the way was wild.

And then when you and I got a chance to connect this past year, I thought it was a great example of someone who really understood the concept of syndication and providing a passive investment strategy to your investors that can be applied in a lot of different areas. Right. So it's like you've done a lot of different things.

You understand the business concept, and you're able to take that and kind of really run with it and go in multiple different directions until you found your niche. And I'm curious to know about your investor base.

Obviously, the name of podcast is a truly passive income podcast, and we want people to know about a lot of different passive investment strategies that are out there. And honestly, it kind of makes me think of you.

And you've provided a lot of these different opportunities and looked at a lot of different strategies from parking. And I know that you're invested into RV parks and multifamily and storage and things of that nature.

So your investor base, like the way I'm envisioning this and tell me if I'm wrong, is that they're invested in you. What you and Elizabeth are doing, and you probably have investors that are invested into multiple different asset classes with you.

Is that fair to say?

Sam Wilson: 00:09:29

Absolutely. Yes, it is. And I'll go back and say thanks for teeing up the laundry discussion, because I think that's a fun one.

I'm looking forward to really digging in on that, I would say, is the pandemic till end of last year, kind of finding our footing in what asset class we really love. And we've done well. We've done well in land, have done well in parking. We've owned some multifamily assets right now.

But I will say, just to your listeners, for better or for worse, we've been involved in a lot of different asset classes.

And I would probably say just from a personal perspective, it's been for worse just because without focus, you can't scale, you can't get the meaningful traction that you need without just devoted focus. And that's something that I think that's cost us maybe some progress again, has never cost our investors money.

They've done well, but we've not achieved the scale that maybe we can or could have otherwise achieved at this point in time. So what was your question again, Clint?

Clint Harris: 00:10:20

I'm sorry, you've actually given me a great segue, but my curiosity is about your investor base, and here's why. I think that we've all heard the concept of if you find a deal good enough, you'll find the money. And I think that's total nonsense.

And I think this is a great place to bring it up, is it really comes down to the operator, right? If you're looking for a passive investment strategy, you should look at the deal. Absolutely.

You should understand the asset class and everything else involved. But it's only as good as the operator.

Sam Wilson: 00:10:46

Right.

Clint Harris: 00:10:46

I have a short term rental background, and if you buy an Airbnb property or multifamily property and convert it that way, it could be a great underwritten asset that should perform well in that market. With the feasibility study and the demographics to back it up and the staging is right and everything's there.

The reality is it's gonna perform as good as the operator. I think you're a good example of you're the operator, right.

You and your wife are the operators, and you've tried a lot of different things and you've had a lot of success with different things. It's not that rare to have investors invested into different asset classes or even different geography or different managers.

What it is pretty rare from what I've seen, is to have an investor invested into multiple asset classes with the same operator. And I think that's a testament to the operator.

Neil Henderson: 00:11:26

Right.

Clint Harris: 00:11:26

I think you guys are doing that the right way. So I think this is a great example of just highlighting the importance of the person that's doing it.

And I'd just love to hear about, like, some of your conversations that you have with people with like, hey, we did that parking, now we're going to do this. And how that's received and how those relationships have been built over time.

Sam Wilson: 00:11:43

I'll agree with you on that. There's three things I always say you look for. One is the first thing you look at is the team.

Like, if you're a passive investor, spend 80% of your time evaluating the team. Spend the next 10% of your time evaluating the market that you're investing in. And then the last 10%, spend it on the deal itself.

Because you can change once you've closed. You can't change the team and you can't change the market, but you can absolutely change the deal. So just agreeing with you on that, Clint.

Like, you buy the right Airbnb or short term rental, but you have a terrible operator in a bad market. Well, I don't care how great the Airbnb is. I mean, the thing could be plated in gold, but nobody wants to stay there and operator sucks.

Well, then the deal goes bad. So, yeah, and I've not done a great job of that personally investing as a passive investor.

I think about my early investments, things I've learned, Neil, not any deals go south, but I certainly have some Deals as a passive investor I'm involved in are nowhere near what the projections were. So those are things that, you know, lessons learned the hard way. So that was the first part of it.

What was your second part to that question again, I'm sorry, maybe I've been up too early today.

Clint Harris: 00:12:45

Just the investors that. As you've had those different conversations, how has that been received?

Like, hey, we were doing this, the market turned this, we're going to pivot and this is where we're going to go.

Sam Wilson: 00:12:54

The one thing that we've done well is any time we're looking at shifting or presenting a new opportunity is warming up our investor base a long time ahead of time. Like sometimes three, four, five, six months in advance. Yes, we've done parking. Yes, we've done this.

And then we do a weekly newsletter which has been to most people. People is a monumental undertaking in of itself.

Like, oh crud, like every Friday I get 10am I got to get a newsletter out with something informative and thoughtful and well written. It was work at first and now it's like start twitching if it's not out the door by 10 o' clock Friday morning.

It's like, you know, it's just part of what we do.

And so using that as the springboard for warming up your investor base to what it is that you're looking at or thinking about, even if you haven't invested in it yet, just start sending out information. In your case, self storage, you know, hey, here's five things look out in the self storage market.

Here's some industry trends, here's some case studies, here's this, here's that. Just building that content base and feeding that to your investors.

n't had a live opportunity in: 2023

But you know what I've been talking about for the last six months? Laundry. Laundry. Laundry. And that's it is laundry. So then by the time the fund goes live, investors are like, oh, cool, yeah, of course, laundry.

Why would we not be investing in laundry? So that's, I think one of the things that's really helped us effectively warm our investor base up to a new asset class.

Each kind of iteration without shock, throwing them into a bath, a cold water, like, wait, laundry. Why are you talking about laundry? Last year we were doing RV resorts, which we did the same thing on RV resorts.

I mean, that's all we talked about for almost 12 months straight, which we did. We closed three RV resorts last year and they're doing great. But I think that warm up period is really often overlooked.

Just because you have a good deal doesn't mean the money will come.

Clint Harris: 00:14:37

Where do most of your investor base come from? I'm assuming your answer is probably going to be your podcast. You got 800 episodes in your podcast. You got over 40,000 monthly downloads.

Is that the number one place where your investors are coming from?

Sam Wilson: 00:14:49

It's funny, you know, I have not done a good job on our podcast of even talking about what we do. I spent interview based podcast and that's on my short list of things is to get out there and actually promote myself on my own show.

Which seems like a no brainer, but I've done a poor job of that. But you know, it's funny. Word of mouth is a lot of what we get. Yes. Producing a podcast. Yes.

Putting out a weekly newsletter, getting featured on shows like yours. All of those things in the aggregate kind of move that investor along the investor journey, if you will.

So yeah, I think all those things in aggregate, no one in particular has been the magic thing, but I think they all certainly help along the way.

Neil Henderson: 00:15:23

Have you had any struggles with investors? Often some of the going advice is work with an operator who's solely focused on one asset class.

And is that sort of what you mean when you say maybe self inflicted wound there for that stopped you from scaling is that you've bounced around and unless an investor knows you pretty well and trusts you, they're going to be like this guy's all over the map.

Sam Wilson: 00:15:45

Correct? Yes, I would say absolutely. You're spot on. Correct there. That has not helped me in the slightest, which is fun for us now.

And it's taken us again three years to probably get around to finally finding the thing that I'm like, okay, this is scalable, it's repeatable, there's killer returns. This is what we're doing. It's funny, I was talking to Elizabeth this morning, I said, hey, this is the eight year plan. There's eight years.

I've got eight hard years. Maybe not hard. We're putting in eight years into exactly what we're doing right now. I don't see any deviation from that. Not really at all.

And that's kind of fun to be finally in that position where it's different ways you guys do storage, but you're doing just storage. That is going to serve us really well.

Clint Harris: 00:16:19

I actually watched you guys on that Journey.

So I went to my first best ever conference in Denver two years ago, and it was like this room with a couple billionaires in it, and then like a bunch of 100 millionaires, and then like a couple hundred 10 to 20 millionaires, and then like a bunch of just millionaires. And then like 20 or 30 chumps like me looking around like, like, what am I doing here? This is crazy. I didn't know anything.

I had no idea what was going on. Like I said, I got to connect with your wife, Elizabeth, about her laundry facility.

And I was actively hunting for one right then to help with our property management company. I was like, look, brick and mortar laundromat laundry facility.

If we can more than pay for the fixed overhead with the £25,000 of linens that we have coming in the back from the property management company, the front would just be all profit, right? And so we were navigating that, and since then, we've opened up a laundry facility, and it's part of the business model.

But it was really funny to connect with her and hear y' all story a little bit. And then the best thing for me was actually not that meeting.

It was going to the second one a year later and seeing what happened to everybody that was there. Because this past year was a lot of doom and gloom. There's a lot of people really worried about what's happening with the market.

And everybody's talking about trying to survive till 20, 25 if you're in the multifamily space and variable rate debt. And it was a totally different atmosphere. But I got to watch.

There's definitely some people in the space, the syndication space, that are doing really well and growing like crazy.

And to be honest, there's one or two groups there that I thought maybe had taken a step back, and there were groups that were in the middle of a pivot. And it was really fun for me to see you guys. You came in with so much more focus this past year.

You presented to the entire group and did an incredible job multiple days to present your model. And it was really neat that to me, it seemed like you guys spent that year looking back on, like, okay, what do we do really well?

Like, what's working for us? What's the asset that is really working well for us? And you guys had already done all the work there, and it's an uncrowded space.

So you took a knowledge base that you. You had and you stepped right into it. And I know you said you didn't have a lot going on the beginning of this year.

But you're mentioning some numbers right before we got on this interview. And you guys got a lot of stuff happening right now and over the next couple weeks.

So tell us about that and how your investors are getting involved in that.

Sam Wilson: 00:18:25

Yeah, no, it's a great question. It's in the laundry facility space. And again, I don't know either.

it is that drives me, but in: 2018

So I'd googled a laundromat. I found one close to our house I went to. The place was nasty, you know, lights hanging in, cockroaches running. Most of the equipment didn't work.

The lady behind the counter that helped me out probably smoked 20 packs a day, had the requisite voice that went along with it. And the place just stank. And I'm like, this is awful. It was in the middle of flipping houses and I go, thing just looks like a flip.

This place is nasty. It just needs a new owner. Asked the lady, I said, hey, who owns this place? And what do you think you'd ever sell it?

And three weeks later, we owned a laundromat. I didn't know anything about it. We'll figure this out. And we did. We built that business up, We've let it run.

And it was at the end, like you're saying, Clint, at the end of 20, 23 or 22 rather. We bought about $20 million in RV resorts last year.

And I was looking at those and I'm like, my one little laundromat, like on a relative scale is crushing everything else we're doing, like, crushing it. Not only is it crushing it, but it's a perfect time to be in this business because it's market cycle agnostic.

Like, we'll do great in a downturn, we'll do great in an upturn.

We have enough ancillary revenue streams inside of it that we can really navigate any market cycle and we can get high double digit returns without of input from us. From a return on time and a return on investment perspective, I'm winning in the laundry space five to one.

Anything else I'm doing and no one else has really scaled this, which is kind of fun as well. Like, there's tide has come in the space, which is interesting. Tides In Chicago, Tides in Fort Myers.

Like when Tide Laundry Detergent is now buying and branding their own laundry mat. There's something to it. I mean, they got people there.

Hopefully they're a lot smarter than me going, hang on, there's revenue to be made here, profit at least to be made. So, yeah, that was kind of it. We just looked at it and said, we have a scalable model. We have a, a business that serves a basic human need.

There is doom and gloom, as you were saying, Neil, on the horizon. I'm like, and I can exit all of those.

I can exit or kind of skirt all of those market forces and get into something that should do really well for the next decade, no matter what. Well, why not do that? And it hits a double digit return to our investors annually on a cash, on cash basis. It's blue ocean for us.

On the acquisition side, it's just an industry that is ripe for consolidation, new ownership, group sophistication.

I mean, I can get into all that, but it's a fun spot to be in to look at that and go, okay, I've got something I can present to my investors that is downside protected, that preserves capital, but then also throws off an excellent annualized return. Like, why do we not go long on this? The reception has been actually amazing.

The multifamily story, it's not worn out, but it's certainly less compelling maybe than what it has been because it's again, you got to find very particular assets. And I've invested multifamily passive this year, but it was very selective. It was a deal that just made a whole heck of a lot of sense.

It was like, oh, you can't beat this. So the deals are still out there, but they're far fewer maybe than what they were before.

So that said, the laundry space for us as an active investor was just something we just couldn't not really grow and scale and put in teams and exactly what we're doing. And that's the eight year plan. We do things very differently, but I don't want to get into the weeds on all that.

So that's exactly where we are right now and what we're doing for the foreseeable future. Future.

Neil Henderson: 00:21:32

Okay, so I want to ask this question from the standpoint of an lp. You know, Clint and I have heard you talk about Laundromats.

We've got a little bit of an idea of what the business model is, but I want people who are listening to this to come away with, all right, how does this work? For LP investors. So first of all, what's the basic business model?

And then once we've gone through that basic business model, explain to me how it works for the average lp.

Sam Wilson: 00:21:57

Yeah, well, let's go the basic business model of what the industry has and then we're going to do the basic business model of what we're doing.

Basic business model in the industry is you buy machines, you have worn out store, you put those machines in and then people come there and do their laundry and you send a cleaner in once a day that takes care of the lint traps and wipes down the machines. Otherwise there's nobody there to help you.

There's probably a TV blaring Judge Judy on in the background and the place is dirty and you're like, okay, I just need to get in and get my clothes washed and go home. That's the basic business model the industry has.

The model that we are doing that is doing incredibly well is one obviously brand new stores, all new equipment, all new payment systems, getting rid of the coins, putting in automated doors that open up to increase access for customers, obviously giving guest wifi, giving loyalty card systems, getting credit card systems, pay by phone. I mean I could get on my phone and start any machine at any of our stores, like it's really cool. Getting reward systems put in place for them.

All of those things that the laundromat industry just doesn't have. So that one on the self serve side of things, that's what we're providing to that customer base.

It is the true field of dreams thing that when you build it, they do come. We took a store just with that model from $4,000 a month, almost $40,000 a month in gross revenue just by doing that with no money in advertising.

It's just simply word of mouth. And that's incredible for a little 2,700 square foot store to produce almost $40,000 a month in revenue.

And that again is mostly on the self serve customer side of things. The second thing that we do is we're fully attended. So most stores that you walk into their laundry facilities, there's nobody working there.

Our stores usually have one, if not two people on walk into the national brand that we're rolling out. It's called Ellie's Laundry. It's Elizabeth, it's her nickname called Ellie's Laundry.

So you walk into Ellie's Laundry and they're trained to greet, hey, welcome to Ellie's Laundry. It's like the Chick Fil a model, right? You walk into Chick Fil A I've never walked in Chick Fil A and not been greeted. Hi, welcome to Chick Fil A.

I mean it's almost like the robots. Hi, welcome to Chick Fil A. It's like what our staff are going to do. Hi, welcome to Ellie's Laundry.

It's basic but it makes customers one, they feel secure and then two, they can get help with hey, which machine do I use or how do I use the loyalty card system? There's always somebody there to help. Three, it keeps our store spotless. Us, we had somebody, one of our happen to be in there with him.

They're like, wow, this is not the laundromat I grew up in. I'm like, thank you. Exactly what we want to hear. So you get the self serve customer side of things.

The second thing we do is because we're now attended is that we do just an incredible amount of drop off laundry. So to your point, you guys run or ran a property management company that just did an incredible amount of linens.

We serve all of those short term rental companies.

I don't know, thousands of pounds of laundry get dropped off at our facilities a week with those, those short term rentals and then people that just don't want to do their own laundry. So we do a ton of full service laundry right there in the stores of course, right alongside all of our self serve customers.

And the third thing we do is delivery.

You can get on your phone again back to your phone and order delivery right from our app and we'll come and pick it up at your front door and bring it back the next day, wash, dried and folded, nice little laundry bags. And we do on demand as well with doordash. We have doordash integrations now.

to: 10:00

Well, okay, you want your line to pick up at 5pm well fine, you can do it and you can do it right through our website, but you do it through doordash instead. They pay a little premium for the doordash drivers and that's fine. So that's our basic business model is those three different service profiles.

Obviously the brand new store experience and then adding increased accessibility across the board for sell full and delivery services. That's the model we're rolling out and it's just, just I don't know anybody else doing it. So. And we're having great Success with it.

So that's what it is that we're doing a little bit differently in the space. And you asked about the LP experience in that. You need to cover that or you got more questions.

Neil Henderson: 00:25:31

We'll get to that.

What I love about this is that Clint and I are familiar from the storage model, which is for years the storage model has been to take those fractured mom and pop market that was not operating professionally. It wasn't picking up the phone, just had somebody sitting behind in the counter five days a week, not answering the phone.

Maybe just browsing the Internet, watching Netflix or not manned and then also not answering the phone and just like calling people back. Just not running it as a business. Such a no brainer.

And dragging that model, a very boring, fairly simple business model, dragging it into the future and applying let's call it the Chick Fil A model.

Sam Wilson: 00:26:13

Right.

Neil Henderson: 00:26:13

I love it.

Sam Wilson: 00:26:13

Thank you. And it's amazing because you're right. It's like these. What we're doing is not rocket science and it's highly replicable.

They can copy what we're doing is no industry secret. I just told you our playbook. But the mom and pops just, just not doing it. The last store we bought, no phone line.

I mean it's been a while since the phone was invented. No phone line, no website, no delivery. Like this is not hard.

So I mean that's your low hanging same for you guys in storage where it's like yeah, you're not watching Netflix and answering telephone at this basic customer service stuff stuff. So yeah, it's fun to be on that side of where the implementations are not even expensive, it's just basic.

Clint Harris: 00:26:45

It's a location, but it's also a business. But more than anything else it's an operating system. And listen, this speaks to me.

ny right now we're in July of: 2023

Number one is in terms of the scalability and handling that like how do you scale up and able to take on a customer. That's a huge time consuming burden.

Like you can have one customer who can make up such a large percentage of your book of business that my question is how much is that side of the business? And the second part is do you have interest in opening an expansion property in Carolina Beach, North Carolina for no specific reasoning.

Sam Wilson: 00:27:32

Yes is the answer. Of course, Clint. I do always have an interest on that front. We do. About 60% of our business is self serve.

Currently 30% of it is drop off and about 10% of it is delivery. Delivery is light. We're aware of that. There is ample room to grow on the delivery side.

But really focusing on those two kind of core parts of our business right now, delivery is kind of just icing on the cake. We let it do what it does and we really don't promote it the way we should. But that is low hanging fruit for our business. How do you handle it?

When a customer such as maybe yourself came to my store, which we've got customers your size that do just a ton of laundry with us, it's just a staffing thing. I mean it really is getting to know that customer is getting to know the cycle of when their properties turn.

It's getting to know and it's also just dedicating space. When we got kind of those larger customers, we now just said we dedicate rack space that's just theirs.

So it's like this particular property management company, it's like these are their racks inside of their store and all of their cleaning people can stop by and pick up whatever they need. I need two king comforters, a set of, you know, four sets of sheets, this and that and the other together.

And our staff are trained to handle their deal flow, but their amount of linens that they bring in. So we've kind of set up some unique systems for those larger customers because it just makes sense to do so. And then just it's a staffing issue.

So you're also getting figured out. Okay, we know that, you know, Monday, Wednesday and Friday, we tend to be much busier.

So maybe our managers handle all this, but they will bring and make sure that we are adequately staffed for those days that we know are particularly busy. So that's kind of how that's handled for us right now. And it's so far been working. Working.

Neil Henderson: 00:28:59

I don't want to belabor this point, but one thing that I love and I'm sure you know, this is that normal mom and pop laundry. This just dirty old store serves one type of customer, low income, right? They live, they rent, they don't have a machine at home.

You started adding services for different levels of customers all the way up to short term rental companies operating commercial clients. You've got the laundry pickup services probably, probably more towards A higher income people.

And then you've got the sort of drop off and fold, which is more of a maybe middle income and you still have just the machines for people to come and clean. It's more of the average to low income. Again, Clint, I think we're changing the name of this podcast to Truly Passive Laundry.

Clint Harris: 00:29:43

It's funny you mentioned that because Sam, your name came up recently. So Neil and I go to a business networking dinner here in town and we had a friend who was at the last one.

We were talking about different investment strategies that you different people are using in ways to save money for your kids and college and all kinds of stuff. And one of the guys had the opportunity to buy a laundromat and it was like, boy, let's break this down.

And the reality is like, I'm going to send him this interview when we're done with it. And when it comes out, I can't wait to send it to him.

Because at the end of the day, what I've learned is like in most asset classes, it really comes down to the operator.

So what we told with him is like, yeah, it sounds as simple as you can buy a laundromat and maybe increase the advertising or put in a phone number and everything's going to be fit, fixed. But the reality is this is a very successful guy who's part of a successful couple and they're doing incredible things.

It's like, how much is your time worth? Because at the end of the day, if the current operator doesn't get the job done, you have to step in and make sure it's operating correctly.

And your opportunity cost is you're giving up by keeping the main thing and doing that. But let's circle back. So I can't wait to send this to him because here's an opportunity to get involved in that space.

If you love the space, that's great. Get involved with the space. Get involved with the asset class with someone that knows how to operate, operate for the limited partner investor.

These are basically the investors that look at that time is an investment, right? And being able to invest in this, where they can put in order to have success in this, you're going to have time, experience and capital, right?

If these people don't have experience and like to get the experience, they're going to have to invest a lot of time, right? But you've invested the time and you have the experience. So let's talk back and circle back to the LP experience that we've been talking about.

So if Say he's like, look, I've got capital, I want to get into this space case, but here's an opportunity to partner with Sam and Elizabeth. What does that LP experience look like? What are your investment amounts and what's your total raise on a typical facility?

Sam Wilson: 00:31:27

That's a great question, Clint. Yeah, you've asked there. Let's work backwards. The average Laundromat is going to cost anywhere from 500,000 to 1.5 million total build out.

But I wouldn't recommend it. Syndicating a million dollar investment, it's just too hard. It's cost prohibitive.

By the time you get through your deal docs, you get your investors signed up, you got a million dollar store man, you spent 20 grand on legal fees and it's just a nightmare. So the only way that we've found a scale, this is the model we've chosen.

Maybe there's other ways of doing it, but we launched a fund, we just said, hey, look, what we're going to do is we're going to buy 20 to 25 stores. It's all going to be inside of a single fund. You're spreading your risk and your reward across 20 or 25 assets across the mid South.

For us, it's going to be mostly hear, say between Memphis and then Nashville and maybe on down to Chattanooga and Oxville. So, you know, you've got basically the state of Tennessee that we're working in right now. That said, so it's not investing in a single store.

You could potentially invest in a single store, but we didn't find an effective way to scale that with limited partners, again, just for the reasons I talked about earlier. So that said, yeah, you can buy a single store as an investor. If you want to go out and do it on your own, go for it.

I mean, that's going to be a higher return profiling and I can attest to this as being true. The industry average is 25 to 35% annualized returns, cash, cash on cash.

When you build and buy and run and operate your own store, that's pretty strong. It's really strong, actually. But then again, like you said, you're the operator. You're figuring out all the systems.

You're figuring out which door mechanisms to use, which security systems, which point of sale system. I mean, it's just all those things that go into running and operating and then you're staffing a business.

And that's people are a big part of what we do. And people oftentimes, or business owners oftentimes shy away from, I think, having people heavy business businesses. And this is one of those.

It is a people heavy operations, heavy business. So that said, on a limited partner, you come alongside, you say, okay, we're going to put 50 grand, which is we have an accredited investor fund.

But you put 50 grand in the fund. The projected returns are 11 to 14% annualized cash on cash starting somewhere about six months into the life of the fund.

And then you're looking at about a 20 IRR. One of the things, and I even struggled to mention it's an eight year fund.

So just giving you kind of some of the specifics on it, but it's hard to project an IRR in a fund like this.

We had a webinar last week and it's kind of fun to go through it because at the end of year eight, basically, you know, run through the cash flow because it's a cash flow play. That's exactly back to your point, Neil. This is a cash flow play. It's a cash generating operating business.

No one has aggregated 200 stores and had a private equity or institutional exit in the laundromat space. It just hadn't happened. That's where we want to go. That's what we're looking at in eight years. This is fund one, supposed to be two years.

And then every two years from then on, I'm just going to keep aggregating stores. Maybe the next fund will be bigger.

But all that said, it's hard to project an example exit at the end of year eight and say, okay, you know, here's where we're going to be because nobody's done it yet. So we'd just be making up numbers. So at this point we said, hey, look, what we do know is that we can clip a great coupon for eight years straight.

I can almost bet your bottom dollar that will at least be able to sell it for everything we've got in it. Like we can at least get our money back. And so that's kind of what we projected on paper.

So at first investors are like, that doesn't look too sexy to me, man. Like, how did you come up with that number? Because it looks like we're getting our money back in year eight.

I'm like, yeah, I mean we can make something up and I can make you feel good about it, but I have not based in reality because we don't know. So this is kind of where we're going is into the unknown, which is fun to be on that side of things.

So Anyway, I hope I answered your question there without prattling on for too long.

Clint Harris: 00:34:39

No, it's perfect. Again, it's faith in the operator right into the day. Like there's a difference in risk and calculated risk.

Certainly this is calculated risk and at the end of it, it's going to be operated at a very high level. It's going to be a strong cash producing asset and you're hoping there's a market for it.

But at the end of the day, it's faith in the operator and that's what people are just choosing.

Sam Wilson: 00:34:57

Right. I think the other fun thing about that we're doing is that we can hit those return profiles with 50% leverage.

Like I could even go lower and we can still get a double digit return to our investors. And it's like, okay, this is again going back to the recession resistant, inflation resistant asset class.

Like, okay, so things money gets more expensive. Well, I mean, shoot.

Even the loans we are underwriting here for the next few stores that we're buying, I think they're coming in at like eight and a half percent. Okay. I mean it's not great. Four is better. Better. But at eight and a half, we're still hitting a double digit return to our investors. Okay.

I can weather that. It's hard to do that in other asset classes right now. So it's good to have just really healthy margins in what we're doing.

Neil Henderson: 00:35:33

Well, it provides a great margin of safety for the investor and it's something we always, we try to really emphasize the loan to value that we've created on our deals because that's one of the biggest margins of safety. It's like, hey, you're invested in an asset that already has more equity than, than you put in on day one.

Sam Wilson: 00:35:50

You got it. So yeah, it's a fun space to be. So thanks for taking the time to really dig through that and ask some nuanced questions. I appreciate it.

Neil Henderson: 00:35:57

No, I mean, we're students of the game and someday we'll be LPs. We just have to get through the valley of death of cash poor and equity rich. So as I'm sure you know.

Sam Wilson: 00:36:06

I do indeed.

Neil Henderson: 00:36:08

Well, Sam Wilson, thank you so much for joining us today and educating our audience on laundromat investing and everything you've been a part of. If any of our guests want to reach out to you and find out more about what you are about, what would be the best place for them to do that?

Sam Wilson: 00:36:22

Go to brickinvestmentgroup.com that's B R. I C K E n brick n investmentgroup.com you'll find here.

Probably I don't know when this episode will go live, but in the next seven days that'll be all laundry focused there on our website. So there'll be more to learn about there in the laundry business than you probably care to.

But go to brickittmentgroup.com, sign up for our investor club and yeah, that's where you'll hear all about the opportunities we have, more about the fund fund as it progresses and those sorts of things. So yeah, just connect with me on that front.

Neil Henderson: 00:36:49

All right. Great man. Always great talking to you. This has been a great conversation and look forward to seeing you again at the next Best ever.

Sam Wilson: 00:36:55

Absolutely. Clanton Neal, thank you very much. I certainly appreciate it.

Clint Harris: 00:36:58

Thanks Sam. Great to have you.

Neil Henderson: 00:37:00

Thank you so much for listening and watching the Truly Passive Income podcast.

If you liked the show, if you think it would be useful for someone else, the greatest compliment that you could give us would be to share the episode. Leave a comment down below or leave us an honest review. If you have any questions, don't hesitate to let us know down below.

And remember, with Truly Passive Income comes freedom of time, place, and the freedom to pursue your higher purpose.

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