Shownotes
In this unique episode of Truly Passive Income, hosts Neil Henderson and Clint Harris take us behind the scenes from the Centurion Lounge in the Dallas airport. Fresh from the Quest Expo, a self-directed IRA conference, they share insights on the current state of the real estate market, the challenges of raising capital, and the strategies for investing in self-directed retirement accounts. They delve into the sentiment among investors, the impact of high-interest rates on self-storage development, and the opportunities in the self-storage industry. Listen in as they discuss the importance of diversification, the pitfalls of variable rate debt, and their personal experiences navigating the current economic landscape.
Key takeaways to listen for
- [00:00:00] Introduction from the Centurion Lounge
- [00:01:02] Overview of the Quest Expo and self-directed IRAs
- [00:02:58] Benefits of self-directed retirement accounts
- [00:04:12] Investor sentiment and challenges in the current market
- [00:06:06] The importance of diversification in real estate investments
- [00:08:17] Choosing the right operators and risk management
- [00:12:08] The power dynamics between operators and investors
- [00:14:00] Insights from the self-storage and medical professional panels
- [00:17:04] Trends in the self-storage industry and REITs' pricing strategies
- [00:19:56] Future outlook for self-storage development
Resources mentioned in this episode
- Quest Expo: Quest Trust Company
- Self-Directed IRAs: Preferred Trust Company
- Equity Trust: Equity Trust Company
- Connect with Neil Henderson: LinkedIn
- Connect with Clint Harris: LinkedIn
Key Takeaways
- Self-Directed IRAs: Investing through self-directed IRAs offers flexibility to allocate funds into various asset classes, including real estate, providing more control over retirement investments.
- Current Market Sentiment: There is a cautious optimism among investors, tempered by recent market volatility and economic uncertainties, especially in multifamily real estate.
- Importance of Diversification: Diversifying investments across different asset classes, operators, and geographies is crucial for managing risk, particularly in uncertain markets.
- Operator Selection: Trustworthy and consistent operators are essential for long-term investment success. It's often better to invest with stable operators rather than chasing the highest returns.
- Investor Relations: Operators and investors must mutually vet each other to ensure a good fit for long-term business relationships, especially in challenging market conditions.
- Self-Storage Insights: Despite current challenges, the self-storage industry remains robust due to its adaptability and stable performance. Strategic market positioning and cost management are key.
- Economic Influences: High-interest rates are impacting new self-storage developments, creating a pent-up demand that presents future opportunities for well-positioned operators.
- REITs Strategies: Large REITs are using aggressive pricing strategies to maintain occupancy, which may affect smaller operators differently depending on their market positioning.
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Mentioned in this episode:
Sponsored by Nomad Capital
Looking to invest in self-storage? Nomad Capital converts vacant big-box retail spaces across the Southeast into climate-controlled storage, with a target of 20% annual returns. Our fund combines low leverage and high depreciation for strong growth and valuable tax benefits. By buying properties at deep discounts, we often achieve break-even at just 40% occupancy. Join a proven model in a resilient asset class that continues to deliver, even in today’s market. Learn more at nomadcapital.us/tpi. Accredited investors only.
Transcripts
It's just the interest rates are so high that it just doesn't pencil out for a lot of people to build self storage and have to hold on to that interest reserve for the two, three, four years that it's going to take them to build it out and lease it up.
Neil Henderson:So what we believe, our thesis, is that there's a lot of pent up storage demand that is coming down the pipe that's not being met right now.
Neil Henderson:Welcome to truly passive income.
Neil Henderson:I'm Neil Henderson.
Clint Harris:And I'm Clint Harris.
Clint Harris:And today we are coming to you with a very unique situation.
Clint Harris:We're on the road.
Neil Henderson:Yes, we are.
Clint Harris:We have found a.
Clint Harris:A telephone room in.
Clint Harris:What's the name of this lounge?
Neil Henderson:Centurion Lounge.
Clint Harris:The Centurion lounge in the Dallas airport.
Clint Harris:This is going to be a little bit like an episode of drunk history real Estate.
Clint Harris:That's it?
Clint Harris:Yeah.
Neil Henderson:Although that's already taken.
Neil Henderson:J.
Neil Henderson:Scott.
Neil Henderson:Sorry.
Neil Henderson:We're not moving your tour.
Clint Harris:It's where you have a couple cocktails and you reflect on the weekend that you just had talking to real estate investors in Dallas, Texas, which is our current situation.
Clint Harris:We are in the airport, waiting on our flight back to Wilmington, coming back from the Quest Expo, which is a self directed IRA conference.
Clint Harris:So Quest is a self directed IRA sponsor.
Clint Harris:I think today we'll talk a little bit about unpacking self directed retirement accounts, the experience of the conference, and some of the different opportunities we saw of investing, and how the sentiments in the market are.
Neil Henderson:Yeah, so, like Clint said each and called it a sponsor.
Neil Henderson:They're a custodian.
Clint Harris:Thank you, sir.
Neil Henderson:So when you want to be able to invest your retirement funds and self direct them, you have to place them with what's called a custodian.
Neil Henderson:And Quest is a custodian.
Neil Henderson:There's people like preferred trust, equity trust.
Neil Henderson:There's a million different self directed IRA custodians, and they put on this conference once every two years or so in Dallas.
Neil Henderson:And Clint and I came down, had a booth.
Neil Henderson:We were one of the sponsors, got to meet a lot of really nice people who were there, both as sponsors and potential investors.
Clint Harris:Yeah.
Clint Harris:So this is a situation that, to unpack a little bit.
Clint Harris:I know we've mentioned some in the past that we accept self directed retirement accounts invested into our nomad deals, and that's kind of a.
Clint Harris:It's something that's becoming a lot more common these days.
Clint Harris:In fact, I've taken my retirement accounts and converted them to self directed accounts because previously I was all invested into paper assets especially because I had a company match, like my previous employer would match whatever I put in up to a certain percentage.
Clint Harris: o it once I left that life in: Clint Harris:At that point in time, I don't feel like I really want to be that invested into paper assets.
Clint Harris:I still have some holdings, but more importantly, I would rather be invested into real assets.
Clint Harris:That's a personal decision for me and my family.
Clint Harris:What a lot of investors, or, excuse me, financial planners won't tell you, is that you have control of where you wanna spend your retirement dollars and where you wanna put that.
Clint Harris:You can put it in the stock market.
Clint Harris:Mutual funds, compound interest is incredible.
Clint Harris:You also have the opportunity to look for compounding investments, or any type of investments.
Clint Harris:Outside of that.
Clint Harris:You can take your retirement accounts and you can convert it to something that's called self directed, which is exactly what it sounds like.
Clint Harris:You make the decision on where that money goes.
Clint Harris:You can invest in everything from multifamily to storage.
Clint Harris:Obviously, real estate is a big part of it, but it could be ATM machines, it can be rv parks, it could be vineyards.
Clint Harris:Over this past weekend, we had sponsors there that were doing biomedical.
Clint Harris:We had all kind of different debt funds and structures.
Clint Harris:Pretty much anything that you can think of that you think you might be able to invest in with normal dollars, you can typically do it with self directed IRA funds, with the exception of coins and memorabilia and a few other very limited items.
Clint Harris:Outside of that, you have the ability to make the decisions where your retirement account goes.
Clint Harris:And this was a conference for people that have made that decision to self direct those funds and take it from there.
Neil Henderson:What would you say was the overall sentiment among investors at the conference?
Clint Harris:I think that to me, it was evident that the community has been a little bit rocked over the last couple years across, especially since real estate seems to be such a large part of that space.
Clint Harris:Syndications, I'm sure everybody knows that, but especially across multifamily.
Clint Harris:And anyone that's been using variable rate debt over the last couple years, it's been a bloodbath.
Clint Harris:We've had an unbelievable amount of operations, stop distributions, capital calls, some total losses.
Clint Harris:Things have gone down.
Clint Harris:Basically, anybody using variable rate or bridge debt, it's been a total shell shock.
Clint Harris:And because of that, there was a lot of skepticism in the room about that.
Clint Harris:I think overall, people are bullish about the future, but it's an election year.
Clint Harris:We're also coming back from a weekend where the very first presidential, excuse me, the presidential debate was this weekend.
Clint Harris:That was the first one.
Clint Harris:There was a lot of repeat percussions about that that people are feeling on top of already feeling a certain way about the market creates a lot of uncertainty.
Clint Harris:Yeah, exactly.
Clint Harris:That's, I would say volatility and uncertainty is the sentiment that I got that having been said, the more intelligent investors that I met there that I tend to, you know, have a higher opinion of work of all the sentiment, like patients, like, it's okay, wait it out.
Clint Harris:Be careful where your money's going.
Clint Harris:If it's going in anything with debt, be very careful about that.
Clint Harris:Specifically, they're, the big concern right now is things that were purchased a couple years ago on variable rate debt that have now stabilized by using some level of mezzanine debt, which is a second layer of debt, to try to secure the property.
Clint Harris:How the property performs in the long run is going to determine, be determined by what the next one to two years looks like.
Clint Harris:And I think overall, people don't feel like we're out of the woods with what we're currently going through.
Neil Henderson:Yeah, it's a challenge we've talked about.
Neil Henderson:We talked to a lot of other operators that were there.
Neil Henderson:All of them are finding raising capital over the last, probably year and a half really challenging.
Neil Henderson:It's just a really challenging environment.
Neil Henderson:A lot of people are able to put their money into a high interest savings account that's earning what, five, five and a half percent, virtually no risk.
Neil Henderson:Whereas, you know, you come in, put your money into a syndication, you're certainly at a much higher return, but that obviously comes with a much higher level of risk.
Neil Henderson:And the general just chatter among investors in the commercial real estate space is a little negative.
Neil Henderson:It's just a little bearish.
Neil Henderson:Yeah.
Clint Harris:And I thought it was a really good time to recalibrate for a lot of people and just be realist about everything and understand that the returns you're going after is associated with the risk that comes along with it.
Clint Harris:And the smartest, you know, I think one of the things that resonates, resonated with me throughout this weekend is an operator, actually a storage operator, one of our competitors, but somebody that we like and look up to said, look, we're never going to compete with you on returns.
Clint Harris:You can probably go someplace else and fire returns, find better returns.
Clint Harris:But we know what we do.
Clint Harris:We're consistent.
Clint Harris:This is the way that we do it, and we're just going to live in our space.
Clint Harris:And if you're chasing bigger returns, you're probably not going to find it with us.
Clint Harris:And everybody talks about when there's risk in the market.
Clint Harris:Everybody talks a lot about diversification, which is kind of funny.
Clint Harris:Like you, it's not that big of a deal.
Clint Harris:Whenever, when things are going great, everybody looks like a genius.
Clint Harris:You couldn't miss three years ago, everybody was making money.
Clint Harris:Now everybody, a lot of people have been wiped out and their websites have gone quiet and nobody's posting.
Clint Harris:And all of a sudden, you look around, the landscape is a lot more barren than it used to be.
Clint Harris:The people that are operating now, they've usually been operating for a while or they've been doing it right, and these are the people that are going to be operating five and ten years from now.
Clint Harris:And they're also the people that might not have been promising the best returns out there, but they're within their range and they're doing their thing and they're moving forward.
Clint Harris:And so when you talk about diversity and diversification, it's okay, let's have different assets, different geography, different operators, different deck structure, and different time of the deals coming to maturity.
Clint Harris:But the reality is, like, do you really want to diversify across 15 different operators, or do you want to find four or five and go a little bit deeper with them and realize that we all are chasing like we're investing for a reason, we're doing this for a reason.
Clint Harris:And it's typically to make money, but, like, do you want to go after the person that's paying 25% return versus the person that's doing it 15% that you know is going to be stable, that they're buying.
Clint Harris:They're not buying on a super low cap rate and betting on forced appreciation because they think they're going to add net operating income.
Clint Harris:You'd rather be with the people that are buying at a higher cap rate and that have multiple ways of adding revenue and they're a little bit more consistent.
Clint Harris:So I think the sentiment that I got is it was not great on commercial real estate as a whole.
Clint Harris:I think we came out smelling like roses because I think people are very bullish on storage, which is another separate topic.
Clint Harris:But, you know, besides that, people that are consistent, that are being conservative, that are getting those better returns, those are the people that look great when a lot of other people have been wiped out.
Neil Henderson:Yeah.
Neil Henderson:It's also interesting talking to some other operators.
Neil Henderson:You start to share notes on the kinds of investors that you're talking to, both the conference and, like, just everywhere else.
Neil Henderson:And it's, you know, we come across investors all the time who are doing their due.
Neil Henderson:They're doing their due diligence.
Neil Henderson:And you expect that, like, I wouldn't want someone to invest in something that they didn't understand.
Neil Henderson:Wouldn't want them to invest with an operator that they don't know, like, and trust.
Neil Henderson:But there's become this mentality with some investors over the last couple of years because some people have been burned is now, okay, the key now is to just absolutely dig in to a deal, and they'll come at an operator with a 72 page checklist or not question checklist of things that they want answered before they'll invest or $50,000 and they'll ask for, I want your detailed fund, I want your underwriting.
Neil Henderson:Okay.
Neil Henderson:All, like, all stuff that we would, will happily do.
Neil Henderson:But there was one operator said that somebody asked for the detailed financials, and they said, sure, we need you to sign an NDA.
Neil Henderson:And they sent the investor an NDA, and then the investor proceeded to absolutely rip apart the NDA.
Neil Henderson:And you got to remember that as an operator, you're.
Neil Henderson:When we are talking to investors, it's a two way street.
Neil Henderson:We're interviewing them.
Neil Henderson:We're trying to decide whether or not you are somebody that we want to be in businesses with for the next 510 to ten years.
Neil Henderson:And there does come a point when someone is doing their deep due diligence that the juice no longer becomes worth the squeeze.
Clint Harris:I thought that was really good.
Clint Harris:And it was an initial conversation that actually turned into a conversation we had several different times.
Clint Harris:As other operators came and kind of added in, it became this conversation that became bigger.
Clint Harris:That kind of lasted over the weekend.
Clint Harris:And the reality is, there's no deal so important that people are willing to accept any investor to come in.
Clint Harris:The reality is there's standards, just like what you said, you're talking about being in business together for a very long time.
Clint Harris:And the, you know, the investors should do their due diligence and everything that they're supposed to, but the idea that the operator is standing out there with their cup out, asking for funds, even when the market is tough right now, it was interesting to me to hear other operators have same conversations that you and I have had in house and just be like, you know what?
Clint Harris:That's not the right person for us.
Clint Harris: They've got: Clint Harris:That's not the right person for us.
Clint Harris:We're not going to be able to meet their expectations.
Clint Harris:And the best thing for us and for them is to go in separate directions.
Clint Harris:And that's okay, because that's the interview process.
Clint Harris:Right.
Clint Harris:People think they're interviewing us, we're interviewing them as well.
Clint Harris:And I think that it's easy right now to be like, oh, well, if I'm willing to invest in this market, this is my expectation.
Clint Harris:And the reality is that even in that situation, you know, if you're going to have a tough relationship or someone's going to scrutinize things and realize that some of this is unknown and you can give parameters and it's probably going to be one of these decisions.
Clint Harris:But our job is to listen to the market and do its best for keep the asset safe first, keep the investors safe second, keep ourselves protected third, in that order.
Clint Harris:If people can't understand the unknowns with that, it's best to have that conversation up front and not do the deal and not work together.
Clint Harris:And the reality is there is no deal so important that you should accept capital from someone that you wouldn't be willing to work with for five or ten years, whatever the length of the deal is.
Clint Harris:There, there's this balance of power shift that seems to be happening.
Clint Harris:And behind the scenes there's a lot of operators that are just like, you know what?
Clint Harris:No, I would rather go find.
Clint Harris:There's other options for operators, right?
Clint Harris:There's family offices, there's a high net worth individuals, there's insurance companies, and they all come with different deals.
Clint Harris:Right.
Clint Harris:You have different expectations you're going to pay a different amount for that kind of capital.
Clint Harris:But there becomes a point, this is going to sound a little bit brutal.
Clint Harris:There becomes a point when dealing with the retail investors is not worth it.
Clint Harris:And I think that it's kind of to the point with a certain population out there that is really scrutinizing people and putting the screws to people because they've been burned, like once bitten, twice shy.
Clint Harris:I understand that.
Clint Harris:At the same time, remember, you're investing in the person and your relationship with them and their ethics and your core values.
Clint Harris:You can underwrite the deal as much as you want to.
Clint Harris:At the end of the day, it's a deal and it's a pro forma and we're all doing the best that we can.
Clint Harris:But it was interesting to hear that even in times like this, and admittedly across every operator, very tough to raise capital right now, there's still quite a bit of capital out there they're not willing to accept because it comes with a lot of responsibilities that, you know, that are a little bit unrealistic, I think.
Neil Henderson:Yeah, well, it's important to remember too, that when you're talking to an operator, they live and breathe this stuff every day.
Neil Henderson:And if you're coming through and you're trying to essentially act as a third party underwriter on their deal, it's very doubtful that you're going to do a better job than they do.
Neil Henderson:At the end of the day, we're all making our best guess based on the information we have at hand.
Neil Henderson:And, you know, if you're just pulling up somebody's spreadsheet and just picking apart the numbers and saying, all right, well, you know, what are you gonna do if this happens?
Neil Henderson:What are you gonna do if this happens?
Neil Henderson:And what does this number mean?
Neil Henderson:And it's important for you to understand a deal, but at the end of the day, you know, you say this all the time.
Neil Henderson:You're placing a bet on the jockey.
Neil Henderson:Yeah, not the horse.
Neil Henderson:And one individual deal could go great, could go bad.
Neil Henderson:At the end of the day, it's the marathon, not a sprint.
Clint Harris:It was kind of funny, the overall sentiment.
Clint Harris:I think we'll move on after this.
Clint Harris:But the idea was like, hey, this is listen to other operators talking.
Clint Harris:But there was like, we're all just, just talking about the background, the year that we've had raising capital, and it was a little bit of a, hey, I don't come to where you work and throw rocks at you while you're mowing.
Neil Henderson:Kind of a.
Clint Harris:Kind of an attitude, but every deal is different.
Clint Harris:And a lot of that was coming from the multifamily guys who've taken it on the chin over the last couple years and changing subjects.
Clint Harris:Now, I would say that we came out smelling like roses a little bit as an industry, because you and I do self storage.
Clint Harris:I was on two panels this weekend.
Clint Harris:One was a self storage panel, which is obviously my wheelhouse and was easy to talk about.
Clint Harris:And the other panel was about being a medical professional.
Clint Harris:I'm not a physician, had a background in medical sales, but being a medical professional and making the jump to full time entrepreneurship or real estate investing.
Clint Harris:And so within that realm, I got to speak, which that was cool for me because I got to speak to.
Clint Harris:I was on a panel with a bunch of physicians and got to speak not only about the medical side of things and what that is like, and trading time for money and late nights and weekends, but making the shift to being a full time real estate investor and entrepreneurism and how that works.
Clint Harris:And one thing that resoundingly came out on both of those panels was that, that in volatility, when markets are up markets are down.
Clint Harris:And arguably this is one of the probably worst times for storage because the housing market is frozen.
Clint Harris:The drivers of self storage are, you know, death, divorce, downsizing, or relocation.
Clint Harris:No one's moving right now.
Clint Harris:We have billions of dollars worth of people locked in with a 3% interest rate.
Clint Harris:We're sitting at 7.5% interest rate right now.
Clint Harris:Nobody wants to move.
Clint Harris:A few people are being forced to fraction of what it was.
Clint Harris:So arguably, if you look at things, this is probably one of the worst times for storage in the last ten years.
Clint Harris:And for the last 30 years, it's still been.
Clint Harris:It's the best performing commercial real estate asset.
Clint Harris:So I think everyone is.
Clint Harris:You know what?
Clint Harris:This unique thing happened where some of the bigger reits, extra space, dropped their prices rock bottom to get people to move.
Clint Harris:Dropped it so far that it no longer became about proximity.
Clint Harris:Storage is always about, you want to go to the one that that's five to 7 miles away is about as far as you want to drive.
Clint Harris:And they switched it so that they dropped the prices so low that you would drive across town 15 miles away to get to this one because they're $30 a month and the one next to you is $95 a month.
Clint Harris:Like, it has to be such a difference that it's worth doing even then.
Clint Harris:Even.
Clint Harris:And basically what happened is they did that first.
Clint Harris:A lot of other people dropped prices comparatively, and this is typically primary markets, and it's one of the reasons that we operate in mostly secondary and tertiary markets.
Clint Harris:But in a lot of these markets, you had this massive price swing, and even then, everything's fine.
Clint Harris:The numbers are good, the occupancy is there, it's stable.
Clint Harris:You're renting someone a box of air, you're paying for the lights, the AC and some staff, that's it.
Clint Harris:If you believe that things are probably going to change for the positive for storage in the future, which I think most people would agree with, that storage as an industry is doing very, very well because the reality is all we care about is some kind of movement, right?
Clint Harris:Interest rates up, interest rates down, unemployment up, unemployment down, people moving, whatever it may be.
Clint Harris:It's like if you're a silver or gold coin broker.
Clint Harris:I was talking to one of those not long ago and he's, look, I don't care what the price of gold or silver is doing, as long as it's moving, if it's going up or if it's going down, because I make my money when someone buys or sells, buys or sells, either one, as long as it's moving, I'm making my margin.
Clint Harris:That's where storage lives.
Clint Harris:As long as people are moving or buying or selling or anything, that's where storage lives.
Clint Harris:And right now no one's doing that and storage is doing fine.
Clint Harris:Yeah.
Clint Harris:So we're very bullish on the future, as most people are, but as anything, it all comes down to your cost basis.
Clint Harris:And that's the trick because cost of construction is still really up.
Clint Harris:But overall, I came out feeling very good about our asset class.
Neil Henderson:Yeah.
Neil Henderson:Something additional to that discussion about the way that the Reitzen are absolutely just dropping their prices just completely, like, absurdly low first month's rents is that their revenue is still up.
Neil Henderson:Their revenues, their revenue growth is still high, even though they're absolutely just dropping in rents so low because what they're doing is they're getting people in the door and then they're aggressively raising rents, doubling like within two months, they're doubling your rent because they know now they got you locked in, you know, and most people are going to be like, all right, at what point are you going to want to pack up your stuff and put it another in a u haul truck and move it across town to somebody who's just going to do the same thing?
Clint Harris:For anyone thinking about anyone that's using storage out there, and there's 11.1% of all households and a lot of businesses that do.
Clint Harris:If you are thinking about it and you're tempted by the person across town or someone close by because they're $25 a month and you're currently paying 110, just know it's a bait and switch.
Clint Harris:What they're doing is they're dropping the price to get their occupancy where they need to be and then they're going to wrench it up and they're going to leverage it.
Clint Harris:And they can legally do that because you're on a month to month lease.
Clint Harris:And when they do, that's a lesson that it takes one time for you to learn.
Clint Harris:When you learn that lesson that time, the next time someone across town is dropping their price to 25, $35 a month, you are once bitten, twice shy again, you're not going to rent a U Haul, move your stuff across town again because you know what's going to happen over the next few months?
Clint Harris:Is it like two months later and it's pre programmed?
Clint Harris:It's not.
Clint Harris:You're sitting there waiting like, oh, I hope they don't remember to raise the rents on me.
Clint Harris:It's coming.
Clint Harris:It's in an algorithm.
Neil Henderson:Yeah.
Clint Harris: ,: Clint Harris:Until you were right back where you originally were.
Clint Harris:They had a dip in the pro forma and in the balance sheet, and you're right back to where they were.
Clint Harris:And they fixed their occupancy problem by looping people in with the bait and switch and then wrenching it up.
Clint Harris:We're not seeing that as much on.
Clint Harris:It's.
Clint Harris:This is still a very fragmented market at this point.
Clint Harris:It's consolidated a lot, but 70% to 75% of properties are still mom and pop owned.
Clint Harris:You're not seeing it there as much, but it used to be 95%.
Clint Harris:Mom and pop owned that.
Clint Harris:25% to 30% that's consolidated.
Clint Harris:We're seeing that game being played.
Clint Harris:Just be aware that it's.
Clint Harris:It's a tool that they are using for occupancy.
Clint Harris:So that's kind of where we are in the market.
Clint Harris:I mean, desperate times call for desperate measures, but that's where we are overall.
Clint Harris:If I'm still looking around, I still think that multifamily has a couple really rough years ahead, specifically because they've got that base level debt that hopefully, by this point, has been secured, but there's still mezzanine debt over the top of.
Neil Henderson:Shake all that out.
Neil Henderson:The last statistic that I really liked, and then I.
Neil Henderson:I think we ought to wrap it up.
Clint Harris:Sure.
Neil Henderson:Is that the number of self storage facilities being built over the last, let's say, six years, was averaging about 100 new facilities a year up until two years ago, and then it dropped to nothing.
Neil Henderson:And they've built 300 facilities last year and this year, and that's a significant.
Neil Henderson:And you'd think, okay, well, that just means that storage is oversupplied.
Neil Henderson:No, it's not at all.
Neil Henderson:It's just the bank financing.
Neil Henderson:It's just the interest rates are so high that it just doesn't pencil out for a lot of people to build self storage and have to hold on to that interest reserve for the two, three, four years that it's going to take them to build it out and lease it up.
Neil Henderson:So what we believe, our thesis, is that there's a lot of pent up storage demand that is coming down the pipe that's not being met right now.
Clint Harris:And part of the thing, what I love about our strategy, the conversion strategy of buying old big box retail buildings and converting them, is that from the time we close on a building to the time we open it, depending on the size of the building.
Clint Harris:We're twelve to 15 months.
Clint Harris:That speed to market, I think, is going to be important as we work to backfill that little bit of a vacuum that's been created.
Clint Harris:So that's something that I think is on the horizon.
Clint Harris:And then if we're also looking at interest rates potentially changing as we, you know, round out this election year, it's going to create a big equity play for people that have been spending this time stabilizing.
Neil Henderson:All right, we're going to wrap it up.
Neil Henderson:What are you drinking?
Clint Harris:I'm drinking a Tito's and soda at the.
Clint Harris:We're in a phone room in the Dallas airport with a lot of people walking by, giving us very funny looks through the glass door.
Clint Harris:So, yeah, interesting spot to be doing this.
Neil Henderson:Look what we actually look like.
Neil Henderson:We're on, like, some sort of video conference call.
Neil Henderson:Really?
Clint Harris:Yeah.
Clint Harris:That's what it is.
Clint Harris:Yeah, we're.
Clint Harris:Nope.
Clint Harris:Instead, we're just a couple unemployed real estate investors figuring out which.
Clint Harris:Which Kmart we're gonna buy next.
Neil Henderson:I'm drinking a margarita on the rocks with salt was my late.
Neil Henderson:One of my late dad's favorite drinks.
Neil Henderson:And so we're about to get on.
Clint Harris:A plane, head back to the beach.
Clint Harris:100 degrees here in Texas, 85 degrees at the beach back home.
Clint Harris:I can't wait to drive back over the bridge.
Neil Henderson:Yeah.
Neil Henderson:I miss my family.
Clint Harris:Yep, same.
Clint Harris:I miss your family as well.
Clint Harris:Neil.
Clint Harris:Oh, Neil.
Clint Harris:Listen, Neal's birthday was.
Clint Harris:You'll be hearing this a lot later.
Clint Harris:Neil's birthday was yesterday.
Clint Harris:He spent his birthday for his birthday.
Clint Harris:He asked my wife, all I really want is three days in Texas with Clint away from my family.
Clint Harris:So I was happy to oblige.
Clint Harris:That was my gift to you.
Clint Harris:You're welcome.
Neil Henderson:I'm a man of simple taste.
Clint Harris:Yep.
Clint Harris:Very, very simple.
Clint Harris:Anyway, thanks again for listening.
Clint Harris:We appreciate it.
Clint Harris:We'll catch you next time.
Neil Henderson:Thank you so much for listening to this episode of the truly passive income podcast.
Neil Henderson:If you liked the show, if you think it would be useful for someone else, the greatest compliment you could give us would be to share the episode with a friend and leave us an honest review.
Neil Henderson:Wherever you listen to podcasts, if you have any questions, please don't hesitate to let us know on Twitter.
Neil Henderson:Truly passive.
Neil Henderson:And remember, with truly passive income comes freedom of time, place, and the freedom to pursue your higher purpose.
