Join Neil Henderson on 'Truly Passive Income' as he interviews Katherine D'Agostino, a self-storage feasibility expert. They discuss the critical importance of identifying growing and underserved markets, various aspects of conducting feasibility studies, and the nuances of investing in boat and RV storage. D'Agostino shares her journey from diversifying her business portfolio to focusing solely on self-storage and offers invaluable advice for new investors on managing projects efficiently, choosing locations wisely, and understanding market dynamics.

Key takeaways to listen for

• [01:28] Katherine's Journey into Self Storage
• [09:17] Financing and Market Selection
• [15:46] The Importance of Feasibility Studies
• [23:36] Conducting Feasibility Studies
• [26:13] Initial Steps in Market Analysis
• [29:14] Evaluating Market Health and Attitudes
• [30:23] Budgeting and Funding Strategies
• [30:57] Boat and RV Storage Insights
• [32:06] Understanding Customer Behavior
• [33:02] Navigating Market Data and Regulations
• [36:34] Challenges and Opportunities in Boat and RV Storage

About Katherine D'Agostino

Katherine D'Agostino founded Self-Storage Ninjas, a consultancy specializing in feasibility studies for self-storage, boat and RV storage, storage condos, and flex warehouses. With extensive experience as an owner and developer of multiple storage facilities, she provides critical market analysis to help clients make informed decisions about their storage projects. Katherine is a frequent speaker at industry events and a contributor to top-tier publications. Her consultancy aims to empower clients by offering detailed, data-driven insights and long-term support throughout their development journey

Connect with Katherine

• Website: Self-Storage Ninjas
• Contact: Contact Katherine

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Katherine D'Agostino: 00:00:42

Another thing that I really look for is growing markets. The first facility in Ashland. That market is the population growth is almost 14% over the last three years.

It's the fastest growing market in Nebraska. It's between Lincoln and Omaha, two biggest cities, and it's also one of the wealthiest areas. So it's underserved for self storage.

But, yeah, I think that the big key everyone should look for is you really want to look for a growing market that's undersupplied, and that's going to be the least risky proposition for you.

Neil Henderson: 00:01:14

Welcome to truly passive income. I'm Neil Henderson. I'm flying solo this week. My partner, Clint Harris, is off doing some family stuff.

But I have a fantastic guest this week named Katherine D'Agostino from storage ninjas. He's a self storage feasibility expert.

Such a huge part of the storage industry, and being successful in self storage, we do our own internal feasibility studies before we move forward on a project.

But then once we decide that a project is worth moving forward on, we then engage a third party feasibility expert, like a Catherine D'Agostino, before we decide to move forward on the project.

So I think this is a really interesting conversation if you're trying to understand what it is that you're investing in when you invest in self storage. So enjoy. Catherine D'Agostino, welcome to truly passive income.

Katherine D'Agostino: 00:02:06

Thank you for having me. I'm excited to talk to you.

Neil Henderson: 00:02:09

Yeah, absolutely. Before we dig into the world of feasibility studies and self storage, how did you find yourself in the self storage business?

Katherine D'Agostino: 00:02:16

Well, so after I got my mba, I opened a separate company in a different industry, and I grew it to about 31 employees. And I. It was about seven years that I had that company. And as I looked to diversify, I wanted another business. But I knew I couldn't have.

I absolutely could not deal with one more employee. That's a pretty short list of businesses that aren't employee heavy. And that's how I found storage.

And I fell so in love with the industry, I eventually sold that company and just went into business for myself. I love. I'm such a storage nerd. I know Stacey Rossetti has trademarked the storage nerd thing, but I'm right there with her.

Neil Henderson: 00:03:06

Has she trademarked it? So when I say so, when I talk to myself about being a storage nerd, do I owe her some kickbacks?

Katherine D'Agostino: 00:03:14

Probably. You might want to send her a check.

Neil Henderson: 00:03:16

Okay. All right. I'll talk to her about that. Maybe every time I say it, I'll have to say trademark. Stacey Rossetti, talk to us about that first facility.

Katherine D'Agostino: 00:03:25

What were, it took us a long, long time. First we looked at acquiring existing facilities and either we just look, I live in Nebraska, so we were looking in like Missouri, Kansas City, Iowa.

And so many of the deals that we looked at didn't have a lot of upside after the debt service. And so we, we eventually decided we're not going to, we're not going to pursue that anymore. We're going to do ground up construction.

And so then we started researching like, where are we going to buy land and how do we make that decision. And that's how I found my first feasibility consultant and I actually had reverse studies done, which I don't know if you're familiar with those.

That's when the consultant finds for you the area to go look for land and you go, the market is under supplied for self storage and all you have to do is go find land and whatever that two mile radius, or five mile radius, ten mile radius, whatever it is. And so I got those reports and I was like, oh, this is great. This solved all my problems. Now I know exactly where to.

However, with my background, with my MBA and my background in new product development, I was like, I could do this and I could do it even better. Well, we worked on our first facility we were going to build and we focus on like more tertiary markets.

So we were going to build in Seward, Nebraska. Lovely Seward, Nebraska. There's a university there, there's a lot of business there. It's a growing, it's a great town.

However, as we went through the process, our land was put under contract by another developer.

And then when that developer wasn't able to get the zoning they needed and we asked for an extension on our purchase agreement, the original seller said, nope, I'm tired of messing with this. It's taken too long. It's been almost a year. I'm going to sell it to somebody else.

And although we sued him and we settled and we technically won, we never really win. So we just, that set us back a year.

And then for one of the facilities I'm building now, that facility also needed zoning, so that was eleven months with the planning commission and city council. So that's a hot tip.

I would give everyone out there, if you really want to speed up the process, to get the zoning first and then just, there's a lot of other things that happens with that. I feel like everything is a learning process, but not always the. I'm tired of learning processes. I just now that I.

The more you learn, the less learning processes you'll have to have.

But I eventually found that that contractor that I had engaged for that facility was fully intending to pad all of the subcontractors bills and keep the difference, even though our contract forbid him from doing that. And so then I rehab that whole project dreamt of, and we are building that facility with another contractor.

But now it's going to cost $400,000 more because the contractor didn't know what he was doing. On one hand, it's a super huge plus because all those buildings would have just slid down the hill, there wouldn't have been any retaining walls.

That would have been a huge problem. But now I also know exactly what type of engineering reports to get, exactly what type of surveys to get.

And I feel like now that I'm on to my third facility, you can't believe how fast it's going because it had the zoning. We're getting the reports quickly. Yeah, yeah.

Neil Henderson: 00:07:10

It's, you know, we talk about this all the time.

The law of the first deal is that you, you can do all the learning you want from books and podcasts and seminars and educators gurus and things like that, but it's not until you, you really. The rubber meets the road and you start doing a deal that you learn what you don't know.

Katherine D'Agostino: 00:07:30

Absolutely.

Neil Henderson: 00:07:31

And then. And the nice thing about it is the more times you do it, the less scary it gets. And you're like, yeah, I've been through.

I've been through this before. It's not the end. Oh, something came back with the inspection in the first deal, it's like, oh, my God, what is?

And the third time it's like, okay, what's the deal?

Katherine D'Agostino: 00:07:47

Yeah, right. Exactly.

Well, and the great thing about self storage is that there's so much data to support your projections and the facility that you feel like once you just finally get the facility built, you know, you know, the market is going to be there, you've done all of that research and there's all that, those numbers to back it up. So. Yeah, definitely sticking through it.

Neil Henderson: 00:08:12

Yeah. So let's get some details on that first facility. How. What's the size of it, what acreage units?

Katherine D'Agostino: 00:08:19

Yeah, so the first facility is about 27,000 sqft, so pretty small by most people's standards. And we're doing about 80 open parking, boat and rv units. And it's a long, skinny parcel on a highway. It's about six and a half acres.

And then our second facility is in Grand Island, Nebraska, and it's almost exactly the same size, also on a highway. And it will have about 60 book rv spots. And then the third one is in Slippery Rock, Pennsylvania.

And that facility we're building in two phases, so it will. The first phase is only 12,000. Phase is only 12,000 sqft.

Right now I focused on markets, smaller markets, where after we get these facilities built, the larger plan is to contact the self storage owners in the area and hopefully acquire their facilities and build our portfolio of that.

Neil Henderson: 00:09:23

Gotcha. So rather than trying to buy an existing facility the first time, for your first deal, you're just going in, you're just building in the area.

Now you're in the area, and now you can start scaling by just dragging in the existing facilities.

Katherine D'Agostino: 00:09:38

Right. Got it. Yeah.

Or instead of a lot of my clients, they'll build in a larger market, whether it's Fort Worth, Orlando, or whatever, but then they're building 100 sqft.

Neil Henderson: 00:09:49

Yeah.

Katherine D'Agostino: 00:09:49

So we'll acquire 100,000 sqft, but it's going to take be like four facilities, six facilities to get. So just a different model.

Neil Henderson: 00:09:58

Yeah. What. Would you mind me asking what the all in is going to be on that first facility?

Katherine D'Agostino: 00:10:06

The first facility is about 1.6 million. The second facility is about 1.4. And the third, the first phase will only be about 900.

Neil Henderson: 00:10:18

Okay, and are you bootstrapping all of this off of the sale of your previous business, or are you bringing in investors?

Katherine D'Agostino: 00:10:26

The first facility I did by myself. The second facility I brought in investors, and I'm actually speaking about that this year at World Expo.

And then the third facility I'm doing with a partner who's one of my investors at the Grand island project.

Neil Henderson: 00:10:43

Gotcha.

Katherine D'Agostino: 00:10:43

And so that one is working out really well because we're subdividing the ten acres we've bought, and we will actually sell it for more than we paid for it, and that will pay for the down payment. So we'll actually be able to build that facility without really using any of our own money in the end.

Neil Henderson: 00:11:00

That's great. That's great.

Katherine D'Agostino: 00:11:02

Yeah.

Neil Henderson: 00:11:03

So on that first facility, what type of financing did you use?

Katherine D'Agostino: 00:11:08

I did SBA loans on both of those first few facilities, and we'll be working with Mandy on the third one. We'll see what she comes up with. But I did 10% down on the first and 15% down on the second.

Neil Henderson: 00:11:22

Gotcha. Okay. And what drew you to those markets? I mean, you said you're sort of targeting tertiary markets.

Was there anything else that kind of stood out to you about those markets.

Katherine D'Agostino: 00:11:34

Well, so I live in Lincoln, Nebraska, and I want to be able to visit my facilities easily and quickly. These first facilities. And then my partner lives in Pennsylvania that I'm doing the third facility with.

Another thing that I really look for is growing markets. The first facility in Ashland. That market is. The population growth is almost 14% over the last three years.

So it's the fastest growing market in Nebraska. It's between Lincoln and Omaha, two biggest cities, and it's also one of the wealthiest areas, so it's underserved for self storage.

But, yeah, I think that the big key everyone should look for is you really want to look for a growing market that's undersupplied, and that's going to be the least risky proposition for you.

Neil Henderson: 00:12:27

Gotcha. We'll dig more into that here in a minute. So it's a drivable? It's drivable.

The first two facilities are drivable for you, but they're tertiary markets that are growing.

Katherine D'Agostino: 00:12:40

Right.

Neil Henderson: 00:12:40

Gotcha. Okay. Okay. And then on that first facility with the SBA loan, they. I assume they gave you all of the money for the construction costs and everything.

Correct. And.

Katherine D'Agostino: 00:12:54

Yep. So, in both SBA loans, they will include your loan payments during construction, as well as until you're at break even, and you can pay those.

And then they'll include your operating expenses until you can pay those. So you ask for all of that as your total loan. So, like, our. Our total loans would probably be about $200,000 more than I told you.

But if you don't use that, then, of course, it just comes off from the principle. You never draw on it.

Neil Henderson: 00:13:27

Gotcha. Gotcha. So they're giving you. They're basically allowing you to.

They're basically giving you the money to pay the loan for the period that you're leasing up to stability or to break even point. Okay.

Also, I forgot to mention earlier when you were talking about zoning, we interviewed a man by the name of Scott Crone, who you may or may not know, who specializes in converting old buildings to storage. And Scott has some great tips on dealing with the zoning departments.

Katherine D'Agostino: 00:13:57

Yes. Yeah. So, yeah, I. I have a client, too, that he used to do entitlements for the reits, and.

Yeah, I wish that I had known him before I embarked on that process.

Neil Henderson: 00:14:12

It can be very political. It can be very.

Katherine D'Agostino: 00:14:14

Yeah.

Neil Henderson: 00:14:15

You know, you gotta be.

Katherine D'Agostino: 00:14:15

Yeah. It is shocking how political it is.

Neil Henderson: 00:14:18

Yeah. The other tip that I heard from somebody, and I think it was on one of the. The clubhouse storage chats where some guy talked about.

I forgot what he called it. He called it the. Hey, y'all. Hey, y'all. Where you go into the city planning department or the zoning department and you go, hey, y'all.

I'm new at this. I'm trying to figure out how to do this. I've got an idea for. Here's what I want to do.

And basically get them to basically talk you through the process that often you would probably have to go and hire an architect or. I'm not sure who in the process would do this, that would be doing it at several hundred dollars an hour for you.

And when they show up at the door, a lot of times the zoning department is going to be like, what do you want?

Whereas if you start this kind of slow process of asking them how you do it, now they get kind of invested in you and they get invested in your success, and now maybe you'll have a better chance of them approving.

Katherine D'Agostino: 00:15:24

Absolutely. Yeah.

There's a seminar from last year's world expert expo that a company called Design House did, and they're actually, I believe, primarily architects, that they did a seminar on zoning. I think you can buy it for like $49. I got it for free since I was a speaker. But you. They go through in that. I wish I had known this when I started.

It was like, I'm not joking. Like a thousand steps to getting your zoning project through.

Neil Henderson: 00:15:56

Wow.

Katherine D'Agostino: 00:15:56

And one of them was exactly what you were talking about. You go to those first meetings and you don't give any details. And you're just like, I am just a novice. I'm a friendly person.

Can you just tell me what you want?

Neil Henderson: 00:16:11

Yep.

Katherine D'Agostino: 00:16:11

And don't commit to anything. Just be open to their ideas.

Neil Henderson: 00:16:15

Yeah. All right, so I'll try and look that up. Presentation from design house from the self storage world expo.

I'll try and put that in the show notes as well. Okay, so let's talk about feasibility studies. Let's do exciting world of feasibility studies.

Now, it's often, I probably once a week on some self storage forum, I will see somebody come across and go, hey, I've got this eight acres of land, and I'm thinking about putting storage on it. What do I need to know? Or they'll ask something like, how much does it cost to build these? Or something like that.

Katherine D'Agostino: 00:16:58

Yeah.

Neil Henderson: 00:16:58

And I always come in, I'm like, whoa. What? Congratulations. If you own the land. If you don't own the land. Hold up. I said and you ask, have you done a feasibility study? A what? And.

Katherine D'Agostino: 00:17:12

Right.

Neil Henderson: 00:17:12

And it's okay, just know this is those the days of build it. Drop a self storage facility down in the middle of some area and that they're going to come are over the long overland.

Katherine D'Agostino: 00:17:24

Right.

Neil Henderson: 00:17:25

And I'm totally fine with trying to steer people away from making this mistake because I think the better self storage operators do, the better we all are. And I, and you ask them, have you done a feasibility study? And they go, what? And you go, and then they start going, well, God, it's how much?

You know?

to: 5000

So you're going to have to do it eventually anyway. But any thoughts on that? Any thoughts on that? I'm sorry, I kind of rambled there.

Katherine D'Agostino: 00:18:10

Yeah, absolutely. Yeah. And I stopped participating in a lot of the Facebook forums because it does. But you. Yeah, I mean, of course, I totally agree.

And the more experienced a developer is, the quicker they are to order a feasibility study.

A feasibility study is not only going to identify all the potential risks in the market, it's probably going to uncover several things that you don't know. And that's the. I would say that's the most common thing that I hear from every single client I do a study for is I didn't know.

You might know a whole lot about one part of storage or one part of your market or one part of your planned site.

But like you said, if you're going to be risking two to $5 million, don't you want to do your due diligence and make sure that you're building the type of storage that the market wants and will be the most profitable? We're not building it at all. I mean, sometimes that's what everyone says, right? The deal you walked away from can be the best deal.

Neil Henderson: 00:19:24

Yeah, we. I went through that exact thing less than a couple of weeks ago. We were, my partner and I were under contract for an MTK mark. Great location. Great.

Was in great shape. We were. The plan was to build it in phases and try and have some drive through storage, climate controlled. There was demand for it in the market.

But it came back and it was just kind of the feasibility. We had a feasibility study done and the feasibility study came back and was. Yeah, but it wasn't like the town. And the problem was the town.

The population was declining in the town.

Katherine D'Agostino: 00:20:03

Oh, right.

Neil Henderson: 00:20:05

And.

Katherine D'Agostino: 00:20:05

Yeah. The only way that works is if the market is so dramatically undersupplied that by the time the population hits whatever its rock bottom could be.

Neil Henderson: 00:20:17

Yeah. And we just. There's got to be better opportunities out there and so we will.

Katherine D'Agostino: 00:20:23

Or sometimes you see in smaller market, if it's a one industry town and that one industry is declining, that is. That's a risky proposition as well.

Neil Henderson: 00:20:34

Yeah. So tobacco, that was the one industry in this town and.

Katherine D'Agostino: 00:20:38

Sure. Yep. You see that or you see like railroad. Yep, yep, yep. Yeah.

And I would say one thing to be thinking about too is there might be times when you don't need a feasibility study.

're just going to be building: 5000

Or if you're a REit, or if you're ten federal and you have 100 facilities and you have in house analysts don't need a feasibility stick, but for the rest of the world.

Neil Henderson: 00:21:18

Gotcha. Gotcha.

Katherine D'Agostino: 00:21:19

Yeah, yeah, yeah. Sometimes a beer and a napkin just isn't going to cut it.

Neil Henderson: 00:21:24

Gotcha. So you talked about a little bit about at the beginning, you talked about risk and storage. Talk to me about what you mean by that.

Katherine D'Agostino: 00:21:38

The great thing about self storage is that there's so much data available about how much supply a market can bear.

And you can look not only just at that market, you can look at similar markets in that region, you can look at how the overall state is performing and compare those numbers to the national averages.

And then there's so much data available through the self storage demand study that comes out every three years about what type of storage consumers want, whether it's by what region of the country they're in, what type of urban setting they're in, if they're rural, suburban or urbanization, and what generation they're in, if they're millennial, Gen Z, whatever.

I mean, I think that's one thing I've heard from self storage developers is maybe they didn't know that their customer base would be primarily millennials, and maybe they thought millennials. You hear this myth about millennials all the time, that they don't have stuff and they don't want. Well, that's not true.

And they are the fastest growing group of self storage consumers. And of course they want stuff. Maybe they just don't always have money, but they're getting there.

Neil Henderson: 00:22:59

They are getting there well. And they're also I think leading the charge with the technological revolution that's happening in storage. They're the ones that want.

They want touchless entry. They want no key systems. They don't want to have to go and talk to a manager and get a contract and fill out a form that's got carbon copy.

Press hard to. They want to be able to do it on their phone and do it within at least be ready to move in within the next 2 hours and not.

And the little, the less interaction they have with a human being the better.

Katherine D'Agostino: 00:23:34

Absolutely. Yeah.

And I do feel like that used to be an easy competitive advantage that new facilities could have or that you could go and do value add to a facility. But I now with the pandemic, it's kind of made the industry catch up to the groundbreakers. So now I think it's just like a baseline.

Neil Henderson: 00:23:55

Oh yeah. No, you better.

Katherine D'Agostino: 00:23:56

Yeah.

Neil Henderson: 00:23:57

So what when you're doing talk to us about somebody who's doing an initial competitive analysis on their own before.

Before we get down, before we bring in a pro like yourself or some of the other feasibility study companies which I want mention my name out of respect for our current guest.

Katherine D'Agostino: 00:24:18

Well, yeah. So there's a lot of work you can do on your own to make sure you're comfortable doing a feasibility study and paying the money for it.

So you can call all of the local competitors and you know, just pretend like you're a customer and see you can go down there to chat with them. They're bored.

If they're full time and they'll talk to you all day, you can talk to them about what unit sizes are the most popular, how many of each size they have available, what their business has been like over the last year, or what's really great is if there is a facility that's in lease up in your area and you go talk to them and a lot of times they'll just tell you we opened six months ago and we're at 70% occupants. You're like what? I mean the average in the industry right now is three to four years.

So if they have leased up that quickly, that's a sign of unmet demand that you can learn a lot from just talking to those facilities. And another thing you can do if the facility is outside of your trade area, they're like 5 miles away or 7 miles away and your trade area is 3 miles.

You could just be out and out honest and say, I wanted to build storage. Can I take you out to lunch? Like no one ever does that.

And self storage owners are super friendly and they'll just go tell you everything about what it's like to do business in Lincoln, Nebraska or wherever. I think it's important to join your local state association and go to those meetings. Track d building systems.

They have those free seminars, both virtual seminars that you can attend and then they have in person full day seminars that you can attend. You can pay by the hour to use radius, plus it's $20 an hour, and do some initial research yourself.

That way I will do people's first preliminary report free, which I just use radius for, and then I'll do successive reports for $75 just to see if it's worth doing a feasibility study in that area. So the difference between doing that on your own and then having me do it is you get my opinion.

But there's, I know that there's another feasibility consultant that does those, that you can pay for those preliminary reports, too. So, yeah, there's a lot that you should do when you're just maybe even to know if it's worth looking for land in that area. Right.

Once, if you do find a hot parcel.

Neil Henderson: 00:26:55

Yeah.

Well, let's talk at a high level, kind of like the beginning stages of, and I can sort of walk you through kind of how we look, how I look for potential markets, potential facilities. But what's the first thing you're looking at?

Katherine D'Agostino: 00:27:08

Well, when you're looking at a potential market, I would first think about how you're going to run this facility. If this is your first facility, are you going to use property manager? Then you can expand your search farther.

Are you going to work with a general contractor and are you comfortable managing that process from far away? Probably not. On your first facility, you're probably going to want to go see it.

So I would think about in terms of how far out you're going to go, you're going to run the facility and how you're going to build the facility and what that process will be like. And also if you do live close, then you're just more familiar with the market and more familiar with what's going on.

You mentioned with the, with the tobacco industry, like, there's still places that were tobacco heavy that are growing. And if you live close to one, then you'd be more comfortable knowing, like just because tobacco's not going good. This market could still be.

Neil Henderson: 00:28:12

Yeah.

Katherine D'Agostino: 00:28:13

So those are the first things I think.

Neil Henderson: 00:28:16

Yeah.

Katherine D'Agostino: 00:28:17

So then I would think through budget because then the larger your more expensive it is going to be to purchase the land and develop your facility. So. And that doesn't mean you should rule it out.

If it's big market that's expensive to get into, you're just going to have to think about if you dont have equity yourself, how are you going to raise that equity and what are you going to do to fund your facility?

Neil Henderson: 00:28:44

Gotcha. Okay, so you typically start with management. How am I going to manage this facility?

Is this going to be something that Im going to hire an onsite manager to run? Is it something that Im going to try and run virtually? Is it something Im going to hire a third party self storage manager to take care of?

Which I will point out, people need to understand that most self storage third party management companies are only going to go for a certain size facility.

Katherine D'Agostino: 00:29:15

Right.

Neil Henderson: 00:29:15

You got to really? Because that's not worth their time.

Katherine D'Agostino: 00:29:19

Right. Yeah. They're looking at like primary markets with 50,000 sqft or more.

Neil Henderson: 00:29:24

Yeah.

I mean, so if you're just starting out and you're expecting you're going to buy a 25,000 square foot facility that's 5 hours away by plane and you're expecting to hire Tron Jordheim from store here to run it for you, that's going to be a tough conversation to convince him to do. It's not 100%.

You will sometimes find some self storage operators who are willing to take on those smaller facilities, but they're also usually going to want profit sharing. They're going to want a part of the deal.

Katherine D'Agostino: 00:29:54

Yeah.

Neil Henderson: 00:29:55

All right, so next you're looking at the market health. Just, is it a growing market? Is it a one company town or one industry town? And what's the future of that industry look like?

And then third, you look at, I'd.

Katherine D'Agostino: 00:30:08

Say you'd also look at what are the attitudes towards self storage in that industry, in that market?

Because if the municipality is feels like there's too much self storage already and they're trying to shut down any future development, is that a battle you want to take on?

Neil Henderson: 00:30:24

Yeah. Well, and it's also, even if you don't plan to build, I would say it's smart to call them and find out what their plan is for storage.

And if they say they have no plan, we don't care. That's a bit of a red flag as well. Cause then it just means that anybody see Texas? What's that?

Katherine D'Agostino: 00:30:44

I said, see the state of Texas.

Neil Henderson: 00:30:46

See the state of Texas, or see parts of outside Boise, Idaho, where they're just like, sure, you got. You want. You own the land, build whatever you want. We don't care.

And the next thing, six months after you've built your little 25,000 square foot class b facility, public storage comes in and builds 120,000 across the street. So it's good to know what the attitude for storage is in the market, whether you're building or buying an existing facility. And then last is.

And last is just budget, whether or not are you going to bootstrap this and do an SBA loan, try and put 10% down. How much can you put down? Are you going to.

Are you somebody who's comfortable asking for, pitching your friends and family on private equity and things like that, and bring in investors? All right, so that's a good start. So you. You are doing both indoor storage and boat and rv storage, correct?

Katherine D'Agostino: 00:31:39

Yeah.

And so with boat and rv storage, which I'm super passionate about, and that I really do think it's where it's at for a lot of oversupplied markets or people who wanted to get into self storage that can't find a place to build self storage close to them because it's oversaturated a lot of times, boat and rv isn't. The hard thing is that there's not as much data available about boat and rv storage. And also, it's a different customer.

So you're looking at different demand drivers than you are for self storage. Whereas a self storage customer is storing based on a need that is associated with mobility, whether it moving or divorce or death, whatever.

That's a need. Odin. Rv consumers are storing based on pleasure. They're storing based on something fun that they do.

And the average rv owner only drives their rv 14 days a year. And depending on the state, the average boat owner only goes boating between six and nine days a year.

Neil Henderson: 00:32:42

Wow.

Katherine D'Agostino: 00:32:45

All right.

Neil Henderson: 00:32:48

Hold on a second. I want to. I want to pass this because I, like, I was blown away when I heard the average.

I think I heard the stat that the average self storage customer expects to use their residential. Expects to use it six months, and the average person does it for over 24 months.

Katherine D'Agostino: 00:33:07

Uh huh.

Neil Henderson: 00:33:08

That. What you just gave told me that is a bigger. That's a bigger shocker than that. That's huge. Wow. That's crazy.

Katherine D'Agostino: 00:33:14

Yeah. Yeah. Yep.

andemic bought an rv sales in: 2019

Neil Henderson: 00:33:35

Go outside the country and have fun.

Katherine D'Agostino: 00:33:39

We're going to have fun here. Dang it. But anyways, the demand drivers you're looking at are different.

You're not only looking at how many registered boat owners are in your area and how many registered rvs are in your area. You're not going to be able to find data on expired registration. So that will make your numbers more conservative would be good.

But you're also going to want to look at like the presence of community associations in your area, homeowners associations. You're going to want to look at the municipalities parking regulations and how they allow people to park either at their home or on the street.

You're going to want to look at tourism in your area if you're close to a lake or a destination.

And then you're going to just overall look at other structural changes in your market, whether it's like consumer behavior or the presence of a lot of boat and RB dealers, things like that, that are just very specific to your market. So there's still data there, but it's completely different than the type of data you're looking at for self storage.

Neil Henderson: 00:34:50

You're typically with storage the sort of industry benchmark. And this is very like, this is just a rule of thumb.

People typically looking for a median household income above $45,000 a year with boat and rv, are you looking for, you're looking for a higher median income. Correct.

Katherine D'Agostino: 00:35:11

So the average, the average rv owner income is 62,000 and the average boat owner income is 60,000. But that is going to vary widely because there are so many different types of boats and rvs, right?

Like you might have an aluminum outboard boat or you could have essentially a yacht.

So the type of storage you build in your market, there's the fully enclosed drive through with electricity and wash bay and all the bells and whistles, and then there's essentially the field with a fence and navy gravel.

Neil Henderson: 00:35:56

One of the first self storage associations I went to had a little, it was a nice little breakfast buffet. We had free breakfast and we could go.

And I'm in line and I'm talking to this guy who's probably, he's probably 80 years old and really friendly, as most storage people are. And I strike up a conversation with him and he goes, I rent dirt. That's what I do. And it's the best business I've ever been in my entire life.

I've got 20 acres out on such and such side of town, and. And we. We just rent. We rent dirt. That's all we do.

And, and I talked with him a little bit, and he said, pretty much they did is if somebody stopped paying, they just turned their gate access off. That's all you do. You just make it so they can't get through the gate. And he said, in general, he's.

Eventually, you just came and told him, like, he rarely auctioned things. He mainly just went to people and said, listen, come get your thing. Come get it off my lot.

Because he didn't want to deal with having to do the auction and all that. But, yeah, it's. I would say that you gotta be careful.

You're gonna want to find out what kind of customer you're gonna be dealing with if you're gonna be building boat and rv in an area, because you may. It may be an area where they expect a dump station and, you know, a wash station and things like that.

Katherine D'Agostino: 00:37:15

Yeah, yeah. And for more expensive markets, the only way to make that pencil is if you can build a premium boat rv facility.

Neil Henderson: 00:37:25

Gotcha.

Katherine D'Agostino: 00:37:26

Otherwise, a lot of times you can't make it work with the land cost.

Neil Henderson: 00:37:30

Gotcha.

Katherine D'Agostino: 00:37:30

But one thing just to keep in mind with that guy who was just renting dirt is it's not as easy to opt in those boats and rvs, right. Because they have a title and the self storage association has a number of articles about this. You need to.

What I would recommend doing is just working with a local tow company, because those towing companies are already set up for dealing with people who abandon their vehicles, and they know the process. So it's better just to have a towing company just tow it and be like you deal with it than to try and auction it yourself.

Neil Henderson: 00:38:08

Gotcha. So you mentioned doing research on the rv and boat registrations in an area.

Do you have some tips on where to find that information and how to do that research?

Katherine D'Agostino: 00:38:21

Well, I paid for database I pay for because I'm doing them all the time. Probably the average person is going to want to pay two to $4,000 for an annual subscription for that information.

So I would say you can get some of that information from that. It's usually the game and wildlife department or game and parks. It's called different things in different states.

Neil Henderson: 00:38:48

Gotcha.

Katherine D'Agostino: 00:38:48

They're tracking boats generally, and then depending on the Department of Transportation in your area, they are handling registrations and whether or not they publish that rv data.

There's a lot of places in California that publish that data that you could get it for free, but then there's other states that don't publish it at all.

Neil Henderson: 00:39:11

Yeah. Gotcha.

Katherine D'Agostino: 00:39:12

And then you're just going to need to look at national consumption and apply it to your yard.

Neil Henderson: 00:39:18

Gotcha. Gotcha. So with your three facilities, you mentioned that you've got boat and rv storage on there is.

Do you also still have under, you have under roof storage as well, correct?

Katherine D'Agostino: 00:39:30

Oh, yes. Yeah. Just regular self storage and then we just have open parking boat, rv.

Neil Henderson: 00:39:35

Yeah.

Katherine D'Agostino: 00:39:35

But yeah, when fi goals is absolutely to build like canopy and enclosed boat and rv and larger market. And you can just see so many places where that's undersupplied.

And a lot of people have the attitude like, you can build it as far away as you want from town and people will still come and that's not going to be true forever.

Neil Henderson: 00:39:58

Yeah.

Katherine D'Agostino: 00:39:58

Like it's only true right now because there's not enough.

Neil Henderson: 00:40:01

Yeah, yeah.

Katherine D'Agostino: 00:40:02

Just like with self storage, people either want their boat rv close to their house or close to where they're going.

Neil Henderson: 00:40:08

Yeah, yeah. People aren't going to.

It's, yeah, it's, it's a customer service based business and it's retail and they're not want to, they're not going to want to go far outside of their normal retail corridor that they operate in.

Katherine D'Agostino: 00:40:20

Right. Yeah.

Neil Henderson: 00:40:22

It's interesting.

One of the major value add opportunities that most self storage investors have talked about over the last five years or so is you look for facilities that have, that have under roof storage, but then they have rv and boat parking.

Katherine D'Agostino: 00:40:38

Oh, yes. They just expand more self storage.

Neil Henderson: 00:40:41

So the idea is to get rid of that boat and rv because there's not as much money in that. There's more money in under roof storage.

And it's interesting to me to see whether or not that's going to become, whether that value add opportunities kind of go away because boat and rv demand is going to rise so high that people are going to want. They're still going to want that space, right?

Katherine D'Agostino: 00:41:04

Well, yeah.

So generally, self storage is always going to produce a higher return per square foot than boat and rv because the average boat and rv unit is 350 sqft.

However, and this is where it can be really tough as a feasibility consultant, there are so many markets where there's certainly a demand for enclosed boat rv or canopy boat rv, but there's no comparable, right.

So you're going out like 10 miles, 20 miles, 30 miles looking for comparables, and then you get to those comparables and there are independent facilities that have been full for three years. They haven't raised their price for three years. Maybe they haven't raised their prices for six years and you're trying to use that as the compare.

Of course, when you do feasibility study, that analyst is always going to have to look at what is not what could be.

But when you're running your scenarios in your best case, worst case, most likely case, look at the type of facilities that are doing what you want to do and are offering the same type of boat and rv storage you want to offer. For example, I saw this facility right outside of Indianapolis. It has, I think, about 60 fully enclosed boat and rv units.

And they were renting those, the smallest 130ft dollar, 900 a month. The largest $1,200 a month fully leased, two year waitlist. You would not expect that, like right outside Indiana in Indianapolis.

And so I have a client who just is developing his facility in Fort Worth, his boat and rv facility, and he's previously done Carcon. So he has had somebody call him. He hasn't even.

He's just now closing on the land, getting all of his plans done and everything, and he got a call from somebody through the car condos that says, I need a place to stay to state to stole my rv. Do you have anything? He said, no, but guess what? I'm building a facility, so I'll put you on the list. And he's absolutely, I'll take it.

And he said, catherine, I know you said I should try and ask.

I gave him the numbers that in a study, this is your competitors, this is a for sure thing, but this is what I want you to set your prices at and see if you can attain them. And so I said, $1,200 for this particular unit size. And he said, I just couldn't do it. I froze.

I asked for 900 and he was like, we're going to be able to rent this whole facility. 100 rm sorry. I'm like, yes.

Neil Henderson: 00:43:43

Yeah, yeah.

Katherine D'Agostino: 00:43:44

So I think that's the toughest thing with boat and RB, is that there's not a bunch of reits in the market. Pushing them prices pushing the prices. So you're going to have to push those prices on your own and you can't be afraid to push them on your own.

Neil Henderson: 00:43:58

Yeah, yeah. One of the other things that I've heard in a mastermind that I'm a part of with a guy who specializes in boat. He's just boat and rv.

He does no underroof storage.

Katherine D'Agostino: 00:44:08

I love it.

Neil Henderson: 00:44:09

Yeah. Says you gotta be careful. If you're only gonna do boat and rv storage, you need a lot of land to be profitable. Yeah, like you're not gonna be.

You're probably not gonna be able to build three acres. On three acres. You're going to need probably ten acres.

Katherine D'Agostino: 00:44:28

I always tell people minimum of five. Five to ten.

Neil Henderson: 00:44:32

Yeah, dodge. Okay, final question, because I like to hear other people's opinions about it because they vary.

What do you consider to be a trade area for an urban market versus a suburban market versus an ex, urban versus rural market? Or does it vary?

Katherine D'Agostino: 00:44:52

Well, I would say it's going to vary based on the competition.

But pretending that you have average competition in an urban market with more than 100,000 people in your trade area, then that might be as small as one to two months. If you're lucky enough to find a pocket that's under supplied, maybe it's three months.

And then for a suburban market, it's generally between three and 5 miles. 5 miles. That would not be as common. So that population is probably between 30,100 thousand.

And then for a secondary suburban or rural market, the population is going to be less than 30,000 and it could be up to 10 miles. But you can't. It's. I think one thing that people really get fixated on is drawing everything in circles and concentric circles. Here's your radius.

This is what it is. Now, your final trade areas is going to be some kind of poly, going to be like the.

You're cut off by this lake, you were cut off by this interstate, and you're cut off by this other town, because the people from that town are not driving to your. And so you really need to look at what your actual trade area is.

Neil Henderson: 00:46:14

Yeah. We interviewed Fernando Angelucci and Fernando's.

Katherine D'Agostino: 00:46:19

Oh, my man, Fernando. I love Fernando.

Neil Henderson: 00:46:21

Yeah, I know. I love Fernando, too. Yes.

And he talked about they were looking at a facility, I think even maybe a portfolio of facilities out near Asheville, North Carolina. And he said it was kind of a rural market. And we drew, we drew our little circle and we were like, oh, this is great.

Until we realized that there was this huge pocket of population that they were counting that was like almost a two hour drive away because you had to go around the mountains.

Katherine D'Agostino: 00:46:52

So no one's driving around the mountain.

Neil Henderson: 00:46:54

No, you gotta, you can't just draw a circle, draw a radius and say that population is ours. You gotta sit there and do a little bit more thinking about how are people moving through the area.

Katherine D'Agostino: 00:47:05

So absolutely. Absolutely.

Neil Henderson: 00:47:08

Yep. Well, Katherine Dagostina, thank you so much for sharing with us today.

Katherine D'Agostino: 00:47:14

Thank you for having me.

Neil Henderson: 00:47:15

You have, you are offering, you offer a free consult the first time you mentioned it earlier, but give us some detail.

Katherine D'Agostino: 00:47:23

Preliminary report.

Neil Henderson: 00:47:24

Okay.

Katherine D'Agostino: 00:47:25

Yeah. So if you just go to my website@selfstorageninjas.com, and click the button for preliminary report, ill do your first one free.

And thats like a high level overview of the supply and potential unmet demand in the market and the consumer demographics in the market. And then I do charge a fee for future reports.

Neil Henderson: 00:47:47

Okay, great. Well, thanks for being a storage nerd with me today.

Katherine D'Agostino: 00:47:53

Oh, youre welcome.

Neil Henderson: 00:47:54

Youre welcome to see Rossetti: 2021

Katherine D'Agostino: 00:48:03

Yes, you too. Have a great day. Take care. Bye.

Neil Henderson: 00:48:06

Thank you so much for listening to this episode of the truly passive income podcast.

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