The 7-Step “Playbook” for Scaling Your Real Estate Business With AJ Osborne

Brandon:
This is the BiggerPockets podcast show 388.

AJ:
You need to look and audit what you’re doing and the impact that that has on your business. And most people that I see, the vast majority of their day is spent on things that are irrelevant to the longterm goals of their business and should be, and can be executed by people that are better than them at that. And that was one thing that I did clearly at the first I do all the time is I’m like, I’m not doing something I’m not good at.

Speaker 1:
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Brandon:
What’s going on, everyone? It’s Brandon Turner host of the BiggerPockets podcast here with my co host, Mr. David Greene. David Greene, DG, what’s going on in the world of real estate for you?

David:
It’s going pretty awesome. I got flip we’re getting ready to put on the market. I think we might’ve actually just put it on. That one’s in Oakland and then this Bay Area market’s really hot. I know it’s kind of a weird time in real estate because you’ve got parts of the economy that are the hottest I’ve ever seen and other parts that are actually kind of slower. And everybody’s asking the same question, what’s going to happen? Are we headed to a recession or are we not? So it’s exciting. Rates are dropping right now. It’s a good time to refinance a house. There’s moves to be made depending on where you are.

Brandon:
That makes sense. Yeah actually just refinanced my house, closed on that.

David:
Good!

Brandon:
I had an offer on, yeah, so that went through. I’m saving like $550 a month or something like that.

David:
I remember talking to you about it and you were like, eh, I don’t really want to have to get- [crosstalk 00:01:35]

Brandon:
Yeah 500 bucks a month. It was hell but we got through it. I also got a offer a couple weeks ago we talked about on the flip I’m doing it here in Maui, got an offer on it. It fell through which I thought it might, which is why you told me not to take it.

David:
Don’t take it.

Brandon:
Which I took your advice and I didn’t take it. Cause they wanted to put it like a long what’s it called the contingency-

David:
The contingency period.

Brandon:
That they sell their house, but they hadn’t even listed their house yet.

David:
Yes.

Brandon:
They didn’t want to list it. So anyway, so we ended up not taking it. They re-offered without it, we took it and then they backed out anyway.

David:
And that was your sign that yes.

Brandon:
Yeah. Yeah. We got another offer [inaudible 00:02:05].

David:
This is why I’m glad I get to be a part of your life because even your Hawaii house, remember you were like, I don’t know if I should buy this thing and we went through it and now like, if I had told you then you’re going to knock 500 bucks off the price anyways, you probably would’ve been like, Hmm I think that sounds good.

Brandon:
Yeah. But you wouldn’t have known because you don’t out psychic. But I did get another offer even though the one fell through I got another one that’s much better. So we’re in contract again. Hopefully that goes through. And we got two mobile home parks under contract in two days last week, which was incredible. So big shoutout to Ryan Murdock for his work on that as well as the rest of the Open Door Capital team.

David:
Congrats on that.

Brandon:
Yeah. So both of us, real estate is picking up despite the whole COVID thing, kind of maybe winding down, maybe gonna come around for a second show up. I don’t know, but definitely real estate is still moving. So if you’re out there one of those people right now, listening to this going well, I’m waiting for everything to calm down. Don’t wait, this is a time to like sharpen your ax. You can start swinging at that tree later on whenever you are ready. So even if you’re not fully ready to buy right now, maybe you’re laid off whatever, start sharpening your ax. And if you have a sharp ax start swinging. With that, let’s get to today’s Quick Tip.
All right today’s quick tip. We are doing a survey of every single person who listens to the podcast. So here’s the deal. If you listen to the BiggerPockets podcast or the real estate or the business podcasts or The Rookie Show or The Money Show, you are required by law to fill out a survey for us. I’m just kidding not by law, but we are requesting your help. And if you would just go to BiggerPockets.com/survey today BiggerPockets.com/survey. We have a survey on that. We just want to answer a couple of, have you answer a couple of quick questions so we can improve the show. It’ll take you less than five minutes. You can do it on your phone. Just don’t do it while you’re driving.
Mr. David Green. I think it’s about time we get into today’s show. Today we’re talking with one of my favorite people in the entire world. His name is AJ Osborne. He was on the episode three, or 286 back a couple of years ago, we had an incredible conversation. We just got done recording it with AJ today. All about, I mean, tons of different stuff, everything from leadership to scaling your business to self storage, which when he goes through why you should consider self storage, it’s going to really make you reconsider what you’re doing and jumping ship to go do self storage. Cause there are a lot of really cool benefits to it. He also walks through kind of a seven step process or blueprint of what you need to do to build big wealth through self storage.
And really what that applies to is this BRRRR strategy, how BRRRR applies to commercial real estate. So that means it’s a longer episode, it’s an hour and a half long, I think maybe somewhere around there. And we get into the BRRRR topic later in the show, but make sure you listen to the first half as well before we get into the discussion of the self storage and BRRRRing. Cause man, both halves are so vital to the growth of an investor’s life. So I think you guys will love it. So without further ado, let’s get, yo that’ll make more sense later in the show. Let’s get to the interview with Mr. AJ Osborne.
All right, Mr. AJ Osborne welcome back to the BiggerPockets podcast. It’s awesome to have you here.

AJ:
Thanks for having me on guys. I appreciate it.

Brandon:
Yeah. So let’s for those people who don’t know who you are, shame on them, but.

AJ:
That’s right.

Brandon:
You have this shame on them. So maybe they didn’t listen to your episode, which by the way was number, what was it? 380-

AJ:
286.

Brandon:
286. All right. So for those who are not here, which is almost a hundred episodes ago, give us a quick update on who you are and what you do. And I would love you maybe in a brief version, retell the story of what you told last time.

AJ:
Yeah, I will. I’ll walk. So it’s, that’s probably how most people know of me, but I’m AJ Osborne. I’m from Boise, Idaho. I am in the self storage game, but we own commercial assets as well as other businesses, service businesses, online businesses. And a lot of people probably remember me as the guy that got paralyzed overnight. So what happened to me is I worked in the insurance world and then, oh man, it’s been a while now. It’s been a long time. We started slowly diversifying in early 2000 into other asset classes. But after 2010, I thought we really need to step up our real estate game because I got really worried about how connected my time was with my income. You know, I have kids and I thought, I don’t know how life’s going to play out.
And I was a sales guy, right? So I got paid on what I did. And if I didn’t work, like any normal person that gets a W2 or anything else, it was over for me. So we looked at other asset classes and which ones would suit us best. Really I have just kind of a fundamental thing where it was like we need to be able to improve the value, right A value, add strategy and do a lot of revenue management and then be able to redeploy the capital at a known rate of return. Standard, right? Real estate investing stuff. So we started doing for us that was self storage that became our major move, but we did that.
And then out of nowhere, I was working for a big corporate company out of Chicago and I became paralyzed literally overnight. We had no idea what was going on, went to the hospital. And within two days I was put into a coma. And when I came out of the coma, I was hooked to tubes and ventilators and machines keeping me alive. And I was paralyzed from head to toe. And so I obviously was no longer able to work. In fact, my boss came and they were nice enough to keep me on the payroll for a long time, at least until I could speak again, I couldn’t speak for over 10 weeks. And then they came and visited me in the hospital and let me know which I knew, don’t know when you’ll ever work again. So the relationship’s over. And then that was while I was still lying in a bed, paralyzed in the hospital.
And for that reason I said, listen, real estate, investing, self storage, this shit saved my financial life, my family’s, my wife could take care of me. We’d had our fourth child at the time. So four kids and my wife’s got a quadriplegic husband lying in the hospital who she can’t even speak to cause he’s on tubes. And we didn’t have to worry about selling our house. We didn’t have to worry about my wife leaving me and the kids to try to earn an income to cover us while I was obviously not able to do anything. And that was because we started to really get serious about real estating investing a few years before. And I guess that’s why I’m passionate about this stuff. Cause it’s nice and people think, Oh, you gained wealth and things, but it’s so much more than that. It’s having control of your financial wellbeing and financial future, it’s having control of your life.
It’s having control of your time. And it’s true freedom. And for people that have experienced things like job loss, have experienced that sudden abrupt, there is probably nothing more disturbing in your life when you don’t know how you’re going to pay for grocery bills and you don’t know how you’re going to pay your mortgage. It is just, there’s nothing more that can upturn us in society. But that is once again, so many people have realized over the last little bit. And so for me, it was something that I came out and I could still do while I was in a wheelchair trying to recover. They sent me home paralyzed in a bed and my wife took care of me and my kids. And I slowly started to get better and recover. I had to relearn how to eat. I had to relearn, I was in occupational therapy, speech therapy forever.
And then I got in a wheelchair and I could go out, which was amazing. No one understands freedom until you don’t have it. And then that wheelchair was like the best thing that had ever happened to me. I could get out of a bed. And then from my wheelchair, I started another company. And then I kept going. And just in the last five months, actually I got rid of my leg braces, which I was told I would never get out of and I’d never be able to walk normal again. So I stopped going to rehab because they said, you’re not getting out of these braces. It’s just not going to happen. And so I left rehab and said, well, if that’s not going to happen, no reason to see you. And so I went and me and my kids and my wife, we worked on it and you know what it took about another, probably six, eight months. But I got out of leg braces.

David:
That’s awesome.

Brandon:
At some point in there is when you and I met cause you were-

AJ:
Yes.

Brandon:
I can’t remember were you in a wheelchair? I think you were.

AJ:
I had a scooter. Remember? There was like little red scooter. Cause I couldn’t couldn’t walk. I was in leg braces. And so we met in Hawaii on the beach.

Brandon:
Yeah. At the Disney Aulani resort.

AJ:
Yeah Disney Aulani that’s right. Cause after I’d been in the hospital for the last two years and stuff before we’d met, finally we were to a point where we thought we could travel. I had a wheelchair, but we met on a scooter and I know, I was just a little guy drive around on a scooter. I’m like, Hey, I think I know you. How do I know you?

Brandon:
That’s awesome.

AJ:
But yeah. We took the kids and we went to Hawaii for a long time and thought, let’s forget about this stuff. And once again, we could do that because we had cash flowing assets that paid us. Well, I didn’t have to work.

Brandon:
That’s awesome.

David:
If you listen to episode 286, you remember AJ. His story is incredible. We kind of glossed over it right here, but it is one of the coolest, most inspirational things you’ll hear. And if you haven’t heard it, I’m just going to highly recommend right now, make yourself a note, talk into your phone, give yourself a reminder, go listen to episode 286. This is, I mean, everything AJ saying he’s sending out, but it’s something that when I first was interviewing AJ with Brandon, I was texting Brandon saying, this is one of the most incredible things I’ve ever heard. And now AJ, you’re a, I don’t mean to blow too much smoke, but you just have this extremely pleasant, uplifting demeanor, the way you look at life because you went through hell-

AJ:
Yes.

David:
For so long. And it’s a really strong argument that sometimes for the people that are listening that are not happy in their situation, they don’t like their job. They don’t like their financial situation. They’re coming from a place where they feel like they’re behind the game. Man, sometimes that’s just your biggest blessing. If you take that and you flip it around, those are the people that just become unstoppable.

AJ:
Well, and it’s strange now looking back at it because, and I don’t want to say this lightly or anything, but me and my wife really do believe that was one of the best things that ever happened.

David:
Mm-hmm (affirmative).

AJ:
It was obviously a nightmare. I mean, a lot of people don’t understand that you think that you’re a quadriplegic, you’re lying there so you can’t feel anything. You’re just staring at a wall. That’s not the case at all. In fact, my entire body, my nerves, where it had all been ripped apart. And so they were telling my brain that they’d been blown up. So I felt like my entire body was shredded and they couldn’t stop it with medicine. It just, they could not give me enough pain meds to stop it.
So I didn’t sleep for like a month and a half outside an hour or two hours at a time. Cause I was in pain. I couldn’t tell anybody. And I was just sitting there you couldn’t eat, drink and everything like that. But with all that said, that created a life where I felt more independent. I was ready to take my life to the next step. I’ve done so much since then that I’ve had on a bucket list that I’m like, Oh, we don’t got time. We’re doing it all right now. And you know, we just approached that way with life and my kids and you know we were lucky and we had a good attitude through the whole thing.
I loved my nurses. I played in the hospital and they loved having me. And it was actually hard when I left the, it’s called a longterm care facility because the hospitals couldn’t take care of somebody. They didn’t, we didn’t know if I’d ever even get out of the bed. So they sent me to a facility that could take care of me. And when I left that facility, I was balling because I was like, I can’t leave these people. First of all, they kept me alive now for how long. And that was scary leaving and going to the world, but they’d become like family. And it was, we just kept going. It’s just like head down, smile on your face. And it kept going and my wife and family it was like, this is just a blip. We’re moving on. No matter what the outcome is, this has nothing to do with the outcome of the rest of our lives. And that made all the difference. It really did.

Brandon:
That’s cool, man. Well, like David said, everyone go back and listen to the episode. It was really, really good. Now, a lot of people might not know is that so last year I hosted a, you know, Tarrel Yarbrough and I hosted a, I would call it a mastermind. It was basically, we invited a few of our friends and people that we knew that were high level real estate investors out to Hawaii. And we hung out for a week. Right. Or I don’t know, five days and had one of the most incredible times ever. And what people might not know is that you were there, we of course invited you because you’re one of the coolest real estate investors I know.
And you were like, I don’t know. It was so incredible to have you there because you are incredibly gifted at explaining things to people and be able to see what’s going on in their business and kind of tweak it a little bit and then at like leadership and be able to scale a business. So that’s kind of why I wanted you back on the show today is not just talk about self storage, which we will get into, but also talk about just leadership and scaling a real estate business.
Cause like most people who listen to this show are probably in a spot where they’re like, yeah, you know, I wouldn’t mind having enough passive income coming in that if I had to leave my job or if I got in an accident or something happened, my family would be okay. Or worst case if I died, my family would be taken care of. And so you’ve really nailed that process down. So I want to go through that a little bit today before we get into the actual self storage stuff, which I think is super fascinating. You know, what have you learned, especially in the last few years, since the whole nightmare, what have you learned about leadership and about, and we’ll start there. What have you learned about leadership and how that kind of guided your evolution as a real estate investor?

AJ:
Yeah I view real estate, first of all, whether you’re in self storage or anything else, it doesn’t matter. You’re just picking a wealth vehicle that you’re utilizing to accomplish a goal. At the end of the day, it’s all business, it’s a revenue management, it’s capital management. And all you’re doing is you’re utilizing leverage in the form of people, time, processes, procedures, technology, and capital to achieve, build, and reach a certain point. Now how you utilize those things is different in every scenario, right? And the wealth vehicle may be different, whether it’s an online business, whether it’s self storage, apartment buildings, whether it’s a service company, it doesn’t matter. It’s all the same thing. So once you utilize and understand how to leverage those different aspects, you really then can start to design and build your entire life and your freedom.
And one of the things that I find huge is leadership is that pride gets in the way of people and it kills their ability to lead because they can’t utilize the tools at their disposal because they can’t see past themselves. And that is just so absolutely damaging to our own personal success. And after lying in a bed and having people bathe me, pride kind of went out the window. So that was the one thing that I was really able to take to the next level, and really look at my life and say, where have I been holding myself back? And I had a long time to lie in a bed to say all these things I’ve been holding myself back on, it’s time to let them go. And let’s move. If I’m going to do anything, we need to do it. We need to do it right. I need to do it big.

David:
You said something there that I thought was very insightful and it has to do with how you look at real estate investing. Now I want to break this down for a second. What we find with newer investors is they’re a person who’s starting this journey and they know where they are and they know where they want to go is financial freedom. And the first, the easiest way to look at this, is someone tell me what steps to take, what’s my first step, what’s my second step, what’s my third step. And they want a step by step guide that paints a path that everybody can walk. And Brandon and I have done this for long enough that we have this perspective and AJ I know you have it, that there is no same path for every person. There’s different skills. There’s different personal situations. There’s different, a different goal for a lot of people. How AJ’s mind works and what his skills are, are different than if he would not have went through what he did. And they’re different than what, how my mind works cause I went through a different life than him.

AJ:
Mm-hmm (affirmative).

David:
So for some people to get to the end involves go up and over the mountain. They’re very good. They’re good climbers. For others, it doesn’t make sense to do that. Walk around the mountain. And while you’re walking around it, pick up a bunch of berries that you can use for something else. A better way to approach financial freedom is to start with the end in mind and work yourself backwards, and then see which parts of the journey you want to avoid in which parts you want to take.
And the way that I like to start off to simplify this is just to understand you are buying a income stream. When you’re buying an investment property, just simplify it like that. When you buy a self storage, an apartment complex or a single family house, when you invest in a note, you are paying money to earn the right to collect income from that asset. Very simply.
Then you work backwards. Can I leverage money? Can I borrow money from someone else to buy it? What are the pieces that I need to make this as painless as possible? And AJ, that’s when you went into all these things like leverage, technology, people, systems, they all make sense when you say, I want to collect this revenue stream as simply as possible. And when you look at it that way you understand not everyone needs to be a single family investor. Not everybody needs to be a multifamily investor. You’re all just trying to collect revenue stream. And when you understand the pieces that go into making that work, you can really find the niche that’s going to work best for yourself. Is that what you found too, AJ?

AJ:
Yeah, and the thing that you have to really realize is that knowledge is the key to all of this. It really is because knowledge creates the, really the arrows in your quiver. It gives you the tools that you need to build the life that you want. And the reason why knowledge is so important, because the more you know, the more you can adapt that to your situation. And that’s what it is. There’s nobody out there that does not have opportunity. It doesn’t exist. There’s lots of people out there that do not have the knowledge to take advantage of the opportunities or even see them in front of them. I mean, the experience, the things that I got, I have more opportunities today than I’ve ever had in my life, which is really just because I have more knowledge and I can see more opportunities.
And when you can see the opportunities, then you can utilize all those tools at your disposal to create them, whether it’s entrepreneurship or investing. It’s the exact same thing. You’re using the same tools. You’re using your knowledge and the tools at your disposal, which there’s never been more tools at our disposal than now. I mean, when I got started, there was no BiggerPockets. There was none of this, right?

David:
Yeah.

AJ:
I had to pay huge amounts from people to learn, to grow. I had to, there was not a simple database that I could even search to find these people. It was very localized. So the opportunities for individual investors, people starting out has never been greater than it is right now. And when you look at how you’re formatting the basis to grow off of, this is I think where people have the hardest time, because there’s so much noise out there and they need to pick and choose.
And a lot of people adapt certain avenues because they’re told it’s the best avenue. And when I look at when you’re starting out and defining that destination, not only do you not have to have a clear path, you have to have a clear tool bag. Once you have a good tool bag, you can start walking on the path because finance, business, all this, it’s like you’re walking in fog, right? You can see six feet in front of you, but you have to walk six feet to see the next six feet. Those things go hand in hand. You can’t do it without it. If you’re not walking, you are not seeing further down the way. And if you don’t have the right tools in the bag, then once you encounter problems and all the issues that you need, you have nothing to overcome them.
And so curating a good network, knowledge base, curating the right amount of the right people for the right jobs, all these different things that go into it, that allows you once the fog clears and you see the stone wall or whatever it is blocking your path. And instead of just saying, I knew it, this is a dead end. There’s nothing I can’t do. You utilize the resources, you get over the wall and you keep going and you’re going to be walk in and there’s not going to be any problems at all. And then one day you’re going to hit a wall, a river, whatever it may be, just like I did. And the purpose is to utilize the things at your disposal to get over those obstacles and keep moving. And then the higher up you go like on a mountain that fog starts to clear.
And then all of a sudden you get to point and you’re just like, wow, the possibilities are endless. My possibilities are endless. And you can see so far ahead of you. And then you start looking at things differently. So I look at opportunities now based upon the one resource that I can’t get more of and that’s time. And so for me, when I look at opportunities, they need to meet a very, very large criteria because we have so many of them, I have to pass lots and lots of them by. Well, that’s part of going down the process. And that’s just getting to a point where you can see those things and underwrite or evaluate those opportunities properly.

Brandon:
Well, I love the fact I’ll point out a couple of things. Number one, that you talked about just how like pride and ego gets in the way, right? I love the fact-

AJ:
Yes.

Brandon:
That you pointed that out, just saying, look, if you just believe you’ve got everything you need. Like how many times have I, I’ve met investors who have just that had a really difficult time. And I’m like, well whether they failed at something or they just couldn’t get a deal and I’ll say something like, well, have you read the book on, for example, I can’t find any good deals to flip. I want to flip houses. Okay. Well, what’s the last book on flipping you read? Well, I don’t really think that flipping, I don’t really think that reading actually matters that much. And you’re like, Oh, okay. Well, I mean, have you attended a workshop on flipping houses? No, I don’t really, you know, I just kind of like, I just know this stuff. Okay. You can see that problem right there, the fact that they don’t need those resources cause they already have that.

AJ:
Yes.

Brandon:
So I just want to reiterate that if you are struggling, like in any area of your life right now, ask yourself, how are you being prideful in that area? And that’s why and how that’s holding you back. I think that’s applies to anything.

AJ:
You’re exactly right. Pride aligned with preconceived notions is like a no-go. I meet people that they just it’s self sabotage. They have all the opportunity in the world. They can do anything that they want. They’re not allowing themselves to move forward. And that’s something that I can’t help with it. You know? It doesn’t matter how many tools you throw at them. They’re not picking them up. And that is the real thing that’s an insurpassable, right?

Brandon:
Yep.

AJ:
That’s the thing that nobody can get over is if you’re not allowing yourself to, because of preconceived notions, because of your own pride that sits in the way and says, this is not worth it to me or this is dumb, which I ran into. When I first got started in self storage, I went to a self storage convention and we were sitting in a room with like 20 people.
And there’s this huge guy in overalls and sitting next to me and a wife beater on. And I’m like, what am I doing here? It was like, I’m sitting here going, I want to start businesses. I want to take over the world and everything. And it was getting over the pride to realize the vehicle just achieved what I wanted it to and to say, no, none of that stuff matters. That’s not important to my goal. That’s not important to accomplishing what I have to accomplish. And so often it’s pure self sabotage. It still does. It’s hard, right? Like when we were in Maui, you told me, you need to write a book and I was like, Oh yeah, okay. You know, and I thought, I don’t know if that’s worth my time and everything.
And then all of a sudden the limiting beliefs and preconceived notions, like AJ you’re dyslexic, you can’t write a book. That’s not for people like you. And I’m like, I told Brandon to, so I’m going to, right? And so, and then I did. And so I wrote a book mainly because I made a promise to myself when I was in the hospital. You know, these things are so important, have changed my life. That those are the tools people need. I need to give them out and I need to understand.
So I followed through, I got rid of my preconceived notions. My pride was saying, AJ, if you get embarrassed, you’re going to look dumb and this is all going to come down on you. And so ego starts to overturn and then we just stop, right? And those things just kill us as individuals. And it’s not that I won’t fail. Of course, I’ll fail. I have, and I will in the future, but it’s being okay with that and not letting the pride and ego take over and saying, you can’t fail.

David:
What do you think about the person who doesn’t plan for the journey? They just say, okay, I’m going to do this. And they just start walking and they’re figuring it out. And they get frustrated very quickly versus the person who has better expectations for what to expect. They say, okay, I know I’m going to get tired. My feet are going to be hurting, but I’m doing this for what I learned along the way that the grit that they developed versus the person who didn’t understand what they were getting into and then how quickly they lose interest.

AJ:
This is like a balancing act. I view people when I’m saying, all right, listen you have to balance knowledge and actually doing. It’s not one or the other, it’s not bad or good. You need to meet in the middle. You can’t be one of those people that just constantly learns and never does. And you can’t be one of those people that just goes off their hip, doesn’t know what they’re talking about. And so then all these things that you need to leverage that we talked about, nobody will help you.

AJ:
All these things that you need to leverage that we talked about, nobody will help you and we live in a world no success no wealth has happened on an Island. Never has never will. The amount of people that help create my success, the amount of people that all need to create successes is very large. And if I go into something and nobody trusts or believes me or I’m not presenting value to those people, I can’t move. And so you need to have at least an understanding of the goal and the path and the needs that you’re going to need on that journey or nobody’s going to want to jump on it with you. They’re going to say, “Listen, you don’t know what you’re talking about.” And I can’t tell you how many people I’ve had that have pitched us ideas as investments, business opportunities things and I didn’t even really know about it and I can tell why it wasn’t going to work.
And to me it looked like you just didn’t do your homework. You’re not even prepared for this meeting more or less prepared to go on this journey, which that’s where risk comes in, right? Real risk is lack of knowledge. So knowledge creates the ability to execute. And I’m not saying you need to know everything, but you need to know the basis of execution. And without it, once again, you’re not going to get anybody to go down that journey with you.

Brandon:
Yeah, that’s really good man. So you used this example earlier about at the base there’s a lot of fog, you’re not sure what you’re doing. But as you climb up to higher and higher levels of investing, you can see a lot further. I want to talk about some tangible, what are some tangible ways that you have been able to move from being at the base to being higher up on that mountain?
And a phrase to wrap this in is a phrase you and I joked about back I don’t know a year ago you said something like, “I do two things at my business, I make high,” I think you said, “I make high impact decisions,” and there was another one in there it’s like high impact something else, right? That’s what you do. Is you make high impact decisions and you have high impact meetings or whatever, right?
We joked about this idea of you should write a book someday called The High Impact Real Estate Investor which I’ll still convince you to write someday.

AJ:
Yes. You did on the last one so.

Brandon:
Yes, okay, I’ll get you on this one. You do such a good job. So what are some things that you’ve done tangibly, to be able to do that? What are some things that people listen to and say, “Yeah, I want to move up that mountain and stop being in the fog. I’m going to get better.” What can people do to become better leaders in their organizations?

AJ:
Okay. So there’s two things, if you’re trying to take things to the next level, the first thing that you need to do is you need to audit your day. And you need to look and audit what you’re doing and the impact that that has on your business. And most people that I see the vast majority of their day is spent on things that are irrelevant to the longterm goals of their business and should be and can be executed by people that are better than them at that.
And that was one thing that I did clearly at the first I do all the time is I’m not doing something I’m not good at. And two, I’m not doing something that doesn’t take our business to the next level or has a large impact on the business and the lives of others. And that thought process took me out of the business and worked on it instead of in it.
And this is really important because when I knew that I had to do that, I had to create processes and systems that were streamlined to execute what I know had to be executed. So I spent a lot of time to build the framework because as I said, the framework is what’s going to get us there. So I hired in a guy that had worked with franchises, right? Out of all the people I didn’t get anybody that had to do with real estate. I went and found the guy that was running, he’d run franchises for Wendy’s and Starbucks and all these different things, right? And I said, listen, I need to build a system that I can repeat over and over and over again, and needs to have the same look, it needs to have the same feel and it needs to have the same outcome.
I’m really good at this, but if I’m doing this all on my own, and if I’m not doing this in a way that other people can do it, then it’s not repeatable. And I can’t measure it and I can’t do anything. So once we outlined the framework, then I could identify areas that I wasn’t good at. So these systems and these processes, these need to be done by someone else because I’m not good at them and they’re repetitive, and that won’t allow me to do these things which nobody can do but me, because it’s my business, right? So everything when I’m looking at deal flow, right? So I have a deal flow funnel where all the deals come at the top of the funnel, okay. All the market data and it goes and streams down through other people. And then the final, let’s say 10, those show up at my desk.
And then we have a process for evaluating deals where we have a deal panel. We all sit down, we look at the deal, we all have to give approval. This is extremely important because I recognize also once again, we all have pride, we all have biases. So when I am looking at a deal, I don’t think that I should be the only one that says yes or no. I don’t believe in playing God or king, especially when I’m dealing with my business or other people’s money. I’m humble enough to realize there’re things I’m not going to see. We all sit down in a room. Half the room has to go against the idea. They literally have to find all the reasons that it won’t work. And then we go through all the avenues and everything of the deal. And then at the end, we all have to sign off on the deal.
This allows us to be unified in purpose, right? And this lets me and focus and get the insight from those below on executing on those deals and then passing that on to others. Well, I can’t be analyzing tons of deals. I can’t be looking at the best things to do. I can’t make the right connections. I can’t be out building our business if I’m stuck in the systems. If I have to do little things over and over and over again, and that’s hard to let go of at first, right? Because you’re going, this is my baby, this is what I’m working on. But if you don’t, you just can’t get over it.
And so we use technology to align everybody on the same page with communications that were also documented. So this was another thing that was really important. As we went along, the more we documented, the more we could go back and see the things that went right and went wrong we could adjust them. Once we adjusted them, that became policy and procedure. We now know this is the best way to execute. You need to do that. This repeats me running in circles. And so many entrepreneurs are just running around in a circle and I’m like, “Stop running. What are you doing? Stop. Let’s move forward here.” Right? But you can’t do that unless you have a written out way to execute the best possible in a way that you can analyze that and change it as you move forward. I can’t stress that enough.

Brandon:
How would you apply this to somebody who is maybe they own a couple of duplexes. Maybe they own a single family house or two they’re newer on their journey. Maybe not like fresh, completely new trying to buy their first deal. But they’re like, you know what? I got a few deals here, how do I scale this into a business? And I love the fact that you said, audit your day. I think that’s an amazing tip, right? I love the deal panel, I think that’s genius. But what advice would you give to somebody who’s at that lower level?

AJ:
Listen the thing about it is the lower level or the higher level, this doesn’t change. And this is the problem that I think I have run into people. They go, “Oh yeah, but I’m not big.” And I’m like, “I wasn’t either. But how do you think you get big?” I don’t care if you’re starting with one duplex, when you’re going, when you close the deal, you better be documenting. How did I find this deal? How did I make the decision to buy this deal? How did I close this deal? Who did I need to make all those things happen? Who are the people? And what were the tools and resources that I need. Did I need to use DocuSign? Right? And now how am I going to collect rent? And then two, when you figure out all those things that happened on your first deal, then outline them all and say, will these things let me do 40 deals.
Will these things let me do 30 deals. And on my framework, I’m very particular on utilizing things that can scale. And when you build a base that is fractured, when you put more weight on it, it breaks and everything crumbles down. So starting is the best time to get these things right. You don’t have to be perfect and you can change on the way. But you have to have a process to identify what got you there, what got you this great deal, and then how to repeat it. And then the people, the systems that you put into place, they need to become your best friends. I identified this early on when we had a broker, 50% of all my deals have come off, excuse me, 50% of all my deals were me, I found them. The other 50% were through broker relations. And a good broker that can help you, and all my deals are off market by the way.
And a good broker that can help you understand underwrite is like gold. You have to keep up because there’s more bad than there are good. And it’s I went through a long process of interview talking to people, finding the absolute best brokers that I could find that met my criteria and they saw my vision, right? We were on the same page with the outcome, the end destination. Then when I have them, so the perfect example of this is that broker brought me a deal. The deal was an off market deal. The owner was having troubles with taxes or whatnot. This was a hundred thousand square foot commercial deal that I bought and it was sold to me for 2.7 million. But I had to go work with the owner because the bank’s like, this isn’t short sell, he has to give you permission.
So the broker, the guy is like, there’re no circumstances any way, shape or form that I’m going to deal with that broker. So he had to sit on the sidelines. After we got the deal done, which was an amazing deal by the way, we put 800,000 more and we expanded it. It’s like 140,000 square feet. And it’s easily worth 10 to 15 million today, all day long. It does over a million in revenue. And we bought it for 2.7-

Brandon:
That’s awesome.

AJ:
… I think when we were all in. That broker, you better believe I paid him. I didn’t need to. I still paid him. You don’t go short on the things that matter in your business. You don’t go shortsighted. You have to keep that longterm view. Since then, we’ve accumulated over 50 million assets with him. All off market deals. All of them have produced us a hundred percent return and they were presenting, until we refiled and took our money out, a 20% cash on cash return. It’s the definition of stepping over dollars to pick up pennies. When you’re starting out, find the best people, treat them extremely good, do what you’re going to say you’re going to do and then document your journey. This is how you build a good foundation, how you can scale. This is how you can really get to your destination because you’re not doing it on your own.

David:
I’ll give you some very practical examples of how this can work at a small level. So for listeners who are like, well that’s cool. I’m not making $2.7 million on a deal, what do I do? In my real estate agent business if, like AJ if you sent me a friend and you said, “Hey David, my buddy needs to sell his house. Can you give him a call?” We immediately send you two movie tickets to that movie theater that’s near you just to thank you for thinking of us, right? Like you mentioned, you’re already paying that person, even if it’s a small thing, it shows that you value them. Another thing that I do is I go at the end of the year and I look at every house I sold, which is very easy, I can just go on Zillow and see what I sold and I say, where did I find this person? My mom told them about me. I did an open house and I met them. I did immediate meetup and they came to me and said, “I want to buy a house.”
We just closed on a $1.3 Million house for someone that just came to listen to me speak at someone’s meetup. And I’m like, I need to keep doing that. It’s helping me in a lot of different ways, right? Helping other people, it’s helping me. It’s that simple look at where your contractor referral came from or who sent you the deal and track it like you’re saying. Make this a habit when you’re not very busy, so it becomes a foundational component of your business when you scale. You don’t have to figure it out while you’re moving. I’ll let you comment on that and then I want to ask another question.

AJ:
Perfect. This is really important and I heard this a long time ago. I live in Idaho so I’m a fan of fly fishing and we have lots of grizzly bears so it was perfect analogy for me. So the analogy was simply this, don’t be the fishermen be the grizzly bear. Because the fishermen sits on the side of the river with this pole, hoping that a fish will go by on that side of the river. Then he hopes that gets a bite and you can actually get that fish in to eat. The grizzly bear just plops down in the middle of the river on a waterfall and the fish jump into his mouth. The point of building out systems and knowing these things and your network so that you can be the grizzly bear. You’re putting yourself in the middle of the river. So the deals jump to you.
I can’t tell you how many people call me up and they’re like, “I can’t find any deals at all.” And I’m like, “I’m under contract on four.” And the reason being is I’ve developed a system to find these deals and I’m sitting in the waterfall. All four of the deals were ones that somebody emailed to me. And when we started out, I didn’t have that. I had to go out and hunt for it, right? And that’s fine, that’s part of it. It’s going out and doing the work, meeting the people, showing them value. But then really importantly what I did was when we met these people, I knew particularly from sales that if I said I was going to do something, I was going to do it.
So if I told the broker, “Listen, I’m looking for a house hack. If you’re going to bring me a duplex, that’s $200,000, meets this criteria and I’ll buy it,” and he does, and you don’t buy it, he’s not coming back. These people are busy. Their time is important and they are trying to build the right connection. So you need to make sure you’re also the right connection when you’re starting out and building that’s really important.

David:
So the next question I want to ask you and Brandon has to do with how you scale, because you’re making very, very good points about how you need a team, you don’t want to be the only person making decisions. But that can feel unattainable for someone who’s getting started and they’re doing everything themselves.

Brandon:
Did for me.

David:
And I’m working on … for you too, right? I’m working on a new book for BiggerPockets. And I’m trying to describe what this process is like from learn the thing you’re doing to create systems and scale it to where you can do it at a big level. And I’m toying with this idea and I want to run it by you, and you can tell me if it’s accurate.

AJ:
No, I love this. This stuff is fun, right? The first part is hard. I’ve been there. It’s hard and then two, it never felt worth it. And you got to realize my first deal that I did, I sold for less money than I bought it for. It was not ever a home run, right? I bought in a teeny third tier market. I made all the wrong moves, all the wrong mistakes. I didn’t run it. I had somebody else. It was just, right? I had screwed up and it was hard and then I got done and thought, do how much time I spent on this? Do you know how much time … but what happened was I learned all the things not do. So when your starting out, you don’t have the basis. I didn’t have any information like this anybody helping me out. But scale I view as well we’ll start with the first concept and then I’ll move over to the second part.
First of all, when scaling you have to be ready for two things. There’s two ways you can scale. I think you need to merge both of them. You can scale of volume or magnitude, okay? So some people say, “I’m going to scale off magnitude. Is this I’m just going to get the biggest, best deals I can do. Two of them are home runs and I’m rich and I am never have to do anything again.” Other people are like, “No, I’m going to get a hundred single family homes, right?” I think both of those are wrong. You need to have volume and magnitude as in every unit that you put on, so if you have like a let’s say a chart and you’re moving right along the chart, that’s volume. Magnitude is moving up.
Every unit that I put on, I need to also start to move up. So at first I did small little facilities and commercial real estate and even some homes and they were small, they were all way under a million dollars. But then after I got four, five of them, I moved up. I said, “Okay, now it’s time to scale up.” And so then I started focusing on magnitude. How can I take this $600,000 investment and make it a 1.5? Then I did that. Three times later we said, “Okay, now how do we move up from there?” And so then all of a sudden your scale has this upward trajectory. Now once you get towards the end and you have volume and magnitude, sky’s the limit. And it has a really big effect on your outcome. But when I look at how you execute on these things or how you build the base, the basis formed up of four things, think of like a four square. Any of you guys ever play four square with the ball you know?

Brandon:
I loved that game.

AJ:
Yep. Oh yeah. Four squares’ awesome, right? So this is real estate four square. So what you do is you have four boxes and these are the things that you need to compartmentalize to understand how to build. The first box that I had was a platform. This is the hardest because I had to build this, right? Once again I had to figure out what I was doing, I had to train the people well afterwards, when most of the time too, I didn’t even really a hundred percent know what I was doing. But I knew this action, like we said, leads to this result. So I had those processes that we were documenting, I put them on huge, you know like the little sticky notes they have these ginormous sticky notes.
I put them all over our walls over a weekend. And my employees came in, which was literally my partners, my dad and my brother-in-law, they were my two partners. They came in and they’re like, what did you do? And I’m like, we’re going to systematize this whole thing, right? And there was just these big sticky note boards. And I treated it like it was a billion dollar company. It was nowhere even remotely close. It wasn’t even a million dollar company, right? But we said, here’s what we have to do. From there we could organize it into a book. And then we could hire people to come in and start to do it, and we changed along the way. But we accrued people, we accrued the knowledge that was easy, accessible that I didn’t forget and say, “Now, how did I do that? Who is that person?”
So we could accrue the knowledge and then from there we built the systems. This is a platform, right? This is a platform that you can build up from. That’s the hardest part. Because it took me a long time, I didn’t know what I was doing. I was guessing half the time. And if I went back today, I’d look at it and be like, “Man, you were dumb.” But the next side that you need to do is technology. Okay. So if you’re looking at a four square, your top left corner, I view as your platform. It’s one of the most important pieces. The bottom right square would be technology. Technology is so important if you’re trying to scale because you need to aggregate and disperse information and automate processes quickly, or else you will get bogged down and you have to have the right technology to scale off of.
So if you get a crappy property management system and there’s property management systems that are literally made for single family homes, which is fine, but I looked at everything and said, will this property management system take me to the next level? How are we communicating? Can we do this efficiently over lots of areas? I’m in five states now. And so there was all these things that we had to get with technology. And we were putting into places we went. The next two squares, the top right and the bottom left. The top right is deal flow. Okay. So deal flow is obviously important because it’s the most if you don’t get a deal, you don’t got nothing. So deal flow is really important. And having a way that will give you deals consistently is … just that’s it, right? And that for me was harder because I wasn’t from real estate, right?
I came from insurance background so I had to develop that up and that’s been an ongoing process and a struggle for me which I depended on other people which is fine. And this is a key that I’m going to tell you right now, if you don’t have one of those things, it’s okay because you don’t need it. So I paid for the technology, I paid for the deal flow, right? And I even had to pay for my platform and had other people sending. I had to hire another person to manage it at first, right? But then I started to internalize those things. So I build in my platform to manage and operate, which that took a while. We were operating years with somebody else and it didn’t work out. Once we did that, we started to learn, I could see deals. Then when deals came to me, I knew that I could get them.
I developed broker relationships. Then I started focusing on off market deals and I developed a system to underwrite to validate, get the information and then how we communicate, put in offers different things like that. And that solidified my deal flow. The next one is the one everybody focuses on. That’s your bottom left. It’s the least important, money. And so you have this platform, you have deal flow, you have technology and then there’s money. Everybody focuses on this one and it’s the least important. When you’re buying big deals and you’re buying lots of deals, money is finite for everyone. There’s only so much real estate you can do, whether you have a hundred thousand dollars or 5 million, your money is very finite in real estate. So for that bucket I went the totally hard way, like ridiculous. I worked three jobs and my sales job to try to get money to invest.
It was not the right way to do it. It slowed down tremendous amount of growth. We would be, we’re at 150 million in assets right now, we would be way, way higher than that and bigger than that. And out of the 150 assets that we’re now that is not from our syndication company or anything. That’s just from us building. But money for us came in two ways. We could get the money from working hard or we could get the assets to give us the money, which that was our second phase and that got us to 150 million. Or you can get it from other people. But at the end of the day, if you have a deal and the platform which consists remember of systems and knowledge and people to execute, the money comes, money’s easy. I don’t care if you need a hundred thousand or 10 million, if you have that everything else gets put into place.
And that becomes the last final key, is money. And these four squares I view as the base of all real estate investors ability to scale and execute. And so many people are confused they think, “Oh, I’m going to get started in real estate. I don’t want to syndicate. I don’t want to go big. I’ll get a couple houses.” Then they’re disappointed because the couple of houses didn’t give them freedom and then they stop, right? So you need to be able to build, if you’re looking for financial freedom, right? And you want to do it in a big way or anything like that, you got to scale and you got to use other people’s money. At first, you’re using a bank like everybody else. But then it usually comes to really get going and really get that upward trajectory, you need other people and you need their money.

Brandon:
And I heard, I want to jump back to a minute what David was saying, but first I heard you were getting into syndication, you just mentioned that, right?

AJ:
Yes.

Brandon:
Because of raising money from other people. Is that for self storage as well?

AJ:
Yes. So we are starting out in self storage, but we are looking at other assets as well. Everything from multifamily to I wouldn’t do mobile home parks though, I would just give those to Brandon.

Brandon:
Yeah. Give those to me, I need all of them.

AJ:
To different hotels, different things like that people that we have either knowledge and I don’t need the full foundation, but I need other people that have it. So when you’re looking at your four square foundation, you don’t need to have all those things, but you do need to know people that do so you can execute. That’s how I started out that’s how we moved into. But syndicating and I struggled with the word syndicating, because I’m not a syndicate, right? I don’t raise capital.
But I created a company called Cedar Creek Wealth. And that was our ability to take our deals and our processes and our system allow other people to come in and do it with us. So instead of doing maybe two, three deals a year, I can do 10 or 15. That helps me out investors get to ride up and they get all the wave up too and then I can do more deals, right? So my platform gets bigger on and on and on. I feel that’s the next level for me. Some people start out that way, right? Which is probably, you can, that’s a great way to start out. But using that is really an important piece to it all.

Brandon:
That’s really good. So just to summarize what you just said in case people want to take some final notes on this, the four squares basically ended up being platform, which is like your systems, knowledge and people. And then there’s technology, which is what you build your business on the actual tech there. Then there’s the deal flow, what are you doing to get leads consistently? And then the money finally comes last. And if you have the first three, the money does seem to come a lot easier. So just a quick example of how I use that in my life. We decided to go into the mobile home park industry. I brought in a bunch of people, including Ryan Murdock, Brian Murray and a lot of others actually. We have all the foundational technology we needed to be able to scale this thing.
And then we had to ask, how are we going to get consistent deal flow? So like I’ve done a number of things, including brokers and off market stuff. I even made a website called bringbrandonadeal.com. We’re actually just offer referral fees for the BiggerPockets audience. So like all of these things were designed to fit those three things. And then money, of course we syndicate. But you also mentioned that you can sometimes use your assets to create the money or in other words-

AJ:
Yes.

Brandon:
… you do a deal, make a bunch of money, dump that into future deals. So all that really, really good stuff. Now I want to go deeper into self storage. But before I do, I know David, you had an analogy you were going to pull it earlier and we kind of got off on a rabbit trail, but I wanted to bring you back in because you said you had a question for me and I’m greedy and I want to be asking questions.

David:
I want to get your guy’s advice. I’m writing the new book for BiggerPockets.

Brandon:
What is it the book, yes.

David:
Yeah. And I’m describing a way of thinking about how you get from new guy to where AJ is. So AJ is giving us really good advice about where you want to end up. And I’m asking if you guys would agree that this model is a good way of looking at it. I look at each step of this process as starting with one dimension, then moving into two dimensions, then three dimensions. So in a one dimensional plane, you can either go forward or backwards. This is where Brandon and I are talking about take action, do stuff, learn things, go to meetings. You either do it and you get successful or you don’t and you go backwards. That’s it. It’s very simple. Okay. Learn about the asset class you want to buy in, read a book about it.
That’s when you start off now, you can only go so far if you’re in a one dimensional plane and then at a certain point you’re moving so quickly that all of the burdens, the administrative tasks of what you’re trying to do, slow you down and you hit a ceiling. In order to get blow through that and gets where AJ is talking, you have to add a second dimension. So think about Mario, when you’re playing Mario Brothers, he just runs back and forth. But when he jumps, now there’s two dimensions. You can go forward and backwards, you can go up and down.
That second dimension is when you learn how to hire people, train people, create a system to leverage part of what you do onto someone else. And with every successful move you make in that direction, there’s less for you to do and you start focusing on high impact thoughts, high impact activities. You get a exponential increase in what you’re able to do. But the challenge is you’re no longer responsible for just understanding your asset class. Now leadership ability comes into this. How do you recognize talent? How do you lead talent? How do you delegate? How do you hold people accountable? And that’s why Brandon and I keep talking about this all the time. This is a component that comes to scaling to getting better at what you do. And if you don’t learn it, your life.

David:
… scaling to getting better at what you do. And if you don’t learn it, your life is miserable because you’re doing everything all the time and you’ll tap out.
Now, the third dimension kicks in when you have to replicate this. This is when you want to franchise what you’re doing, or you want to take it and move it into a completely new industry, you want to take your ability to lead people, and build systems and start another thing.
Brandon started doing this with his single family houses. He then leveraged and built a team around him so he could buy houses and flip them. That was the second dimension. But he took that knowledge and he applied it to mobile home park investing. That’s the third dimension, and there’s a whole new set of challenges that come with that.
And I wanted to run this through with you guys, if you would agree that that’s kind of how your businesses evolved, and if you could help me encourage the listeners that you’re not just signing up to be a real estate investor. That’s the first dimension. You’re actually needing to be a leader in a system and a business, of course.

AJ:
I love that. It comes back when you’re one dimensional. I think that’s why, when you get to the three-dimensional level, you see so much more because your range of viewpoint is bigger.
And then, two, by the time you got there, you can’t get there on your own, so you can’t… You just can’t. You have all the resources and people to work with, but if you’re not a leader and people don’t want to be around you, they don’t trust you.
Trust is so big for me. It’s my name, it’s everything, and I know that that reaps so much rewards. Like we mentioned before, on a triangle of most important to least important being at the top, money’s at the top. It’s the least important. There’s trillions of it. It’s everywhere, right? And two, you just punch in a few numbers into a computer and there’s more of it. It’s the least important thing.
Trust, knowledge, networks, and your ability to communicate processes, your ability to communicate with others why they should be doing this with you, those are, hands down, more important and have more value than money. No, I love that. I think that’s great.

David:
Brandon?

Brandon:
Yeah, I think it’s awesome. I think that the Super Mario… Anytime you can put a video game analogy into my life, that’s an automatic win.
But yeah, here’s what’s nice too, is in the beginning, you don’t have to jump in at the third dimension, right? Right now, for many people listening to this, all you need to start thinking about is, how do I move and take action and move forward, because that’s where you’re at right now. You need to do that. And once you’re doing that and you’re moving forward, then you can start the up and down jumping a little bit, and you can start bringing in some more people.
A good example of that is, I… Early on in my career, I was just doing stuff, and then I brought my mother-in-law just to answer phones, because I hate talking to people on the phone. So I didn’t want to answer the phones anymore, so I just hired one person to do something.

David:
That was your-

Brandon:
And that was-

David:
… first step into the second dimension, right?

Brandon:
Yes, exactly. Yeah, I stepped in and I started jumping up and down. I’m like, “This is amazing.”
And it relates back to what you said earlier, AJ, which was, I guess, you finding other people around you, getting away from the ego of, I have to do everything, or I am the only one that can do this all. It’s like, hey, there’s other people that can do it. I create a franchisable model, so to speak.
Today, I work maybe two minutes a month on my actual… maybe 10 minutes of reading a report every month on my properties in Grays Harbor, Washington, because everything just runs. It’s all systematized. So that allowed me to go to the third dimension, yeah, which was building a much bigger scalable team. Everything just runs now. I mean, I don’t even work that many hours at Open Door Capital compared to what-

David:
But the problem-

Brandon:
… everyone else does.

David:
… is, when people hear you say that, they think, “If I just learn how to buy houses, I’ll be Brandon Turner. I’ll move to Hawaii.” And when they think about this journey they’re taking off on, they think it’s a straight shot. And what happens is, the minute you get a part of it figured out, there’s new challenges, and now you got to overcome all those, and that’s your next dimension.
And I want everyone listening to know, you can have what Brandon has, you can have what AJ has, but your expectations need to be appropriate, that you’re not just learning one thing. You will eventually be learning three different, powerful skill sets. And combining them all is what gives you the life that you have, Brandon, and that has a lot to do with the guests that we bring on, the topics that we bring up.
For people that are listening, like, “This isn’t telling me how to find a deal,” no, because lots of people can tell you how to find a deal. But what do you do once you get a bunch of them? What do you do when you’ve found so many deals and you’re scaling really quick, but you don’t have systems in place to support that, and then the whole thing crumbles on you?

Brandon:
Can I give an analogy? I got-

David:
[crosstalk 00:58:19].

Brandon:
… a good one. All right, here we go. This is another winner right here. So my daughter Rosie right now, is getting into art. She really likes art a little bit, a lot. And one of the things she has in her little workbooks of her preschool and stuff is the paint by number, right? So there’s a color-in, simple document that says, number one, orange, number two, red, number three, green. This actually relates back to what you said earlier, AJ, as well.
So at the first level, you’re just literally just painting by number. You’re just filling that in because people are… They want to be told, “How do I find a deal? What should my direct mail letter say? What do I say to a broker when I call him?” That’s like that paint by number, right?
But what we’re getting at so far in this podcast today… and we are going to switch to a little bit more paint by number here in a second. I want to get into self storage paint by number for a minute. But what we’re teaching is, here’s how a brush works, here’s how you do a stroke with the brush.
Now, we’re not telling you what to paint. I’m not saying, “You need to go paint a ship and put your Bob Ross in it here.” And yes, I just made Bob Ross a verb. Not Bob Ross-ing it here and saying, “Put the…” But even he would say that. Bob Ross would even say, “Make your own version of this,” right? I’m just showing you the skills needed, the technology, the people. You’re going to have to paint your own picture. And so what we’re doing now is trying to give you guys, from, again, one of the best investors I know, AJ here… This is the skills needed to paint a really, truly epic picture, so take note of that stuff.

AJ:
This is really important because the world changes quickly, as we all know. When I got started, if I was using the same methods now, I would not even be where I’m at now. I went through the hype, the crash, the hype again, and now, wherever we’re at in the world, which everybody knows what’s going on in the world, I’m there. I have to change. I have to adjust. You know the destination, but sometimes the bridge gets washed out, right?
You need to be able to take the tools and utilize them on your path. People that can’t utilize the tools around them to change and are expecting an exact way to do things… because what that causes is, they’re expecting the result, which markets, people, don’t care about the result you want. It doesn’t matter.
So if you’re not willing to change, you’re not going to be getting those results. And that’s just a true thing in real estate. You got to be proficient at what… the opportunities and what you have around you, and build off of it. That creates more opportunities, more resources, and you can change more and keep building.

Brandon:
That’s awesome. By the way, I want to make a t-shirt that says, “I’m Bob Ross-ing,” and it’s-

AJ:
I’m Bob Ross-ing.

Brandon:
… going to be a picture of Bob Ross. Yeah, I’m Bob Ross-ing. Make it a verb, and it’s going to be a t-shirt. I’m pretty sure his face is going to be trademarked, but if not, that’s going to be a t-shirt. Oh, by the way, we sell t-shirts now. Biggerpockets.com/shirts. So you can check out some shirts there, including one from last time. [crosstalk 00:07:15]-

David:
The bird is the word, right?

Brandon:
Yeah. I designed the shirt. It’s awesome. It’s all about bird. Anyway, all right. We’ll talk about that another time. I want to move into some paint by number a little bit-

AJ:
Let’s do it.

Brandon:
… and talk about, how does somebody… Give me some specifics, at a high level, of how do you get into self storage, because I know you just wrote a book on self storage. This is something that I am tremendously interested in. One, because I think it’s super profitable and exciting, but two, I own mobile home parks that have self storage on them. And we’re looking at that as an avenue of creating more wealth by expanding those, and so I’m going to use this free consulting time to ask you, how do I get into-

AJ:
Self storage.

Brandon:
… self storage?

AJ:
So first of all, I know I’m biased, but I am a firm believer that self storage offers more opportunity and wealth and income creation than any commercial asset on the market. The reason being is the landscape of the industry.
First of all, let’s compare it to multifamily. 80% of multifamily is owned by institutions, right? But 20% is owned by more individuals or families, right? Self storage is almost completely inverse of that. 73%, I think, as of today, is owned by mom-and-pops. Then, what’s left over is owned by institutions. This means the deal flow for this industry is huge for individuals coming in. There’s less competition, right? I mean, I’m in the top point, 7% of owners. I mean, it’s crazy. And so when you look at the deal flow and the ability to get access to these assets with upside potential, it’s huge.
And then on top of that, the industry is consolidating, and it’s consolidating quick, so I also believe that this is a limited time thing. I think we have 10 to 15 years, and then after that, it’s going to resemble multifamily investing. I don’t think that this is going to be a forever thing because in… When I got started, it was 85 to almost 90%, was owned by mom-and-pop investors.
And so after 2008, two things changed. First of all, it got tested during the great recession, which everybody looked over and was like, “What the heck? All these assets are failing. This thing keeps pumping out cash.” Then, the next thing that happened was the technology and the ability to run them really came to light, which… That was one of the major hurdles for people. And so these things combined have caused acceleration, but it’s also opened doors for more access to individuals. So for me, I’m like, “You can go out and get a piece of this awesome juicy pie for the next 15 years.” And with the consolidation, once it gets to the 80/20, your storage facility is going to be worth so much value, even if you did very little.
But the real benefit to self storage is what you can do with it. It has so many more lines to create and turn around and build a revenue into that asset class. And when you deal with an asset that’s traded on a cap rate, those small changes can equal millions to you. And then, you can refinance in a stable recession-resistant asset, and you can do it non-recourse. And then, you have your money out, you have now, this non-recourse asset, your risk is gone, your capital’s back in, producing you income forever, and you can turn around and go do it again.
Essentially, I created what was called the playbook, okay? Let’s see. So my book that I’m releasing, The Investors Guide to Growing Wealth in Self Storage, really, it was because when you looked at the books on the market, the information on the market, most of it was so outdated and old, it didn’t make sense, and there was really nothing that walked you through how to do it.
And so information has been limited within this asset class, even though it’s humongous. There’s more self storage facilities than McDonald’s, Starbucks combined, plus more. They’re everywhere, and investors can get a whole… They can buy them. So I’m like, “We need to create a whole entire book here on how to find deals, how to finance, how to manage, how to run, how to all those things,” right? And so The Investors Guide to Growing Wealth in Self Storage is all of that, but it kind of comes off of this playbook that I made.
And for individuals, I think there’s a lot of people that say, “Well, I’m a first time investor. I can’t invest in self storage,” and that’s totally not true. I can’t tell you how many markets have facilities that are cheaper than fourplexes, where I live in a second-tier market. That’s not true. And you can scale up very easily because these assets get, obviously, very big, and you can learn how to do it.
So the playbook has kind of… As outlined, it’s… Most of you listening will say, “Yeah, this is a real estate playbook, not even really a self storage.” As we talked about it, you got to identify. So the number one step in the playbook is, you got to identify your goals and resources, what you have, what you don’t have, who you are.
When I got started, I was working, easily, 60 plus hours a week. I was commission-based. Self storage could not be my number one, so I didn’t have that ability. I had to get into it, work my job and manage that, and self storage provided my ability to do that.
So the first thing is, I knew I had to get certain amount of help, I had to learn about it. And two, I had to go into smaller assets that I could afford, putting 200, $150,000 down on them, and then grow it from there. So those were my resources and what I had the ability to get into, and so that’s where me and my partner, my dad, started. And from there, you have to identify a market and a facility, obviously, to find the deal.
But the second point is even more important. You have to understand what kind of markets you like, based upon the goals and what you’re trying to achieve, right? Do you want fast appreciation and zero risk at all, and you’re going to go into a first-tier market, or are you like, “Listen, I need to have some upside on this. I need to make some money?” That changes where you go and what kind of deals you’re looking for, just like multifamily or any other real estate asset, right? From there, it’s really on the due diligence.
And the third part is… This is the most important part with self storage. It’s underwriting it, right? It’s making sure that you’re in a market that’s growing. You don’t want to be in a dying market. You want there to be demand. Self storage can act like a commodity sometimes, although it’s not… Good performers perform… operators operate at levels, way, way higher than others on the market. And once again, that’s the beauty of self storage, which I’ll get into in a minute. But you have to really understand how to underwrite that thing. What’s it worth?
I like to think, first of all, price is not value, and I’ve always believed in this. I’m a firm, firm believer. Price does not equal value. I do not let banks tell me what I can afford, and I don’t let brokers tell me what something’s worth, so I need to be able to underwrite it, understand what the price that I should pay for is. Whether somebody else down the street’s going to pay for it or not has nothing to do with my goals or my resources and ability, so I need to understand for me.
The next part is, after that, you’ve identified a market, you’ve identified a facility, the price you want to buy for. You have to either raise money or you have to get your own money, save, raise, whatever it is. You need a capital to put a down payment on it, right?
After you put the capital down… Let’s say, my first one was 160,000, I think, we put into it. From there, after you purchase the facility, you need to really look at turning it around. So after the acquisition, once you have this facility, what are you going to do to increase the income and revenue on that facility? And this is what makes self storage great.
Let me give you a quick example. I bought a self storage facility about, oh geez, what was it now? Three, four years ago, and I bought it at an auction. The facility had very little capital expenditures ever put into it. It was a large facility, but the facility itself had not been run. There was no revenue management. They weren’t doing rate increases, anything else like that. So when we came at the auction, the person who had done the feasibility study and the person that had determined its worth came up with a worth of $3 million.
Now, I understood that was not its worth at all. And I took the normal rates and all the things that they weren’t doing, like giving insurance. They weren’t managing rate increases. Let’s say that they were pricing at 10 by 10, at a hundred dollars. Well, a lot of the people in the facility weren’t paying a hundred dollars, they were paying way below that, and the market was 150. So when you priced all these units and these revenue lines normally, the value of it was $8 million.
So we went to a bank and had an appraisal do it off of my numbers, and the appraisal came back at five, six million. So I walked into an auction. Everybody was holding an appraisal that said 3 million. No one had gone and gotten their own appraisal done. I was sitting on an appraisal that was six million, knowing that it was worth eight. So I bought it for four and everybody was like, “Wow, you paid over a million dollars,” and I’m like, “No, I didn’t overpay. I just got it for $2 million discounted.”

Brandon:
[inaudible 00:16:58]. Yeah.

David:
I love that you’re pointing out that that’s not a one-way street, that everyone will use that argument to say, “I’m not going to pay that much for that house. It’s not worth that much to me.” But if you’re going to do that, you got to go the other way also. I’m happy to pay over asking price if it’s worth this much money.

AJ:
Exactly. And this is where I come into problems, even with cap rates, right, because cap rates are so… I got an issue with them because there’s so manipulatable, right? A broker that doesn’t understand the asset and puts out a worth on a cap rate, it’s almost always not only completely wrong, it’s flawed, it’s all sorts of stuff. So when we look at it, that deal, we ended up paying a two or a one cap for.

Brandon:
Yeah. I hate when people ask me, “What cap rates do you buy a mobile home park in?” I’m like, “It’s completely irrelevant because I’m going-

AJ:
It’s irrelevant.

Brandon:
Yeah. All that talks about is price, not value. That’s a good way of explaining that, yeah.

David:
And they’re-

AJ:
Yeah. I said that on-

David:
… different in every area. It’s like saying, “What comps do you buy houses at?” Well, is it in Maui or is it in Wisconsin?

AJ:
Exactly. Yet, that’s the determining factor. And everybody looked at it and said, “You bought it at a one cap. You’re crazy.” Three months later, we’d increased the gross revenue by over 35%, and occupancy had risen.
And we did virtually nothing to the facility. We ended up redoing the office, so we put 150,000 into it later on down the road, but nothing except operationals, revenue management and pricing. We’d increased the facility by value. So three months later, all of a sudden, we’d bought it at whatever it was, a 12 or 15 cap. So that’s why the cap rate’s irrelevant, because it had nothing to do with its actual value.

David:
And that right there is why we say, “Start at the end, learn what you’re doing and work backwards, instead of starting at the beginning and saying, ‘What’s the first step?'” Learn how to price a house. Look at cap rate, look at NOI, come up with an answer. You miss all those opportunities that you’re describing, AJ, when you say, “Give me the paint by numbers thing. What’s the first step that I do?”

AJ:
And a great way to look at this is, they go, “Oh great, AJ. Well, that’s fine, but you know how to do that.” Well, when I was buying my first one, I didn’t, right? And so I knew that I had to go to a place where I could get more out of my money. So I was priced out of a lot of the major markets. I was priced out of a lot of these things, so I had to go to a small city. And I went to a small city and I bought a facility, and we learned, and from there…
We sold that for 20,000 less, that first one, than we’d bought it for. We took that money, we rolled it immediately into a new one, and we bought it for right about, I think it was 800,000, just over 800,000. 8 months later, we sold it for a million. We took that and bought a four million one, and then we expanded it. We still own the four million one today, which has been expanded by 30,000 square feet. It’s got to be about a $10 million value.
And that was $160,000 that we’d put into it. So that $160,000 has made us somewhere around 4 million, not including all the cashflow. To give you an idea, that one nets me almost double what I bought my first one for, and that happened within a three-year period of time.
Now, once again, I didn’t know. I had no idea. But when I learned, I applied, I moved, and I made adjustments. I built out my systems, right? I found opportunities, I relied… put my pride in the back end. This was stupid, AJ. Buy another one that’s better. I cut my loss and I bought a better deal, and then we rinsed, repeat.

David:
Yeah.

AJ:
Yeah.

Brandon:
This is why I teach this concept a lot on BiggerPockets, called The Stack. And it basically says, if you start with a single family house or a duplex, start with something small, and then make the mistakes, learn the lessons, go into something a little bit larger, make the mistakes, learn the lessons, go into something larger.
And so by doing so, this is exactly what you did, and you just explained, you scaled your business, because when you look at the entire… Let’s call it a pyramid, even though there’s a lot of connotations of pyramid scheme here, but just a name only, right? So you look at this pyramid. At the very top, you bought a single family house or a small thing, or in your case, you bought this small little self storage, right? Then you bought bigger self storage, then even bigger self storage. Then you built out this platform and this business that can buy lots of self storage.
When you look at your whole portfolio over the course of a decade, how much does that very first little tiny deal at the top matter? It doesn’t at all. The only thing that matters is knowledge and experience and confidence. That’s really what matters, is that you get the confidence and [crosstalk 01:15:13].

AJ:
The $20,000 loss ended up being 60 million in equity.

Brandon:
Exactly, yeah. Who cares?

AJ:
Who cares? It’s irrelevant.

David:
Let’s move forward.

AJ:
But what I learned was gold, and that’s the thing. When I did that first facility, that was… It was a golden goose. Not the actual facility, but the asset class, right? What I learned. And that’s what produced all the dividends.
So after you’ve done… you purchase your facility, number six. I know we got sidetracked. But number six is, you create value through operational improvements and targeted marketing. And this is really where a lot of our success, almost all of it, comes through. We use operations through price management and finding the right tenants, because in self storage, you have three tenants. You have tenants that care about price, you have tenants that care about location, and you have tenants that care a lot about quality. I buy facilities the tenants care about price. I kick them out, and I bring in tenants that care about quality.
The spread between that is double, right? It can be massive, depending on what you’re buying, how you’re doing it. We do that through our operational ability. We increase pricings, we increase the value offering, we add insurance, we do box sells. All sorts of stuff, right?
Then from there, after you’ve done that, now we’re at the real awesome part, because now, I take this facility and I can refinance it and get my capital out, tax free, and go do it again. And then, I can improve it, refinance, take my capital out, tax-free, and do it again without ever losing the assets. I can move them over into a non-recourse model, which then, all of a sudden, all my capital’s out, all my risk is out, I-

Brandon:
Yeah. What do you mean by-

AJ:
… go do it again.

Brandon:
Explain non-recourse for those who are unfamiliar.

AJ:
Yeah. My goal is simple when investing. I want infinite returns without risk. I know it’s a simple goal, but the reason being is, I… Let’s say, once again, my 160,000 I put into a facility, then we moved it up, and we got a million and we rolled that into the next one. The million we rolled into, we refinanced, we got that out. Now I have zero risk on my capital because I pulled it out, right? So now, the returns are infinite.
Now, risk though, is different than returns, okay? So risk can mean me signing on the bank loan. So it doesn’t make any sense to refinance, max out the loan and not have a good margin on that, and then hold the note. And then, if things go bad, you’re screwed. No, I want to refinance at 70/30, and then I do that through refinancing, which means I’m not putting my assets and my name on the line.
The bank takes the risk, because what normally happens to this in a lot of method that we use is, they take our debt, okay? So we go to our broker, we go to, what’s called the CMBS market. They take our debt, they put it with lots of other real estate assets debts, and they turn this into a financial vehicle called a bond. That bond then is sold on the open market, and all these investors buy it to make 3% or less, or whatever it is, and they now take the risk.
So I shift my risk onto those investors because that asset is what backs the investors, not me. If the asset goes under because we’re in a recession, whatever, they don’t come after my house. They don’t get to take it. The investors just lose their money. This is a risk transfer.
So I take my capital out, plus more, usually. I can put it into more deals. Now I’m diversifying my cashflow, I take the risk from capital away, I take the risk from suing, or losing my house, or anything else like that away, through a method of non-recourse. Insurance companies will do non-recourse too, but that is really our model. That’s how we operate. And then, that compounds our capital by lowering our risk. And we still own a hundred percent of the assets. Those investors that buy the bond, they own the bond. They don’t own my storage facility, I do. It’s like having your cake and eating it too.
And when you look at this and you build it out… and I build how you do this in the book. I show it out. When I first started explaining this to people, they’re like, “Hold on. In three years, you get a hundred plus percent of your money back. You get rid of all the risk. You still own it, have all control and say, and you get a check now for life. As it grows and gets more valuable, you do it again, and all that money that you’re making is tax free.” And I’m like, “Yeah.” It blows their mind, right? It’s like, “I didn’t even know that was possible,” because it blew my mind when I found out about it.

Brandon:
So basically, what you’re doing here is, and for those who probably pick up on this, you’re BRRRR-ing commercial real estate. So the BRRRR strategy is something we talk a lot about with small deals on BiggerPockets. But in reality, a lot of people don’t realize this, the idea, the concept of the BRRRR strategy actually came… was birthed from the commercial real estate space of guys like you, doing exactly what you’re doing.
So before the word BRRRR ever came around, which for those who don’t know what it means, it means you buy a property, you rehab it or improve it, you rent it out, you get higher rents for it. You then go and refinance it, like AJ is talking about here, is getting all your money back, which gives you all your money, and then you repeat the process. So this happens with duplexes, single family, fiveplexes, mobile home parks. Exactly what you’re doing, we’re doing with mobile home parks.
And what’s similar about both mobile home parks and self storage is that because… And this gets a little bit into the math weeds here, but listen closely, you guys. This is important. Because our values are so much lower, meaning… Oh, sorry, our rents are so much lower, adjustments to rent is a much higher percentage than on a big property. So in other words, if you have a rental that’s $2000 a month for your nice rental property that you’re renting out, and you increase rent by a hundred dollars, that’s a pretty big jump, $100, to go from… Now you’ve got $2,100. You just increased-

David:
That’s a pretty big jump, a hundred dollars to go in. Now you’re at $2,100. You just increased it 5%. So, your net operating income or your value of your property is worth maybe 5% more. But, if you have a place where you’re renting a unit for a hundred dollars a month and you increase it to 150.

AJ:
Or 50.

David:
Or, yeah, from 50 to a hundred, you’ve now doubled a hundred, like fully doubled your rent. Which means, because commercial real estate is valued on how much income you make, basically how much profit you make, you’ve now doubled the value of your property, or maybe more. And so, mobile home parks, same way. There are a couple hundred dollars a month for lot rent. We go from 200 to 300, that’s a hundred dollars, but we just increased 50% of the value of our park by just doing that. Now, not that we always go and jump rent from 200 to 300, but the idea being percentage-wise on cheaper rents. The same thing is true for like workforce housing and other low income housing is the smaller rents actually have a bigger sway in terms of percentage-wise.

AJ:
It’s disproportionate to what you’re doing. And that’s why I love self storage. So, my increases are disproportionate. If I went and bought a multifamily property, all of the two bedrooms, one bathroom that are similar quality are going to sell at the same amount. Right? That’s not how self storage works.
So, for me, we get to institute things called like dynamic pricing. So, when you go on an airline and you’re sitting in a seat, you did not pay the same price as the person next to you. So, I adjust my prices with demand.

David:
That’s so cool.

AJ:
So, what that means is that, once we’re getting full, the prices that the other people are paying, they could be coming in and their street rate is double than what the guy came in two years ago at. But then too, that guy that came in there is always headed to the street rate every six to nine months, he gets a rate increase. And, if I have high demand, I’m going to give him a 12% annual rate increase every single year or more.
And so, lots of times we’ll buy the property. We’re giving an initial, everyone, we’re getting all the units up to a certain level. Okay? So, once again, let’s say that you have 100 ten by tens. And the person that owns the facility, their street price right now is a hundred dollars. 50%, or maybe even more of those sometimes, are at 50 bucks. They’re half of what he’s even charging because they either came in late, they did all that stuff. So, what we do is, when we buy it, we immediately bring all the prices up to where they should be. This can result in very large increases, which will lose some people. That’s great. Leave. Because then I’m going out and I’m marketing to people that I know are going to pay the most.
So, I do targeted marketing. We bring them in. And, when we bring them in, the street rate is 50% higher. It’s now 150 bucks. So, I got a 50% increase in the rate increase from taking the people from 50 just to what they were charging when I bought it, to 150. Then the new street rate is 150, and the whatever, 30% or 20% of people I lost, I fill in at 150 bucks. My now average rate increase within the four months is however much that is, 150% or whatnot. Because now the half of the populations or 30% is at 150, the rest is at 100, and they all get individual rate increases six to nine months, depending on when they signed up. So, that means I don’t ever have mass move outs. And I’m constantly every month getting rate increases.
So, someone in all my buildings, in all my units is getting a rate increase this month, all of them. And, if they don’t like it and they leave, that’s just one unit of 900 that I have to replace. It’s insignificant in the revenue. But, over a total, it’s very large. So, that helps us keep them.
So, let’s say then, demand drops really high. I’m not going to go cut the person that’s at 150 back, but I may put somebody in now at 100 and then work on getting them up. Because when you have a ten by 20 and it’s full of your entire house stuff, and it’s January in the Northwest, you ain’t going anywhere.

David:
Yeah.

AJ:
Because a $50 rate increase of 30% or whatnot is 15 bucks. Ain’t nobody caring. I’m not going to go spend days moving all my stuff out in January for 15 bucks. All these things on top of each other, this is stuff I’m talking about without any capital expenditures even in the building. So, now some of them, we put huge capital expenditures in. Right? And we’ll go and we’ll double or triple the rates. But this is operational efficiencies. That’s it.

Brandon:
Well so, I mean, it definitely is a good reason why self storage is so powerful. Right? Like, I mean, like this ability to raise your rents. I mean, like evictions are going to be totally different. We don’t need to go into that, but like that’s a different process because you’re not kicking people out of their homes.

AJ:
Yeah. You basically just tell them to leave.

Brandon:
Yeah, exactly. So, there’s a lot of-

AJ:
Yeah.

Brandon:
A lot of really good reasons to go into this. What I’m wondering is, if those people obviously want to know more, they can pick up a copy of your book. And they should. But can you quickly… I just… because we spent like, I don’t know, 15, 20 minutes going over the playbook. Can you list what those are in case people are taking notes and they missed one. Like what were kind of the points there?

AJ:
Yeah. So, here we have kind of a seven point process. This is identifying your not only goals, but your resources. Once again, this will let you know what you need to add. Think of the foursquare. Okay? It’s okay if you don’t have everything, but you need to identify what you don’t have so you can add it in. Then the next one is you need to identify your markets or facilities, the types that you want to buy, which may depend on capital, different things like that. Right? Most people start small. That’s okay. Start at a really small facility.
The next thing is performing your due diligence. And this gets into demand. Okay? So, if you’re buying a storage facility that it’s ten by tens for 50 bucks and everybody else on the market is 100 bucks, you know there’s a lot of upside. If you buy a storage facility that’s 10 by 10 that’s at 100 bucks and everybody is at 50 bucks, there’s a lot more downside than known upside.
So, I don’t believe in just guessing and hoping real estate goes up. I deal with what’s called money on the table. And money on the table is the difference between that facility is doing now and what the market is doing. That spread is a riskless profit. So, there’s all this money sitting on the table. It may be insurance sales that the owner just didn’t even take. I just buy it and I just pick up the money. That’s all. So, I look for the leftover money sitting at the table. I buy it. I take the money off the table.
The next then is your… so, that’s three, saving, raising money, however else you’re going to do it. Right? So, whether that’s by yourself, friends, family, all that kind of stuff, how much capital do you need, and creating a system to which you can ask for getting the right LLCs done, all that that you need to do. The next one is actually acquiring the facility. Okay? Now, acquiring the facility, especially in the book, we go over after you buy it, what all has to be done, vendors, how you need to transition it over to your name, and how you need to set it up right? Do you need to hire someone? Are you automating the facility? All that kind of stuff.
Then you create the value through operational improvements and targeted marketing. This is the process of taking your money off the table. Then the last one is, after you got all your money off the table, refinance it or just use the revenue, whichever you want to do, and go buy more. And then, you just repeat. And you scale like we talked about before. If you’re starting out small, do a couple small ones, but then work on volume as well as magnitude. Go bigger. Do more. And it’s a way to leverage your knowledge, your process, which once again, all of it is given everything in the book. You could literally just use it. And it’s a total playbook from point A to point B. And that’s the point of it. Right? And so, then you just leverage it and you keep building if you want to. Maybe you don’t want to. Maybe you just want one. That’s fine too.

Brandon:
Yeah. Maybe you want to just sit and retire on the beach because you bought one big [inaudible 01:28:48].

AJ:
Sure.

Brandon:
But no, here’s what I want to point out to everybody before we move on to the famous four that we’ll see at Fire Round today. This is a long show in a good way. But so, notice. I’m going to read these seven off real quick again. Real quick, I’m going to read them off because I want people to take notice of how this applies, not just to self storage, but it could apply to anything. Number one, identify your goals and resources. Can you do that if you’re trying to buy your first property? Of course you can, and you should. Secondly, what kind of markets and facilities? In other words, where are you going to invest in what property type are you going to buy? Are you going to buy a single family house in this neighborhood? Are you can buy a duplex, an apartment complex, whatever?
Number three, do your due diligence. Know what you’re getting into. Right? Number four, figure out the financing, the money, saving, raising money. Number five, buy the property, close on it, make it happen. Right? Number six, increase the value by improving it, whether you’re flipping, whether you’re doing rentals, whatever. Improve it. Do what you’re going to do. Improve your marketing, which can be a big way. We don’t talk enough about that on the show, but marketing is huge for increasing rents. And then, finally, number seven, refinance and repeat the process. So, basically finish the [inaudible 01:29:48]. And this applies to almost any type of rental real estate really is these same seven steps. This really is like the playbook, the paint by number for scaling your real estate business. It really is. So, AJ, thank you.

AJ:
Yeah. And two, I want to mention something here because I know we all have so many limiting beliefs as well as I did when I started. I have some guys that they’re just awesome. I get a call and he’s like, hey, listen, I know you bought a bankrupt Super Kmart and turned it into a storage facility. I have a bankrupt Super Kmart in my town. And he’s like, I have it under contract. If you’d let me in on the deal maybe and let me learn from you then, I’d love to do this with you. Well, for me, I’m like, great. All the better, right?
And so, that person that’s never been in self storage, he owns no property, is now dealing with the city. He’s doing all these things and he’s going to manage the conversion of the property. I’m giving him a complete equity split in the entire deal, and then I’m running it. I’m turning it around. I am going to refinance him out, give him all the money and everything back. He has zero money. He’s not going to put anything into it because he doesn’t have it. And he is going to own what will be a 20 million dollar asset. And he’s going to own 10% of it. And, out of that 20 million, it’s going to cost us seven to build. Think about the equity and what he just did with no money at all.
And that’s why I really want to make this important. If you know, which he did, he knew me. He knew what I needed. He understood this stuff. He brought to me value.

David:
Yep.

AJ:
And he’s going to be getting all this money, all this upside without having the least important thing, money. So, get rid of those limiting beliefs and you say, oh, storage is either complicated or I can’t do it. It’s just not true. There’s so many ways to go about it. And there are so many ways to get into the business and just identify, once again, your resources.

David:
Yeah. So good, man. Really, really, really good stuff.

Brandon:
Yeah. We talked about the deal delta a lot of BiggerPockets, where you got to have three things, knowledge, hustle, and money. But you don’t need all three. Just, if you don’t have the money, then get the knowledge and hustle like this guy did for you. Find somebody else who has got the money. Put the deal together. Whether it’s you are joining with a large operator like yourself or whether you’re just bringing in a silent partner who can give you the down payment.

AJ:
Yes.

Brandon:
Again, this is the paint strokes we’re talking about. This is the tools and the method for painting. You can apply them to whatever art you’re trying to paint. So, with that, let’s move over to the last segment of the show. It’s time for our Famous Four. All right. This is the part of the show where we ask the same four questions we ask every guest every week. And, AJ, I know we asked you these questions the last time, but in case anything changed, we’ll ask them again. Number one, what’s your current favorite real estate related book, besides your own? Because I’m sure that’s probably all consuming right now.

AJ:
I’m going to have to give a shout out to Brian Murray. I bought his book.

Brandon:
Yeah.

AJ:
And I have just been in an absolute deep dive. And I don’t do apartment buildings, but it’s helped me out a lot because, once again, I’m trying to take tools from other people and use them in my own. So, I think that one. And then, Schwarzman from Blackstone had a book. Actually, that’s another question. That’s a business book.

Brandon:
Oh, is it? Okay.

David:
Yeah.

AJ:
I got to wait for that one.

David:
You save that.

AJ:
Safe.

Brandon:
By the way, that book, Brian Murray’s book is called Crushing It in Apartments and Commercial Real Astate.

AJ:
Yes.

Brandon:
Did you know, AJ, that Brian and I are actually co-writing two books. I don’t think I have announced them on the podcast yet. We’re co-writing two books together right now. Kind of like he’s leading one, I’m leading the other, but we’re doing it together on a multifamily investing. That’ll be out next year, so.

AJ:
Yeah. I was talking to him last week and he was telling me about that.

Brandon:
Yeah.

AJ:
And I was like, I’m excited. I’m really excited.

Brandon:
Yeah.

AJ:
To listen to that one.

Brandon:
It’s going to be pretty darn awesome. So anyway, that’s a year out. So, this is your first tease of it. It’s coming. But that book was so like monumental for me. I was like, I got to write with Brian. And so, we’re doing it together. So, anyway, number two-

David:
Random question, AJ, I just pulled this out of the air.

AJ:
Yeah.

David:
What’s your favorite business book?

AJ:
You know what? I’m glad you mentioned that. Let me think. I’m going to have to think about this one for a second, but I think I can come up with it. Oh, okay. Let’s go with What it Takes by Stephen A. Schwarzman. Now, this book is brand new. I don’t know that I classify it as my favorite, but I’m absolutely loving it right now. I just finished it like a week ago.
And the reason I like it is because, for those of you that don’t know, Blackstone is the largest holder of real estate in the world. And so, they are worth something like 500 billion dollars. It’s crazy, but they own more real estate than anybody. And he didn’t even get started in real estate. He was trying to do mergers and acquisitions. But all those things that we talked about, building up systems, creating business models, finding the right people, this is the book you need to listen to. And especially if you’re one of the guys that’s like, I’m an empire builder, I want to go big, I want to really knock it out of the park, this is an awesome, awesome book for you.

David:
Blackstone is so… I’m often confused with how little they get talked about because of their sheer size. I mean, everyone knows about Google. Everyone knows about Apple. You don’t hear Blackstone get talked about a lot. But they are… I mean, how would you compare how much bigger they are compared to everyone else?

AJ:
I mean, they’re a juggernaut. I mean, you’re talking Schwarzman makes like 800 million a year in his income. It’s almost not fathomable. And two, I don’t know how they actually underwrite it because these guys own everything from businesses, to towers all over the world, Tokyo, Japan. I mean, these guys own so much real estate. I wonder the valuations, how wrong they maybe are.

David:
Almost single handedly, and take that with a grain of salt when I say single handedly, turned around the recession of real estate values.

AJ:
Yeah.

David:
When they got into the game and started buying up properties at auction at the scale they did, they soaked up-

AJ:
Single family homes.

David:
Yeah. That’s what I mean, single family homes.

AJ:
Yeah.

David:
They soaked up so much supply that they returned an equilibrium to supply and demand and prices could actually rise again. They were like this towel that came in and just wiped up all the mess. And then, boom, we were like-

AJ:
Well, it’s true. And the thing that I love about that is they saw an opportunity. But like most people you say, oh, it’s too big. I’m not going to do it. These guys are doing 15 billion dollar deals. And they saw an opportunity.

David:
Oh, yeah.

AJ:
And they decided, oh, let’s go buy a hundred thousand dollar homes.

David:
Yep.

AJ:
And they went in. And they figured out how to use technology. Often they made an app to underwrite it, go to auctions, to buy it. And then, they figured out how to manage it. And they are the largest single family homeowner in the United States.

David:
Remember when Warren Buffet made that comment, if I could, I would buy a bunch of single family homes.

AJ:
Yes.

David:
And he just didn’t have the infrastructure to manage that. Well, Blackstone figured it out. And they went in there. And, to your point, I’ll tie this in. They were the ones that said, what are they worth to us? Okay. To the person who is buying houses at auctions who are like, I’m not paying more than 110. I’ll pay 95 for that thing. Blackstone said, I’ll pay 130. I don’t care. I’m borrowing money at 2%. It’s going to go up eventually.

AJ:
Yes.

David:
I can rent it out, in the meantime. When the thing is worth 300, do you really care that you didn’t get it at over 110? And that’s a perfect example of what you said.

AJ:
Yep. If it met their criteria, they acquired it. That’s how we view storage. That’s how we view everything. It’s you’ve got to have it be ready to be executed to move fast. And they did it in a way that is just unbelievable. Which, once again, for people that said you either couldn’t do that or it was impossible, that just doesn’t exist.

Brandon:
By the way, this worked really well for getting Jocko on the podcast. I’m going to do it now is by putting a shout out to our audience. If anybody has a connection to Steven Schwarzman, please hit him up and tell him that the BiggerPockets Podcast would like to interview. And we’re going to do an episode called from zero to a million houses in 35 years or whatever. It’ll be amazing.

David:
No, it’s from zero to a million houses in like two years. That’s what they did.

AJ:
Yeah, two years. Exactly.

Brandon:
Yeah. Those episodes tend to be our best episodes is like the zero to ten houses in two years.

AJ:
Yeah.

Brandon:
Zero to 20. Yeah. Zero to a million, that’s going to be the show. So, Kevin, Kevin is our producer. Kevin, we’re going to need you to get to work on that. So, give us Steven, uncle Steve a call later today if you could. Number three, David, you want to ask it?

David:
Moving along, what are some of your hobbies, AJ?

AJ:
That’s not real estate? Yeah. So, I do have four children. I love the outdoors. I’m a fly fisherman, backpacker, skier. After not being able to walk and everything, I was bound and determined to get back up on the mountains. And that’s really important for me and a great way that I can share time with my children and build bonds, so.

David:
Awesome.

Brandon:
Yeah. That’s awesome, man. All right. Well, final question. What do you believe sets apart successful real estate investors from all those who give up, fail, or just never get started?

AJ:
You know what? I’m going to go back to the same thing I talked about before humility. Humility doesn’t mean you don’t think you’re good. It doesn’t mean things. It means that you’re simply aware that everyone is flawed, and so are you, and that’s okay. And so, you don’t need to front and you can be honest with yourself. And then, when you’re honest with yourself, that allows you to figure out the resources that you need to accomplish a goal. And I think that’s one of the biggest things that I see people, they trip themselves up and it’s just in their head. That’s it.

David:
I 100% agree. Sometimes people say, David, what do you think you did different than other people? And they’re expecting me to say, hustle, grit, I did what they didn’t. It’s not. I was very honest with myself about my flaws. And I quickly looked for other people and just admitted, I’m not good at that. I’m never going to be good at that. Let me get someone who is good at it. And, the quicker you can get to that point, I mean, AJ, you probably agree that the faster you will scale.

AJ:
Absolutely. If, everybody, you want to grow, you want to get bigger and stuff, get out of your own way.

David:
Yeah.

AJ:
That’s the best way to do it. Get out of your own way and you’ll grow right along with everybody else.

David:
It’s kind of an unspoken rule Brandon and I have in our friendship. If I see something that I know he doesn’t like doing or he’s not good at, I just jump in and do it. I just have carte blanche like fridge privilege. You walk in my house, you can go in the fridge. I he does the same thing for me. He’s like, oh god. David is never going to be able to do this. He’s going to screw it up so bad. And he just jumps in and speaks for me in many ways. And it’s so good. And like that principle works in many aspects of life, your friendships, your relationships, your business, all of it.

AJ:
Yes. Absolutely.

Brandon:
On that note, this morning I got an email. So, there’s been an email… David knows I’m not very fast at responding to my email. And so, there was an email thread where Katie asked if she could interview. Katie is a head of publishing and head of BiggerPockets Wealth Magazine. Asked if she could interview David and I for the magazine to do a feature discussion. Right? As typical, I’m like a week behind on my email and responding. So, David’s response, the first one was, I think the interview idea is great. Brandon would probably prefer that too. Answers for me, right? Less pressure on us to come up with the content. We can give them information in less time. So, then we went to interview. Brandon, any objections. Of course, I didn’t even see that one. So, I didn’t respond to it. So, then David responds I’m in. And, if Brandon is too busy, I could answer for him in his voice using phrases like “without further ado,” and “that’s fantastic,” and “here’s what I like about that,” because apparently David knows how I talk on podcasts. So, it reads just like him.

AJ:
That’s awesome.

Brandon:
That’s a real example of how that works in the real world.

AJ:
That’s awesome.

Brandon:
In fact, I haven’t actually answered any of my Instagram messages in over two years. David just sits on Instagram 24/7 just responding for me.

AJ:
And answer them and nobody knows.

Brandon:
Nobody knows. David, he’s not actually a real estate agent. He just is my virtual assistant really. So, y’all got punked. David’s just my assistant.

David:
That’s funny.

Brandon:
All right.

David:
And now you guys have seen a peek behind the curtain of what really goes on.

Brandon:
Yeah.

David:
Yeah.

AJ:
That’s right.

Brandon:
That’s not true. That’s not true. I do check [crosstalk 01:41:36].

David:
I don’t go on his Instagram account.

Brandon:
Yeah.

David:
It’s probably that it would be the opposite. He would be on mine responding to people in a way that’s like much more friendly and warm. Right? I’m just always like, here’s the facts. Here they go. And I always go to Brandon when I’m like, okay, here’s what I want to say, but I don’t know how to say it.

Brandon:
Yeah. How do I say this nicely?

David:
And he’s like-

Brandon:
Yeah. How do I wrap it in a hug? And I’m like, here. I’ll tell you how to wrap it in a hug.

David:
Do this. That’s exactly right.

Brandon:
Yeah. I’m like Olaf from the Frozen movies, which would make no sense to you, David. But, yeah. Olaf, he is a snowman who likes warm hugs. All right. Moving on.

David:
Last question, AJ. Thank you very much for your time today.

AJ:
Yes.

David:
Can you tell me for people who want to know more, where can they find out more about you?

AJ:
Yeah. So, I have a site called Self Storage Income. You can go to that. It’s where we have all our content information. The podcast, Self Storage Income, it’s solely devoted to self storage. We talk about execution. We talk about details. We interview people. And it’s the largest self storage income podcast out there. And then, once again, the book, The Investor’s Guide to Growing Wealth in Self Storage. That’s on Amazon or you can get it on my site. And then, Instagram, of course, AJOsborne. I got really lucky with that handle.

David:
Yeah.

AJ:
AJOsborne. And that you can go on there and DM me. You can follow me. We go through and I’ll post our projects, our turnaround, everything from different businesses that I own. So, you can kind of see behind the curtains, as we just saw with you guys. And I try to be as completely transparent as possible with everything. I’m an open book, once again. So, I try to tell everybody so they can see how it’s really done. That was hard for me when I was getting started because I felt like… we didn’t have social media or anything. You never really saw how it was done. But, yeah. Email Self Storage income too. It’s got our contact. You can email directly. This all goes to my phone. Literally, you’re just talking to me. So, any of those things are great.

Brandon:
Awesome man. Appreciate it. It’s awesome having you here. Every time I talk to you, I walk away like a better investor. So, I appreciate you for that.

AJ:
Well, the last time we talked, or the last time I was at your place, which we were supposed to be this spring.

Brandon:
I know. We were supposed to be again.

AJ:
I was so mad. But, yeah. You told me to write a book.

Brandon:
There you go.

AJ:
And then, the group that we were in told me that I should start this syndication company and start doing deals with other people. You create a lot of work for me.

Brandon:
[inaudible 01:43:55].

AJ:
So, I think my wife’s going to be nervous about me going over and hanging out with you when we do it again.

Brandon:
Yeah. We’re going to try to reshift the mastermind to this fall maybe, if this whole shutdown in Hawaii, if it finally goes away. Let’s hope.

AJ:
Let’s hope.

Brandon:
All right, man. Well, David, you want to take us out of here?

David:
Yeah. This was a great job. Thank you guys very much for your time today. AJ, I think that you definitely raised the bar as far as the amount of content that we squeezed into an hour and a half or whatever this was. So, this is one I’m going to listen to two or three times, because I’m sure, when there’s this much content, it’s easy to miss it. But I had a great time. And thanks for sharing it. And make sure you go back to episode 286. Listen to AJ’s story on there.

AJ:
Yeah.

David:
Without further ado, this is David Green for Brandon a peak behind the scenes Turner signing off.

Speaker 1:
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