How to know if you have enough knowledge?

Question

Hey everyone,

I have been thinking a lot about something recently and I really wanted to get some insight and advice. 
 
I along with so many other new investors have yet to do even one deal.  Right now I’m in a position where I am trying to learn as much as I can (through BP, books, webinars, and trying to network) but I keep coming back to one main question.

How do I and other beginners know when we have enough knowledge to actually start taking action?

I feel like knowledge without action in pretty much useless but I’m really struggling with knowing when I have enough knowledge to begin.  I think a lot of people use the excuse, “I don’t know enough to start investing.”  While in some cases there is probably some truth to this, I know others just use it as an excuse to stay in their old ways. 
 
I feel like I am letting this lack of knowledge (whether real or perceived) stop me from taking action and I know I have to get over it to be successful.
  
Anyone have any thoughts on this or experienced this yourself?

Ann Bellamy · Answer

Definitely start small, because when you are in the big leagues, a small mistake is multiplied many times over and can sink you very quickly.  So do a single family or duplex first, and go through the process of acquiring and managing real estate.

On top of that, self storage is a business in and of itself, with it's own special quirks.

Here are some resources:
www.selfstorage.org
www.selfstoragemichigan.org
www.selfstorageeducation.com
www.selfstorage101.com
www.insideselfstorage.com
www.selfstoragetraininginstitute.com
www.selfstoragetalk.com

There is a self-storage guru on the reia circuit - Scott Meyers.  Not suggesting you pay big bucks for his stuff, but you may find one on ebay.

Glenn Espinosa · Answer

I agree with the other posters regarding starting out small and building your way up to self storage. Self storage is no joke, one wrong move can ruin you. A smaller deal such as a SFH flip or rental is much more forgiving.

Remember, in most scenarios your first deal is not going to be perfect. Not everything will be lined up like you want. There will be risks involved. Take the opportunities as they come and learn along the way. Just make sure everything is a calculated risk and you have your backside covered if things were to go sour.

I learned more doing my first deal and making mistakes first hand than I ever did reading real estate books.

Callum K. · Answer

Nick K. my family has been involved in self storage's for over 15 years and I have been directly involved in it for just over 10.  Like you, my fascination is in mini storage's but unfortunately they are highly capital intensive but can pay nice dividends with low maintenance.  Because of the capital requirements, I decided to start with rental properties and have been able to build a small portfolio to which I plan to eventually graduate into more self storage's.

My recommendation like Rob K's is to get a house.  A smaller investment will put less at risk and build the experience you need.  You don't have to learn how to play poker by going to the high stakes table immediately.  The cheaper tables play the same game and will get you the same exposure with less money at risk.

By initiating through rentals, it will get you access to things like basic financing and help build your experience/knowledge to much more than simple financing and management.  There are tons of similarities with self storages and rental properties so even if you have the capital to move forward with a mini storage I would strongly suggest you take a stab at rental homes first.  To me, getting into the home rental market didn't necessarily 'build my experience' but rather allowed me to do things like start building relationships with banks, escrow's, lawyers, CPA's, while also helping me ask better and more direct questions.

Brandon Turner · Answer

Hey Nick K. -

I think you probably have the education, so it's time to start making the plan. Like a road map that you can follow. If you are convinced that self storage in your area is the way to go - then envision the end and work backwards.

How many units do you want to start with? How much will that cost to build? What will the land cost? How much down payment will the bank require to do this? How will you get that money?  How will you manage the property? What are the vacancy rates?

I'd map out your plan as well as you can. Then post that to BP and get our thoughts. We'll definitely help you work through it. Then, if it still seems viable, perhaps you'll feel the confidence to jump further into it.

Hope that helps!

Account Closed · Answer

The best way to learn is to get your feet wet. Obviously, don't jump into something you're absolutely clueless about. But eventually it comes time to stop reading, stop thinking and make a decision to just get involved.

Tiffany H. · Answer

Nick, a couple points made in thread that should be emphasized
1) It's different when you're working to build your own business & you can delegate the parts of residential you don't like if you start here.
2) The smaller your earlier deals are with less zeros = less painful when you make the inevitable mistakes
3) Free education ala internship really is priceless!  Do that!

Steve Babiak · Answer

The best part about having your own business is you can decide to hire / outsource those activities that you dislike.  Remember, your family was using your free labor - but you gained inside information as well.

Karen Margrave · Answer

The question I haven't seen answered is: Have you researched your local market and know if there is demand for self storage units in your area? Do you know the market, how much units rent for, etc.?

Also, if you live in a small area, not having any other investors in that market might be a good sign, less competition.

The fact you like self storage doesn't mean anything if there isn't a demand for the product, so do the research on your market, not just the concept of self storage units as an investment.

Most people are nervous about their first project, no matter what it is, and the only way to get past that is to go through it... jump in!

Bill Gulley · Answer

Sounds like you're ready and I agree with your thoughts, especially as to financing, I'd suggest you strart studying seller financing and corporate structures to be ready to put things in motion when you find your deal. Good luck!

Bill Gulley · Answer

Self storage....wow, most newbies don't start there, but if that's the goal go for it! There is certainly more to the business side than renting a house. Insurance expenses, bailee coverage can get expensive, and liability is all together different, having the care, custody and control of property held. It can be more profitable per sq ft than other RE uses.

It's a limited market by various constraints, zonning and good locations. While several (if not all individually owned mini's) have been or are for sale I have found asking prices very high, it's not just the RE but the ongoing business, a lot of blue sky there.

So, I can understand your hesitation, I was thinking you were a home buyer!

Where are you at, looking for an existing business, raw land to build, any specialty focus like boat storage? One guy picked up an old gas station with a couple acres near an airport, he simply fenced it in, got a  van and undercut the long term parking, storing vehicles, not the same as mini's but he did well with it.

So, what specifically   are you wanting to do?

How to know if you have enough knowledge?

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