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Jan. 8, 2023

Ep 322: Gabe Peterson's Creative Finance Tips For Negotiating Great Deals For Self-Storage Industry

Ep 322: Gabe Peterson's Creative Finance Tips For Negotiating Great Deals For Self-Storage Industry

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Transcript

0:01 Hey, welcome to today's episode of the high with us podcast. This is a special episode called deal breakdown. We talk about cool, interesting stories with our guests. And today's guest is Mr. Gay Peterson. If you haven't seen the other podcast recorded, it may come out soon and may come out before this one. I don't know. I don't know. I'll release it. But definitely go check it out. We're talking about multifamily and his podcast called The Real Estate Investing Club. Here we have Mr. J. Peterson. How're you doing today? What is your cooler? Interesting story? 0:28 Daniel. Yeah. Thanks for having me back. Yeah, when you ask you, you know, you talked to me about this before we got into the interview room, and I could not every deal I feel like has a story in it. Every deal that I've done. I told you that one and the other episode about the first deal I did. That was a crazy story. And I feel like every deal since then, has been kind of crazy. But I'm gonna kind of go down and talk about I'll talk about do you mind if I talk about two deals? Is that okay? 0:59 Let's talk about it. All right. All right, 1:00 I'll make them short. The first one about how I first got into self storage when I decided to get into self storage. And then a just really cool seller financed deal that I just finished up. So the first deals I in last summer. So the summer of 2021, I decided that I wanted to focus on self storage, I had done multifamily or mobile home RV parks. That was my foray into commercial. But I decided I wanted to own something where people didn't live inside of the property. And so landed on self storage decided, you know, this is where I'm gonna go, took me about six months to market for off market properties, shooting out mailers, shooting out texts, all that stuff, calling owners finally found a good deal after six months of calling. And it was this guy down in Texas, he owned two self storage facilities. And he just didn't want them like he'd own them forever. He was getting really old, he didn't manage them whatsoever. Like he, they were, his occupancy was like 20 something percent, well, on the paper is actually like 50%, but only 20% of the people were paying. And it was just it was just a mess. But I negotiated a really good really good price with him. I bought both of the properties. We with seller financing, I always suggest people reach out and try you know, try to negotiate seller financing in the deal. And so we ended up closing that one, it was out in Dallas, really good market. We got them both, it was a two for one. And that was my first foray into self storage, it went really well like they I feel them too. I think they're at 86% occupancy right now. And that was a little bit a little it might have be a year exactly since I actually closed on those properties since from today. So we've you know, we did really well with those. So that was the first deal. And the second deal that I'm gonna go over is the deal that I just finished in Indiana. And this is another seller finance deal. And I want to kind of accentuate the seller finance pneus of it because I feel like seller financing is such a good deal for both the buyer and the seller. You can you can change the terms change everything to make it work for everybody's expectations. And this is a shining example of that. So this one's in Indianapolis. It was again, I found it off market doing text, mailers, all that stuff, got in contact with the seller took a while a couple of months before we actually decided that we're gonna go you know, he's like, Okay, I'm ready to sell. But he wanted an absurd price he wanted, it came out to be I think like $90 a square foot, which for cellphones or for self storage, like 40 to 60 is a is a good deal. It's or it's within a deal territory, but he wanted 90 And I was like No way dude, you're not getting this much money. It's just not not possible. And so, you know, we kept talking there was benefits to the property it was like right downtown. So there's a lot of good expansion potential and, and the property essentially had double the the, the lot size was double what was taken up until only half of the lot was taken up by the footprint of the property meaning there was opportunity to expand that additional acreage on the property was flat as a pancake. So and it already had permits and zoning everything in place to expand on to so there was that upside potential. And the seller was just he was willing to negotiate and that is kind of what made this deal go through. He, what we ended up landing on was we'll stick with his price. You know, it was I think it was almost $100 per square foot. It was it was pretty high. And it was all outdoor storage so or drive up storage so it wasn't, you know, climate controlled or anything. But he we negotiated interest only payments So 5% interest only, meaning we're not playing any principal. So the monthly mortgage is a lot less than you would normally normally be paying. Exactly. And it's 5%. So it's lower than what it is right now, although we close on this when interest rates were lower than that 5% interest only. And he gave us a 20 year period. And so we can keep this 5% interest only payment for 20 years. And so and the other benefit was that he was under market and rents. And so we we ran the numbers. And it turns out that we would be cash flowing things like $4,000 a month, you know, when we bought the property. And so, you know, it all checked out, even though it was a really high per square foot price, with this 5% interest only structure, very low down That he I think we put No, I can't remember how much but it was a low amount down, which allowed us to buy the property with seller financing didn't have to go through a bank. And now we have this property that we can keep and expand onto for for a good deal with that with that low monthly payment. 6:08 Do you know what's your cash flowing? 6:11 So we just closed on this? I think it was four months ago. And so things are we're still in the stabilization period. But on average right now we're doing about 3000 A month after the mortgage payment. So the cash flow is 3000. 6:24 Yeah, for everybody here the interest only payments is really good because like, essentially pay be paid off at 20 years is the full asking price of what he wants. So essentially ride the Yep, you have cash cash flow increase, and you have potential appreciation increase that he gets his price point, but it's in the future, which is huge, huge, huge, huge. So just only payments. We talked, we talked about, like we talked a lot about seller financing ourselves, too. And we do a lot of seller financing. It is definitely pivotal. And it's definitely key, especially like that, because you pay this price point, which is exorbitant, but with interest only payments and a 20 year loan. Yeah, it's a win win. 7:11 It makes it work exactly. But you know, when we bought this property, the guy he was doing a lot of cash payments. And so we forced everybody onto online payments. We talked about this in the earlier show, we lost probably about Yeah, about 15% of our tenant base. And so we're building that up now. But once we get to full, you know, at market rents, full occupancy, or at least you know, 90 to 95% occupancy, we should be you know, doing pretty well, which would allow us to build out that additional footprint. 7:40 It's it's definitely interesting. I'm really glad you're doing seller financing, everybody if you don't know seller financing, please go look it up, go learn it. It's going to be pivotal in your real estate career that you can take with you the rest of your life. And you can do some amazing things like structuring an amazing deal. Mr. Peterson here. 7:59 Yep. Yep. And it works with even commercial properties. You know, people think that you can only sell or finance residential, you know, single family houses but any finance Yeah, you can do with land exactly. Daniels is shining example of land seller financing. So it works anywhere you become the bank as the seller and that's awesome. The banks are the ones that make the most money in any any country. And so if you want to be the bank that is seller financing. Yeah, it's a win win all around. 8:30 Man. That is amazing. Definitely go check it out. Definitely go check out seller financing is underutilized tool that most people miss out on. It's cool, man. Gabe, where can people find you online? So it's all about your podcast. Where people find you online on that point in 297 episodes, the Real Estate Investing Club podcast. 8:54 Yeah, the best place is just the website the real estate investing club.com that's investing with an ing and if you want to reach out to me just Gabe at the real estate investing club.com 9:06 Hey go we appreciate you coming out I hope you enjoyed this episode and I hope you look into seller financing and learn a little bit more. I was getting a little bit of water and I got a little tongue tied right there went a little bit more open a little bit more from this episode, but definitely got solid financing. Check out his podcast we will see on the next episode. Please go like subscribe and share with your friends and family. We do this for fun. Thanks. Have a good one. Bye bye

Daniel Esteban Martinez Profile Photo

Daniel Esteban Martinez

Host/ Ceo/ Speaker

I have been an entrepreneur since 2018. I come from a regular home just like most people. My dad worked on the roads in the Chicago area for over 30 years. He always taught me to work with my brain, instead of my body. Your body can only take so much abuse. I learned so much from my father. He always pushed me to work smarter and not harder.

I have owned and operated a trucking business for 2 years. I started learning real estate in 2019. Fell into the Data & Skiptracing business in 2020. My partner Anthony & I started Hivemind in 2021.

I have done a ton of different jobs coming up from painting, to door-to-door sales, telemarketing, truck driving, and loading trailers. What I learned most is that I want to stay in the digital business space. The leverage you can have delivering digital products to the marketplace can yield limitless possibilites.

I started The List Guys in 2020. It is a data and skiptracing service. We provide seller and buyers list nationwide. My clients have been getting great results and I am proud to help people killing it.

I started the Hive in 2021 with my partner Anthony Gaona. It is a real estate and business mastermind. It also comes with a all in one CRM, that can host unlimited websites and users.

Starting the Hivemind has been an amazing journey so far. Seeing one of our users make his 6 figure month in June 2021 leveraging our software, I know there will be plenty more to come!

Gabe Petersen

REI Pro

Gabe Petersen is the founder of Kaizen Properties and the host of The Real Estate Investing Club podcast.

He started his career as a management consultant for Fortune 500 companies in Seattle, WA, but soon realized the corporate world did not fit the vision he had for his life.

After buying and selling his first triplex in 2014, Gabe had officially caught the REI bug. He now owns and operates Kaizen Properties, buying and repositioning commercial real estate across the US - with a special focus on self-storage and industrial properties.

Gabe eventually decided to start what you know today as The Real Estate Investing Club podcast and YouTube show.

To connect with Gabe, reach out at gabe@therealestateinvestingclub.com or go to https://linktr.ee/gabepetersen.