Self Storage Investing Mastery with Scott Lewis

Transcript:

Scott Lewis  0:00  

Your operator sucks. The deal doesn't matter. do when you're looking at the deal, get interested in it, but then put down the OM and pick up the phone and start vetting the sponsor. That's what's mattered.

Taylor   0:15  

Welcome to passive wealth strategies for busy professionals. Thank you for tuning in today. Today we've got a great interview with Scott Lewis from the Spartan investment through Spartan is a self storage syndication company, who I actually currently passively invest with him in one of their deals in Texas, and it's going great. 

Today we're going to talk about self storage, just the asset class, the markets that are ideal to invest in today, where we as say smaller independent investors can really find our niche in this self storage asset class where we're in terms of competing with big wall street, which we want to minimize our competition with big wall street dollars, because they tend to pay too much for things. we really want to find our own little niche inside this niche asset class. This is a fun interview. 

Scott's a really nice guy, I enjoy my investment experience with Spartan Investment Group, and I'm sure you will enjoy this interview. Thank you for tuning in once again. now on to the interview. Scott, thanks for joining us today.

Scott Lewis  1:29  

Hey, Taylor, really appreciate you having me. Thanks for the opportunity to talk about self storage.

Taylor   1:35  

Yeah, I'm really happy to talk with you about it. I mean, probably address this in the introduction, but I invest with you guys. I'm happy to talk about the Self Storage asset class more deeply on the show. We haven't really addressed it yet. you know, I obviously I'm converted to self storage, I love it. But for the listeners out there, what's so great about self storage, particularly when we compare it to say multifamily or mobile home parks.

Scott Lewis  2:06  

Sure, and I think I'll have to start maybe at Spartans  foray into the Self Storage into why we decided to do this. The smart investment group started as an as a residential company, we were doing some flips and some condo conversions in DC. we just really didn't like the residential game. It just wasn't really in our blood. we started to look at all these different asset classes multifamily being one Self Storage office, medical office, mobile home parks, all this other commercial asset classes. we looked at them for against three evaluation criteria that Spartan really is interested in, easy to operate, easy to maintain, and quick rent recapture, ie eviction. 

That last one, you know, when you look at the residential space is probably the most damning out of all of them. It's very, very difficult to Vic folks. even the most landlord friendly state, it's not quick, in self storage is I'll talk about it can be 60 days, and not only do you get somebody out of your unit, but you can sell their stuff to try to recapture some of the rent. Now I will dispel the myth that some of your listeners might be like, on Storage Wars or edge wars. Yeah, boulders like yelling into the unit and they're like fighting over it. Yeah, that doesn't happen. Usually, that's like $16 for the unit. there's there's occasionally there's some, some good bidding and it goes on, but most of the time, it's a loss leader. 

But  going back with these those three evaluation criteria, Self Storage really fell to the bottom. I  want to take your your listeners through what a self storage is. Many folks are used to seeing just those roll up doors like rows and rows of roll up doors from the older facility that sometimes behind the fence, sometimes it's not some of the facilities looks pretty junky and say the ladies 80s, early 90s. 

But Self Storage really is  undergone a Renaissance, I'll call it since the financial crisis. the reason for that is that self storage is really a lifestyle investment. It's either going up because people are buying a bunch of stuff they don't need. I'm currently broadcasting on vacation from a very exclusive RV park in Breckenridge. when my wife and I are walking our dogs around, everybody's got these razors and golf carts and like a land yachts and all these other things that they have. that's the economy's really great. Well, a lot of these folks will go back to wherever they're from, and they're going to live in an HOA, and an HOA controlled neighborhood is going to say nothing in your driveway. 

Where do you put your your razors and your golf carts and your Arby's while you put them down the street to storage? Also, when businesses are doing better, what do you do you buy additional triple net retail frontage that's super expensive for you inventory, or do you go to the stores that's probably one mile away, and you rent a unit there and you keep your excess dog food there and you just send one of your employees back and forth. That's a true story from one of our facilities in conifer Colorado. There's a retail strip that's across the street. I've like if I had a better arm and I didn't throw like I can at all. I was trying to like I was trying not to take it down improper on.

Scott Lewis  5:29  

Yes, I like I was a hockey player, I was not a baseball or football player. me Taylor go very well. But if I could throw out to hit it with a rock, almost every single one of those tenants in that retail shopping center, have storage facility, what are they doing? They're stored inventory. Because every every dollar that 24 to $30, a square foot triple that should be generating revenue versus I think our storage is about $16 a square foot across the street. they're paying 24. that's it at $8 a square foot that they're gaining by using the storage across the street. 

it's a really smart move. Now on the flip side, when things are going to hell in a handbasket, like they were in Scala 2007 2008 2009, people were losing their homes. yeah, they didn't have the razors and boats and that  stuff. But they had furniture and like artifacts from their family heirlooms and stuff like that, you know, they were losing a four bedroom home and going into a one bedroom or two bedroom apartment, and one of your multifamily deals, and they needed a place to put their stuff, right. they put it in storage until times get better. 

Same with businesses, during layoffs, office equipment is incredibly expensive. instead of like trying to sell that stuff for pennies on the dollar, businesses will store it until times get better and they expand again, then they go grab it, and they're paying a fraction of the price that it would be to lose it. with that, with that  that I'll say balance between the divide of goods times and bad times. 

Storage did phenomenally well during the 2008 to 2009 recession. So what happened is the big dogs took note, there were already four REITs in the space. But then some of the bigger ones also took note. the New York money started to pour in and the real money started to pour in. When that happened that really  mature the asset class. Prior to the big dogs taking note of the 2008 2009 recession, self storage is a pretty sleepy asset class. comparatively to you know, your multifamily folks or office or retail, it still is a sleepy sector. It's not even considered a top five asset class. When you look at industrial retail medical, multifamily, it's not. Now there's a ton of money pouring in which is good and bad. Good that its institutionalized the asset class, so it's easier to assess. 

But then it's easier to assess so that competition drives cap rates, depressing, things get more expensive, it's harder to buy. we know those are the reasons why we love self storage.  going back to the evaluation criteria. I'll touch on the two easy to maintain and easy to operate the concrete box. There's nobody ripping out my copper when they're mad at me because like I'm evicting them, right? 

I mean, you want to punch the concrete wall, I mean, by all means Have at it, the worst thing that we do is people just vacate their unit that is completely filled to the brim of garbage in there. That's  the I'll tear out your copper wire mentality and storage. But that doesn't happen very often, the vast majority of people are, you know, if we do have to affect they're not happy to go. But it's not a big to do because it went on housing unit for family and jurisdictions. I mean, if you try to evict somebody or you try to raise the rent a ton on multifamily politicians get involved. Nobody cares about grandma's rocking chair. Nobody. like everything you throw away somebody's possessions. Yes, there are legal processes that you have to follow. But nobody cares about grandma's rocking chair. there's no politicians that are getting involved with self storage evictions or anything else like that. Yeah. When

Taylor   9:13  

it comes to rent control, and that  thing and the Self Storage Units. I mean, it might be something I don't know, I don't think I'm right one, but I don't know, 60 bucks a month or something like that., you know, times get tight, but people can come up with $60 in a month that they really want to keep that stuff.

Scott Lewis  9:32  

Yeah, you're absolutely right. let's look at percentages, because one of the ways that know a lot of your investments in my investments, a lot of the way they work for us smaller dogs that don't have big wall street money, or a hedge fund behind them or life insurance money. The way that these work is we're creating value and some of the ways that we're creating value is fixing up the facility or raising rents or doing something like that. when you take a multi family and I don't know Chicago in a good multifamily call it a B plus are a minus asset class that rents probably $2,000 a month for a one bedroom, something like that. 

I'm making stuff up. Let's just call it that. Because I know those exists in Chicago. I know, I know, somewhere in that city, I'm correct. it's at let's look at a 10% price increase, that's $200 a month. it's 10% in price increase will absolutely drive a ton of value in that facility. Well, one, how often Can you do that? once a year, at most, because you're controlled by rent, and you actually set an oxymoron for self storage, rent control, there's no such thing. If I wanted to, I could raise my rent every month. Now I do need to give 30 days notice. But let's look at a facility that I have in Conifer, the rent is $150 a month, they'll have a 10% increase in my facility will be very similar in cap rate, if given the cap rates are equal, if I can increase all my rents by 10%. I can make increase all my rents by 10%. the other facility, then I should be able to drive similar proportional value in both of those facilities. 

But who can pay it easier? Your multifamily tenant where it's going up $200 a month, or my self storage tenant that's going up $15 a month? Because it's 10% of 150. when we look at that, I mean, we can raise the rents pretty significantly. you're right, it's not that big of a deal. It's like, Oh, well looks like we're not going to Starbucks three times this month, we can make the rent, right? So that's really where the Self Storage is now, now the valuations that you asked me to talk about, they're nowhere near multifamily Not at all. the cap rates are also they're approaching multifamily, for sure, but they're not there yet. multifamily properties are far more valuable. 

From a total dollar volume, there's very, very few 50 or $60 million self storage facilities, they do exist, there's some really big ones and stay Seattle, Dallas or Los Angeles, that could get to the 50 or $60 million for the individual facility. But for the most part, their five to 10 million is  that middle 40% of your bell shaped curve with you know them being right in the middle.

Taylor   12:16  

So is that that five, get the number, right five to 10 million? Where are the big dogs  playing in there? And then where can I mean, for all the great big things you guys are doing? You know, and I invest with you, I'm happy to you know, Wall Street money, which is great, because I don't want my money with Wall Street. 

you're playing smaller than the Wall Street guys read guys. where does that split  work out? And what dollar valuation does it you know, where you start seeing those rates come in and really kick the prices up and be a lot more competitive with their offers and stuff like that.

Scott Lewis  12:51  

That's one of the the I'll say nuances of self storage, is the reads are playing at all levels. the reason for that is that they've been entrenched a long time. these big monster self storage facilities that are getting into the $50 million range is number one, there's very, very few of them. let's just talk about the 10 to $20 million facilities, those are relatively new phenomenon. 

Last call it five years, these big class A facilities that look like office buildings in downtown locations, or they look like a multi family, but they just got a bunch of doors in the inside. That's not the history of self storage that's new. it's because jurisdictions are becoming less and less interested in self storage. in order to get those on Main and main, the design quality and the overall quality had to increase. In order to do that.

The big dogs, I mean extra space, public store, quest, and food smart. Those are all national brands, especially the big two extra space in public. Most people are familiar with those brands, because their national public spending the longest public was started in the late 70s, and Texas. they've been at the longest and extra faces number two, and they're doing a phenomenal job trying to catch up the public, but they're a long ways away. The other reason that the REITs, their plan  at all levels is because they have a lot of third party management platforms. even if you are an individual owner, and you want extra space to slap its name on your facility and manage it for you, because they can do a much better job. you can, they will come in and do that. A lot of times what will happen is if they if they come in and they're really successful, they'll write a check. Because they don't want you john to owner to be a part of their equation, they want to own the facility. 

if they really like it, then it's going really well eventually, most people will get bought out by those big reads, where we're really being able to create some distance is moving into secondary and tertiary markets where the reeds aren't there yet, because the markets aren't big enough. Now that also hurt some of the facility valuations. 

But as you all aware, we just paid $6 million for facility in a tertiary market. that was a pretty good deal with got about a 10% discount on that right out of the gate from the appraisal. But there's no reason that market whatsoever, we've got another market where there are reads were that we're looking at right now. we're surrounded by them. I think really  they're playing in all the different spaces now that small facilities, the 15 to 30,000 square foot facilities, that's a pretty small self storage facility. No rates are playing in that they're going to play in the 40 to say, you know, they're their sweet spot is 40, say 100,000 square feet because 40,000 is generally the minimum day you'll have to support an onsite employee a manager and reads don't want to be messing with on man facilities.

Taylor   15:45  

So I mean, there's so much to unpack in this asset class. Right. I want to  liken this to multifamily. We have a lot of multifamily syndicators come on the show is a multi channel all that great stuff. multifamily, the dominance strategy right now is value add, you go in, you buy it, you raise the rents, you cut the expenses and raise the noi sell it for more later, great, you're making money. in this self storage model, you know, obviously I invest with you guys, I know the whole strategy, and I know the things that you're doing on the deal that I invested in. 

But as far as the overall strategy in the Self Storage world, what are people pursuing? Is it just a value add strategy, or people go in for cash flow place or just holding the long term? And if it is a value add? What are the value add strategies that are making the most sense today?

Scott Lewis  16:42  

Yes, I think folks right now are going after all different types of strategies from core core plus value, add an opportunistic, you know, core been buying that stabilized facility in downtown Denver, to place capital in an asset class that's going to cash flow probably better than say a multifamily would just because they're less competition and the cap rates aren't as compressed to opportunistic, what's your development from raw land? 

That's really been the strategy over the last like three years to prior to this Renaissance Self Storage really hadn't seen a building boom in 10 to 15 years, that a long time, since a lot of inventory came on the market. Well, when cap rates started to compress and self storage, it made sense for developers to ratchet up what they were doing. now we're starting to enter an era of hyper supply and some of the primary MSS there's still a ton of room to grow. some of the secondary and tertiary markets and the big dogs are already starting to set their sights there. 

We got there a little bit early, because just because of necessity, because we would get stomped all over if we tried to do a class a facility in Denver, I mean that the reason it's stomp all over us, we couldn't do anything there. We've been in these markets a little bit longer than the big guys. now they're starting to really  turn their sights there. it could present a pretty good opportunity for us if we're able to close down some of the deals that we're working on right now. Because we'll be able to turn them over to the other guys that are starting to look at the secondary tertiary markets, the value add play that you're in is very, very similar. that that includes all of the things that you just mentioned on the multifamily going in. 

A lot of these are single mom and pop owners. the expenses haven't been under control, or they're running all kinds of personal stuff through the business. That's just pretty standard. Maybe their contracts aren't the best, we just renegotiated an insurance contract and knocked off like 50% of our insurance premium. 

We've added a bunch of stuff we negotiated with u haul renegotiate a tenant insurance stuff is really starting to pay more attention to expenses, very similar to what you were saying. In addition, I'm not very familiar with the multifamily. I don't know how much goes on. as far as marketing for multifamily building goes. But for self storage marketing is incredibly important because your customers are turning over on average every eight month. But anywhere anywhere from three days. Do the 24 years, we've had some customers in one of our facilities. Wow. Yeah, those are the good ones. 

We have to do a lot of marketing, and we're purchasing a site right now. There's no website. It's not on Google, nobody answers the phone, the sign is literally falling down on the building. Wow, that's a huge  like business play that we had is to go in and just start marketing. I mean, like, there's no brain science to it. It's like, go to Google, right? put up a website, answer the phone, rent the unit, when you don't answer the phone, all the way to building additional stores the deal that you're in, you're well aware that we're developing that two acres of land that's there, and we're going to add, you know, another 36,000 square feet out there, which represents about 40% additional inventory to that facility. 

that will drive a ton of value there in addition to raising rents and doing the things that the multifamily guys are doing and a lot of the other asset classes are doing as well.

Taylor   20:07  

So I mean, there's, there's a lot in there. I mean, marketing is important for every business, right? I mean, you need to get the word out there and answering the phone comes down to customer service and sales. I mean, you need to, if somebody can pick up my call, and I need to store my stuff today, then I'm going to call the next one even, you know, even though it's less convenient, as far as the you know, local supply and competition and things like that. 

What are you guys looking for? Because, you know, people are only willing to drive so far to go anywhere, whether it's self storage unit or you know, anything else. what do you look at in terms of local competition and how you're assessing the demand in the market?

Scott Lewis  20:53  

Yeah, there's two different methodologies. You can do drive time, or you can do distance rings,  the old heuristics are 1-3-5 miles else, we don't necessarily use those inside a Spartan. They don't necessarily represent what people are doing today, we use drive times we use some different technology that is able to draw polygons to annotate  drive time, we think that's more indicative than just an arbitrary distance, because one mile in downtown Denver is available out there from that one mile in Corsicana, Texas. 

That being said, there is a difference in calculating demand for a world versus a very urban facility. In the urban stuff, it's 1-3-5 mile, that's generally the heuristic, you look at competitors and a one mile ring, three mile ring, five mile ring. if you're more rural, you can switch 2, 3, 5, 7 to look at where your competitors at. 

For us, a lot of ours are in secondary, tertiary markets. we look at 5-10-15 minutes drive times, because people generally don't want to drive very far to get to these facilities. But you'd be pretty amazed and like, in a place, you know, like Corsicana, Texas, the drive time go pretty damn far in 15 minutes on 65 mile an hour like side streets, which is just Texas, right? 

That says like, I don't like 300 mile an hour highways. But, but does it really big open stretches in Texas, so 15 minutes, easily, easily could be 10 miles away, 12 miles away. if somebody's in a rural town in Texas, they would drive 12 miles to get to that facility. Now, some folks might aspect Well, you know, if you're in a rural area, you have a lot of land and things like that. But a lot of people do have that a lot of people have space in their garage, a space in the basement a space in an attic, but yet, they still get Self Storage, the underlying psychology there no idea. 

I'm not a psychologist, I don't know. But a good majority of the people that rent. when we look at that we know that folks even that are a little bit further out could be customers of ours. we look at the competitors there. we ultimately calculate the amount of square footage just in the space versus the supply. there's demand heuristics out there that are published by the Self Storage, associate creation. it  they do an annual heuristics of all these different things. demand is one of them. Self Storage is fluctuates between five to, you know, eight square foot per person is generally what a market saturation looks like. 

if you go out there, and you calculate your supply and your supply, as you know, one square foot per person, you may have a really good opportunity on your hand, if you go out there and you calculate and it's 24. You may you may not. it's  you know, it's not black and white by any means as to the demand. there's a there's a scientific component, and then an art an art to it as well. Yeah, I

Taylor   23:37  

mean, everything, all the investments, we make our case by case, right? I mean, are you talking about these radio I 135 mile versus driving time, and then I'm thinking about this where I live, I live on the south side of the river in Richmond and a good area, if you drew those rings 135 mile, you would encompass some self storage facilities on the north side of the river. 

For me to get to the north side of the river, I gotta go way out of my way across a bridge, I meant to pay a toll, I have an easy path, but I have to pay a toll. the drive time is going to be ridiculous. But on the other hand, if you just look at drive time, if you continue to go south of me away from the river, well, the crime rates go up, and it just generally gets less safe. 

I can see how it turns into Yeah, you have these heuristics, you have these numbers, all these things you look at. then there's a little bit of, I don't know, right brain, left brain, wherever you want to call it. I don't know which one is which. 

But you have to just evaluate the property right and see if it makes sense and get to know the market.

Scott Lewis  24:42  

Every one of our feasibility studies has both a digital and a boots on the ground component. We have a Director of Business Intelligence, Lindsay that does all of our internal research and uses all those different metrics to include crime rates, we have some pretty sophisticated data systems for small as we are, then that informs our boots on the ground feasibility trip, which is headed up by our Director of acquisitions, Ben, who actually goes there and kicks the tires, he goes to all the competitors, he'll drive across that bridge, he'll drive down into the ghetto, like, much to my chagrin, but Yes, he does. 

we really look at that. we look at the terrain features as well. I mean, if we have an obstacle in our path, like, there's a couple of us that are military folks that completely understand like the looking at terrain features. if it's a train feature that causes a train to be what we call restrictive, we're definitely going to look at that because it may not matter if there's one bridge that's going over there, all those all of the apartments and everything that line that river on the south side of that river, it may or may not matter if that drive time, if you look at it, we do the polygon and it actually takes traffic into account. 

if it's going to take somebody 45 minutes to get across that river, because there's one bridge and it's a toll bridge, we would discount that heavily across that river, and we may not use it.

Taylor   26:01  

It's all the fine details that end up really making a difference when it comes to analyzing any deal. I mean, we're talking Self Storage here. But no matter what you're looking at, it's it's all the fine details. you mentioned your team. 

Obviously, you guys have a bunch of my money. I like you guys. probably the coolest thing that's happened in addition to the money coming back my way was I just for the listeners out there, I got this. An investor booklet is a leather, three ring binder with all the documentation and it all it's all very beautiful. 

It has a Spartan logo in the, I guess in Boston leather share certificate, which I need to frame and put on my wall. But is gorgeous is gorgeous. I've never gotten that from any of the syndicators I've invested with so

Scott Lewis  26:47  

it's so funny because I know you're a little bit of a younger guy. it's funny that my partner is a millennial. I am not by by a little ways. so I was putting these binders together. He's like, what are you doing? 

I'm like, I'm putting these finder's fee. Why are you doing it? Nobody wants that. I'm like, What are you talking about? People love these. it's just ironic that, you know, one of our younger investors you is like really enamored with this. Like we had some of our older investors that are in their 50s and 60s, of course, they love them. They absolutely love them. But like you just put the final nail in the coffin with like a 40 pound sledge hammer and slammed it down. But now Ryan's like, are we getting those diners out? binders you didn't want But no, it's like, we really want to make sure that our investors get a good experience with that that's kind of, you know, for us, we really  focused on the customer experience, and we want to make it easy to invest with us. 

We want to make it effective that yes, we do return your money at some point, that's  important. But we also want to make put some emotion in it and really tie it to our brand and  our team. that's really what we go around to create this tribe of investors that we have that are, you know, fiercely loyal to us. 

Because they know, you know, we take care folks, and we have a good team and we are valued bound. we really  take try for our size, take it to the next level and really try to be you know, as professional institutional as we're able to at our size. I think that binder really  represents that.

Taylor   28:15  

Yeah, yeah, absolutely. I mean, I think I mean, in this investment business, I suppose you could go one of two ways from my end of this transaction and seeing that we're hearing about the binary you could just be like ads just salesy crap. Or you could say that it's demonstrating something that's underlying, and then in Spartans case, it's definitely, in my opinion, demonstrating an underlying thoroughness and business operations excellence. you know, I'm definitely pleased with it. This is not a surface level type of thing that you're not just doing this, it demonstrates a, like I said, something that's that's underlying and me You guys have years ago, when I first met you, I think you're giving out your due diligence checklist. I know I still have it somewhere. But

Scott Lewis  29:06  

then there's now 600 items.

Scott Lewis  29:12  

Come on. I think the one that you had probably has, like, who like 45, or something like that. over the last call it 24 months or so we've added another like 300, just as we've gotten more experienced and done more studying. Wow.

Taylor   29:28  

Yeah, I'm gonna have to go back and look at mine. But yeah, I mean, like I said, I think a lot of the syndicators just broadly, that are out there doing it right now, don't look at their business operations. They even on the same plane where you guys do so? 

Yeah, I don't know. I could sit here and say how happy I am all day, we're going to take a quick break for our sponsor. All right, so I've got three questions for you that I asked every guest on the show.

Scott Lewis  29:56  

Yep. Are you ready? I am ready.

Taylor   30:00  

All right, great. Number one, what is the best investment in real estate that you've ever made?

Scott Lewis  30:06  

So I think, probably happening right now is an RV park in Odessa, Texas, it's just it's turned out to be a very, very good investment in all ways. I think the reason it's been the best investment because it was the hardest one we didn't have experience in an RV park, it really stretched our team to go and do it. 

But we believed in ourselves enough to feel that our team could could handle the soup to nuts of learning a new asset class very, very, very fast. then operating it at a very, very high level and it's overshot returns for our investors, it's overshot his projections for us, we're currently under contract to sell it and it's going to do pretty well, the new buyers are getting a fantastic deal. they're really good buyers. it's just it's so far, it's been just  an all around outstanding investment. But it really started with the belief that we could do something that we hadn't done before.

Taylor   30:58  

Interesting. if we're going to dig into that a little bit, I mean, I've been hearing about this deal, just from knowing you guys for a while. What set this particular investment, this RV park, what set it apart from any of the other investments that you've done, I mean, this maybe ignoring the fact that's an RV park, or maybe not, I don't know what made the difference, really.

Scott Lewis  31:20  

But I think what made the difference is being able to see the diamond in the rough, I'll say this thing was a mess. When we first went down there and we walked those streets, you know, maybe a lesser investor or maybe not, that's maybe that's not the right term, that's a thinner skin, maybe less steely investor would have walked down there and said, like, You're crazy. 

No way we're doing this. We walked down there  with an open mind and just said like, okay, here's what we're going to do. Here's the steps to improve this thing. Here's what we really  feel that people want. quite frankly, I mean, it was really simple. I mean, a lot of folks do this, but a lot of folks don't. 

We knocked on the doors, RVs and said, Hey, we're thinking about buying this, like, what would make this a really nice place for you? And they told us, and we just did it. We're not creative. We didn't work. We're not these magicians. All we did was listen to the customers and do what the heck they told us to do.

Taylor   32:15  

Hmm, interesting. but I would assume that there are probably some things that they said, you should do that. You're just like, we're not doing that. But you got some some good ones and bad ones, right?

Scott Lewis  32:26  

Yep, absolutely. Most, most of the folks down there, it's in the Permian Basin. It's just, that's a good like, hard working blue collar like, damn proud to be an American town. they they were pretty like upfront with  like what they needed. it was definitely not anything crazy that was ever asked for I like to be completely Honestly, I can't think of something that we didn't do for somebody, because their requests were really reasonable. 

that's just  it like, no, most customers are reasonably of the outliers that either never talked to you or like come up to you and say, You know what, it would be fantastic. If you could put a spaceship landing pad in the middle. That would be fantastic. We would like that. Right. there wasn't really any of those.

Taylor   33:10  

Interesting, good enough. All right. On the other side of that you have your best investment, what is the worst investment you've ever made?

Scott Lewis  33:18  

Yeah, so the worst investment we've ever made, was, unfortunately, a deal we just finished up. it was a part of two of them. Like, both of them were bad. One of them, we did end up making a lot of money on but it came at a big cost to both Ryan and I. the other one, we ended up making no money on, the investors didn't hit their returns, we got them something, but we ended up working for free. 

That was unpleasant. we made mistakes in hiring the contractor that we didn't fire fast enough, like, you know, for the folks that are getting out there into the operations, you can never fire fast enough, especially on the contracting team. make sure your contracts are bulletproof. We'd worked with this guy contractor for years and done a bunch of deals with them. then all of a sudden, he just fell apart on us. our contracts were okay, but they weren't like they didn't have a ton of teeth. you know, we weren't quick enough to fire and replace them out. 

while the investors didn't make a little bit of a return, we definitely missed our returns, we worked for free on one of them. The other one on the investors did hit the returns. we made some money too. But just the amount of emotional and I'll say for maybe not resource toll on our business probably prevented us from from assigning resources to other deals to go after them. while we made money, we probably lost money on other deals that we couldn't do, because we are mired in this just like I'll say cesspool of a project, just trying to make it right for our investors and for the people that bought the condos from us.

Taylor   34:49  

So it was the opportunity cost of doing that deal, as opposed to doing any other deal that you could have been working on or your team could have been working on. One of them was opportunity cost the other one, we've been no money.

Scott Lewis  35:02  

And we missed we missed our returns for our investors, which we're not very happy about,

Scott Lewis  35:05  

though.

Taylor   35:06  

Absolutely. so that you mentioned condos, it was condo conversion in DC, at least one of them. I knows where you started,

Scott Lewis  35:12  

both of them, and the same contractor on both of them, which is why both deals, I wrap them up into one investment because it was really  two deals. we had different investors in both of them. 

But it was just that was our, our worst by far, just because of the amount of resources that we had to pump into it to  do mediocre.

Taylor   35:32  

Interesting. Okay. Good to know. my favorite question of these three, what is the most important lesson that you've learned so far in your investing career?

Scott Lewis  35:44  

So the deal doesn't matter, though many investors are chasing yield, and they're like, Oh, this is an amazing deal doesn't matter. Ryan and I are in two deals in Michigan that were amazing deals. One of them's three years behind the other wants two and a half years behind. both of them should have been slam dunk deals. But if your operator sucks, the deal doesn't matter. when you're looking at the deal, get interested in it, but then put down the OM and pick up the phone and start vetting the sponsor. 

That's what matters. My team is so good that I can take a giant pile of poop. I can make it perform. I've gone out there that people could take a I don't know unicorn with fairy dust coming out of its rear end and screw it up.

Scott Lewis  36:32  

that's like that's my like,

Scott Lewis  36:33  

biggest thing as an investor's I never care about the deal. The deals the deal. Anybody can make a deal look good. It's the sponsor that I care about the most

Taylor   36:43  

interesting and you mentioned you mentioned Ryan a couple times we didn't say his name, Ryan Gibson. your business partner in Spartan up to have him on the show at some point? Absolutely. You haven't

Scott Lewis  36:53  

yet?

Taylor   36:54  

Not yet. No, he flew all the way to Richmond from Washington to speak at my meetup, but haven't had him on the show yet. I need to.

Scott Lewis  37:03  

All right, I'll pick up and let him know.

Taylor   37:05  

All right, good. where can folks get in touch with you? Where can they learn more about Spartan? All that good stuff?

Scott Lewis  37:13  

Yeah, so for Spartan Our website is www.Spartan-investors.com and if folks are interested in investing, they can go in and put their information in there. then you get a hold of me if you want to just give me an email at [email protected]. That's where I'm at.

Taylor   37:33  

Cool. Alright. Well, thank you for joining us today. Like I said, I'm enjoying my investment experience so far. I hope you guys keep it up and to anyone that's out there that's interested in self storage, investing. I mean, Spartans great to you know, just reach out and learn something, even if you don't want to pursue it further. You just want to learn these guys have a lot of information guys are super friendly. I don't mean to volunteer their time. But you know, now they're great.

I totally agree with what you said, Scott, about vetting your sponsors, being number one. I mean, personally, if I go I went looked at a deal recently outside of my area, when looked at it, and after I drove it, I was like, all right, well, the sponsor fine guy, but I don't believe for half a second that he's gonna hit the numbers that he says. I'm not interested. But yeah, absolutely.

Scott Lewis  38:30  

So anyway, thank you for joining us today. Thanks, Taylor. Really appreciate the opportunity to be on the show.

Taylor   38:36  

I'm very happy to have you happy to talk with you again, to everybody out there tuning in. Thank you for listening. If you're enjoying the show, please leave us a rating and review on iTunes. Big help helps other people learn about the show. 

If you know someone that could use a little bit more passive wealth in their lives, please share the show with them and bring them into our tribe. I hope you have a great rest of your day. Great week and we will talk to you on the next one. Goodbye.