How Will You Plan Your Self-Storage Exit Deals

Among the fastest-growing sectors of commercial real estate over the past four decades has been self-storage. Self-storage units are useful for many things, from moving to storing vinyl records, and hand-me-down furnishings — to business inventory.

However, COVID-19 was the pinnacle of the industry’s growth. The pandemic closed many businesses and caused many families to downsize their homes, which resulted in an increase in storage unit demand. Many companies and individuals rely on self-storage for the safekeeping of their assets because it is an affordable alternative.

The number of new self-storage units in the United States fell to 44 million square feet in 2022, the fourth consecutive year of decline. As a result, the average asking rent per square foot of storage space declined as well.

While this may seem like a setback, the self-storage market is still expected to grow at a CAGR of 7.53 percent between 2022 to 2027 to reach $83.6 billion, by then.

That’s why I’m so interested in this business. There’s potential here. And that’s why I wanted to speak with Ian Burnstein.

He is an entrepreneur and investor with a strong background in real estate acquisitions, development, and management. In addition, he is the co-founder and principal of SPM Advisors LLC., an investment firm that invests in multifamily, RV parks, self-storage, and cannabis dispensaries for sale or leaseback. Since 2015, they have been involved in more than $500M of transactions.

Furthermore, he has been an active principal in more than $2B of real estate investments and is also the co-founder and COO of Storage Pros Management LLC.

As for Ian’s other businesses, advisory roles, and real estate deals, the list is endless, but I want him to tell us how he built and scaled a self-storage empire.

Are you born for entrepreneurship?

Not everyone is cut out to be an entrepreneur. But, Ian says he knew he was destined to be an entrepreneur and investor at a young age.

Of course, he started out with the traditional lemonade stand and paper route. However, he would sell Michigan hats, gloves, and shirts before games in the parking lot while he was in high school. “And I was always looking to make money,” he tells me.

After that, Ian operated a car wash for a summer. When he was in college, he did a great job making posters and t-shirts. “In fact, I made a t-shirt when Michigan won the national basketball championship in ’89, and here I was a freshman in college and sold almost 20,000 shirts and made just over $20,000,” he recalls. Back then, it felt like $10 million to him as a college student.

He didn’t find any jobs that interested him when he graduated college, and starting your own business wasn’t common. To be on the safe side, he prepared to attend law school. As he saw it, it would always be useful to him. Eventually, he got into real estate law and met a lot of people there. After that, he really liked real estate, and I got a job with a client.

Getting into the self-storage business.

So, how did Ian get out of the law and into self-storage? For starters, he was passionate about being a lawyer. “I was really good at bringing in business,” he says. “I love negotiating deals, but when it came to sitting down and drafting documents, I don’t have the attention span.”

In addition, he wasn’t being compensated for the business he brought in. In order to control his destiny, he realized that he had to take control of it. At a young age, he had a bunch of clients, which was extremely fortunate to have, and he started talking to them about the next step.

“I left the law on Friday and showed up on Monday for a new job!” — Ian Burnstein

“And luckily, one of them who was in the paving trucking business of all things, actually had a big real estate business on the side. They were developing subdivisions and industrial buildings, and we contacted one another almost at the same time,” Ian continues. “And, literally, I left the law on a Friday and showed up on Monday for the new job.”

His transition from his old job to his new career included helping these guys build a trucking facility on a building they already owned. Meanwhile, he served as their lawyer, and another partner/employee began to discuss what else they could do with the land.

This company told Ian, “We’re paving trucking for all these storage properties. There’s got to be something to it. Ian, why don’t you go figure it out?” On his first day, he called a consultant or two, signed up for some trade shows, and realized instantly that he knew this was a real business.

Even though it’s a tough business, real estate is probably one of the best-performing asset classes. The problem was that when Ian started out, very few people entered it; there was very little know-how and very scarce institutional money. There were also only a couple of REITs. With all these institutions and private equity firms bidding against each other, it’s hard to buy a deal at a competitive price. So it’s getting harder and harder to find a good deal.

How life-threatening situations changed his business principles.

Back in 2003, Ian lost his father in September, who he considered a best friend. He then got sick at Thanksgiving, thinking it was the flu. Several weeks later, he got grand mal seizures and was in a drug-induced coma.

Both of these situations changed Ian’s outlook on life and business.

“I would think that was a very important principle of how I’ve been with my family, my friends, and definitely in business, right?” he says. “Like, okay, if something doesn’t work out in business, that’s okay. No one died, right?”

Years ago, an employee sent the wrong email to the company’s database, and she broke down. Since nothing happened, there was no reason to lose his temper — which is something he did prior to these life-changing experiences.

Personally, I love this relaxed, laissez-faire attitude. It’s powerful, easy, and keeps your team healthy.

Building a diverse portfolio.

“You need to quit your side hustle if you want to become rich,” says Grant Cardone. “It’s just a distraction from what you should be doing.” “Commit to and strengthen your first source of income,” Cardone suggests. “It deserves and needs your love and attention.”

“Commitment is like magic,” he adds. “Do it now, and watch what happens.”

I couldn’t agree more. Ian does too.

Sure, Ian has his hands in many other businesses, such as starting a community-based bank and Amazon Accelerator.

Still, his bread and butter are in real estate — primarily self-storage and RV parks.

• About ten years ago, Ian started an insurance company in the storage space where we do content insurance for renters. Today, they’re selling over 500,000 policies a month.
• He’s also purchased 18 RV parks in ten states. In this case, he’s refinancing and sending back all equity. Then you make 15% to 20% on your initial investment after you’ve backed the equity. You don’t have to sell. His returns are insane, so he will sell eventually for a ridiculous amount of money. His portfolio has the heaviest concentration of investment dollars by far.
• He also has a business that sells backside cannabis dispensaries — which has deployed about 80 million of equity. As part of this type of leaseback, he took a security interest in the license as a security.

Featured Image Credit: Photo by Ketut Subiyanto; Pexels; Thank you!