🎙 Passive Cash Flow Podcast EP.189 | Institutional Money vs. The 80% Rule They Won’t Teach You
In this episode of the Passive Cash Flow Podcast, host Aaron Fragnito sits down with self-storage expert Joe Downs, co-founder and CEO of The Belrose Group. Joe shares his transition from the financial and multifamily sectors into the “recession-resistant” world of self-storage, an asset class he describes as real estate without “toilets, tenants, and trash”.
Joe is a lifelong entrepreneur and Villanova University alumnus with extensive experience across securities, mortgage, and hospitality. As CEO of The Belrose Group, he focuses on modernizing self-storage through acquisitions, development, and consulting.
Like to know more? Contact Joe here:
LinkedIn: joe-downs-7990851
Phone: 610-283-0944
Email: joe@belroseam.com
🧠 Topics Covered:
00:00 – The 80% Real Estate Secret
05:00 – The Rise of Mom & Pop Storage
10:00 – Post-Covid Market Shifts
15:00 – Why Now is the Time to Buy
20:00 – Market Cycles and Future Outlook
25:00 – Changing Generational Habits
30:00 – How to Get Involved
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Transcript:
00:00:00:03 – 00:00:17:01
Aaron Fragnito
And by the way, it was the body of the email that really grabbed a hold of me. Not the subject line. Subject line. Get me to open it. The body, the email, said reference something about 80% of all self-storage facilities were owned by mom and pop owners.
00:00:17:03 – 00:00:35:02
Joseph Downs
All right, ladies and gentlemen, welcome back to the Passive Cash Flow podcast. I’m your host, Erin Frag. Neato. And we have an interesting guest here today, a man that does a lot of self-storage, a place to store your junk and pay lots of money for it. Joseph Downes, how are we doing today?
00:00:35:04 – 00:00:37:24
Aaron Fragnito
I’m great. Aaron, thanks for having me.
00:00:38:01 – 00:00:57:12
Joseph Downs
Sorry for that slightly negative entry with storage, but I mean, that’s kind of why it’s a great model. You know, I love the model of self storage. I mean, I’m in the multifamily space, so it takes me 90 days to evict a tenant if they don’t pay their rent. But I’m pretty sure on self storage, if you don’t pay your rent at the end of the month, you’re, you’re out of it.
00:00:57:12 – 00:01:08:00
Joseph Downs
That’s one of the benefits of, managing. But, anyway, before we get into all that, let’s, talk a little bit about what you do and, how you got started in the self storage space.
00:01:08:02 – 00:01:10:20
Aaron Fragnito
Yeah. Can I make a comment on your opening? No, not.
00:01:10:20 – 00:01:12:14
Joseph Downs
Yeah, yeah. Go ahead. You know, what are we doing today?
00:01:12:14 – 00:01:21:03
Aaron Fragnito
Is you must be in a, red state. You’re in a very friendly state. If you can get somebody out in 90 days.
00:01:21:05 – 00:01:25:12
Joseph Downs
I’m in Jersey here, so it’s it actually, it’s not. It’s more like purple, but it’s it’s.
00:01:25:14 – 00:01:45:17
Aaron Fragnito
Yeah, it’s longer than 90 days in Jersey. Most are. Anyway, and I know that because I’m on the other side of the river in, outside of Philadelphia. But I agree with you on, on people storing junk because that’s what it is. I’m 51 of you. 52 soon I’m Gen X. I would never rent a storage unit myself.
00:01:45:19 – 00:02:05:01
Aaron Fragnito
I have a basement, an attic and a garage. So I’m with you. However, most of the country is not with us here. They consume, we consume, it’s consumers, and we buy a lot of stuff, and we we want to save it and store it. So, how did I get started? So, you know, I, I I’ve we got 30 minutes.
00:02:05:01 – 00:02:30:06
Aaron Fragnito
I’ll, I’ll skip over the, the gory details of how I got here, but the bottom line is I was in I’ve been in various, businesses over the last 20 years. All related to or tangentially, directly or indirectly, tangentially related to real estate after my, after I got my start as a financial advisor. But then after that, everyone’s pretty much been real estate related.
00:02:30:08 – 00:02:53:02
Aaron Fragnito
And I was just in a cycle of, of of reinventing myself, you know, in real estate and other businesses, but real estate as well. And we just saw this similar cycle in self storage. You know, you go through ups and downs and cycles. So and some of the businesses I was in the industries actually went out of business, like 1031 exchange business for the most part, went out of business, went dormant for a couple of years.
00:02:53:04 – 00:03:10:10
Aaron Fragnito
So I found myself reinventing and I got an email, to be honest with you, that’s how. That’s how I got into this. And the email had the tagline in the email said, you’ll love it. As a multifamily guy said, something to the effect of, you know, real estate without toilets, tenants and trash.
00:03:10:12 – 00:03:32:04
Aaron Fragnito
And that’s not entirely true. Because tenants are the lifeblood of self-storage, and sometimes they leave behind trash. But it’s we don’t have toilets. We’d have emergencies. We don’t have. It is easier to evict. And I’m not knocking multifamily. I’ve been in, raised money for that space. I’m a passive investor or multifamily. I’m a I’m a huge proponent of it.
00:03:32:06 – 00:03:53:18
Aaron Fragnito
I’m just not someone that wants to buy and operate it anymore. And and that’s personal preference. But also, you know, I’m not I have I’m not established like you are in that space. So if I was starting out, to me personally, it’s easier to start it, get started in self storage. And from what I’ve seen and learn, but that’s how I, that’s how I ended up in it.
00:03:53:18 – 00:04:14:20
Aaron Fragnito
There was a guy who it’s named Scott Myers. He, is I think was the first one teaching people how to buy self-storage. Now, I think there’s a few copycats out there, but, he was the first one. He’s been doing it for pushing 20 years. I got his email probably nine years ago and didn’t even do anything with it for two years.
00:04:14:22 – 00:04:38:11
Aaron Fragnito
All right. I think I maybe I bought an at home study course or something like that, but I never really took the next step until, they were having an in-person, seminar, not a webinar. Seminar back in 2017, maybe you call it, and, 2018 somewhere in there. And, I went to it. It was in Philadelphia, and I went to it and I was blown away.
00:04:38:13 – 00:05:06:01
Aaron Fragnito
And, you know, it was one of those Friday, Saturday, Sunday, you know, three day. You know, events. And I walked out of there just mind blown, because the the email, the the spirit of the email was on point. Even if it technically wasn’t true, which was, there’s there’s other ways to make money in, in very similar, commercial real estate assets to multifamily like self-storage.
00:05:06:03 – 00:05:27:00
Aaron Fragnito
And by the way, it was the body of the email that really grabbed a hold of me, not the subject line. Subject line got me to open it. The body, the email, said reference something about, 80% of all self-storage facilities were owned by mom and pop owners. Now that’s me. And a minute. I’m not someone that ever rented a unit.
00:05:27:00 – 00:05:48:12
Aaron Fragnito
Still haven’t. I would have thought, having very little knowledge of the space, you know, no different. Maybe. Well, you already told me you were a little more involved the than I was out of the gates. But, you know, to me, self storage, where I live was public storage owned stores. Cube smart because it’s headquartered in Malvern, PA.
00:05:48:12 – 00:06:17:09
Aaron Fragnito
20 minutes for me. Right. You know, they got the red doors and then the other green door place, right? Yeah. That’s what I thought was 80% of self storage. I had no idea they were less than 20%. And then this entire industry that was owned by mom and pops, that’s what got me excited. That’s what got me start looking at taking the next steps and buying that the state owned, you know, the Adam course or whatever, reason for that is because I was coming out of a business with a down cycle.
00:06:17:09 – 00:06:41:09
Aaron Fragnito
I still actually am in that business where we buy distressed at, on real estate and that business was it’s, second mortgages and it’s, it’s like the wild, wild West, the secondary market of that business, or at least it was when we got in it. So to me, I looked at it, you’re telling me there’s an entire commercial real estate industry out there that’s controlled for the most part, the assets are controlled by mom and pops.
00:06:41:11 – 00:07:07:19
Aaron Fragnito
There has to be opportunity here because there has to be just dislocated, dislocated and fragmented market when it comes to information and and and management and and sure enough, you know, not I’m not Albert Einstein, but I, I was the horse was led to water and and started drinking right. Eat it. It was correct. Now that number is less than 80 but over 70 probably still in how you look at it.
00:07:07:21 – 00:07:43:15
Aaron Fragnito
So there’s still a tremendous amount of opportunity. Self storage as as the industries has not consolidated in the way that other commercial real estate assets have. When I say consolidated, I mean with with Wall Street money, there’s Wall Street money pouring in. Don’t get me wrong. Excuse me. It’s pouring in, but there’s still so many assets that are controlled and probably will be forever protected and controlled or at least a long time protected and controlled by the mom and Pops versus the institutions just because of where they are in secondary and tertiary markets.
00:07:43:17 – 00:07:53:18
Aaron Fragnito
There’s, there’s there’s almost a, a barrier to entry down from, from the institutions because just it’s hard for them to break into the smaller markets.
00:07:53:20 – 00:08:17:08
Joseph Downs
Okay. Yeah. Yeah. I mean, that’s that’s an amazing statistic. I didn’t realize that. I, I wonder what it is now because I feel like there is such a boom in self storage for, institutional capital to get into it. You know, a lot of, gurus and coaches kind of recognizing the opportunity there. As the multifamily space got very saturated, it became a bit of a new, like, buzz word.
00:08:17:08 – 00:08:19:17
Joseph Downs
I feel like around like 2020 or so. Yeah.
00:08:19:22 – 00:08:25:23
Aaron Fragnito
And, self storage, mobile home parks. Yeah. Yeah. That, anything with cash flow. Yeah. Well, right.
00:08:25:23 – 00:08:45:09
Joseph Downs
Right, right. And then with Covid, like, self storage is huge because everyone was moving. Everyone was back home. And they need to like make space and so on that attic that was still of crap. You know, your kids moving back from it because he’s not in college, you know, for the next year or something. So Covid caused, you know, a lot of changes, in people’s lives.
00:08:45:09 – 00:09:00:00
Joseph Downs
And they just needed more storage. And I think there was a huge amount of demand for prices went up. And, it became much more popular investment. So I wonder what that statistic is today. If it’s still 80%. That’s great. You know.
00:09:00:00 – 00:09:22:10
Aaron Fragnito
But I it’s less than 80 depending on how you, define it. And look self storage, I would think I think really, really started to track a lot more statistics and numbers that it became a real industry around 2000. So they’re starting to trap that more and more now we’re defining mom and pop down as three or less.
00:09:22:12 – 00:09:37:05
Aaron Fragnito
Whereas ten years ago, five years ago, they didn’t even define it. So three or less is still over 60. It’s, depending on number, who you read, it’s 60 plus to maybe still 70 plus. Well okay.
00:09:37:05 – 00:09:37:12
Joseph Downs
All right.
00:09:37:12 – 00:09:38:23
Aaron Fragnito
So really 60 plus.
00:09:39:00 – 00:10:02:21
Joseph Downs
Still ideally a lot of opportunity out there. You know I know what I was looking around the self storage space we were interested about I’d say 3 to 4 years ago. We did find a number of mismanaged mom and pop owned self-storage locations, just like you find in multifamily. That’s pretty much a we focus on are buying mismanaged, worn out landlord, properties that deferred maintenance and rents way below market value.
00:10:03:00 – 00:10:23:09
Joseph Downs
You find the same thing. I think really in any any real estate asset class, you know, you could probably find it in retail. You could probably find an office and so on, you know, but, self storage, I think is one of those a little overlooked kind of, you know, not not anymore. I think it’s it’s more of the mainstream now, than ever.
00:10:23:11 – 00:10:44:23
Joseph Downs
Now just kind of fast forwarding there. So then it became all the rage during Covid. Everyone knew about it. It was on the cover of magazines, newspapers, and the prices went up to buy these, self storage. So did it with multifamily and all real estate and cap rates compressed, and primarily because interest rates were extremely artificially low for and held there for a period of time.
00:10:45:00 – 00:10:57:08
Joseph Downs
What are you seeing now in the self storage space? Have higher interest rates really affected? It? Did people get so because they overpaid for them? Like we see a lot in the multifamily space? Well, what are you seeing these days.
00:10:57:10 – 00:11:27:03
Aaron Fragnito
Oliver? You’re nailing it. So Covid giveth and Covid taketh away. You’re right. Everybody needed more space in their house, the garage, whatever. Everything went into storage occupancies went through the roof, rates went with it, valuations went with it. Interest rates were low. Cap rates were compressing. All of that’s true. All of that happened if you bought middle to end, if you bought a bought a facility middle to end of Covid and even after Covid.
00:11:27:03 – 00:11:47:02
Aaron Fragnito
Now, I don’t know when you’re defining Covid, being over. You know, it’s a that’s a that’s a murky territory. Like, hey, if you bought in 2022 and 2023, I think it’s fair to say we were ending or out of it ending it, depending on where you were. Right. But you were buying all your trailing twelves. Right? So you’re that’s how we buy in storage.
00:11:47:02 – 00:12:10:03
Aaron Fragnito
I’m sure it’s the same in multifamily. You’re buying the trailing 12 numbers for the most part. So you you were paying for the the highest price per square foot. If you look at it that way, that storage has ever been. Yeah. So coming out of that, when people started to go back to the office and they stopped working out again and, and move in the gym, equipment went wherever it went.
00:12:10:03 – 00:12:49:01
Aaron Fragnito
And, yeah, I’ve came out of storage. And more importantly, what happened during this time wasn’t so much that Covid was over. It was, interest rates in 2023 from the middle of 23 to the end went up 400 basis points right? It’s huge. Not directly for self storage, indirectly, but what we learned in self storage that that I don’t think self storage, at least in the recorded, statistical, history of it learned was just how closely tied it was the real estate market, not from a valuation standpoint, from a transaction volume standpoint, because interest rates went through the roof.
00:12:49:03 – 00:13:11:17
Aaron Fragnito
Right. Well, 400 basis point increase in 2023. I don’t remember, at 23 and 24. We had, you know, ask a real estate agent how the year, how those two years were there were terrible transactions. So less people moving, less downsizing, less this, less that, less need for storage. So the storage occupancies came down and with it went the rates.
00:13:11:19 – 00:13:36:06
Aaron Fragnito
And but and I didn’t by the way that didn’t stop all the supply that was in the pipeline. I’m opening and needing to, to fill and stabilize. So for a year almost everywhere, it was a race to the bottom in rates. And the winners of that were, were rates because they could afford it. Right. So you certainly look, we had four facilities struggle actually.
00:13:36:06 – 00:13:59:07
Aaron Fragnito
Oh, facilities got hurt. Four of them were struggled through that time. We’re still digging out. And because you bottom you know hindsight being 2020 you bottom post-Covid so you bottom out right. What would be considered the wrong time. Right. The worst time. Right. And now you got to manage out of it through a very difficult market. So the good news is rates have stabilized.
00:13:59:07 – 00:14:19:04
Aaron Fragnito
In fact, I think they’re coming down now. And, and things have normalized. People are back to work. The economy is picking back up, which is these are all helpful factors. But there’s been no major tailwind. It’s just all little incremental, you know, things that are helping here and there. The real estate market starting to pick back up.
00:14:19:04 – 00:14:41:18
Aaron Fragnito
It’s not blazing. We’re on our way out, back into a more certain time. And actually, that’s one of the things I tell people I want to when I, when I talk to them or on podcasts or wherever, and actually teach this as well, teach people at the Scott Meyers Academy, you know, so I, I went through a student now I’m, I’m like the I’m not just a hair club for president.
00:14:41:18 – 00:15:01:07
Aaron Fragnito
I’m, I’m not just the president. I’m a member. Although you can tell I’m not either. And I should be, but, I, teach people all the time and tell people it’s time. Now is the greatest single time to buy self storage. We’re still buying old numbers and tailwinds haven’t taken effect yet, so that’s the time to get in.
00:15:01:07 – 00:15:22:02
Aaron Fragnito
If you’re interested in self storage and, you know, can I add some color to something I said earlier? Sure, sure. When I said the 60 to 70% of of facilities are owned by mom for mom, depends on how you look at it. My state is based on facilities. If you look at by square footage, I don’t know where that number shakes out.
00:15:22:02 – 00:15:44:02
Aaron Fragnito
Maybe it’s 5050 with with, with the institutional players. Not just retail, but institutional players you’ve never heard of, right? Yeah. You know, we all know the big names, but there’s plenty of players that that most folks would never heard of. From a square footage percentage, they might own more than 50%. I don’t have that stat memorized, because the more important that to me is number of facilities.
00:15:44:04 – 00:16:08:21
Aaron Fragnito
So, that comes down to size too. So, you know, the big boys only want to, you know, maybe they’ll buy something down at 40,000ft². They like to cover up in that 75 to 100,000 square foot range. That’s where the yeah, scale work for them. Sure. Down to sub 40,000. The number of facilities owned by mom and pop might be 80, 90% in the.
00:16:08:23 – 00:16:19:19
Aaron Fragnito
Yes, I was great overall. So there’s plenty of opportunity in the smaller bandwidth still probably will be forever just because of the size and location of those facilities.
00:16:19:21 – 00:16:38:18
Joseph Downs
That’s interesting. And that’s what I found as well a lot of those kind of smaller units, maybe 60 doors, something like that. You know, you’re looking at you know, or kind of like less than 100. Yeah. Where it’s hard for economies of scale for the, the, the big guys just aren’t going to look at the smaller options there.
00:16:38:20 – 00:17:01:23
Joseph Downs
Yeah. And it’s interesting to what you said about now is the time to buy. You know, I completely agree with that. I got in real estate in 2010. It was a dismal, dismal time to be working as a realtor. But that’s how I got started. And I was forced to learn short sales and reos and foreclosures and fixed and flips, because all you could really buy at that time was like homes that were like in complete disasters.
00:17:01:23 – 00:17:21:05
Joseph Downs
And, you had to renovate them and sell them on the market and hope that some buyer could come by and give them a bunch of incentives to close on your property, because there were so many more. It was like a year’s worth of inventory on the market. Now there’s like literally, I think 60 days of inventory in the market, if that, and homes are selling, you know, bidding wars are going on in two weeks.
00:17:21:05 – 00:17:43:15
Joseph Downs
So, but back then it was, a crazy time and it was a great time to buy. And I did acquire some assets. I just wish I had access to more capital, as I do now with more relationships and bought more real estate. But we are buying properties for, you know, pennies on the dollar that are now worth, 1020 x what we paid for them.
00:17:43:17 – 00:18:04:05
Joseph Downs
And, just incredible deal. I was getting three families in Newark for 60 grand. Yeah, they needed work, but now those things are going for, like, 950, and you’re just like, Holy mackerel. So, really just an incredible boom in the market over the last decade. And that’s what I’m seeing, now, is that prices are down.
00:18:04:05 – 00:18:37:14
Joseph Downs
It’s time to buy. Cap rates have increased, 20%. Prices are down 20% for commercial real estate now residential, but commercial real estate, you know, apartment buildings and so on. And, it’s a shame that a lot of equity is just sitting on the sidelines right now. It’s it’s so contrary to me, you know, and back when, Covid was booming, it was 2020, 20, 21, I’d send out an email and, raise, you know, $1 million because people were just a great investor ready to place their money.
00:18:37:14 – 00:18:59:13
Joseph Downs
They’re very bullish on the market. Everything is booming now. Raising capital is gotten much more difficult. People are holding onto their pocketbooks more tightly. And, I think people more bearish on the market in general. Therefore, you know, when you’re, nervous, you don’t invest in alternative investments. That tends to be the case. But now, holy mackerel, is the time to get in and prices are down, rents are high.
00:18:59:13 – 00:19:19:09
Joseph Downs
Rents continue to grow. Inventory is getting saturated. We’re going to run out of inventory here really soon in Jersey because we’re just not building it fast enough. We saturated 19,000 units, trailing four quarters. We, built 16,000, so we’re 3000 short and we’re down and housing starts. So what do you think’s going to happen next year?
00:19:19:09 – 00:19:45:06
Joseph Downs
We’re going to build even less, and we’re going to be saturating even more as we continue to grow, in our size here in our population. So, it’s it’s frustrating. I feel like, you know, like most investors, at least in the accredited space, kind of like buy when prices are high and selling prices are low. And it is totally contrary when you talk to them in family offices, they’re very bullish on investing in real estate.
00:19:45:06 – 00:20:01:05
Joseph Downs
Now that’s very savvy. Money is like, yeah, let’s get in on some great deals and great prices and renovate them and reposition them. And then exit 3 or 4 years from now when rates are low, you know, it looks like we’re going to get a new fed chairman in May. It looks like they’re going to be bullish on dropping rates.
00:20:01:11 – 00:20:22:24
Joseph Downs
That’s going to ideally happen through 26 to 27. You’re going to see that reflected in the prices into 27 and 28. So by my math by 28 we’re back to kind of a boom market potentially there’s a limited inventory right now. And there’s going to continue to be a limited inventory because housing starts are way low. Apartment building starts are way low.
00:20:23:05 – 00:20:39:15
Joseph Downs
And that means you’re going to have a lag of inventory hitting the market for at least two years, because it takes two years to develop an apartment building, get it to market. So this is a perfect storm for prices to go up and, over the next two years. But we have this window right now, like about, a year, I think.
00:20:39:15 – 00:20:56:02
Joseph Downs
And so prices start to tick up again and it is go time to buy real estate. But I can’t seem to always translate that to your everyday accredited investor. And that can be, the frustrating. Are are you seeing the same thing with your self-storage investment opportunities?
00:20:56:04 – 00:21:15:11
Aaron Fragnito
We we do. And and what you just said, I mean, you know, you nailed it. And that’s, that’s true of any industry, the stock market, multifamily storage. And that’s true of the passive investor. Right. And that’s a that might be one reason why they are passive, right? Because they aren’t the ones that are going out and do it themselves.
00:21:15:11 – 00:21:36:19
Aaron Fragnito
So they need to align with someone like yourself who does see what’s happening in the market and is going to position them at the right time. But think about what you just said, right? It’s as simple of it always comes down to operations, right? If you can operate something you can operate in, in any environment, some of the easier to operate in, some in, some environments be easy to operate in other environments.
00:21:37:00 – 00:22:01:08
Aaron Fragnito
But think about what you said. If you can find something that pencils today may not be a home run, might be a single, but if you can find it, that you operate it and it’s just a nice deal, and then you do nothing but just operate it. Based on what you just said 2 to 3 years from now, everything, all of that appreciation should take care of itself through compression of of interest rates and cap rates.
00:22:01:08 – 00:22:12:22
Aaron Fragnito
Right. Right. The asset just becomes more valuable because of environment around it. And all you did was find it, negotiate it and operate it and you don’t have to do anything differently.
00:22:12:24 – 00:22:13:24
Joseph Downs
Right, right.
00:22:14:01 – 00:22:34:04
Aaron Fragnito
Just recognize those things. That’s simple and that works in any environment. You’re just saying this is the environment that will yield cherries later instead of, you know, just, you know, like two years ago if you just bought something because you could operate it, it makes sense. Okay. You’d still just be operating it. No, no benefits yet. But hey, it’s what you thought it would be.
00:22:34:06 – 00:22:47:17
Aaron Fragnito
You just introduced and I love it. Is that’s all? That’s all we do. We just go out and we try to find and operate singles and doubles, and we let the external environment take care of the rest of it. For itself.
00:22:47:19 – 00:23:05:19
Joseph Downs
Right. Yeah. Yeah. We got, you got to be careful trying to hit home runs. All right. If something pencils out as a home run it’s probably you’re probably missing something. I think your spreadsheet has a missing formula. And one of the cells, you know, something like this. And that’s it. You know, we don’t underwrite deals.
00:23:05:19 – 00:23:22:08
Joseph Downs
Assuming the market’s going to be better, we kind of assume rates are what they are today. When we go to refinance in three years, we assume cap rates are what they are today. When we go to sell in five years. But hopefully we’re wrong. Hopefully the market’s better and rates are lower and prices are higher. And that would be great.
00:23:22:08 – 00:23:40:01
Joseph Downs
You know, then we even overperform our investment opportunities that we’re presenting now. But that’s absolutely right. You know, and especially if you buy something with value add now you can increase the revenue on the building, you know, 50, 60% over a 3 to 5 year period. Well, now, you know, through improved management. Not now. You’re really looking at a boom in value.
00:23:40:01 – 00:23:55:19
Joseph Downs
But yeah, I mean, that’s it right now there’s as, Warren Buffett, I get I think it’s Warren Buffett who always it’s credit for this line. Right. When, others are, greedy, be scared and others are scared to be greedy. Although I was told it wasn’t actually Warren Buffett who said that, but, let me.
00:23:55:20 – 00:23:57:03
Aaron Fragnito
Charlie Munger, you never know.
00:23:57:05 – 00:24:17:18
Joseph Downs
Yeah, yeah, something like that. Right. So. But that it’s, you know, it rings true right now and it rings true really in any, market. So, you know, here to, kind of, conclude here. Joseph, what are you seeing? Over the next few years, you know, you had this big boom in storage. Now there’s a bit of a bust.
00:24:17:20 – 00:24:28:07
Joseph Downs
You have still inventory kind of hitting the market from the boom time. So that’s probably getting pretty much wrapped up now. Is storage still a good investment opportunity?
00:24:28:09 – 00:24:49:00
Aaron Fragnito
I think it’s phenomenal. And our boom wasn’t, there was an artificial accelerant to it, and that was Covid. So we boomed, out of the norm. Otherwise storage is is growing at the growth rate. The country’s not it wasn’t growing faster for any reason in one area versus another. It was just humming along at a nice, nice pace.
00:24:49:02 – 00:25:09:11
Aaron Fragnito
Covid happened, so we boomed up and we and all we did was fall back to where were. We are right in line now with where we should have been had there been no Covid. And I and I see that past continuing if there’s an accelerant to it. It’s the artificial growth rate that we’ve experienced over the last four years.
00:25:09:13 – 00:25:48:05
Aaron Fragnito
Which was significant enough, I think, to affect both your business and mine because, our business is tied to multi-family as well. You know, it’s a, it’s a either a leading or a lagging, probably lagging indicator to it. But I, I see as, as a, as the, as our country population continues to grow plus that little surge we had and just a little nod to the multifamily developers out there, we thank you because they’re building when they are building and they’re building smaller units with less closet space, less storage space.
00:25:48:05 – 00:26:14:16
Aaron Fragnito
So and more and more folks are going into multifamily scenarios. The not so it’s artificially or indirectly creating the need for more storage. So we appreciate that. And then on on top of that, you know, there’s no slowdown. It doesn’t appear to be any slowdown in a consumer rate. And so the more we consume, you know, the, the more space we need to store things.
00:26:14:16 – 00:26:36:05
Aaron Fragnito
So, you know, and then actually, I would add to that, that the, the next generation is, is, you know, the baby boomers is largest, my generation is the smallest. And then millennials, they’re actually not only living in apartments more the my generation did, but they’re the houses they are buying are smaller, but they’re consuming the same amount.
00:26:36:07 – 00:26:36:21
Joseph Downs
All right.
00:26:36:21 – 00:27:06:21
Aaron Fragnito
So yeah. So the current storage facilities are, are, are used by baby boomers. Gen X and millennials know uses it the least amount. Yeah. We’re the smallest generation. We’re using the least amount. The, millennials use the, already are using storage three times more than my generation. And it’s continuing the generation after that expects even more the millennials.
00:27:06:23 – 00:27:25:12
Aaron Fragnito
Yeah. So it’s becoming part of life. It’s almost like, And I know you you look to your credit. You look a healthy amount younger than me. I’m the millennial. Yeah, yeah. Okay. So I remember life before cell phones. You probably don’t.
00:27:25:14 – 00:27:27:03
Joseph Downs
I do it. It’s a little fuzzy.
00:27:27:03 – 00:27:46:11
Aaron Fragnito
Yeah, okay. But it’s a way my kids will never know what it’s like, right? It’s part of their lives. They’ve never lived without a cell phone. I mean, you know, they got one at a certain age, and then they’ve had it. Yeah, there is part of their lives. Kids today. Millennials down to what is a Gen Z to kids today.
00:27:46:17 – 00:28:10:18
Aaron Fragnito
Storage is part of their lives for the most part and is becoming more and more part of their lives. Yeah. My generation, we kind of frown on it. Like, who would waste money on that now? It’s something we we that’s in your budget item, you know. Right. Right. Storage. Storage. Right. So, when I, when you asked me what’s the outcome that not only is a short term look at the long term looks good.
00:28:10:20 – 00:28:31:08
Joseph Downs
Yeah. We actually put storage in a lot of our buildings. So we are. Yeah, we’re putting about, we just put 30 storage units into a building we own in, Passaic, new Jersey. And, you know, we’re looking at buying a 78 unit Hackensack right now. We’re planning on putting like, 50 storage units in there because they have these huge unused basements with nothing there.
00:28:31:10 – 00:28:52:13
Joseph Downs
And the most lucrative way to build revenue from that unused space is to put storage in there. So. Absolutely. Right. You know, it is the generation of renters that’s we’re seeing now. The housing costs are through the roof. It’s about 30% more affordable to rent here in new Jersey than it is to own. So naturally, people prefer to, to rent, you know, so that makes sense.
00:28:52:17 – 00:29:15:21
Joseph Downs
Which is a shame, because real estate ownership is one of the largest wealth. Developments wealth, you know, sources of wealth growth for the average, you know, investor or, you know, just working class Americans. So, missing out on that wealth growth is not good and going to increase the wealth, gap there. But that’s a whole different, podcast.
00:29:15:23 – 00:29:22:09
Joseph Downs
All right. So, Joseph, thanks for coming on the show here. How can people reach out to you and learn more about what you have going on?
00:29:22:11 – 00:29:54:06
Aaron Fragnito
Yeah. Our websites, Belrose group.com. But it’s actually Belrose Bella Rossi grp.com or is grp.com? My emails Joe at Belrose am. So it’s, Belle Rossi as an asset. As a management Joe at Belrose am.com love to field. Any questions from anybody interested in storage or learning how to buy a storage? You know, usually get 1 or 2 from, for a podcast.
00:29:54:06 – 00:30:00:24
Aaron Fragnito
So it’s don’t don’t think that, I won’t respond. I always do and love to point in the right direction.
00:30:01:01 – 00:30:21:18
Joseph Downs
Excellent, excellent. To our listeners out there. So reach out to Joseph. I don’t think we’ve had a storage guy on in a while, so this would be a nice, refreshing, take here on the storage industry. It’s probably been a whole market cycle since we had a storage pro on here. So very exciting. And, to our listeners, our viewers, if you’re enjoying this content, make sure to share it with the friends.
00:30:21:20 – 00:30:41:10
Joseph Downs
Hit the like button. Hit the subscribe button. We’re on YouTube with all different types of content masterclasses, podcast episodes, shorts as well. We’re on on any major, platforms there, iTunes and Spotify and so on. So, be sure to hit that subscribe button, that like button. And please share with a friend.
00:30:41:10 – 00:30:59:01
Joseph Downs
We are always looking to grow the Passive Cash Flow podcast here with new episode every two weeks. The new guest. And today we had Joseph Downs, the, self storage master. So you got the John Keys, got the place to put it. And, if you want to learn more about investing in it, he can help you out there as well.
00:30:59:01 – 00:31:06:02
Joseph Downs
So, I won’t call you the junk master, but that would be a pretty go at junk Mastercard. If you,
00:31:06:04 – 00:31:08:05
Aaron Fragnito
I think I probably would call worse, but,
00:31:08:07 – 00:31:17:01
Joseph Downs
Yeah. Yeah, absolutely. That’d be a good bucks. Next buzzword for you. So that’s good. All right. Joe, thank you so much for coming on the Passive Cash Flow podcast.
00:31:17:03 – 00:47:04:22
Aaron Fragnito
I appreciate it. Thanks for having me. So,
00:47:04:24 – 00:47:27:22
Joseph Downs
At People’s Capital Group, we help you invest in real estate, build your wealth by owning professionally managed apartment buildings in the northern New Jersey market. We want to show you how owning real estate is attainable, even for the busy professionals that don’t have the time or experience investing in real estate. Now, we only work with select people who are serious about building wealth.
00:47:28:01 – 00:47:32:01
Joseph Downs
So find out if you qualify at People’s Capital group.com.
