In today’s episode, we chatted with Scott Lewis, from Spartan Investment Group. Scott discusses the advantages of investing in self-storage compared to other asset classes. He explains that self-storage is easy to maintain, evict tenants, and offers dynamic pricing. Scott also mentions that self-storage has not been as affected by the economic downturn as other asset classes. He emphasizes the importance of aligning with the operator’s values when choosing an investment opportunity. Scott provides insights into Spartan Investment Group’s investor relations process and highlights the benefits of investing with their fully integrated team.

Listen To The Podcast Here 

Watch The Episode Here 

What’s Covered In This Episode

  • Self storage is an attractive asset class due to its ease of maintenance, eviction process, and dynamic pricing.
  • Self storage has been less affected by the economic downturn compared to other asset classes.
  • When considering an investment opportunity, it is important to align with the operator’s values and understand their track record.
  • Spartan Investment Group offers a fully integrated team and provides regular communication and reporting to investors

Connect with Scott: 

  • Website: https://spartan-investors.com/

Resources 

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Read The Transcript Here

Trevor Oldham (00:02.062)
Hey Scott, thanks so much for joining us today on the REI Marketing Secrets Podcast. For those in the audience that are learning about yourself for the very first time, can you dive into a little bit why you got started investing in real estate instead of say investing in the stock market or these other alternative investment asset classes that are out there?

Scott Lewis (00:20.535)
Hey, Trevor, appreciate you having me on. My why on the built environment and real estate is just, it’s what I had exposure to. I framed houses in college. I renovated my house in DC and it was just something that I was interested in and had exposure to. Some of the other investing things, I don’t come from an investing background. I come from more of a management background and sales and a non -technical background in regards to real estate investing, obviously over the last.

10 years I’ve gotten that, but it wasn’t something that I was not super interested in stocks, bonds, alternatives. It’s just not, not, I like something I can touch.

Trevor Oldham (00:58.382)
Yeah, I couldn’t agree more through that and that and that was sort of for me where I’d been investing 401k, IRA, thought that was really the only avenue that was out there like a lot of folks when they come into investing. And I thought to myself, why do I want to keep investing in these individuals unless you’re looking to say a self -directed IRA, solo 401k and things like that. I was like, I’m not going to be able to touch that money until what is it, 59 and a half. I want to live for now. And that’s why I got started as a passive investor. But

for you and your company, what is the real estate asset class? Is there a certain asset class that you guys specialize in? Is there multiple asset classes? Just curious to hear from your perspective what your company, what your sort of your bread and butter is.

Scott Lewis (01:40.571)
Our bread and butter is self storage. We have some other stuff that’s come in with some of the portfolios that we’ve purchased and there’s a couple of RV parks that are more man camps that are more legacy investments. But for the 98 % of our portfolio is all self storage.

Trevor Oldham (01:57.262)
And for the self storage that you’re going out and buying, like I’m gonna self storage deal with a different operator. And the deal for them was blow market rents, the operator running it hadn’t raised rents on the units 10 years. There was a lot of land to development. So it’s a self storage development deal. I’ve heard of other folks that go out and they buy Kmart’s and they turn that into self storage facilities. From there, when it comes to your company, what does that sort of look like? Are you?

Developing these self storage facilities, are you buying existing ones that have just been, you know, maybe they don’t have the new technology or is it someone like going out and buying like a Kmart, buying the building and putting up the units there? Just curious what it looks like from your perspective.

Scott Lewis (02:37.883)
We’re full spectrum. So we buy existing deals that are operationally mismanaged. We buy deals that are mismanaged plus expansion. We develop from the ground up. We’re converting a warehouse space to a self storage. So kind of all the above. Inside of Spartan, we have an operations team to operate the existing facilities. We have a development group that just goes out and entitles raw land. And then we also have a fully licensed GC that goes out and builds all of our projects for us. So we really can.

look at multiple mogalities inside the cell storage space.

Trevor Oldham (03:13.07)
And when it comes to self storage, obviously there’s a lot of asset classes when it comes to real estate. You have your multifamily, your mobile home parks, including your self storage. Why self storage? Why do you like that asset class as compared to some of these other asset classes that I just mentioned?

Scott Lewis (03:29.819)
So I don’t have any experience with the other asset classes. So going into office and industrial that are very, very established, just not something that I wanted to do kind of out of the gate. As far as the multifamily goes, not a big fan of people. I don’t like anything that has a lot of government regulations and multifamily is that, right? It’s very hard to evict. It’s very hard to raise rents. It’s very difficult to do those things. It’s profitable.

And multifamily is a great asset class for the right person. It just wasn’t for us. We like self storage because it’s easy to evict. It’s easy to maintain. And as an operating, it’s a little bit harder to operate than some of them, but with dynamic pricing and existing customer rent increases, it’s easier to drive revenue quicker in a self storage facility than it is some of the other asset classes, which are tied into longer leases.

Trevor Oldham (04:19.79)
Yeah, and I definitely agree with that. And for me, as a passive investor, never really had an interest being in the active side, just give my personality, have enough going on, I’d rather be a passive investor. And when me and my wife, we were moving into our house, where we stay with our in -laws for about two months, we moved out of our apartment, just gotten married, had all of our wedding items, put that into self storage, and it was so easy. It was, went online, got the unit, paid for the unit, and then I moved out, just canceled that. It was like a month -to -month contract. And I was like, this is so simple. You don’t have to deal with any tenants.

other than the folks that are putting their stuff in the units. And obviously, like you mentioned, a little bit easier to evict than multifamily. I know being in New York, evicting when it comes to multifamily, I mean, it could be, it could be quite the headache. I mean, you could be looking at six months, 12 months longer, depending on what’s jurisdiction you’re in. So it’s, that’s just to say, I think that’s another reason why self storage has really caught my attention as an asset class. With that being said, have you noticed any trends in the self storage? I guess.

area over the last year or so. Have you noticed with, say, with the economy creeping up in price, have people, I guess, have you noticed like occupancy rates down or anything like that? Or, you know, is the business as usual? Has anything taken a hit? I mean, you look at the multifamily space, it’s pretty crazy what’s been going on in that space with folks defaulting on their loans. And, you know, it’s just not a good space to be in unless you’re a really established operator. But when it comes to the self storage, have you noticed anything like that? Or has it been pretty much business as usual?

Scott Lewis (05:48.411)
No, I mean, like we’ve definitely hit headwinds, but I think they were headwinds that were coming off of kind of a turbo for COVID. So those headwinds are bringing us back down to reality. I think one of the big differences with self storage is kind of our dynamic pricing. So we can move pricing pretty fast. There is a concept of existing customer rent increases that I think really.

Exists in storage and I really don’t know if it exists anywhere else because of the the dynamic nature of our pricing We can raise rents whenever we want Generally, we don’t do that. There are some some practical theories of How you do your existing customer rent increases, but we’re kind of the the dynamic pricing of the hotel guys But the stickiness of the multifamily guys because people really don’t want to move and most of the time our prices are a hundred bucks a month ish

So a 10 % increase is $10, right? So are you really going to go pack up all your stuff in a 10 by 20 unit and move it down the street to save 10 bucks? Probably not. Now I think there is a balance between that and not getting kind of over your tips with the customers. But yeah, I mean, like overall the self -storage industry has softened a little bit. We’re really affected by the lack of people moving. Cause as you just mentioned, it’s usually people moving that generate some of our occupancy and some of our…

rentals and those have come down. The good news with storage though is that it really wasn’t, it didn’t have access to some of the agency debt and some of the like absolutely bananas debt that the multifamily guys had, right? Just wasn’t there. There was no government debt. There was no agency debt for us. So we have not seen, not yet anyways.

Trevor Oldham (07:25.998)
Mm -hmm.

Scott Lewis (07:37.371)
the kind of the level of distress that we’re starting to hear about kind of in the multifamily space or the office space or whatnot. So it just hasn’t been there.

Trevor Oldham (07:46.03)
Yeah, that’s excellent to hear because I find in the multifamily space just folks just not getting cap rates or and just their interest rates just jumping on them getting certain bridge loans not completing the property fast enough and they could go to refinance and it’s just been a total nightmare. So I’m glad I’m only in one investment in multifamily and luckily it seems to be doing well but I have a little bit more faith and confidence right now in my self storage deal that I’m in. But with that being said, like if I’m looking at say a multifamily deal for me I’m just looking in like more of your red states.

like Texas, Florida, Georgia, when it comes to yourself storage facilities, is there like certain parts of the country that you’re looking to? Is it the Midwest or do you just go really wherever you find a good deal and it makes the most sense?

Scott Lewis (08:26.715)
Yeah, we don’t really have to worry about the red states per se because we don’t really have to worry about government regulation for the time being anyways. You know, things could always change. For us, self storage does well everywhere. We don’t generally do a lot of deals in the Northeast. We stay away from New York and Illinois and California just due to the business climates. Some of the Midwest states are harder to make deals work, but there’s still guys doing great there. So there is no magic.

Trevor Oldham (08:41.39)
you

Scott Lewis (08:53.423)
bullet out there for what market you should look at or like stay away from red states or this or that It’s just really I mean self storage does does well everywhere and you don’t have to worry about Regulation at least as of yet

Trevor Oldham (09:06.254)
Yeah, that’s that’s excellent to hear. And that’s another reason I don’t invest in New York. There’s just too much going on here. It’s also I don’t want to be active in this state of just looking to be a passive investor. But let’s say someone’s listening to this conversation. Like, hey, you know, this is great. What’s got saying? I’m thinking about booking a call with this company just to learn a little bit more than say the surface level of what we’re going over in the interview. What does that look like from a call standpoint when someone’s booking a call with your company? Is it yourself? Is it like an investor relations team?

And when you’re on the call with someone, what does that sort of aspect look like? Is it just getting to know the person, their investment background, just curious from your company’s perspective on how you sort of handle that perspective investor call.

Scott Lewis (09:47.355)
We have an investor relations team and my partner actually does all the investor relations. I don’t do many at all. I will interact with some of our top investors, but that’s it. Ryan Gibson, our chief investment officer really is the one that leads that team. And we have a team of investor relation reps in which if you go on and you book a call, you’ll end up talking with Ted or Rob or Jack to have an initial conversation so that we can get to know you better and understand.

your investing needs and what kind of what you’re looking for and what’s important to you. So that way we get you access to our portal and then you can go on and when you see a deal that you like, you can engage us and go from there.

Trevor Oldham (10:26.382)
That’s perfect and let’s say myself I speak to someone from your company Maybe I have 10 grand in the bank just working my way up over the next three to six months to invest with your company And let’s say you have a deal 50k now. I’m finally at that 50k mark What does that sort of communication look like from the time that say I speak? Let’s just say I’m speaking to you as you’re I’m speaking to Scott. You’re the investor relations manager I know you mentioned some other people on your team. Just being hypothetical. I speak to you now

I’m ready like six months down the road to invest. When you’re putting these investments together, do you have like a fund model that you’re just constantly bringing in additional investor capital? Is it on a deal by deal basis? Just curious what that looks like. Because for me, I’ve found that I’ve talked to operators and sponsors before. I want to invest with them. I don’t have the cash just yet. I have the cash six months later. They don’t have any deals for me. And then I kind of lose interest for saying I find another operator where I can put that cash towards. But from your company standpoint,

how often are you bringing in this additional investor capital for these deals?

Scott Lewis (11:30.011)
So it depends, we have funds and we do individual syndication. So we do both. When we have a new deal, we do have a webinar that we push out. If somebody calls and they’re not accredited, then we don’t do active follow -up. They’ll get messages to say, hey, like we have an upcoming deal, but there’s no active follow -up in that regards. So that we do, like there are folks that fall off. All of the like operators have the same boat that they have a conversation and the person’s not ready to invest. And…

You know, people stay on our list and they see our deals, they see what’s going on, and then they can make the choice when they’re ready to come.

Trevor Oldham (12:03.73)
Yeah, that’s excellent. And then now let’s flip the script. Say someone has invested with your company. You had a deal opening and it just made sense. It was what they were looking for. They invested, again, I’d say 50K into your company. At that standpoint, what does that sort of communication look like? Do you give monthly reporting? Is it quarterly reporting? Is it, like one of the sponsors I invest with, they do like…

I think it’s bi -annual, about every six months I do a webinar on how the deal is going. Just curious from your company’s standpoint what that looks like.

Scott Lewis (12:35.403)
So we do monthly updates. So there’ll be, you can log into your investor portal and you’ll see all of the monthly financials from your investment. There’ll be a kind of a summary of kind of what happened. And then once a quarter, Ryan goes through all of our deals so that somebody can join a webinar and get on and see kind of the whole full spectrum of what’s going on.

Trevor Oldham (12:57.262)
Yeah, I really like that. I find that I think two of the four deals that I’m in, they do something similar to that. Well, they’ll do like monthly reporting and then they’ll do a broad spectrum of all these other deals that are out there through their company that I can invest in. And obviously if I’m watching the webinar, I already like the deal that I’m in. I’m not going to be wasting my time thinking about investing in the other deals if they’re not doing a good job. But with that said, Scott, I’m just curious if someone isn’t interested in investing in…

say Spartan Investment Group, what are the benefits of investing with your company? How long have you buys been around? Is there a certain amount of units that you have access to right now? Just curious what that looks like.

Scott Lewis (13:35.491)
Yeah, so I mean, we’ve been around in the storage space for probably 2017. So what are we going on? Six years now, we were doing single family homes before. You know, I think that we do a good job communicating whether it’s good, whether it’s bad. We’re fully integrated. We have our own management in house. We have our own acquisitions team. We have our own capital team. We have our own construction team. So we’re fully integrated.

So from our ground up deals, probably mitigate risk a little bit better than some of the other folks out there, because we have a construction team internally. So the probability of them walking off the job or screwing us with change orders is pretty low. But there’s a lot of good operators out there, and I highly recommend investors kick the tires. It is more important to fit with the team and understand their values. I always tell LPs, don’t chase returns. Don’t chase pro forma. It’s like…

Pro -formers are a best guess on what we think is going to happen. So don’t chase the deal. Figure out the operator, figure out the team, understand their values, understand where they’re gonna go, and that’s who you pick with. And a lot of that’s alignment, right? So if you get with a team and you don’t like their values, then don’t invest with them. Move with a different team.

Trevor Oldham (14:47.502)
Yeah, that’s spot on. I look at that for me when I was looking at these deals and talking to these sponsors. So I was like, first I want to get comfortable with the jockey and then I was going to bet on the horse, which would be their deal. So if I hop on a call with someone, I like what they have to say. I just feel we have a good synergy. Then I’ll take a look into their deal. I think you sort of second that where you want to make sure that you’re getting along with the operator and you like what they have to offer. Because again, you know, the numbers can change on that pro forma and also take a look at the pro forma and those numbers are just.

out of this world and I’m like, I just don’t think that’s gonna happen. It’s almost like they’re overselling the deal. I get a little too scared at that point. But Scott, it’s been great talking to you today and if someone isn’t interested in investing with Spartan Investment Group, where can they find out more about your company and even more about yourself?

Scott Lewis (15:31.451)
Yeah, they just head to the website, Spartan -Investors .com and all the information’s there.

Trevor Oldham (15:36.878)
Perfect. I’ll make sure to include that in the show notes of today’s episode. And again, Scott, thank you so much for coming on to the show.

Scott Lewis (15:42.523)
Trevor, appreciate you having me.