Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and your investing with The Accelerated Investor Podcast.
Josh:Hey, welcome back to Accelerated Investor. I am so excited to be with you today. Actually, back at the office. Finally, back after being in the quarantine part of my home, as many of you know, and I have three offices in our house. And I was relegated to the basement office for the last 10 weeks while my wife took over the main office. My kids took over the second office for their playroom and their homework. And so I’m excited to be back in my personal office, back at the actual office where we run our real estate operations to do this podcast today. I’m excited to talk with Scott Krone. Scott is the managing partner of Coda Management Group. Coda and Scott, focus today on conversion of warehouse to self-storage. And so before I jump in with Scott, I just, first of all, want to say thank you and just tell you how much I appreciate you, how much you know, how grateful I am that all of you have engaged in the podcast. Spend time with me over the last six or eight or 10 weeks, especially during quarantine, during this corona virus. I’m happy that we’re unpacking. Stress seems to be reducing. People are starting to get back to work.
Josh: And I know a lot of you are excited to kind of get back to your normal life. The one tip I want to give you before we jump in with Scott is that I want to encourage you to think about what is the one thing that you’re going to do differently as your life starts to unthaw and unpack from coronavirus. You don’t want to go back to doing life as usual life as you used to know it. What I’d love for all of you is to have a better life. Take the lessons that you learned by working from home, you know, kind of creating a new economy, take the best of your old life and incorporate just one or two things into your new life so that you can you’ll be a better version of yourself, a better investor, a better entrepreneur, a better leader, father, mother, and incorporate new things into what you’ve learned being home and being alone. So, guys, welcome, Scott. Scott Krone to the podcast. Scott, thanks so much for jumping on today.
Scott: Thank you. I’m very excited to be here. Appreciate the opportunity.
Josh: Absolutely. Scott, I’d love to start with my guests when I have a guest on and talk about what they’re working on right now. I always like to really talk about today. We can always go back. We’re going to go back and talk a little bit more about your past. But what are you working on today? What are you excited about? What is your firm do and what are you excited about working on as we kind of unpack and unfreeze here from the virus?
Scott: Well, I appreciate that. We have two companies; Coda management Group and Code Design Build. So on the Coda management side, we just opened up one of our self-storage facilities that I think the week before Illinois got shut down in place. And so we’ve been adjusting, learning how to adapt, how to keep the you know, we are essential. So keeping it open and how to attract people, how we can serve the community. And so we’ve been working on that. And then we have a facility that we’re converting up in Milwaukee that is about to open up next month, as well as one in Toledo, Ohio, which was the first opportunity zone, privately funded PACE project in Ohio and perhaps the country with the combination of those two. And then we’re still working on our Dayton project. We’re doing a conversion there. And we’ve gone under contract for a property in Louisville to convert that building into partially into self-storage and will be flex warehouse as well as self-storage.
Josh: Yeah, that’s fantastic. So to give you some more, you know, kind of foundation background on Scott, they’ve done forty seven syndications, meaning raising capital from private investors to fund projects. They currently manage over 400,000 square feet, over two thousand seven hundred fifty-nine storage units under management. That’s twenty-five years of development in design build. And so now, although he used to do residential and commercial of all types, left the residential space to focus on this. Scott, I’m interested to hear more about, after all the things that you’ve done, why did you land on the conversion of the warehouse to self-storage? What did you see about that niche that you really liked? The opportunities, the return on investment, maybe how it aligned with your goals and your objective? Tell me more about why you like to focus on that niche.
Scott: Well, we were seeing a tremendous amount of volatility within the single-family area of real estate and then on the multi-family, there were such cap compression that we actually sold our multifamily apartments because we didn’t feel that we could get any better pricing. So in the course of my twenty five, thirty years and being in real estate, I’ve, I can’t say I’ve perfectly timed it, but I listened. And that’s the biggest thing that I take away that I would say is I listen to what is happening within the economy, I try not to dictate the economy, I try to react to it. One of the things I’ve been paying attention to is when we’re near the heights and when we’re near the lows of the cycle so we can act appropriately. Right. And so I was seeing cap compression. I was hearing, you know, what was happening in multifamily and we moved out of that space.
Scott: But as we’ve been studying self-storage back since 2013, I’ve gone back and look historically over the last four recessions. And if anything, self-storage has either held or dropped only one percent in occupancy during that period of time. And so rather than say it’s recessionary proof, it is certainly recessionary resistant and it seems to thrive in the cap. Compression gets bigger in the recessionary markets than it does in the bull markets. And so the combination of all of that, as well as the fact that we can we can analyze and look specifically at the data to determine what the supply and the demand is. It makes it for a much more attractive and less volatile investment category for us within real estate. And that’s the biggest reason why we’re pursuing that.
Josh: Yeah, I love it. So help our audience understand. Why don’t you describe a recent deal so they understand exactly what your model is? Purchase price acquisition. What was the asset before you converted it? And what does it look like now? Help us understand some of the numbers around it. So if our audience is saying, hey, you know, Scott seems to be on to something, I makes a lot of sense. I would love to either do this myself or potentially invest with Scott or joint venture with Scott in the future or find a deal. Help us understand a recent deal that you’re working on so they can get real nitty gritty into the niche and what that looks like.
Scott: Well, I mean, the building that we bought in Milwaukee was an old storage facility that we converted into self-storage. The one we just opened in Chicago was originally the Lincoln Log Factory. We purchased the original Lincoln Log Factory. So it’s a lot of history there. So we actually tried to recreate some of the paint schemes on the inside to honor the original Lincoln Logs there. The building we bought in Dayton is five stories above grade, one below. So six total stories. It’d been empty for like 30 years. But there’s a tremendous amount of development going on around it. It was like three thousand multifamily units coming online or already online within a quarter mile. So there was a tremendous amount of growth right in that downtown area.
Scott: And the building can be converted into multifamily or mixed use because of the fact that they couldn’t accommodate parking. There was no extra property for parking. The structural layout of the building didn’t accommodate parking spaces. And so it was sort of like a dead use. But we could come in there. So we bought it for eleven dollars square foot. So well below replacement costs, including the land and the building. And then we’ll put a couple million dollars into the building and we’ll begin the operation of it. And so of that, we’re getting a million dollars a pace financing through the state, you know, through the local part. It’s actually going to be privately funded, pays for that one. And so it’s an OZ zone. So we have an opportunity zone and we have Pace financing and then we will bring in the third party management company to manage it for us. And we will hold that, you know, for a while and get it cash flowing and performing.
Josh: So for our audience, it doesn’t order Pace loan kind of explain that. What is a PACE loan?
Scott: PACE is through the Department of Energy is property assessed Clean Energy Act. And so the idea of it, it’s a very interesting mechanism because it’s a federal program that has to be adopted by the state and then implemented at a local level. And so it’s like really who has jurisdiction over this entity? But what it is, is that if you go in and raise the energy performance of a building, then you can show that you’ve raised the energy performance of it. Those measures qualify for PACE financing. And the financing tries amortized lifespan of the improvements. So we did roof, we did HVAC, we did electrical, we did elevator. We did insulation. So we created like a twenty two year, a 20 year amortization schedule. And instead of it being a debt payment, it gets applied to your real estate taxes through a special assessment. So you volunteer into the program. So banks look at it as equity because it’s above the line item expense. Versus top line. Right. Top line versus bottom line. And so it’s a great program. You know, it’s comparable, you know, when we see it as an equity investor. It’s a lot lower cost for an equity investor than our other equity investors.
Josh: Yeah. Than the other potential syndication investors. Yeah. When I first had experience with a PACE loan, we’re talking about that as we were getting ready to record today. And I was first having it described to me and like, well, what do you mean it’s above the line. Like it’s debt. It’s a mortgage. It’s you know. But I understood it that if we end up selling that building, that the next buyer would essentially assume that loan because it becomes part of the equity payment or part of that deal. And instead of having like a new debt payment, that’s just an expense to treat it as an equity investment, treat it as a long-term part of the deal, and somebody just buy the building and assume that loan because it’s so favorable long term.
Josh: Really cool stuff. Obviously very specialized type of financing for larger deals. So with self-storage, my understanding, I don’t own any self-storage. So help me understand if I’m a passive investor or if I’m looking to be an active investor in self-storage, why self-storage over office, retail or apartments? Is it the hands-off nature of the management? Is it cap rates? Is it the fact it’s recession proof? Is it that we need more of that because more people are maybe working from home and, you know, they need more storage space? Help me understand some other of the benefits of self-storage versus some of the other niches.
Scott: I think the answer to your question is yes. Right. So it’s a loaded question. But yes, in summary, yes. Well, in the end, each of those things, one, the firstly and we really like is that we’re able to analyze the marketplace. So we can determine whether or not a market is too saturated. When I was, when I first got into real estate 30 years ago, you know, my first project that I was working on was one hundred million-dollar, 400-unit development. We didn’t really have any data whether or not the community was going to be able to absorb it. We just it was almost like a mentality, like build it and they will come. You know, we did know that there is the aging population and more people were looking to move out of a home, into a condominium, those sorts of things, to go more low maintenance. But that being said, we didn’t have a feasibility report. We didn’t have you know, we didn’t study the demographics of the community. We just knew the community. And therefore, it was like, this is going to be, this will work.
Scott: What we’re doing now is tremendously more due diligence than I did 30 years ago. So we study the market. We know what that specific property will yield in terms of supply and demand, and we can quantify that. So that’s the first thing. The fact that in a recession, they tend to hold because as people downsize, they don’t want to lose their goods. They want to maintain it until their life improves again. So they put it into self-storage. Death, divorce, downsizing. These are all different categories as to why people tend to use self-storage in a recessionary market. The other thing is, as people are going back into the urban settings, which is where we’re focusing on, they don’t have the attic. They don’t have the garage. They don’t have the basement in order to store their stuff. And so it’s cheaper for them to rent for 50 dollars a month as opposed to buying a bigger unit. It just gives them a lot more flexibility.
Scott:So in each of those situations, that is why we see that there’s a market, 10 percent of the of the population utilize the self-storage. And so we also like the fact that especially here in Illinois, where the tenant loss had become so favorable towards the tenants, it’s almost punitive to the owners. We don’t have those same conditions within self-storage. And so it’s not that it’s favorable towards the owner, but in here in Illinois, specifically Chicago, it is onerous to be an owner. It is incredibly challenging. If you screw up how much you claim in terms of the interest on earned the security deposit, you could be sued by the entire building. And people have been firms that specialize in that. So it makes it incredibly difficult to to protect your interests as an owner here in Chicago. Got it, so those are the main reasons.
Josh: I’d love it. Help me understand. So we work with a lot of passive investors who invest in our multifamily syndications and things like that. You’ve done forty-seven syndications. So describe a typical syndication for these conversions. You know, obviously, we’re not soliciting money here or making an offer to our audience. But help me understand, what is a typical syndication look like as far as maybe a preferred turn equity? How long is the investment? You know, I don’t own any self-storage. I’m kind of asking this question selfishly because I’d like to own more. And I have some of my investors that are looking to diversify out of multifamily and maybe add some other different niches that they can invest in, including self-storage. So help me understand what that looks like.
Scott: Well, whenever we look at any deal and this is something that I was trained in back 30 years ago, that, you know, in order, development is risky. So in order to have an appropriate amount of return for that risk, we model over 20 percent rate of return for our investors. And we won’t go into that unless we meet that because we recognize that it is a longer-term play. But there’s you know, it’s risky. It needs to be rewarded. You know, we can’t offer 10 percent, that sort of thing. It just it’s not as attractive. And so each of our modeling is based on a three to five year hold. And, you know, especially with it, if we’re doing in opportunity zone, then we have to, you know, obviously balance the restrictions of what’s going on in the OZ zones. But the reason why we’re doing that is because we view what we’re doing, similar to a growth stock. An existing self-storage facility, a smaller one class C which is first generation, is more like a penny stock. It’s cheaper to buy. You’re gonna get your monthly payment offer, you’re clipping your coupon, but you’re not going to see a whole lot of appreciation in it.
Scott: The Class B, which is more of the suburban, maybe climate controlled, newer than it’s you will be more like a blue chipper that will perform in both an up and a down market. But what we’re doing is growth in the sense that we’re looking at both appreciation as well as cash flow. And so when we’re starting with, you know, zero tenants similar to lead to multifamily, you’re looking at a three percent absorption rate. So every month you’re expecting to have three percent more people in your facility. And so that’s what we’re really focusing on in terms of, you know, why it takes some time. So we have to build it out. And then we have a year lease enough to cover operational expenses and then we have another year to cover our debt service. And then that’s when we begin performing. And at that point in time, we look to reinvest our equity out and keep our investors in, which is something different. Where we view our relationship with our investors as a long-term relationship. And so everything that we do is set up to enhance the investors rate of return.
Scott:So we have sold cell towers. We have done historical tax credits. We’ve done opportunity zones. We’ve done PACE financing. Each of these things are to enhance the rate of return. They weren’t based upon the modeling. So each of these things we look for to enhance it because our interests are aligned with our investors. And that’s what’s a little bit different than most is that most people do prefer. But then they hit it with all these annual fees and this and that. We don’t do it. We just do a split because that way our investors know that our interests are aligned with theirs. If it doesn’t make sense for us to sell or to hold it, more importantly, if we hold an asset because we’re getting an annual fee off of it, but our it’s not good for our investors, then they’re going to become resentful way. It’s truly a partnership is how we do it.
Josh: I love that approach. I love that approach. So you say three to five years, so I’m imagining you find something like a growth opportunity to buy some industrial warehouse space converted into storage, self-storage, looking at absorption rate three percent every month. All of a sudden, you get to a high occupancy level, 80, 85, 90 percent or more. And then. And then what happens? Are you looking to, like you said, refinance and pull out your equity, leave them in the deal and eventually sell the building and exit three to five years? Or you just holding these things long term?
Scott: Well, I’m in real estate, right. So everything is for sale at the right price?
Josh: Oh, yeah. No, not always.
Scott: But I mean, we model I mean, because once these things are operational, a typical facility of let’s say it’s between six and eight hundred eighty-nine hundred units, it’s going to wear off about a million dollars of gross revenue. But one of the things that you’re comparing or asking about multifamily before is our operational expenses are like thirty five percent compared to fifty five percent. Sure. So once we get, these things kicking, if we can refinance the equity out because we can take it like a, let’s say, a six million dollar asset and convert it to a nine million dollar asset, even when we refinance that we can still put an appropriate level of debt on there that doesn’t compromise the well-being of the asset.
Scott: And that’s a key thing for us. We don’t want to over leverage it, but we can still and create a rate of return without any equity into it. So obviously, it’s incredibly profitable and are from a percentage point of view for our investors because of the fact that their equity has been returned. So we’ve had, you know, situations where we’ve refinanced the property, restructured it, and then those investors moved right into the next one. Right. So that’s one of the things that we really like doing is having that repeat scenario, because now someone has just take a number. They invested a hundred thousand dollars into a deal. They first went into one deal, but now they own two deals with the same hundred thousand dollars. Yeah. It’s a better situation for them.
Josh: That’s very similar to what we do with our multifamily. So we’re looking to do value add. We don’t do new development like you do or repositioning things. But value add, multi-family try to buy everything at a wholesale price in B class workforce housing markets. But things that, you know, the ideal deal is actually we have one right now under LOI, 80 units. The guys owned it for twenty-seven years. He’s at the end of his depreciation schedule. He’s in his 70s. He doesn’t want to do any more improvements. The property hasn’t been improved for 15 or 20 years, although it’s a solid, solid asset. It doesn’t have any significant distress, but cosmetically it’s way outdated. There’s significant room for rent bumps. But to acquire the asset and get 20 percent down the syndication dollars from our equity investors, improve the building, jackup the rents, and then refinance it within, like you said, three to five years. A lot of our stuff is within two to three years, return all that equity to investors and then they’re in that deal in perpetuity with a little piece of equity.
Josh:So they’ve gotten a preferred return, our model is a preferred return during the stabilization phase. And then they get there, in most cases, all of their equity back, if not almost all of their equity back. They’ve had the preferred return, even in some cases, some cash out refi proceeds and then they own equity in perpetuity forever. So they get that little mailbox money, that little coupon every single month, every single year with no money in the deal. And then they can stack up multiple deals with that same hundred thousand, same two hundred thousand dollars, just like you described. So I love the model.
Josh: Scott, help me understand and help our audience understand what’s the perfect asset for you to buy. So help me describe to us a warehouse in a specific type of area. So if they’re if they were ever I’d like bird dog a deal for you or find a deal for themselves. Sounds like you’re a lot in the Midwest. People are moving back into the cities and, you know, there’s even these apartments like micro units that are in the cities. And then those people need storage because there’s no storage. And those micro units. Right. Or these small apartments, they need storage space. So your asset matches up big time with people moving back into those urban areas. But help me understand, what does a deal look like? How many square feet is it? Is it in the, like you said, the path of growth, a path of progress of people moving back downtown into an urban core. Help us understand what the asset looks like on top of, obviously, the feasibility study. The feasibility has to work, but what does the asset actually look like? Is it a rundown old warehouse building? Help me understand.
Scott: Well, there are one in Dayton was empty for 30 years, so. I mean, from the outside it looked nice. There’s a brick building, you know, multiple stories, solid building. But it had no new roof, need new windows and new they had no mechanicals that had no electric. It had nothing. So, OK, just typically brick shell, it was a shell. But what we’re typically looking for is between 80 and one hundred and ten thousand square feet. The one in Louisville is actually a hundred and forty thousand square feet. We don’t need all of that for self-storage. And we have existing tenants. So it will be basically about 40, 60 split percentage wise between the flex and the self-storage. But we’re looking for those in an urban market. And what we’re looking for is growth in those urban markets.
Scott: It doesn’t have to be huge growth, but we want to make sure that it’s not negative. We were presented with a building in central Ohio, which we love Ohio. But the market was declining and there was already a plethora of self-storage around it. And so we didn’t feel that there was really a marketplace for that. There wasn’t enough demand to support it. So we’re looking at the population. We’re looking at the size of the building. And then obviously, the more rectangular, the more, you know, module or the building is, then it’s easier for us to do the self-storage. I’ve got a lot of curvatures to it that we just lose efficiency.
Josh: Got it. Scott, you’ve done forty-seven syndications. Help our audience understand. Give him some tips around raising money. What do you do with your investor relationships? You know, recruiting people, creating relationships, marketing for capital, getting people into your syndications. You’ve done forty-seven of them. We’ve raised a ton of money as well. You know, it’s a relationship type of business and obviously the returns have to be there. But what are some of the things that you guys do on a regular basis to create newer investor relationships, manage the investor relationships that you have?
Scott: Yeah, I mean, when I when we say that that began back when I was working for other people as well. So obviously I’ve taken what I’ve learned during that period of time into what we’ve been doing for ourselves. When people are first getting out, I mean, syndications, sort of a broad word. But, you know, I view it as equity partners. And, you know, when my first one was when I was twenty-eight on my own and it was my grandfather, it was my uncle and my father.
Josh: It’s a good syndication to start with.
Scott: It was great. But they didn’t have that word back then. Right. It was just like, do you want to invest with me on this? And I think syndication is just a word that has come up recently in the last five years in terms of how they describe it. But, you know, when we went to it, you know, the first thing on my you know, here I’d been working for a top 20 developer in the country in multi-family and, you know, and I was running twenty four fifty million dollar projects. And so, you know, my father, my grandfather asked me, like, how do you know you’re going to be able to do this? And you know, we bought a property for three hundred thousand dollars. We tore down. We built a new home and we sold it for a million 50. And I returned a 90 percent rate of return of my investors.
Scott: It was a good start. I’m like grandpa. I’ve been running twenty-fivemillion-dollar projects. I’m sure I can run one million dollarhome. But it’s the credibility, right. You got to have the credibility that what you know, you don’t have to have always be in real estate in order to have credibility. But are you, most people when I’ve done coaching, when I’ve done helping people get their businesses going. They don’t. They undervalue what they do on a daily basis. You know, they might be working for someone and running a fifty-million-dollar project, but they’re like, but it’s for somebody else. But you’re doing that work. You’re managing that. So rely upon that past experience and a lot of it is how you present yourself, how you promote yourself and they gonna believe in you. I’m mentoring three young men in Rwanda.
Scott: We went over there and they were part of an orphanage called Sunrise orphan from school in response to the genocide. And we took our family and we went over there and worked with them. And now they’ve graduated. They’ve gone through college and now they’re starting their own stuff. And he sent me over an offering memorandum in terms of how to create like the Spotify in Rwanda. OK. And it’s the same conversation. Like if you’re talking about what you’re hoping to do versus what you are doing, you’re talking about, you know, what you think people want versus presenting, you know, of a definitive investment with definitive numbers and projections and more importantly, how you’re going to get your money back to them. But it’s the same sort of conversation. We you know, he was saying things like. We are creating this because this will accomplish both of our goals.
Scott: And I said to him, how do you know what my goals are? You don’t, you know, you haven’t asked me what my goals are. So how do you know my goals are aligned with your goals? Right. So you have to be the mentality of this is something to come. That people want to come along with you. But you have to present it in such a way that you, and this is something that my mentor taught me. Do you want to be the professional, the expert or the authority in your field? So the professionals like you look in the Yellow Pages, and for those who don’t know Yellow Pages are you do a Google search and whatever comes up first. That’s a professional. Right. And then the expert is someone who is known very well in their field. But the authority is like the best person in their field. So if you have, like a brain tumor, are you going to go to the professional, the expert or the authority?
Scott:So you want to position yourself as much as possible within what you’re doing and everything that people know that you’re in this field. So they view you as the expert or more importantly, the authority. And that’s why I told this young man in Rwanda, I said, are you promoting that? Every time that you talk to people that they know that you’re getting into the music industry, that you’re doing this. You’ve been doing it for a year and you’ve been testing this model and you have the social media, you have the pictures to back it up. So he goes, no, I said then people aren’t going to view you as worthy to go into this because you’re high risk. They don’t have any sense that you’re doing this. And so when I talk to a lot of people are getting into real estate, they’re like, well, I hope to do rehabbing or I hope to do wholesaling or I hope to do this to me. That’s the first kiss of death. Oh, yeah. That’s with that art percent. What are you doing? I don’t care what you’re hoping to do. I want to know what you are doing. That’s the first thing I tell people.
Josh: Yeah. And I think credibility doesn’t have to come from, quote unquote, experience doing exactly what you’re hoping to do. Everybody starts from zero at some point. So when you do, you did your first warehouse to self-storage conversion. It was your first one. When I went from being a residential investor to investing in my very first multifamily value-add, that was the first time. And so you have to take some credibility from of course, experience is one version of credibility, but credibility can come from, like you said, a feasibility study. It can come from. I understand my market in this market needs this product. It needs these self-storage units. And I know we can lease these up because know the market needs it. There’s not enough self-storage units in this market. So credibility can come from that type of education, know how, the feasibility studies, you can leverage other people. You could bring in a partner that has the credibility and maybe the experience that you don’t.
Josh: It can come from a lot of different places. It doesn’t have to always come from experience. I’ve had a lot of students and members who were looking to raise capital for all different kinds of deals. And they’re like, I don’t have any experience like, well, what do you have? Let’s talk about everything that you do. Let’s talk about one guy’s name is Joe. Joe Greaves had massive amount of commercial construction experience as a project manager for someone else. And he’s thinking like he’s working on like you did, 20 million, 50 miles, one hundred million-dollar developments, Walmart’s and all these massive buildings he’s built as well, coming in to recruit capital for my two hundred-thousand-dollar rehab.
Josh: I’m like Joe, you work on these massive buildings. Tell everybody about that. You’re going to be easily be able to handle a half a million-dollar project because you’ve handled these massive buildings before. Good stuff, Scott. So listen, as we can around third here and head for home. I’ve got a couple questions for you. We call it the Accelerated Investor Trilogy, the final three, the final questions along with our accelerated investor told you wealth model that we teach. So the final three questions I have for you. We’ll rapid fire these out. And so the first one is, who has been the best mentor that you’ve ever had and why did they have such a big impact on your life?
Scott: Oh, that that’s an easy one. I would say it’s Dr. NitoKubain, OK. I don’t know if you know who he is. Good. Excellent. So for those who don’t. He moved from Lebanon when he was 16 and put himself through high school and college. He attended High Point University in North Carolina and he started off selling Sunday school material and then turning that into motivational speaking, then turned that into real estate and banking and so on and so forth. And now he’s on the board of BB&T Bank and he owns great RV Spread and Lazy Boy. And he’s the president of High Point University. And so I was fortunate to be a mastermind with him for about five years. And I’m still in relationship with him. And now I have one daughter currently attending and my son will be attending in the fall at high point. I view him more as a friend as well as a mentor. But he expanded my mind in terms of just looking at real estate beyond real estate and looking at it entrepreneurially in terms of obviously doing it myself as an entrepreneur. But how to expand it from a marketing point of view from, you know, each individual branch of the of the business and how to approach those different elements of the business and how to improve it.
Josh: That’s fantastic. Number two, favorite book course or seminar that you’ve ever been to on any subject that don’t have to be about a run real estate, but favorite book course or seminar that you’ve ever been to on any subject? And why did that have such a big impact on your life?
Scott: Well, of course, I would say as I went to an options seminar for my father in law, who, you know, I twisted my arm and I went with him on options trading and I was looking at upside and downside protection and how we can you know, you can buy a stock, but you can still be exposed. But with an option, how you can create that coverage and how I could apply that to what we’re doing within real estate. So I’m always looking for an option is how to protect the upside as well as the downside. And so that that mentality, that mindset was very important in terms of how I approached real estate. Currently, the biggest book that’s had an impact is The Road Back to you by Ian Morgan Cron. It’s about the enneagram and understanding your own personality. But the other nine other types of personalities that these fourth century monks came up with this concept. And it just it’s so current, relevant to today in terms of how people respond and how they react. How they responded in a healthy manner and then also in an unhealthy manner. And so it’s not only help me understand myself, but it’s helped me understand the people I work with and our clients and how we can better communicate and respond to each of those people individually.
Josh: That’s fantastic. Scott, final question. What’s one tip on self-development? What’s one sort of habit or the way you think your mindset, a hack or something that you do personally to kind of when you do it, you feel like you’re your best self. This is I’m getting the most out of who I am and the way I operate.
Scott: Well, I think prior to meeting Nito, I had the mentality of that. I knew my industry and therefore I just had to act into my industry. But Nito really presented that there’s always something you can be learning, always something that you can be growing. Always something that you can be pushing yourself because business is constantly evolving and changing. And that is something I have since I’ve been met with him that I’ve been continually trying to do is always be learning. And I know it’s a cliché like I always make sure that you’re learning something new, always trying something different.
Scott: But really putting that into practice and to the self-improvement, because when I become stale, that my business becomes stale. And so I’m, you know, and it might drive the people in my office like crazy because I’m always trying to push them and stuff like that. But that’s how we improve. You know, if we’re definitely doing things better today than we were three years ago, for sure. And if it hadn’t been because of that mentality, then we would be stagnant. And when we become stagnant, that’s when our business becomes, you know, decline.
Josh: Yeah. Love it. Well, there you have it, guys. Scott, thanks so much for joining us today on Accelerated Investor. If some of our audience wanted to reach out to you. I know you’ve put out a book website. What are some different ways that people can reach out to you if they ever wanted to maybe joint venture on a deal or invest capital with you or just learn more about your business?
Scott: Well, our Web page is www.codaamazonmanagementgroup.com. CodaMG.com. And our way to get all of us as firstname.lastname@example.org. And we have a resource page on our on our Web site that has like a feasibility study and demographics and, and all the different things on why we like self-storage units. That’s hopefully will be helpful for people that are exploring an interest in learning more about self-storage.
Josh: Fantastic. Scott, listen, thanks so much for joining us today on Accelerated Investor.
Scott: My pleasure. Thank you.
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Are you looking for a way to add a little recession resistant investments to your portfolio? Scott Krone and his company Coda Management Group moved into storage units after seeing a tremendous amount of volatility in the single family area of real estate and a cap rate on multi-family units in their area.
Scott and his company currently manage over 400,000 square feet of storage units across the Midwest, and they are actively looking for more warehouses to convert to self-storage and flex space.
Death, divorce, and down-sizing are three reasons people rely on self-storage. In addition, as people move to a more urban setting, they lose the garage, attic, or extra bedroom where they may have stored their extra stuff. And if they need to downsize for a while, as most people do during a recession, then a storage unit is a lot cheaper than renting a bigger apartment or house.
Using PACE funding, which stands for Property Assessed Clean Energy Act, Scott has been able to fund these projects in opportunity zones (OZ). This federal program has to be state adopted and implemented at the local level, but it’s designed to help buildings become more energy efficient. Instead of paying this back like a debt payment, it gets applied to your real estate taxes through a special assessment. There are huge and exciting benefits to utilizing the PACE funding on your properties.
Typically, Scott is looking to convert warehouses that are between 80-110,000 square feet, and he prefers warehouses in a growing urban market. If you’re interested in bird dogging a deal for him, he would love to connect with you.
- Some of the really cool tax benefits of PACE funding for properties.
- Why self-storage is an attractive addition to your real estate portfolio.
- The perfect kind of warehouse to convert into storage space.
- Scott’s current model for investors, and how long it takes to turn a profit.