The Fastest Way To Build A Six Or Even… Seven Figure Real Estate EMPIRE!
The world of self storage has changed a lot in the last 15 years. Since 2008, investors have had incredible opportunities to turn around underperforming mom-and-pop businesses or convert unused property into more of this in-demand asset class. And nobody knows this better than today’s guest, AJ Osborne.
Since we last spoke in July of 2020, AJ has become one of the world’s top 70 self-storage operators. He’s also the bestselling author of The Investor’s Guide to Growing Wealth in Self Storage and host of Self Storage Income, the number one podcast in his field.
In our conversation, AJ walks me through how and why he’s chosen to focus on self storage, what he’s doing to maximize his value as the world emerges from COVID, and what investors in this asset class need to know as they navigate the unique challenges of the US economy in 2022.
Key Takeaways with AJ Osborne
- The three strategies AJ uses for investing in self storage.
- Why the self storage industry underwent a dramatic transformation in 2008, creating a massive opportunity for investors.
- Why self storage outperformed so many other asset classes during the COVID pandemic.
- How rising costs and changing interest rates have affected AJ’s operations.
- Why both multifamily and self storage rents are likely to keep rising.
- AJ’s two keys to success in real estate investing.
AJ Osborne Tweetables
- AJ Osborne.com
- Follow AJ Osborne on Instagram
- Self-Storage Income Podcast
- Self-Storage Income YouTube Channel
- Episode 131: How to Find Profitable Self-Storage Units
- The Investors Guide to Growing Wealth in Self Storage: The Step-By-Step Playbook for Turning a Real Estate Asset Into a Thriving Self Storage Business by AJ Osborne
Rate & Review
If you enjoyed today’s episode of The Accelerated Real Estate Investor Podcast, hit the subscribe button on Apple Podcasts, so future episodes are automatically downloaded directly to your device.
You can also help by providing an honest rating & review on Apple Podcasts. Reviews go a long way in helping us build awareness so that we can impact even more people. THANK YOU!
Connect with Josh Cantwell
Sign Up For My Coaching Program!
Get The Flip System book!
Click Here to Read the Transcript with AJ Osborne
Josh Cantwell: Hey, welcome back to Accelerated Investor. Hey, I’m Josh, and so excited to have you on. Today, my guest on the podcast is AJ Osborne. AJ is an absolute stud at owning and managing and structuring self-storage facilities. He owns over $100 billion in assets. He’s a national speaker. And he was actually on the Accelerated Investor podcast about 18 months ago, back in July of 2020. So, I’ve asked AJ to come back and talk a little bit about how self-storage has changed over the last 18 months with people working from home and with COVID impacting people’s work and home life.
Secondly, we’re going to talk about traits of elite entrepreneurs and how to build an amazing real estate empire and achieve financial freedom. And third, we’re going to talk a little bit about the key performance indicators and some performance numbers in self-storage and specifically, AJ’s portfolio and how they’ve held up and done over the last two years roughly, kind of operating in the middle of COVID.
AJ is also a leader in the industry of technology and self-storage automation, and he’s built one of the largest facilities in the country that’s fully automated using technology. You’ll love this interview on our Accelerated Real Estate Investor podcast with AJ Osborne. And of course, if you missed the first one back in July of 2020, make sure you check out that episode as well. Here we go.
Josh Cantwell: So, AJ, listen, welcome back to Accelerated Investor. Man, you’ve been busy. It’s been 18 months, man, July of 2020 since you were last on the show. You are now a top 70 self-storage operator in the world. You’re an absolute savage, man. So, welcome back.
AJ Osborne: Thanks. Thanks for having me. It’s crazy. Like I was saying, it’s crazy, it’s been that long. It seems like it was certainly, yesterday, we were chatting, so I’ve been busy, accomplished a lot, and that flew by.
Josh Cantwell: Yeah, so tell our people. So, if you guys want to reference back, AJ was on Accelerated Investor. It was Episode 131 back in July of 2020. And in that episode, AJ, we talked a lot about the strategy of investing in self-storage.
AJ Osborne: Yeah.
Josh Cantwell: So, tell us again, just real quick, like what is investing in self-storage? How do you do it? Tell us about the strategy. Let’s start with that. Just kind of dust that off for us a minute. Then we’ll kind of get into what’s kind of snapshot, right?
AJ Osborne: So, really, there are three strategies. First of all, we have the value-add strategy, right? So, we’re buying underperforming mom and pops and we’re turning them around, and that’s where we’ve set our whole entire company. So, we’re fully integrated, meaning we fund, we manage, we do our own syndicating operating. We own our own tech stack, our own data. We do all the revenue management, all in-house. So, I have 60-plus employees that we built over the last 15 years to execute on getting yield out of storage. So, that’s one of our main ways.
The other way you can do it is if you really have a conversion or development, and we’ve done huge things with that. We have a conversion that’s actually up for sale right now. We have offers at over $30 million that five years ago, we built for $7 million and put $2.5 million into it and we’ll sell it now for over $30 million in five years. And that was a conversion that’s transforming one type of asset into another or bankrupt Super Kmart into a storage which used to be really good, then that kind of caught on and watered down. So, now, we’ve moved into another one, which right when COVID started and things got really, really hairy, we actually bought office buildings and turning downtown office buildings into storage complex. Then you have just straight development with that too, round up as everyone knows. The third strategy is you’re just buying and holding and you’re just trying to do traditional investing strategy. You’re looking for safety, cash flow, and tax advantages, so more of stabilizing.
That’s really the three strategies that there are in self-storage, but self-storage to really do well, it’s an operations game. And that’s the thing that I think a lot of people misunderstand. Storage is a business, right? And the operators that are good in self-storage outperform the other operators by leaps and bounds. And it’s something that new people get into it and are shocked by it, they’re shocked by how much it’s a daily reoccurring thing, right? Like, we view it as a retail store. And so, we use tech and data to get high yields, revenue management systems, like airplanes, right? So, you’re on an airplane. Everybody sitting in a different seat has a different price. We implement the same thing through our tech stack.
Josh Cantwell: Wow. Love it. So that’s where, as an operator, you can win, and I imagine, I mean, I used to have a self-storage unit, especially when I moved into my first house, and then we were just totally outgrowing that. And then we moved into this one and we had so much extra stuff. And I never talked to anybody. I just keyed it, I keyed into the garage, I keyed out. There was sometimes one young dude sitting in the management office. Otherwise, it was pretty much fully automated. So, when you are winning as an operator, are there some people that are still manually running these, and they’re kind of losing?
AJ Osborne: Yeah, until the mom and pop ones, right? Self-storage blew up and really got big after 2008. Before that, nobody wanted to be in it. But that’s where the vast majority of the assets have been built, but they were all built by mom and pop. There were really no investor professionals in it. So, that meant that there are a huge plethora of mom and pop operators that have been around for decades that are operating in self-storage facilities like they did in the past. And how you operate the self-storage facility has changed at 100%, it’s totally different now.
And so, these are people that are operating at, they’re sitting in a chair, they let somebody go in. They’re only focusing on occupancy. They want it to be hands-off. They’re making their money and they’re done, right? Those are the ones we buy. We implement technology. We have a franchise system that we come in. Everything looks the same. We have intense management styles, sales process. We add other lines of revenue, and that revenue just goes way up.
Josh Cantwell: I love it. I love it. So, AJ, obviously, you mentioned 2008, and people lost jobs, had to consolidate, leave from home. Of course, self-storage became a big thing with just putting their stuff in new places because of the closure crisis. Now, of course, you have a slightly different trend, which is people leaving office complexes and working from home. So, how has self-storage evolved over the last two years?
AJ Osborne: Yeah, self-storage is such an interesting asset class, and the story behind it is very fascinating. And through COVID, once again, self-storage outperformed everybody else, and it did really, really well. And that was primarily because nobody lost their incomes because the government supplemented. Yet, everybody was still buying things. They were working from home. We had mass migration due to COVID lockdowns, and different states handling things differently, which made people start to move around like crazy.
And self-storage benefits from movement, right? So, stagnation is really bad for self-storage. And when you’re looking at what the downsides are to self-storage, really, that’s it. So, when we look at things that may hurt self-storage, I look at rising interest rates slowing down the housing market. That’s really bad for self-storage because if you don’t have movement, you can’t replace the people that are moving out. These are month-to-month leases. And it’s also, for most of the United States, very seasonal. And if you don’t have movement, you’re not replacing and you can’t get higher rents, and your occupancy starts to drop over time.
So, when you have movement, first, when COVID first hit, we saw occupancy drops, the lockdowns were horrible. So, we had occupancy drops. We had states where they wouldn’t let us raise prices, so we couldn’t fill up. We couldn’t raise prices, right? Now, in states that were more open, self-storage did better. People were moving to them. We had movement with them. So, stagnation is bad. Once the lockdowns really got, self-storage really bounced back a lot better. And it also kind of put a pause on some of the development, which before COVID happened, we were actually seeing in metro areas like Dallas and others that they were having a downtrend in rates that they were being able to charge and they were increasing vacancy rates because we were on the back of the largest development expansion of this asset class. It’s mind-boggling how much they’re building. And that was starting to hurt a lot of metro areas, and COVID kind of put a Band-Aid on that.
Josh Cantwell: Okay. Wow. So, the Band-Aid happens. People are now locked down for a while the first, let’s say, three to six months, and some states are still locked down, which is crazy, but whatever. Now, these people can unthaw from COVID. They realize, hey, maybe they’re in a state that has too much restriction, or they just realize maybe they lost their job or they could work remotely. And now, the movement happens. Obviously, there’s a lot of movement to the Sunshine State. There’s a lot of movement to some cities that are adopting technology like Salt Lake City and Columbus, Ohio, so movement into those areas. So, on a go-forward basis, how are you and people like you going to monetize that movement and some of the things that are happening now?
AJ Osborne: That’s a great question. Now, first and foremost, you have to understand self-storage is outrageously sensitive to demand. So, the one thing that kills self-storage is oversupply, too much products, too much markets. So it’s a balancing act. Lots of times, we find also, though, where people are moving and the states where lots of people are moving and we have high occupancies that there’s mass development going on, and you don’t want to get caught that when you have that mass movement slow down, that all of a sudden this new inventory hits the market, while at the same time you’re having a slowdown and you just have an oversupplied market, you can’t come back from that. There’s nothing you can really do. It really sinks all ships.
So, it’s a combination of we’re looking at growing markets, we’re looking at underperforming facilities, but we’re also, most importantly, analyzing the high-demand markets in self-storage. And that’s why you can find markets, even like Southern California that there are tons of demand because they won’t allow anything to be built. So, it’s almost like a monopoly that they have in there, right? So, we find a huge opportunity, let’s say Texas, in areas of Texas. And they’ve had great returns in self-storage, but also in a lot of those areas, we see a lot of downside and risks that we have to be worried about. It’s great if things keep going the way it’s going, but if they don’t, you’re going to get hurt.
So, it’s really a balancing act when we’re looking at that. That’s why I prefer to find underperforming facilities that I can measure that spread in operation. So, when I invest, I’m buying a storage facility. I don’t even care about the future. I’m looking at the spread that I can yield immediately by changing operations and everything else. And that spread protects me, and it gets me all the yield that I want, it gets me my returns. Then whatever the market does, anything else like that’s on a cherry on top. And if I do it in a market that’s high demand is not oversupplied, I protected myself for future, and also, making sure that once I get that yield, it doesn’t come back off.
Josh Cantwell: I love it. So, one of the conversations we’re having, AJ, in the multifamily space is people are talking about building new, building new, building new, but they’re looking about building, and the cost is double the X. What we can buy a distressed value at an apartment complex at, like I’m making an offer on a $15 million building on Monday at a roughly $50,000 a door, and it’s in a market that I’m already operating in. And then I had a conversation today about building new, and that seemed like a slightly different market, still in the same city, but you’re talking about $200 or $230 a foot, which would put that same type of same square footage at like $150,000 or $180,000 for new construction because the cost of lumber so big. So, I’m on board with you by buying distressed value at operationally deficient or…
AJ Osborne: And still, for us, is the main driver and still has quadrupled. I mean, I was building literally four years ago or whatever it was at $30 a square foot. I’m putting things out of the ground at $130,000 a square foot right now. So, you can see there’s going to be a lot of operators. If you’re building today in self-storage and you’re building a nice facility seat indoor, you’re at 130 bucks a square foot. You need to get the highest rates that are in the nation to really make this work. And so, you have a lot of operators that are going to get in big trouble because they’re putting new stuff out of the ground at the highest prices we’ve ever seen with high debt loads. And if you have a vacancy or a contraction in that market because it’s month to month, you could see a lot of operators get hurt and get in trouble. So, we’re really nervous about that.
Once again, I’m building 650,000 square feet right now, net rentable square feet. So, we’re big builders. We’re building in really high-demand areas that are really hard to do. We’re building totally different types of products that you’ve ever seen or in the marketplace that other people have never done. And we’re doing it in areas where the revenue per square foot is double the nation’s average.
Josh Cantwell: Nice.
AJ Osborne: That’s the only places I cut out 80% of the markets that we would have developed in pre-COVID, we won’t touch now because the math doesn’t even work anymore.
Josh Cantwell: Got it. You mentioned interest rates several times, and I think, look, the Federal Reserve only has a few tools left in their toolbox and fighting obviously an economy that’s still recovering. They’re fighting obviously many supply chain issues and then runaway inflation, and they need to raise rates to kind of temper the inflation a little bit. At the same time, one of the things we look at in commercial obviously affects apartments. It affects self-storage, mobile homes, etc. But the Fed can’t raise rates that fast or that much because the residential real estate market is so big, so much bigger than apartments or even self-storage that the faster they raise interest rates, the majority of average Americans, average homeowners, they hold their wealth and their house. And if they raise rates significantly, it’s going to temper the market. And then people could even lose equity in their homes.
AJ Osborne: 100%.
Josh Cantwell: So, what factors or what conversations are you listening to about interest rates that impact the self-storage side of things?
AJ Osborne: So, interest rates is really important, especially right now, and it has more to do for me with the cost of assets, the cost of building. We’re in an area where the cost has exploded, and money is cheap, so it’s actually buffered that cost to build, right? I mean, the amount of increase that we’ve seen in two years on building costs is historical. If you tie that though, with an increased cost of capital, those historical numbers, it doesn’t work anymore. So, what you’re going to have happened is the price of homes, the price of everything where it’s at today, you increase the cost of capital for buyers. It doesn’t make sense.
In most markets, it’s hard for buyers to even make these numbers work today at unprecedented low rates. It’s a big worry for us because that market and that slowdown in the housing market directly will result in self-storage occupancy. So, we have what I view as you have long-term occupancy, but then you also have more of the short-term occupancy that is due to movement. That short-term occupancy in a lot of markets can be huge, like 30%, right? And that long-term occupancy is on average, we’re talking what, maybe 1.5 to 2 years and that’s long term. So, all of a sudden, you slow down that housing market due to high-interest rates, and people stop moving. You’re going to really see that hit self-storage as far as occupancies go and then you have a downward cycle of rates as people try to fill up their occupancy. New builders have to get people, and they have to pay bills, and you start to see that deceleration of that revenue increase that they’ve seen during the opposite time when prices were going up. but everything was affordable. And that is a big, big thing we’re looking at.
Josh Cantwell: I love it. Yeah, I love to see what’s going to happen here. The Fed’s hands are kind of tied.
AJ Osborne: They’re tied. And we could enter into a Paul Volcker era where Carter, Paul Volcker allowed interest rates to rise to combat inflation, knowing and everybody knew it was going to take the economy. And unfortunately, for Carter, it didn’t matter. They had to do it. They had to stop inflation. They tanked the economy. Carter got kicked out. They put it into a recession, but they tamed interest rates. And that’s an important thing to remember. At some point, it doesn’t matter if they’re going to put us into a recession, they have to do.
Josh Cantwell: Yeah. And I think there’s some argument that obviously, there was the COVID recession within the first six months when COVID hit, and the lockdowns happened. But the economy has roared right back since…
AJ Osborne: And it’s important to know when you’re looking at the data. And one thing that we do is (A) I don’t listen to mainstream media at all. We are our own, we have our own people, we get core raw data, we put it into models, and we look at it there. We have a whole team that actually does analysis for us. And when we’re looking at, first of all, you had a huge spike in savings rates. At the same time, right now, we have the lowest velocity of money and the economy that we’ve had since, I mean, decades, we’re talking prior to 1980. What that means is all this cash, and we’ve had an increase in the total capital in the markets by 40% in the last two years. The most money creation we’ve ever seen in the history of the world.
So, the money creation happened, savings happened, all the capital sitting around, and it’s not moving in the economy and people say this is transitory or this is a supply chain problem. China shipped more products last year than it did in history. So, products are moving around, that’s not the problem. But the money isn’t moving around. So, when you look at that dollar moving through the economy, those dollars aren’t even moving yet, and we’re having inflation. What happens when those dollars start to move? What happens when we get all this mass amount of money that actually starts to go back to a normal velocity rate? It’ll be unprecedented.
So, right now, that money is being held down. It’s not moving through the economy. We’re already having inflation. And really, that’s kind of what you hope happens. You really hope this money doesn’t start moving. That money really starts moving through the economy and that’s going to cripple us even further because we don’t have a system. The supply chain problems that we’re having, it’s not just because of COVID, it’s because the supply chains were never built for this kind of demand in this much money. So, it’s not like not having COVID will stop that, right? That money goes to work. Our supply chain cannot handle that much money moving through the economy at a normal velocity rate. Those are things that we worry about.
Josh Cantwell: Sure. Absolutely, you’re making so many great points there economically, big picture as well as very micro. So, is your thesis done that at some point, the money starts to move, inflation actually gets worse and higher, thus triggering the Volcker scenario, where they have to raise interest rates substantially, and Biden is essentially a Carter 2.0, the economy has to go into recession, is this kind of…
AJ Osborne: Kind of, not to the extreme? We’ve done a lot since Carter to really get it, but that doesn’t mean it’s not possible. And I do not believe anybody that says it’s not possible to have that happen again, you should worry about it. If anyone that talks and knows like that, they don’t know. I don’t know, you don’t know. So, it is possible. Likely? We don’t believe it’s likely. We do believe, though, that interest rates will rise, which is important to know that the effect of interest rates rising, we don’t need interest rates to rise to 15% to have happened what happened to Carter because we don’t need it. The interest rates are so low. There’s so much money out there, and prices are so high due to supply chain problems and everything else. It doesn’t need a 10-point basis. Right now, 300 basis points or a 3% rise in interest rates would cripple the economy. With that said, though, it also shows how sensitive that capital is going to be. So, that rise in interest rates is going to have an effect. And we think that’ll keep that money down and we think that’ll help it.
So, we do believe interest rates will rise. Inflation, we do not believe, is going anywhere. We will see persistent high inflation. The money is still there. It’s got to move, it’s got to go, that’s not gone away. So, the fundamentals that are causing inflation haven’t changed, but interest rates will help slow that down. So, we think it’s going to be this almost weird phase that we’re in. We don’t have super high-interest rates, but we have super high costs with rising interest rates. And it’s going to create a stagnation period. That’s actually what we see most likely, which for that, we prepare micro and how we execute within these environments to make sure that these markets that have more downside than they do upside in assets that are at the top of the market or price we’re not buying. I’m buying in great markets with high demand, low-performing assets, and just bringing them up to standard. And that’s how I make my money.
Everything else is great. If it happens, great, but I’m not betting on the economy to make me money. And that’s a really dangerous thing right now, to be betting on that things will just go up or keep going up. That’s a risk we wouldn’t take. And two, we have the expertise to where we don’t need. We can make incredible returns, not having the economy perform like it did in the last past five years. And in self-storage, the last past five years were unprecedented in total returns, and most of the people that have gotten into it, they didn’t go through the Great Recession like we did. And they’re new into self-storage and they perform now, they’re modeling because they were around for the last three or four years, and they’re modeling that to continue. That’s ludicrous because it’s so out of the norm of what we’ve seen in performance. It’s not going to perform like it did in the last five years or the next five years. I mean, if you look at what that would just do to revenues, rates, and asset values, it’s not even logical. The consumer can’t sustain that. So, we just don’t see it happening.
Josh Cantwell: Yeah, I love it. We’re having very similar conversations on the multifamily side. And the one thing that we’re playing with when we look at our models is the fact that there’s really no affordable housing out there. There’s a lot of affordable housing that’s even being started by builders that people are just simply because of the low cost of money, prices keep going up. Inflation, like you said, keeps going up. There’s more money in the system. Values for single-family homes keep going up. It’s pricing people out of even buying a house because if you can imagine if your house used to be $200,000, now it’s $300,000, and you got to put 20% down. Even if you’ve got to put down 3.5% on an FHA loan, 3.5% on a $200,000 house is 14 grand. Now, it’s $21,000, and your average new homebuyer of an apartment complex can’t do it. So, they’re being forced to stay in apartments longer. So, even though the interest rate is going up and the cap rate is going up, we’re subsequently modeling the rise of rents because there are more people that can’t afford to buy a home.
AJ Osborne: Could not agree more with your synopsis. We believe rents will keep rising. And what you said is really important, and I want to hit on this because it ties into multifamily plus storage. There’s a misnomer that people think that it’s people in apartments that rent storage. That is not the biggest demographic at all. The biggest demographic is single-family residents that are living in normal middle-class homes. That is our largest utilizer of self-storage. It is not apartment dwellers.
Josh Cantwell: Yeah, I believe it.
AJ Osborne: Yeah. And that shocks a lot of people. And when you look at our overall performance, let me give you a number here and let me tell you the average. These are all my value-add storage facilities that I talk about that I did, all of them combined. So, I took an average of all of them in the last nine years. So, we’re rolling out our self-storage fund that we’re doing this. We do value-add storage. We just rolled it out this week. So, what I did is I took all our past performances to show this. And right now, this is important for you to know, we have not sold any of these assets. So, the numbers that I’m giving you are no sell at all. So, we’re not taking in a big sell at a high market at all. This is only cash flow. Our cumulative cash on cash return for my firm in the last nine years on all of our assets is 471%. Total return, including equity, is over 1300%, never selling one asset. That equates to a rolling average of 52% on average annual cash on cash return. Not IRRs, cash on cash.
And now, once again, I don’t expect that to do it, but that shows you, now go compare those same numbers in the self-storage average on weeks. Everybody else, go take it on self-storage alone. Those numbers don’t exist. Or other operators, they get numbers like that. They have to sell the assets to actually get that equity. We still own assets. They still cash flow all of them. And what that shows, though, is the performance in self-storage amongst operators is astronomically different, and that is due to running the business, not flipping anything else. That’s really, for me, why I love this asset class in this industry because we could build a firm focused on technology and access and yield high-demand markets, underperforming assets, and we don’t need a big event for us to make great money.
Josh Cantwell: Yeah, I love it. That’s fantastic. And this is the type of information, guys, for our audience, that you’re only going to get from a guy who’s operating a super high level, one of the top 70 operators of self-storage in the world to be able to kind of produce these kind of numbers but also understand their numbers and share them successfully. So, AJ, I’ve got one more question for you, and this is really just around kind of what it takes to be successful. Again, guys, if you want to learn some of the nitty-gritty about how to buy and structure self-storage, go back and listen to my first interview with AJ. Again, it’s Episode 131, July of 2020.
AJ Osborne: And I’ll jump into this, but I also want to share. The information on how we do what we do, everything else like that, I give all of that away 100%. So, if I tell it is, it is, I don’t hold anything back. It’s very important for me to be transparent. And that’s when you talk about what makes a successful entrepreneur and what are the things that really drive, I do a few things, those numbers didn’t happen overnight. Long-term thinking for successful entrepreneurs is so, so important. We are taking years’ worth of work, including years where me and my three partners, who are my father and my brother-in-law, we built our management company. We have reinvested into our company for five, six years and we didn’t take any money out, not a salary, nothing.
And so, the cost to get those returns to us was big. So, I find the most successful people are so long term. Me and my partner, who is my father, we worked another job during that time and reinvested everything back into the machine that could produce those numbers. And those numbers, by the way, are not compounded returns, those are straight-line averages of individual asset performance. And it doesn’t take in anything that I’m saying, but I did. That money, though, that cash flow that came out of those returns, we kept returning in. So, now, we can get those returns off every deal, but it’s this long-term thinking. We went through the Great Recession, right? We came out. We have a strategy. We know our numbers, we stick to it, and we don’t get distracted. Over the long term, that yields numbers like that.
Now, in the short term, though, it doesn’t, right? So, if you look in the short term, maybe we had a down year, or maybe it took us three years to get an asset to perform the way that we wanted it to. But we never wanted to be a short-term investor and we never wanted to be in a position where we had to make short-term decisions at the risk of long-term results. And I think that’s really, really important.
Josh Cantwell: Yeah. We just had a conversation yesterday, AJ. One of my partners, said, “Look, if we sell this building now, we’ll make 10 years of cash flow all at the sell.” And I said, “Be careful.” The conversation we had is I said, “Be careful because the point of the asset is to generate the passive income.” We put in the work, could be a year, could be four years, whatever it is, to generate the passive income. And then over the next 10 years, we have the passive income and the equity, which just continues to grow and grow and grow. So, if you just take the one conversation, which is, like you said, a very short-term kind of statement or a short-term question is why don’t we just sell it? We’ll make 10 years’ worth of equity or 10 years with the cash flow at one time. Yes, but that’s short-term. You lose out on the depreciation, accelerated depreciation, appreciation, cash flow, the equity, 1031.
AJ Osborne: The compounding nature of it all.
Josh Cantwell: Right, and the reputation, all these types of things that we had planned on doing. Now, our smaller assets, sure, we could sell them, no big deal. We’ll just roll them up into bigger deals. That makes sense. But just selling things off, all of a sudden now, you’re a short-term player again. Just had this conversation yesterday. So, you mentioned long-term thinking, that’s a big one. What others do you think there are to being really successful in this game?
AJ Osborne: Next thing that I want to touch on is you hear this a lot and– well, there are two things, I’m going to hit on the first one, being very clear on who you are, what you want, and what your strengths and weaknesses are. So, I wanted to build an empire. I wanted to be a top performer in an industry, right? And so, I had to make short-term sacrifices to reach those long-term goals. And I was very clear on what I was willing to give and do to hit that. That is not everybody. A lot of other people are like, I don’t need to be a leader, I don’t need to be this. Maybe I want passive income. Well, then, maybe you shouldn’t be building it on your own, but you should be investing with other people. Maybe you have a smaller mark, right?
So, what I did is not something that somebody else should do. Now, if you want the results, though, you have to be very clear with yourself on what it’s going to take, you have to accept those, and you have to go and you really have to make the sacrifices, right? I am the hardest worker in our business, and all my employees know it. Nobody’s outworking me because of my goals, I am very realistic about what we’re trying to achieve. And we’re seeing the fruits of that, but we’re talking this is 15-plus years and the amount of sacrifices we had to make and get there. So, being very clear on who you are, what you want, and what you’re willing to do to get it is really important. And that comes down to happiness, that comes down to everything. Don’t fool yourself. Don’t copy what somebody else was doing, right? It’s got to be based upon your strengths and weaknesses.
So, I am dyslexic and I am ADHD, right? I know this. So, I have to put systems in place in my life to keep me organized and I’m very rigorous about it. There are people in my life that look at every detail. They’re measuring everything. I have handlers because I know that I need that in my life and I’m okay with it. And I recognize those weaknesses. It’s one of those things that some weaknesses, I always need to be working at getting better, but there are other weaknesses that I need to say the energy that I put into this weakness will never yield a result. And that’s just kind of intrinsic, and I just got to come to Jesus and say, “Hey, it is what it is, and I focus on my strengths.”
Josh Cantwell: Love it. Love it. So, that clarity is big. Matter of fact, AJ, I was watching the Tom Brady special on ESPN+, Man in the Arena, just this morning when I was working out. And one of the comments that he made I thought was so good about what you just said is that Tom Brady said, “Listen, 50 years from now, nobody’s going to give a sh*t about the seven Super Bowls that I won. I’ll be in the Hall of Fame. I’ll be probably dead. I’ll be 94 years old. Nobody’s going to give a sh*t. So, what matters, regardless of the wins and the losses is did I do something that made me feel fulfilled? Did I have joy and relationships in that moment? That’s what was most important.
To hear someone like you, $100 million portfolios, massive portfolio, million square feet you’re developing, Tom Brady talking about seven Super Bowls and really none of that sh*t matters, what matters is the joy of today, is that in line with who you are and what your goals are, that’s such a good personal message for our audience. It’s not about how many units. You don’t own 4,000 units like Josh Cantwell. You don’t have this massive self-storage like AJ. So what?
AJ Osborne: It doesn’t matter.
Josh Cantwell: It makes you happy, right? Do you get joy and fulfillment from the work like AJ is talking about? Do you get joy and fulfillment from coaching youth sports, like you guys all know, I enjoy? The joy of being able to hear, your head down under the pillow and thinking, damn, I had fun today, that’s what’s most important.
AJ Osborne: And lying to yourself, and this can be really hard for people. So, I’m an avid skier and fly fisherman, right? And I used to think that that’s what I wanted to be. I wanted to literally be a ski bum and a fly fisherman. And I was like, oh, I never even wanted to work in an office. But what I found was that actually, both reason I liked that because I liked being with other people and I liked achieving goals, so we had all these things that we were trying to do and we had metrics that we were competing and trying to hit, and then actually, nothing to do necessarily with those activities. Yes, I like the outdoors, everything else like that.
And so, when you get to the root causes, that’s really important. What I found is, I love going, I love taking risks, I love hitting goals, and I love working with other people. So, for me, I want to get into the office. I want to go to those activities with other people, everything else. And that can be hard to actually come out with what the root driver is of you. And that root driver can be applied to a lot of different circumstances. So, it’s about finding the root driver and then applying it in the circumstances that will yield the results that you want. And that’s something that a lot of people miss, hobbies, or I think, they view like something is, oh, well, I like this. Well, just because you like playing video games doesn’t mean that that’s your purpose, your strength, or anything else, right? You need to find what it is about that, find and go to the root cause, and then apply it to something that yields great things for you. Then all of a sudden, you love what you’re doing, you’re happy with the life you’re building and the outcomes, and that’s the goal.
Josh Cantwell: Absolutely. AJ, that’s fantastic. I almost feel like we should wrap up there because that was so well said. So, before we sign off, I know there are a lot of people in our group, our audience, our listeners who will want to connect with you. I know they can go to AJOsborne.com. I know you have this new podcast. Just tell us where people can connect with you.
AJ Osborne: Yeah. So, we are the leading authority in self-storage, our self-storage podcast, Self-Storage Income. It’s the largest by far on self-storage, also the number one bestselling book Investor’s Guide to Growing Wealth in Self-Storage. So, we have two sides. I have the AJ Osborne podcast, everything else, which is all business, economics, things like that. Then we have pure self-storage where our only goal is to be the leader, that’s also including YouTube. Once again, we tell everything. We don’t hold back secrets, nothing, because I don’t do it. I’m like, yeah, good luck trying to do what we did in 15 years. By the time I give you all my secrets and you do it, which you can, you could take everything I did, but I’m going to be light years in the other direction. So, we hold nothing back. We tell everything on either AJ Osborne or Self-Storage Income, either one of those YouTube, podcasts, or just Instagram, AJ Osborne, and we show data, numbers, everything else.
Josh Cantwell: Oh, great stuff today, AJ. Listen, man, thanks for carving out some time. It’s great to reconnect with you after 18 months.
AJ Osborne: You too, man.
Josh Cantwell: Congratulations on all your success.
AJ Osborne: Hey, thanks, man. It was great talking.