Josh Cantwell: So, hey, Tom, welcome to Accelerated Real Estate Investor. So happy to have you on the show. Thanks for carving out some time.

Tom Dunkel: Hey, Josh, it’s great to be with you and great to see you again. It’s been a number of years since we crossed paths.

Josh Cantwell: Yeah. Tom and I were just chit-chatting before we hit the record button and got started. We crossed paths all the way back in 2008, I believe it was.

Tom Dunkel: Yeah.

Josh Cantwell: When the world was melting down and the short sell market was heating up. And so, it is great in 14 years to be back with you is fantastic stuff. Tom as I mentioned in the intro is an expert and an investor in self-storage and syndications. We’re going to talk through that. But, Tom, I’m always curious to talk about today’s market. Obviously, the Fed’s going to meet here shortly to talk about possibly bumping the Fed funds rate again by maybe another 75 to 100 bps. The stock market dropped yesterday by 1,200 points, but there’s still tremendous opportunity. So, what are you up to today? What are some things that you’re excited about and things that you’re doing here to wrap up the rest of 2022?

Tom Dunkel: Oh, my blood pressure’s definitely up but it’s not because of the stock market or any of those other crazy things going on out there. It’s from excitement because I’m really excited about the self-storage industry right now. It’s been kind of the sleepy asset class in commercial real estate for a number of years but the last few years it’s really gotten folks’ attention, and that’s for good reason. It’s a great investment for folks that are just looking for a steady flow. And what I mean by that is if you look back 40 years, Josh, self-storage occupancy has slowly just meandered kind of like that lazy river ride between 80% and 90% occupancy over that time period. Meanwhile, in that time period, you and I have lived through the bubbles and even before that, I lived through the Internet bubble. But through all these ups and downs of the general economy, self-storage has always been very, very steady. And today, things are continuing in that direction and even growing because of what we call the Ds. You know, you’ve got displacement, you’ve got downsizing, you’ve got divorce, and then most recently, you’ve got the pandemic.

I know that’s not a D, but that caused people to take their spare bedroom and have to turn it into an office to work from home. And so, those spare bedroom furniture is ending up in a self-storage facility. So, we love where we’re at right now. We’re big fans of the self-storage industry and can’t wait to talk more about it as we go along here, Josh.

Josh Cantwell: Yeah, for sure. So, yesterday I was on a webinar with the CEO of Marcus & Millichap and the finds he was sharing were pretty wild. Were you on that? Did you listen to that as well?

Tom Dunkel: You know, I signed up for it and I couldn’t be on it because I had an investor call but, yeah, I’m looking forward to listening to the replay. I’d love to hear about it.

Josh Cantwell: Yeah. Make sure you listen to it. And my audience, if you’re not following the CEO of Marcus & Millichap, I think his name is Hessam Nadji, something like that. Just fantastic content and webinars around the global commercial real estate market. So, definitely check that out. But yesterday they had Larry Summers on who was the former U.S. Treasury secretary that was very involved in the crash of 2008, ’09, ’10. And I thought it was interesting, Tom, that he said we are not in a recession. He said, “Look, when you look at what’s going on with the market, you look at job growth, you look at income growth, you look at all these different kinds of things and you look at, well, GDP went down a little bit, two quarters in a row.” So, he said, “Sure,” and he said, “I liken that to now everybody has cash liquid available and people have jobs and there’s 5.2 million jobs that are out there. They’re not even filled that need to go get filled.” And then you say, okay, well, we have all this cash available. We have jobs or incomes are growing. We’re going to go buy stuff and we’re going to take everything off the shelves because we’re going to consume it all. And then GDP has to catch up with that and deliver it.

And there’s still supply chain problems. You know, getting containers delivered from China, getting it out of stores. It’s still kind of an issue. So, GDP growth might be going down but he likens it to the fact that the store was full of inventory and now all the inventory is gone. Now, the store is trying to play catch up on rebuilding the inventory. And he also mentioned to your point about self-storage, that self-storage vacancy rates have gone down from 20 to 15 to 10 way down to the single digits. And that’s what you’re referencing as far as you’re very bullish on self-storage. So, you’ve seen that. It’s been very 10% to 20% vacancy but it’s actually gone down to single digits lately. So, I imagine that your operations, your performance is well outperforming your pro formas at this point.

Tom Dunkel: And that’s, in fact, what’s going on. Of course, we’re tracking the operations very, very closely. And we really do push the envelope when it comes to working that demand curve. So, we know that storage is popular right now in the markets where we are. Those markets are attractive to us because they’re typically underserved. So, that allows us to really be aggressive on pushing up our rental rates. And because it is self-storage, it’s a month-to-month contract that theoretically we can raise our rents every month if the market would bear that, we don’t subject our customers to that. We actually do two raises per year on existing customers. But meanwhile, our street rates for new customers continue to go up right now, which is great. Our rates are up about 20% year-over-year.

Josh Cantwell: So, we understand like people working from home, like nobody wants to go back to the office and they’re having to use the spare bedroom now for an office so there’s nowhere to store their stuff. That makes total logical, common sense. But my understanding, too, is that businesses because they’re not going to the office, they’re letting some of their office space leases expire, and then the businesses are also a major customer for self-storage. So, talk through that phenomenon because that wasn’t the case five or ten years ago.

Tom Dunkel: Yeah, absolutely. Well, so you have like pharmaceutical reps, right? Like they’ve got pharmaceuticals that they take around to their doctors. Well, they need a place to keep those. And the other thing, Josh, that’s going on now, you touched on it a minute ago, the whole supply chain issues, right? So, we have contractors out there that are buying up as much material as they can get their hands on because they have upcoming projects and they don’t want to be subject to the supply chain issues. So, they’re renting large units from us. Across our portfolio, we’re seeing our large units are very, very much in demand. And so, those contractors are using that space to put their lumber and their plumbing materials and all those things in those spaces for their commercial purposes. So, yeah, that’s spot on. And in fact, some of the facilities we own have opportunity for expansion. So, when we expand, we look at what are the demand drivers in that market and we size those new units accordingly. So, we’re putting in a lot more like 10 x 20 and 10 x 30 units now, as opposed to 10 x 10s, which is more traditional consumer-sized unit.

Josh Cantwell: Got it. And also, to your point about those commercial tenants purchasing as much inventory as they can so they can keep it so they have it when they need it, the other thing that they mentioned yesterday was that prices of lumber, concrete, steel is actually going down. And partially because a lot of the consumers like us have gone out feverishly buying everything we need. Then in your case, your customers are storing that in your units. And now as we catch up with what we need and get comfortable that we have the inventory to do whatever we need, whether it’s construction, whatever your business is, you have that material sitting in your self-storage locker. Now, there’s not as much demand to go buy more product because it’s sitting in your self-storage unit and they reference that now but those prices are starting to come down because the supply chain is catching up. And in some cases, construction companies, they have more than enough inventory sitting in their self-storage unit kind of take them through the next three months, six months, nine months. So, that phenomenon, again, is still a COVID supply chain phenomenon that’s definitely helping but the fact that people are not going to return to office anytime soon on a substantial basis, the residential customer for self-storage, I think is going to be in demand for a long time.

Tom Dunkel: Oh, sure. Yeah. And we’ve seen that through history now that folks are using storage and we hear this story a lot, Josh, is someone a customer will come up to one of our facilities. They’ll say, “Hey, I think I’m going to need this unit for like three or four months,” stuff like that. And then three or four years later, they’re still in the facility because in good times that $150, $200 a month, it’s kind of it’s low on the budget list as far as paying attention to things. And we like to put our customers on auto-pay so it becomes kind of a planet fitness model where it’s more of a pain to cancel it than it is to just keep going with it. But then in bad times, Josh, that’s when people actually need the storage because they are selling their house or they are moving somewhere else. And so, it really becomes a higher priority budget item. So, I think those are a couple of reasons why I think storage has been so steady over the years.

Josh Cantwell: I love it. I love it. Now, going forward, Tom, if our audience want to invest more in storage? Let’s say they want to be more of a general partner finding deals of their own. How is that done? I don’t own any self-storage. I’ve had several self-storage guests on but I always love to hear our guests talk about what is their acquisition strategy, how are they finding storage units, how are they evaluating markets and places? Because, look, making commercial investments is a calculated risk. So, how are you reducing your risk as much as possible? What are some factors that you look at and how do you go about your acquisitions?

Tom Dunkel: Yeah, that’s a great question, Josh. And that’s one of the things here at Belrose Storage Group, we’ve really put a lot of time and effort in to building out those systems and building out that team because just like any other commercial real estate asset class, it’s competitive out there. So, we have to have a better, faster, stronger kind of approach. But we have an internal team and we do an outreach to facility owners, starts using virtual assistants. They’re making hundreds of phone calls per day into the markets that we’re targeting. And then when that VA gets a warm lead, it gets kicked over to our next phase where there’s a warm conversation that takes place. And then if it really does look like there’s a potential transaction there, then it goes to my partner Joe Downs and he builds that rapport with that owner and really just tries to add value any way we can. You know, we’re not necessarily starting the conversation like, “Hey, you want to sell your facility?” It’s more like, “Hey, we own a facility a couple of towns away. How are things going for you? You know, we’re new to the market. Here’s what we love. Here are the challenges we’re running into.” Certainly, try to be more of a value-add partner there.

But a lot of times those conversations end up with, “Well, I’ve owned this facility a long time and I’ve been thinking about selling. I hear prices out there are pretty good now,” which highlights something else, Josh. I think it’s important for people to know about the self-storage industry. You know, sure, people driving around their neighborhoods, they see the public storage or the extra space or the CubeSmart. But the fact is those big real estate investment trusts only control about 25-ish% of the self-storage market, which means 75% of it is either smaller regional players like us or moms and pops that got into the storage industry almost by accident. You hear the story all the time about how they had some extra land. And it’s funny, a lot of the facilities we see will have like a house in the front and then there’s storage in the back or there’s like a convenience store or some other business in the front with storage in the back because they had extra land. And so, they’re not really storage people. Their whole goal is to just keep those units full, whatever they have to do. So, to do that, they keep their rents artificially low because what they don’t want to do is have to do an acquisition team or an acquisition plan or a marketing plan or have a website or any of those kinds of things. And so, they don’t keep tabs on the rents in that market.

So, it gives us the opportunity as a professional business and professional self-storage operator to go in there and push the rents and clean up the delinquencies and fix the roll-up doors on the ten units that this guy has had unavailable for a year because he just wasn’t getting around the ordering of springs.

Josh Cantwell: Right. Yeah. We just took over a building that we bought. It had 40 down apartment units out of 300.

Tom Dunkel: Right.

Josh Cantwell: It had 87% occupancy. When were these units last available? And we found out it had been years since they were turned, you know.

Tom Dunkel: Yeah. So, you’re looking to your chops on that one, right?

Josh Cantwell: Oh, yeah.

Tom Dunkel: You’re like, “Hey, There’s some found money there. Let’s go get it.”

Josh Cantwell: I love the fact, Tom, that you’re going after self-storage owners directly using a direct outreach program. Let me ask you, on the flip side, obviously, the other big question is funding, right, is getting funding, limited partnerships, investors. And there’s obviously big high net worth investors out there, institutional investors. And then that was what I would consider a traditional private investor or private lender, somebody that could be 100,000, could be 2 million available to invest. What’s your preferred method for syndicating and investing and recruiting investors for your deals?

Tom Dunkel: Yeah. It’s a great question. And it’s one of those things, Josh, that’s evolving for us. Like, we’re a growing organization. We have big growth goals. And so, that whole what we call capital servicing, when we reorganized earlier this year, we made capital servicing its own lane if you will within our company. And that’s actually what I’m in charge of. So, traditionally, we have reached out to the $50,000, $100,000 friends and family style capital raises. But now that our capital requirements are going up, we are starting to reach out and we’re doing more of the, sorry to throw around SEC terms, but the 506(c) offering, which means that we can generally solicit out into the world. So, we’re having to go that route because we need to throw out a bigger net to raise the capital that we need. But we’re trying to maintain that thought leadership position in the self-storage industry so that we’re attracting investors to us as opposed to us having to go out and find them. They’re finding us. So, that’s partly why I’m here today with you, Josh, is we’re putting ourselves out on the podcast. We’re writing articles or doing press releases, speaking at industry engagements, and belonging to mastermind groups and all of those kinds of things just try to keep our names out there.

But we do really like, Josh, working with the smaller investors because, honestly, that’s one of the reasons I got into real estate to begin with was because I just saw it as a better way for the average Joe to go out and create that financial freedom that everyone’s looking for.

Josh Cantwell: Yeah. So, do you have experience with super high net worth? Do you like working with them? Are there pitfalls working with those kinds of like family offices types, super accredited? Obviously, then there’s lots of gatekeeping to work through. And if you have, what are some of the pitfalls that go with that type of investor?

Tom Dunkel: Yeah, 100%. So, yeah, we’ve tried lots of different avenues and you brought up family offices. The facilities that we’re buying are in, generally, like the $3 million to $5 million range. So, we’re only needing like maybe a million or 2.5 million of equity typically. And what we found going to the family office route and I don’t know, maybe others have had some more success but I kept running into a number of dead ends in that world because those family offices, I mean, these are like ultra-high net worth investors, right? I mean, they’ve got billions and they’ve got whole teams and whatnot. And so, for that family office to have that team engage on a deal, they want to write a bigger check, right? So, they want to write a $10 million check minimum or 20 million. And they want to see a deal flow where they can continue to write those checks with a particular sponsor group. And so, that ended up being our challenge in that world because the deals, we just didn’t have the big enough deals. But you know what? I think the other thing with family offices that we found too is that’s a long cycle like to get those folks on board.

I mean, they’re not going to get an email or have a meeting with you and then say, “Yeah. Okay. I’ll invest.” You know, it’s going to be a multi-month, if not multi-year process for them to really get to know you which is fine. And I’m sure there are people out there doing much bigger deals than we are. You know, we’re certainly not the biggest player out there. But that keeps us coming back to the high-net-worth individuals who are more than folks who can write $100,000 or $250,000 check to participate in our deals.

Josh Cantwell: Yeah, love it. And what’s the typical structure, Tom? Help me understand. And again, I’m just going to make the disclaimer. This is not an offer to invest in securities, but we’re just talking high-level about structure and strategy. What is it we’ll structure with GP/LP in a self-storage deal? I’m asking for selfish reasons because I’ve got some money to deploy and I look to expand our commercial holdings outside of multifamily. What’s a proper structure like a pref return equity? What does that type look like? Hold period? What’s kind of a good normal structure for you and what works for your business?

Tom Dunkel: Sure. So, we started out, Josh, when we first started raising capital for these kinds of deals with just a straight split between the GP and the LP. But we would always include a preferred dividend to the limited partners and that was typically in the 8% to 10% range. So, we did that because a lot of folks especially if they are looking for some income, they like to see that kind of juicier preferred return. And then the thing with self-storage actually that I like is as long as we’re kind of going under the covers here is our splits are actually more in favor of the sponsor a lot of the times. So, some of the initial deals that we did were 65% to the sponsor, 35% to the investors. But we were still able to get our investors to kind of the mid-high teens, targeted IRR range and that’s on like a 2 to 3-year hold, Josh. So, we had some investors, though, that we had known over the years because we’ve raised over $50 million of private money over the years in our various businesses. But we had some investors kind of balk at that split. So, we’ve actually at the beginning of this year, we adjusted our terms. And so, now we still offer the preferred return which is actually cumulative and that varies in the 8% to 10% range, still pretty juicy.

But now we have just a small waterfall. So, we pay investors 80% of the excess cash flow and profit split up until they get to a 15% IRR, and then it flips to us 80%, 20% to the investor. But again, we are still gearing, you know, we’re doing our numbers, we’re doing our projections, our underwriting. We’re always gearing the IRR to the investor to be in that mid to high teens range, maybe a little higher if there’s a development component to it.

Josh Cantwell: I love it. That’s great. That’s exactly what I was looking for. So, I like the fact that you’re flexible and changing with your investors and with the times, and each deal is a little different. And listening to those investors is key, right, because without them, without us, it’s very much a partnership. You know, the deals don’t happen unless both sides of that table are happy.

Tom Dunkel: Absolutely. And I’m sure you witnessed this as well, which is when you do a good job and you do right by your investors, they come back. And a lot of times what we’ve experienced is they not only come back, they come back with more money and they bring their friends. And so, we love that. That’s telling us that we’re doing a good job.

Josh Cantwell: That’s right. Tom, if I was a limited partner in one of your deals, a lot of the guys will ask me when I’m looking at multifamily as well, what are the risks? What’s the doomsday scenario where a self-storage deal doesn’t work? And then how do you rectify it or exit to save the investors? So, just high-level, what are some of the things that you keep your eye on when it comes to that? What are the risks? What could be worst case scenario and how have you kind of insulated yourself to make sure you protect for that?

Tom Dunkel: Josh, I have to be honest here. I’ve been on a number of podcasts and I’ve had a number of conversations with investors, and I get this question a lot, and I have to be honest, I actually stumble with this question because I have a hard time thinking about a scenario where self-storage would like totally tank. And I’m just being honest. I mean it’s real property, right? So, the only things that I’ve been able to come up with, well, first of all, let’s talk macro, right? So, if the world goes to hell in a handbag, storage is probably the least of the problems as far as other potential investment opportunities. So, I think it’ll survive the best but still could have some serious downside if really bad things happen. But again, anything that macro I think is going to hurt other things more. And then the other thing would be market, right? And I think what it ultimately comes back to is us as sponsors I think is we’re probably the biggest risk because if we missed something in a market like one of the things we look for, Josh, and you probably do this in the multifamily world as well, is we look for a diversified economy in the market where we’re going to invest. We don’t want it to be a one-factory town where that factory goes out of business and then the town’s out of business, right?

So, we do a lot of homework upfront. We’re looking at the market. We’re looking for growth or at least a steady market with good income, low crime, diversified economy, low unemployment rate, low poverty rate, those kinds of things. But I guess there could be a scenario where something happens in the market where we own a facility and something devastating for that particular area. But that leads me to think about natural disasters, right? And of course, I can’t control natural disasters but with real estate, you can buy insurance for that stuff, right? So, again, I struggle with this question because I can’t really think of a real doomsday scenario just for storage. You know what I mean?

Josh Cantwell: Absolutely. And I think keeping your eye on this return to office is obviously something that’s got to be on your radar because if people are forced to return to office, which isn’t going to happen but if they were, then some of the demand for, “Hey, I’ve got to go back to the office, which frees up my other bedroom,” I feel like COVID has just structurally changed our economy to the fact that employers and employees are now going to expect a diversified maybe go to the office for one or two days, work from home for two or three days type of thing or full work from home. I just believe that we’ve convinced ourselves that that’s a very doable economic way to run a business. I’ve been doing that since I had cancer in 2011. I let all my employees work from home when I was sick 11 years ago, and we’ve been pretty much virtual ever since. Obviously, people that are on-site are at our apartment complexes all the time and we have an HQ office, but nobody ever goes there. So, I believe that that’s really what COVID has proven to us, is that we could operate in that scenario. And I don’t see that reversing back to the way things were in 2019. If it did, maybe that would drastically influence the self-storage demand but I think you’ve got to make a bet when you’re an operator like you or like me, you’ve got to make a bet based on the economics, and the economics are just purely different than they were three years ago.

Tom Dunkel: Sure. Well, of course, self-storage has existed long before COVID came along. But another thing we look at that supports the self-storage market, even in the instance where folks did go back to the office, we are a country just chock full of consumers, right? I mean, anybody can pick up their smartphone right now and go to their Amazon account and buy whatever trinket is looking good that day. And that’s just what we are as an economy. We’re consumers and folks are out there buying stuff and now it’s easier than ever. Credit flows pretty freely and folks are just buying stuff. And millennials are looking at, you know, they look at housing the data suggests completely differently than maybe prior generations. They’re looking at wanting a smaller house or even an apartment but they still want their toys, right? They want the kayak and they want the bike. And so, as part of their overall housing strategy, they include a self-storage unit and they say, “Okay. I’m going to rent that house or that apartment and I’m going to rent that self-storage unit down the street. And that’s where I’m going to keep my extra stuff.”

Josh Cantwell: Yeah, I love it. I love it. Tom, you’ve obviously learned a lot. You and I met back I think we were trying to piece it together. It’s like 2007, 2008.

Tom Dunkel: ’08. Yeah.

Josh Cantwell: And back then we were both in the process of doing short sales. You were a HomeVestors franchisee at one point. You’ve obviously learned a lot. Just talk for a couple of minutes here about your entrepreneurial journey. What was it like coming out of the 2007, ‘08, ‘09 crash? Obviously, my journey has changed. I’ve had kind of a couple different… My mom said to me a couple of years ago, I’ll never forget this, she said from a marriage perspective, “I thought I was married to your dad. I felt like I was married to a different man every five years.” When I look at my entrepreneurial journey in real state and other things, I feel like I’ve been a different investor roughly every five years. What’s that been like for you since we first met?

Tom Dunkel: That’s a great question. And if you’ll allow me, Josh, actually just because I think it gives a good context to the story if you allow me to go back a little bit further before we met. So, I was a corporate guy, right? I was MBA and I went to corporate world. I was doing mergers and acquisitions and corporate finance stuff, which was great. I had a blast. I worked with some great people in the aerospace industry. I had lunch with Neil Armstrong. I mean, I did some pretty cool stuff in my corporate life, but I just knew it wasn’t where I ultimately wanted to end up. I’d always wanted to do something on my own. 2006 rolls around. I met Nutrisystem, the weight loss food company, and that company’s growing and things are going crazy there. I came on board there as an M&A guy. They were looking to maybe go into some other markets. They ultimately decided because the core business was exploding, “Hey, we’re not going to do that. So, bye-bye, Tom.” So, I got the boot in 2006, but as a VP at the company I exited with kind of a nice package, right? So, it was the kick in the pants that I needed though, Josh, to actually launch my entrepreneurial career. It was a little abrupt. It wasn’t exactly how folks draw it up but that’s what happened to me.

So, I got fired. I’m out in the world. They’re looking for something to do. That’s why I ran across HomeVestors because I did want to get into real estate. Of course, my timing couldn’t have been worse. So, that nice nest egg, a nice war chest to cash pretty much dwindled down to about zero over those next few years. So, I learned some hard lessons those first few years. But I was in it to win it and so I just said, “Hey, I got to reinvent.” So, when the HomeVestors, which for those who don’t know, it’s a residential wholesaling company. And so, I did some fix and flips along with the wholesaling and I had a rental portfolio that was a disaster. But around about that time, I found distressed mortgages. So, I started buying pools of distressed mortgage notes, and that’s when my partner, Joe Downs, and I connected and we’ve been business partners ever since for 12 years now. So, that business is US Mortgage Resolution and we’ve done over $50 million in revenue in that business over the years. We’ve acquired going on $1 billion of unpaid principal balance of distressed mortgages in that business. So, the success in that business has allowed us to try out some other things along the way.

So, we tried to do some more fix and flips and that didn’t work. Again, I should have learned the first time. And then we started getting into we did a hard money lending business. So, I think you might have done a little bit of that as well, Josh. But we started doing that and, again, just for whatever reasons, couldn’t get any traction there. I don’t think we had the right people, don’t think we had the right attention span because we did have other things going on. And so, we’re actually in the process now of closing down that business. So, I throw that one in the failure bucket as well. And actually, I started investing as a limited partner in apartments back in 2013. So, I am a fan of multifamily. I’ve had a good run as a limited partner in those deals. But we found self-storage and having had all these other experiences along the way, I think for us, it just checked all the boxes. We got around the right people, we made the right relationships, we built the right team. We spent this year really building out our internal systems so that we can really set ourselves up to grow because we have some aggressive goals the next couple of years. And so, now I feel like we’re just checking all those boxes and we’re just in a great spot and we’re just out there looking for investors to join us on this great journey.

Josh Cantwell: Yeah, I love it. And I wonder, Tom, for you, if it was similar to the epiphany that we had, which was and I have this talk I give. It’s called The Nine Traits of Elite Entrepreneurs. And trait number one is invest for cash flow now. And when I fell into the fund that we ran and we started doing private lending, that was our first real significant entree. That was a $50 million fund into investing for cash flow because it produced immediate cash flow. And then the apartments became the replacement and ultimately where we finally landed were ultimately you kind of see the writing on the wall that this is the promised land. This is the promised land for cash flow. And we fell in love with that years ago. And we’re like, okay, we’re all in for this and this is kind of where I think we’re going to stay, and that’s where we’ve stayed. Sounds like you’ve done the same thing. Like you said, you reinvented yourself, reinvented yourself, reinvented yourself.

Tom Dunkel: Yeah.

Josh Cantwell: That trait, that first trait that invest for cash flow, you just have been doing it with storage. That sounds about right?

Tom Dunkel: It is about right but I have to say that our distress mortgage debt business like we’ve built that so we have a portfolio of re-performing loans there that generate cash flows that fund the business. So, anything over and above that is gravy. But the problem with the distressed mortgage debt business is at least for our company, US Mortgage Resolution, is that it’s very lumpy. When those portfolios come up and we’re able to buy it and then start to liquidate it and get it cash flowing, that is a great period of time but unfortunately, it’s very unpredictable. It’s very lumpy. You know, several years ago, we went like maybe three years without a trade and that’s when we were like, “Well, jeez, we got to get into some other business here to try to smooth things out.” So, ultimately, kind of like you’ve landed with multifamily, we landed with self-storage. So, still the distressed debt business, which is great and it’s still lumpy, but now we’re smoothing things out with our self-storage business where we really spend over 90% of our time on that now, probably more like 95.

Josh Cantwell: I love it. I love it. Tom, It sounds like a lot of the traits that I’ve talked about with my group, you kind of check the boxes on that. Investing for cash flow now is obviously a real big one. You know, working with private investors so you can come out of pocket with little or no money down. I guess, last question for you is what have been your big takeaways? What I heard you say is reinvent. That’s the one word that you use today that really sticks out for me. But what else have you learned along the way? If you give some advice to our audience about what you’ve learned from your journey, what are maybe one or two things that really stick out that if you could pass back, pass forward, whatever you want to call it to say, “Hey, these are some things I did right that I would want our audience to hear?”

Tom Dunkel: Sure. Well, if that’s okay, I’ll share with you Belrose Storage Group’s core values, because I think that really encapsulates the things that we’ve learned in our journey. So, the first one is principle, right? So, we’re always working in a principled way with high integrity. We’re looking for win, win, win solutions across the board. The other one is SEAL Team. So, SEAL Team is the Navy SEALs, right? They’re elite performers. They perform with excellence. They’ve got each other’s backs and they just want to go out and crush it. They don’t want to be the biggest. They just want to be the best. So, that’s our next one. If you’re not from the Philly area, you might not appreciate the humor with this next one, but it’s gritty and it’s not grit because the Philadelphia Fliers mascot is Gritty. I don’t know why his name is Gritty. It’s ugly. But grit, right, is really the basis of that core value and we got to get things done. We work hard together. You know, we just grind, right? We get things done. The fourth one is gumby, right? So, you got to be flexible. You got to be willing to be flexible with a smile. Gumby was always in a good mood. I’m showing my age here but if you remember the Gumby cartoon from way back when, the claymation, I mean, is awesome. But he was always very flexible, always in a good mood, always doing things to help out his neighborhood.

And then the fifth one is champion and it’s not the noun. It’s the verb. So, we champion each other. We keep each other pumped up. You know, we help out folks that might be having a difficult time. And we not only champion each other internally. We champion our communities and we champion our strategic partners. And we try to do what we can to lift them up. And so, I think those core values, Josh, kind of encapsulate the things that we’ve learned along our entrepreneurial journey.

Josh Cantwell: That’s fantastic stuff, Tom. I know that you guys are actively in the middle of a deal right now. Why don’t you just real high level tell us about it real quick? And then we’ll wrap up and we’ll tell our audience where they can engage with you.

Tom Dunkel: Yeah. Great. Thanks for the opportunity. Yes. So, we’re acquiring Kent Self Storage up in Carmel, New York. It’s upstate New York, about a couple of hours north of New York City. It’s a really great opportunity because there’s an existing facility there that is the typical mom-and-pop run facility. It’s beautiful but his rents are like 20% below market. So, there’s an easy big value-add component right there. It also comes with a lot right next door. The owner, he’s in his mid-eighties and he’s just kind of ready to move down to Florida so he didn’t want to take on that project. So, the deal comes with a lot right next door where we’re going to build another facility and basically double the size. We’re going to be able to build that for about $120 a square foot. And where that market is, we’re going to be able to ultimately sell both of these together for $350 a square foot. So, there’s a big arbitrage opportunity there that we’re super excited about. It’s a solid market. There’s a Costco retail development going in right across the street. And we’re offering our investors our typical high-teens IRR with cumulative preferred payment in there like we talked about earlier. So, we’re super excited about this one. It’s going to be a really fun deal. It’s going to be a really lucrative deal for everybody.

Josh Cantwell: I love it. I love it. And if people want to learn more about you or about your business or invest with you and take it for the next step, where can they do that?

Tom Dunkel: Sure. Of course. BelroseStorageGroup.com is a great place to start. We’ve got our portfolio in there. We’ve got the background of all the principals and at that website, you can also register in our investor portal, which is where all the fun stuff happens. That’s where our offerings are presented and the documents are all in there. So, you need to register there if you’re interested in participating. And I would also encourage folks, Josh, we mentioned about a little bit ago about lessons learned along the way. So, we have a free resource on our website that we call It’s the Safe Method. And it’s a due diligence framework for high-net-worth individuals that might be like struggling to figure out how to invest in a storage deal or a multifamily deal or anything outside of the stock market. So, real quick, SAFE is an acronym. S is for sponsor. Who’s running the deal? What do you know about them? What’s their background? A is asset. What is the asset you’re investing in? Is it membership interest in an LLC that owns an apartment building that Josh’s group is buying? So, this is where I love to hear a crypto investor tell me what asset are they investing in so I have no idea. F is for financials. What are the financial projections? What are the return projections? Does this investment meet your individual investment criteria, income growth, capital preservation?

And then E is for exit. How do I get out of this thing? If you invest in a Belrose Storage Group deal, unfortunately, you can’t go to Schwab.com and click, click, click, sell your position. You have to be comfortable with whatever the deal is to be in it for two, three, four years, whatever that investment time horizon is. And you also have to be confident in the sponsor’s ability to execute on that exit strategy.

Josh Cantwell: Love it. The SAFE investing method. I love the acronym. That’s great stuff, Tom. Listen, man, this has been a great interview. Appreciate not only your self-storage advice and ideas and investment opportunities, but your journey, your entrepreneurial journey. It’s great to reconnect with you after 14 years and see all the success that you guys have had. So, thanks so much for taking some time and being with me today on Accelerated Investor.

Tom Dunkel: Thank you, Josh. It’s been great, buddy. It’s great to reconnect. Thanks so much.