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Welcome to the Self-Storage University Podcast, where you will learn the correct way to identify, evaluate, negotiate, perform due diligence on, renegotiate, finance, turn-around and operate self-storage facilities. And your host is a partner in one of the largest real estate portfolios in the U.S. with nearly $1 billion of holdings, Frank Rolfe.
Many people in the self storage industry use the term newbie to describe new entrants into self storage investments. And they use it as a derogatory term to put people down, say, "Yo, you're less qualified, you're a newbie." But I have always hated the word newbie and the concept because it's not really based in fact. This is Frank Rolfe with the Self Storage University podcast. We're gonna talk about why I don't like the concept of the word newbie and the many examples I've seen where the term, more than being derogatory, might actually be a compliment.
So in 30 years, I have seen new investors do really smart things, and I've also seen many seasoned investors do really stupid things. And that one item renders the whole concept of newbies being somehow a lower class of citizen out the window. Now, why is that? Why do some of the most seasoned storage investors make the biggest mistakes? And why do some of the new, newbie investors play it smarter? Well, probably because the more seasoned investors often get a little more cocky on what they're doing and they don't follow along as well on due diligence, financing terms, et cetera. Because they think, "Well, I'm already an established player, I know what I'm doing, I don't have to bother with that minutia." But the new investor doesn't because they don't really have that firm confidence in what they're doing. So as a result, what they want to do is they want to turn over every rock and learn everything about the business.
And a lot of times the new investors are in fact the innovators. They're the ones who have new ideas, better ideas, because the old guard may be stuck in their ways. So in no way would I ever, if you had a horse race and you had a new investor versus a seasoned investor, would I always pick the seasoned investor. Because often they are the ones making the bad mistakes, not the new people. Also, everyone starts out as a newbie. It means absolutely nothing. So it's not like you're somehow a lesser buyer than others because you're buying your first property. Well, everybody started off with no properties and then bought one, so it doesn't mean anything at all.
Also, new people to self storage often bond better with moms and pops than seasoned people do. And that's a very important point. Because if you're buying an established storage facility, maybe in a suburb or an exurb from mom and pop, for them to give you a really good deal on price, or sometimes to carry the paper for you, or maybe even to agree to sell at all, they have to like you. They have to identify with you. And when you're a new investor, you're more like them than when you're a seasoned investor and you're much larger in your holdings. So I've seen many a deal where the seasoned investor lost out on it to the new investor because mom and pop liked the new investor better. They bonded with them, and they hold all the cards on deciding whether to sell or not and on what terms and price.
So a new investor often has the definitive advantage over the seasoned investor simply on that one issue that mom and pops like them better. Also, many new investors in the self storage space have shifted over from some other real estate industry. Maybe they owned apartments, single-family rentals, commercial buildings. But when you say a new investor, how do you really classify new? Because if someone has owned a chain of apartment complexes and then decides to start investing in self storage, they already had the experience from those apartment complexes, right? So they already may have more real estate experience as a "newbie" than the established group who is the one laughing at them, calling them a newbie. So there's no real frame of reference on experience when you use the word newbie. All you're describing is they never bought that one asset before: storage, but they may have owned a lot of other things in the past.
Now, the reason I take offense, therefore, using the word newbie is it's not really accurate or reflective. There's nothing I hate more in life than hypocrisy, when people say one thing and do another. I hate inaccuracy. I hate fake news. I hate all these things right now as a society that we are very susceptible to. But the use of the word newbie predates all of that. People were using the word newbie when it comes to real estate back in the '90s and the '80s and the '70s and the '60s and probably back since they invented the word real estate. And it's typically something that the more seasoned investors use as a put-down. Like the people in the NFL where they say, "Oh, that person's just a rookie." Well, have you ever noticed in pro football that often the rookies are the best players? And is the rookie really a rookie when he comes out of a Division 1 college as an all-pro football player? Is he really new to the game? More than likely not.
So I would urge you and suggest that in the future, you don't use the word newbie when describing somebody who's new to the storage industry. And if you are new to the storage industry, then I don't think you should be that concerned if someone calls you a newbie. Because it's a fact of life that everyone in the world likes to feel superior to everyone else. So they'll often come up with slang terms and things to try and put groups down. And in this case, the group they want to put down are new self storage entrants. But the fact of the matter is, they're wrong. This is Frank Rolfe with the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.