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Investing in self storage gives you the fundamentals and growth you need to grow your portfolio. But skip the opportunities from golf buddies and gurus—invest in a real track record. Started by John Muhich in 1993, AAA Storage has delivered 19% IRR across 90 deals, totaling $450M in exits. Listen to our expert insights on investing from the AAA Storage team. See more at aaastorageinvestments.com.
Welcome to the AAA storage podcast,
your integrated real estate and
development partner, exploring all
things, self storage investing to
bring you diversified success.
Let's dive in.
Brandon Giella: All right, so say
you're an entrepreneur and you are
interested in investing in real estate.
Paul, walk us through that relationship
as an entrepreneur, a business owner.
Why should I care about
investing in real estate?
Why does that matter?
Paul Bennett: Um, I, I think the
first thing is, is that the most of
the business owners out there, 80%
of their net worth is tied up in the
business that they own and the other
20 is in their qualified accounts.
Um, and that's a concentration of risk.
That isn't wise.
Um, it sometimes turns
out very well, right?
I mean, you know, if you can grow
your business and it's successful
and ultimately you can sell it or
pass it on to the next generation in
a financial structure that gives you
financial security, it's a great thing.
But as often as not, uh,
there are bumps along the way.
And, um, and so diversifying some
of your net worth out of that
business asset is always, um.
A, a really good idea.
Uh, real estate certainly has a
place in that diversification, so,
um, but I think that's, uh, I think
that's probably the biggest reason.
Brandon Giella: Okay.
That's helpful.
Um, so when we think about, uh, being
an entrepreneur, as you mentioned,
concentrated risk, income can fluctuate,
real estate could be maybe a, a
thing that can help maybe stabilize
some of that, that risk and that
income, things like that over time.
Paul Bennett: Yeah, it, it
should be a, it should be a
stabilizer and not a distraction.
Um, you, you built your business
and, and know you're building
your business, um, by taking risk.
Um, the, the real estate's
role should be to help you
keep those gains, uh, you know.
You have to find ways to extract capital
out of the business along the way.
Maybe not every year, some
years are better than others.
Uh, but you have to find ways to extract
capital and invest them outside the
business, um, in, in an environment
that'll that'll, you know, meet or maybe
even exceed the rate of growth within the
business so that you're building wealth.
You know, on, on multiple pathways, not
just inside the business that young.
In the old days, and we, we did a, an
episode, you know, very recently we
talked about medical professionals.
One of the things that, that, that medical
professionals used to be able to do, uh,
is they used to own their own office.
It was a way to own real estate in a
format that was related to their business.
It made sense.
Their opportunity is diminished
pretty significantly because
the hospital systems.
You know, own most physician
practices today, business owners
still have that opportunity.
And one of the things you, you should
do is own your own real estate and let
the business rent it back from you.
Put it in a separate LLC, uh, so
that from a, a liability protection
standpoint, it's, it's, you're
protected and it's protected.
Uh, and then let the business pay off the
mortgage on that real estate over time.
Growing your equity value
in that real estate.
You gotta have real estate
in a lot of businesses today.
Maybe not as many as you used to,
but, um, you know, there are a lot
of brick and mortar businesses today
that, that have the opportunity
to own their own real estate.
And it's one of the things business
owners, uh, and, and they often do.
I don't think that's new news to anybody,
but it's, it's certainly one of the ways.
To own real estate that, um, that
makes sense for an entrepreneur or
a business owner, uh, because it's
related to the business and because it,
it's an active real estate investment,
but it's one you're in every day.
It's not like a rental house where you're
gonna get a phone call from a tenant
that the toilet's clogged up, which most
business owners don't have time for.
Right.
So,
Brandon Giella: Yeah.
I, I'm laughing because, uh,
I'm a business owner and I have
never considered doing that.
Paul Bennett: yeah.
Brandon Giella: Buying a, a plot of land.
But I'm thinking, you know, I'm by
myself in my little office all the time,
so what do I need a big building for?
Or whatever, but fascinating.
Okay.
My mind just went in a
hundred different directions.
Um, okay, so I wanna talk really quickly.
I wanna dive into all this and I,
I have lots of questions myself,
but, um, before we get there,
for folks that are listening.
Just like in our medical professionals
episode, there might be some folks
listening that are, you know, successful
in what they do, but they've never
really, uh, dived into real estate
investing and might not know the
differences between some of these.
So, um, talk to us a little bit about,
just really briefly on, um, passive versus
active real estate and how you guys think
about real estate investing in general.
And then we'll dive into how this
might work for entrepreneurs in
Paul Bennett: Well, I, I think the
first thing to point out, Brandon, is
that a business owner has a particular
set of skills and expertise, right?
It's what's made them
successful in their business.
They're really good at something.
One of the things that passive real estate
investing does is it lets them continue to
focus and create value in the areas that
they have a God-given gift to do that.
Um.
And yet still put capital at
work in the real estate world
by leveraging the expertise and
knowledge and experience of a partner.
A sponsor who has sort
of equivalent, right?
Like we are experts in
the real estate field.
I wouldn't know much about running
an industrial distribution business.
Um, but if, if the owner
of that does industrial.
Uh, distribution business is a lot
better off focusing his mind there
and trusting us with his capital, um,
you know, to, to invest in real estate
because it's what we do every day.
So I think that's the first distinction.
From a structural standpoint, there
are many ways to invest in real estate.
I think the, probably the three
most common would be a real estate
investment trust, either a private real
estate investment trust, or a publicly
traded real estate investment trust.
The second would be a
single asset partnership.
That's where a sponsor finds an apartment
project or a self-storage project
that, uh, they either, uh, think is a
great opportunity to acquire or build.
Uh, they raise capital from
investors who are passive.
Um, they have certain voting and
governance rights, but they're
really not involved at all in the
day-to-day operation of the business
or decisions about the investment.
Um.
And, um, and then that that sponsor, who
is a full-time real estate professional,
manages that investment through its life
cycle, uh, to an exit where the investors,
you know, hopefully have gotten maybe some
profits along the way, some cash flow,
but also they get their real, uh, real
return when the, when the asset is sold.
Um.
In the last two.
And, and the, the third one is
a multi-property fund, uh, which
is what we are at at AAA storage.
Um, you know, our growth fund
two, uh, will invest in the ground
up development of 11 different.
Facilities.
Seven of them sell storage facilities
and four of them, small Bay industrial
or office industrial Flex business parks.
Um, the closed in fund approach
gives you greater diversification.
Um, in our fund, you're diversified
across two different property
types and four different markets.
Um, so it spreads the risk around a
little bit, and that's never a bad thing.
Um, it also comes with the,
the reality that you can't.
Do quite as much due diligence on
the individual asset, um, as you
might if it were a single asset,
you know, um, uh, investment.
So there are pluses and minuses in both,
but those are the three vehicles and, and
all of them there is a sponsor or general
partner or manager who is the one who has
raised all the capital and responsible
for executing the, the strategy and
the plan related to that investment.
The, the asset classes that are most
common would be multifamily, small bay
industrial that I've already mentioned.
Self storage, uh, necessity retail.
The, the neighborhood strip
centers, uh, that we all use, um,
I think is a great asset class.
And then some more that are, I wouldn't
call 'em exotic, but they may be a little.
Less well known in the broader market or
things like mobile home parks, uh, and
RV parks that, um, have become really
popular, uh, in for a lot of investors
over the last, you know, 5, 6, 7 years.
Brandon Giella: Hmm.
Paul Bennett: And what you're looking
for in any of those inve, it depends
on what your investment objectives are.
You can buy existing
core plus real estate.
Um, that's cash flowing, stabilized
real estate, um, that you know is,
is, is, is grade A, if you will,
and your overall appreciation over
time is gonna be a little bit lower,
but you're gonna receive current
income probably on a quarterly basis.
You're gonna, the property's
kicking off cash flow.
Above what it takes to service the debt.
Uh, and so you're gonna get distributions.
On the other hand, you know,
our opportunities are, are
really growth oriented.
We're doing ground up development.
We're creating significant
amounts of value.
But the real bang for your buck
comes when we sell the property.
Because we're developing
from the ground up.
There's not a lot of cash flow for
the first three or four years until we
get past a certain point in occupancy.
So, deciding what your
investment objectives are.
And what you're trying to achieve
intermediate to long term, and
then selecting the investment that
sort of matches up with what your
objectives are, I think is important.
Brandon Giella: That's helpful.
I, I, I wonder if, uh, this would
be a good time to segment out or
distinguish between what I think
a, an a business owner listening.
Successful business owner,
they know what they're good at.
We've talked about that, but there's
a difference between being an
operator and an owner and an investor.
And, and the way I'm kind of thinking
about it in my mind is like you have
finance and accounting, both of them.
Very similar.
And your finance people know accounting,
your accounting people know finance,
but they're, they're kind of different.
The ways that you approach and think
about capital is, is there a distinction
that you make between somebody who's
a, a business owner, entrepreneur, who
knows finance, knows investing, and
then being a real estate investor, you
know, is, is, is that, um, a mentality
or thinking about liquidity or risk
or the way that they would approach
this kind of allocation decision?
Like is there different
ways to think about that?
Paul Bennett: Um, I'm trying to really
distinguish the, the best way to answer
in what you're actually asking me.
Um, there are absolutely
huge differences in being an
operator and being an investor.
Um.
Uh, but I'm not sure that was really the
question you were, you were asking me
from, from a business owner standpoint,
a business owner has to make, um,
judgements and decisions every day.
Um, and they apply logic.
And they apply what they know to make
the best decisions they can make.
They're perfectly suited to evaluate a
real estate opportunity as an investor.
Um, they're, they're, they're,
because their thought process, um,
is, is really all about outcomes.
Um, they're, they're able to look at.
Projections and assumptions and
say, do those seem reasonable to me?
Um, you know, and that's what
will drive ultimately the
performance of an investment.
What they're not able to do, uh, is make
the day-to-day decisions and stay in
tune with the day-to-day and month to
month and quarter to quarter dynamics
in a given market of supply and demand,
and what should our rental rates be?
And, you know.
How much do we wanna
improve this property?
And if we did, what would
be the return on it?
Um, those are the, the things that
they have to lean on a sponsor to do.
So I think business owners as a
group are really well positioned to
go through the process of selecting
investments that, that match their
investment objectives and vet them at
a level that, um, improves the, the
odds that they'll achieve their stated.
You know, outcomes.
Um, but they're often poorly positioned
to manage real estate investments
themselves as an operator, particularly
if they've got a significant business
that has a lot of demands on their time.
And one of the things about passive
invested in real estate is it's all
about partnering with somebody who
has the expertise you don't, and the
experience you don't, um, to help
you have a better chance of success.
Brandon Giella: Especially as,
as the investments in real estate
and their business becomes so
complex, you know, they're,
they're focused on their business.
They know the ins and outs
of that day to day of that.
But yeah, it's hard to translate
that over to some investments.
Paul Bennett: Yeah.
And from an allocation standpoint,
um, I, I think a, a, a business owner
who's thinking not just about his
business, but about his long-term wealth.
Starts looking for ways to pull
money out of their business and
invest them outside that 80% of their
net worth, that is the business.
Um, and does that as early in the
game as they can, and for as long as
they can, because that's the, the,
that's the, the discipline that will,
will create as much wealth outside
the business as he's creating, as
the operator owner in the business.
Brandon Giella: Hmm.
Okay.
I know a, a major, uh,
factor for long-term wealth
creation is a tax strategy.
So talk to me about how an owner
entrepreneur can be thinking about
their taxes as it relates to real
estate investing as you see it.
Paul Bennett: Yeah, owners
sit in a unique position.
We talked about medical
professions and we did an episode.
You know, they have fewer
opportunities to, um.
Uh, legally avoid taxes, right?
And I, I don't mean avoid in a bad
way, but uh, but, uh, we all have a
responsibility to pay taxes, but we don't
have a responsibility to pay any more
than we're legally obligated to pay.
Um, and there are, you know,
strategies and things you can
do to reduce your tax burden.
And it's not about what you
make, it's about what you get
to keep at the end of the day.
So, um, business owners do sit in
a unique seat in that they have
lots of options, uh, that they can
exercise to help, um, you know.
Shelter some of their income from,
from taxes, um, because, because
they own a business there, there
are some unique opportunities.
However,
at the end of the day, the
thing that real estate does
better than anything else is it.
It provides long-term capital gains,
which are the most favorable tax
treatment that you can receive on
profits that you make, the profits
that they make from their business.
Uh, most businesses today
are structured as an LLC.
Some older subchapter
S'S are still out there.
It's not until a business gets
really significant in size, do
they tend to gravitate towards a C
corp structure and as a subchapter
S or an LLC, the business owner.
Uh, reports all the profits of
his business own his personal
tax return as ordinary income.
Which is the least
favorable tax treatment.
So to the extent you can extract some
of that cash flow and income from
the business and invest it in real
estate, there are some tax benefits
potentially upfront, uh, that can
offset other, uh, passive income.
But more importantly, when you
get the profits from that real
estate investment, it's taxed at.
Long-term capital gains rate,
which again, is the most favorable.
So it's, it's in some ways not really
converting, but it's sort of converting.
What would've been, if I reinvest
that money in the business, the
income that it helps produce is
gonna be tax at ordinary rates.
Um, versus, um, the, if I extract
it and invest it in real estate,
ultimately is gonna come back to
me as long term capital gains.
Brandon Giella: Hmm.
Okay, that's helpful.
Uh, uh, I, I would have lots of
practical questions about pulling
money out of the business, reinvesting
it elsewhere for that kind of
long-term, uh, uh, value creation.
So.
We won't get into that, but I'm
curious how, uh, how you might
be thinking about risk as well.
So taxes are one thing, risk is another.
When you're talking to an entrepreneur,
a business owner, um, and how it relates
to passive, uh, real estate investing.
How, how do you think about risk or how,
how should an an, an entrepreneur be
thinking about risk that is different
or similar to being an entrepreneur?
Paul Bennett: Um, it's, it's,
well, it's different because you're
really betting on somebody else.
Um, I think we talked about this in
the episode on medical professionals
and the issues and the things
you wanna look at are the same
sponsor risk versus market risk.
Um, you, you know, you wanna invest
with a sponsor that has a track
record that has experience, uh, that.
It has all the attributes that you
would want in a partner, in any
venture that you did in your business.
Um, and I think vetting the sponsor,
um, getting recommendations from
other people that you know, who have
invested with them in the past or
getting references is really important.
The other piece of it is the market risk.
Where is the property located?
Um, you know, is it a market that has
the right supply and demand dynamics to
drive value longer or intermediate term?
Um, and, and, and.
You know, what are, are the
assumptions and the projections, do
they feel realistic in the market
that the property's located in?
Um, because one set of projections in
San Francisco may be absolutely valid
and makes sense, and the same set of
projections in Sheboygan, um, you.
Don't, don't work at all.
So I think you have to sort of
understand those dynamics leverage.
Um, business owners are risk
takers, so they tend to not be
concerned or afraid of, of leverage.
Uh, but having some discipline
in the amount of leverage that
the deals that you invest in are
taking on that leverage increases
returns, but it's a two-edged sword.
It also can affect the risks.
So, um, paying attention to that.
Um.
I think one of the unique things
for business owners is that
their income can be fairly lumpy.
You know, you, you have a two, three
year period, uh, where you're making
good money, you're paying yourself a
decent salary, but there's not that
much left over at the end of each year.
After, you know, the, you get a tax
distribution to pay the taxes that showed
up on your personal income tax return.
Um, and then you hit a two year period
where for whatever reason, you know,
you hire a sales guy and he is just.
Outta this world good.
Or, uh, your product or your
service gets really hot and all of
a sudden you, you really turn it.
That you wanna be careful not to over
allocate in the years where you really
turn it, um, because there's a dollar
cost averaging, um, sort of concept in
real estate, just like there is in stocks,
um, markets, whether it's the public
markets or whether it's the real estate.
Markets all move in cycles and so you
don't want to invest huge lumps of cash.
At one moment in time.
Uh, because what if you're on
the precipice of a downturn in
a cycle, in a part, you know?
So I, I think being disciplined about,
you know, okay, I, I made $500,000 this
year that I could pull outta the business.
It's not needed for working capital
or other investments in the business.
Um, great.
Pull it out.
Um.
And put $200,000 in a real estate
investment and the rest of it in a
money market fund and find another
real estate investment a year later.
Um, and, and sort of have a little
bit of thought about timing and
diversification, um, as, as you
invest as a, as a business owner.
Um, I think the other thing to think
about, although this may be a little
bit of a stretch, is it, is there a
correlation between the real estate you're
investing in and the business you're in?
Um,
Brandon Giella: Okay.
Paul Bennett: um, one of the things that
we talk about a lot is the fact that
real estate, and particularly private
real estate investments, are generally
not correlated to the public markets.
That's a good thing.
Um, uh, because you don't want everything
to go in the same direction at one
time, particularly if it's down.
Um, there's a little bit of
that in for a business owner.
Uh, you know, if I'm a furniture,
if I'm a furniture manufacturer, um.
That may sell a lot of furniture
to the apartment markets, uh, or
to, uh, that's not a great example.
I'm trying to think of a good example.
Do I really wanna invest in multifamily
because I could get into a situation
where my business isn't performing well
and neither is my real estate investment.
'cause they're both, they're correlated
to one another, uh, and they're
tied to one another in some factor.
I, I don't know that that's a huge
risk, but it certainly is something
that crossed my mind as we were talking.
Brandon Giella: Yeah.
Yeah.
That's interesting.
That's interesting.
I was going through my, my mind
of what might be correlated with.
How we would invest, but Yep.
Yeah.
Okay.
Okay.
So, uh, thinking about evaluating a
deal like an owner, uh, talk to me
about maybe the skills that a, an
entrepreneur or business owner would
apply to evaluating a deal and how that
might be different from evaluating a
business versus a real estate opportunity.
Paul Bennett: Um, take, take
an underwriting mindset.
As if you were evaluating a business
decision, an investment in a piece
of equipment that would drive more
efficiency in your business, or, um,
in opening up a new market, you would
look at that market and you would try
to determine what the opportunity was
there and how many competitors were
there and what's the cost gonna be
to open another office and staff it.
And you know, and I'm just, uh, so.
And that's take that kind of mindset
versus getting caught up in the pitch
deck and all the pretty pictures and the,
you know, the, the avalanche of numbers
that pitch decks usually have in them.
Um, I think you wanna look at assumptions.
Not the, you wanna look at the
projections, but you wanna look at
the assumptions behind the projections
because that's ultimately what matters.
Um, and you don't have
to be a financial expert.
It's really logical.
Um, if you, if you look at a, a single
property investment and their projected
6% annual rent increases year over
year, and the historical increases
in the market have been 3%, 6% is
probably not a very safe assumption.
Um, look at downside scenarios.
What happens if, um, what happens
if, um, lease up for this property
that they're developing takes a
year longer than they planned?
How, how much does that impact
the, uh, the, the projections?
What if, what if we can't
get any rent growth?
There's new competitors coming to
the market and there's a fight, a
battle for occupancy, whether it's
a shopping center or a, a apartment
project or a self storage project.
Um, how much does that impact returns?
How much, um, pain can an opportunity
absorb before it becomes painful for you?
Um, you know, is there fee alignment?
Um, is the, is the sponsor
aligned with his investors?
If the sponsor can benefit,
uh, regardless of whether you
do, uh, that's probably not.
The, you know, the right
kind of investment structure.
Uh, we, we address that at AAA
storage by being the largest single
investor in every thing we do.
Uh, we're, we're as much real estate
investors as we are sponsors and,
um, and we, we commit significant
amounts of our own capital right
alongside our investors so that we
put ourselves in a position where, um.
We can't benefit unless our
investors are benefiting.
Um, and, and I think that's an
important thing to look for.
And then governance,
reporting transparency.
You know, what is the
governance structure?
When do investors have the
right to vote on something?
Um, what, you know, it'll be limited.
I can assure you generally, uh,
but there are sort of significant
decisions and things where
investors have the right to vote.
What kind of reporting can you expect?
Um, how frequently, um, you know, and
then, and then lastly, overall, you know,
can you pick up the phone and call the
sponsor and get an answer to a question?
Um, you know, and have
a, have a conversation.
Um, if you're concerned about something
or you get a report that raises a red
flag or, or you know, you, you, you are
wondering how the investment's proceeding.
Is it on track?
Is it on target?
Uh, if you can't pick up the phone
and get to somebody that answers
the, can answer those questions and
that is involved in the decision
making, um, then, um, you know, I.
They, they manage more money
than anybody on the planet, but
I wouldn't give Blackstone or, or
BlackRock one dime of my money.
Brandon Giella: Hmm hmm.
Paul Bennett: Um, and that,
that's nothing against them.
They do a great job and
they manage tons of money.
But, um, I don't want be in a
situation where if I've got a
question, I'm gonna be going to a call
Brandon Giella: Yeah.
Yeah, yeah.
It's like over like a trillion
dollars or something they
Paul Bennett: Yeah, it's insane.
And they're, I mean, obviously o
obviously a lot of the success they're
able to have is because of their
critical mass and they can move markets.
Um, and, uh, but I, I, that's just
for me personally, I, I guess I
probably shouldn't have even said that.
For me personally, I'm just not interested
in, um, you know, I, I'll go by.
Um, Amazon stock, you know, if, if,
if, if, if, if that's what I want.
If I'm gonna invest in real estate, to me
it's a lot more, it's a lot more personal
and a lot more specific than, you know,
Brandon Giella: Yeah.
Paul Bennett: than, than, you know,
than those large, unwieldy, um, vehicles
that, you know, BlackRock and, and those
guys have out there in the marketplace.
So, anyway.
Brandon Giella: I think it was Charlie
Munger said, Larry Fink is a, an emperor.
Paul Bennett: Yeah.
Brandon Giella: because, because
of how large the empire he is
built and, and the power of it.
It's amazing.
Anyway, um, I'm curious,
okay, so I'm an entrepreneur.
I'm ready to get involved
in real estate investing.
How do I think about it as part
of my overall portfolio mix?
So you mentioned earlier I've got 80%,
let's say, of my net worth tied up in my
business, 20% in an IRA 401k, whatever.
At what point do I, this is kind of a
range of questions, but at what point do
I start to consider real estate investing?
Does it matter the size of my, in my
company, the industry my company's
in, the income I'm drawing from
the company, uh, or the, you know,
stage or size of my overall net
worth and the mix of my portfolio.
And when I start to add in real estate to
that, like how do I start to have these.
Decision trees of when and how
to get involved in real estate.
Does that make sense?
That that question.
Paul Bennett: Yeah.
No, it, it does.
So I think, I mean, first of
all, we're not talking about
early stage businesses here.
We're talking about, uh, they, they,
we, they may con, they may be growing,
so I don't mean they're mature and,
and sort of flatline, but they're, uh,
obviously early in the evolution of an
entrepreneur's business and their career.
Um, they're fighting, you know.
It's hand to hand combat every
day, every dollar matters.
And, um, and they're just trying to
get their business to a point where
it stabilizes once it stabilizes
and has some predictability to it.
Um, and it's generating cash profit
above and beyond what you've decided to
take as your reasonable compensation.
And you start facing the decision, okay,
do I reinvest this in the business?
Um, what opportunities
do I have to reinvest it?
What could that do for the business?
Or do I invest it elsewhere?
I think that's the point that you start
looking at real estate and, uh, no
business owner in his right mind is gonna
turn his, uh, back on an opportunity that
he thinks is very promising to invest
in his own business and nor should he.
But there comes a times, generally
when there are not enough quality
opportunities to reinvest in the business
that you really ought to consider.
Start moving that out.
And, um, you know, it's, uh.
I had a lot of experience with business
owners and um, uh, I gave one a toy
train one year for Christmas and he
said, why, why did you gimme a toy train?
And I said, well, you already got
boats and planes and cars and RVs and
you know, and so the train's the only
mode of transportation you don't own.
Um, and my, my, my my point with that
is that, um, there's certainly nothing
wrong with, um, being successful and being
able to buy things that you want, but the
really disciplined business owner will
invest in assets that will appreciate
over time and grow their wealth.
Not, um, you know, not, uh.
Brandon Giella: Yeah.
Paul Bennett: Not just give pleasure.
So yeah, when you get to that fork
in the road where you're still
invested in the business there,
there are probably always good
opportunities to invest in the business.
But the cash flow that the business
is generating provides more than that.
It's the time to start looking, um, you
know, at real estate as a, as an option.
Um, and then it's about being disciplined.
It's about thinking about.
Where is your operating company?
What challenges and
opportunities does it face?
How much cash reserves do we have?
You know, what's the working
capital in the business look like?
Is it well positioned to, um,
to move through a more difficult
period or, uh, pursue an opportunity
because it's well funded?
Uh, and then where am I
in the public markets?
Uh, we generally.
Again, I don't give investment advice
and I'm certainly not giving it here,
but 20% of your total portfolio, uh,
outside the business and, and up to as
much as 40, 50% of your total portfolio
is kind of where most wealth advisors
land, depending on the risk profile of
the person and their long term objectives.
Um, so somewhere in that range
is probably a goal to shoot for.
Brandon Giella: Of real
estate investments?
You mean within your, your portfolio mix?
Yeah.
Okay.
Okay.
Paul Bennett: And, and certainly people
should be allocated to the public markets.
I, I, I, again, I'm biased.
Um, and my perspective and my
point of view comes from, you know.
A, a love and commitment to real
estate for more than 40 years.
Um, but what I see today more than
anything else, um, is people who
really are totally allocated to the
public markets via ETFs and mutual
funds and bond funds and that kind
of stuff, and really, other than
their home or maybe the building that
their business, you know, resides in,
they're not invested in real estate.
And I think that's a mistake.
Brandon Giella: Hmm.
Hmm.
Interesting.
Okay.
Paul Bennett: if you look at
all the data, no one asset
over time has created more
wealth in real estate in the
world, in the history of man.
Brandon Giella: Hmm.
It's only so much land.
Paul Bennett: Yep.
Brandon Giella: Okay.
Speaking of mistakes,
this is my last question.
Imagine you're talking to an
entrepreneur who is wanting to
get into investing in real estate.
As you've talked to many of these folks
over your career, what are some common
mistakes you've seen them make or thinking
about their assumptions, whatever, and
what would you say to, uh, how would
you help them overweight those mistakes?
Paul Bennett: Hmm.
Brandon Giella: I.
Paul Bennett: That's a
really good question.
Uh, I, it's always hard to
answer like the most kind of, or
the biggest kind of questions.
One of the mistake two, I'll,
I'll give you two real quickly.
Number one is people who own
businesses, particularly successful
businesses, are a target for everybody.
Everybody wants something from 'em, right?
Everybody wants to sell 'em a deal.
Everybody wants 'em to.
Um, and sometimes that
can be a good thing, but.
I, I think one of the mistakes that
happens very often is that somebody
at the country club that they know, or
somebody in their network or somebody
they get introduced to has this
great idea to invest in real estate.
Um, you know, and they're,
and, and they're not.
They're not, well Prepared.
They're not a, a full-time
professional or they're not, um, I
mean, a any deal can have issues.
It it, it's not, there's, but the
reality is those informal deals
where three guys get together at the
country club and everybody throws in
$700,000 are the ones that most often.
Turn out to be disasters.
So I think that's probably
the first mistake.
The second mistake is over allocating
when things are good in the business.
Like I said a minute ago, you know, you
get to the end of the year and you've
paid yourself, you know, a nice salary.
And, uh, if you're a business owner and
you have half a brain, your wife is on
the payroll, um, and perform some services
for the business and, you know, you've,
you've extracted cash every way you can
and you still have a million dollars.
Um, so, oh, well, heck, I'll just invest
that million dollars in real estate.
Um, that's probably not
the, the right way to think.
You need to be a little more
disciplined back to the dollar
cost averaging idea a little bit.
Um, but also, um, just, you know.
Uh, spread that million dollars
over two or three opportunities
over a year and a half or two and
invested some different asset classes
and maybe with a couple different
sponsors, get some diversification.
Um, and, and, but business owners
fall prey to that more frequently
than others because their income can
ebb and flow significantly depending
on how the business is performing.
Brandon Giella: Mm-hmm.
Mm-hmm.
Up and down.
Paul Bennett: Yeah.
Oh yeah.
Brandon Giella: Well, this is,
uh, this has been very helpful.
Uh, any final advice, words of
wisdom, expertise you wanna share
with folks that are, um, considering
getting into real estate as an owner?
Paul Bennett: No, you know, at
the end of the day, the goal isn't
to stop building your business.
I'm not saying starve your business
and, you know, invest in real estate.
It's really about building wealth
that doesn't depend on you.
Um, you can go through all the
scenarios for a privately held
business owner, but what, what happens
if they become sick or disabled?
Um, and how does that impact
the business and their family?
The more you can extract assets without
starving the business and invest
in, in vehicles and opportunities
that are really detached from you
and create wealth, whether you're
involved or not, I, I think the better
you are, the better off you are and.
If you're out there and you're a
business owner and you're listening
to this and you're, you really have
never invested in real estate, I would
encourage you to go to our website,
which is aaa storage investments.com.
That's a a a storage investments.com.
We've got three resources
that are available for free.
There's no cost.
One is.
A first time investor checklist.
The other is a white paper called 10 due
diligence Questions to Vet Any Sponsor.
And then the third ones just a
2026, uh, real estate outlook.
It's really kind of geared to self
storage, but it'll give you a little
bit of feel for at least in that
segment how we see, you know, this year
playing out and where we are in the
cycles and, and that type of thing.
So some good reading material that might.
Help you if you're at the very beginning
of starting your journey in terms
of thinking about investing in real
estate passively as a business owner.
Brandon Giella: Awesome.
Awesome.
Okay, all very helpful, Paul.
You're as always, full of wisdom
and expertise and appreciate your
insight to help entrepreneurs
figure out how to do this well.
Paul Bennett: Well,
Brandon Giella: Uh, so
appreciate you very much.
Paul Bennett: always fun.
Appreciate you, my friend.
Brandon Giella: All right, man.
We'll see you next time.
Thanks y'all.
Paul Bennett: Take care.