AJ Osborne on a growth mindset and investing in self storage

AJ Osborne is an American entrepreneur, businessman, and investor who owns and manages his self-storage portfolio of over $212 million of assets through his companies Cedar Creek Wealth, Bitterroot Holdings, and Clearwater Benefits. He’s the owner and host of the largest self-storage podcast, Self-Storage Income. As an operator and private owner with over 1.2 million square feet of self-storage, he regularly keynotes at national conferences on operations related to investing in, buying, and managing self-storage facilities. AJ specialized in developing, converting, and turning around underperforming facilities with a value-add strategy, and loves to show other entrepreneurs and investors how to focus on technology and self-storage automation. To learn more or to connect with AJ, tune in to today’s podcast where he covers mindset shifts that we can be making as investors, as well as what we should be aware of if we're interested in getting into the self-storage industry. Episode Links: https://www.ajosborne.com/ https://www.selfstorageincome.com/ https://www.instagram.com/ajosborne/?hl=en --- Transcript Before we jump into the episode, here's a quick disclaimer about our content. The Remote Real Estate Investor podcast is for informational purposes only, and is not intended as investment advice. The views, opinions and strategies of both the hosts and the guests are their own and should not be considered as guidance from Roofstock. Make sure to always run your own numbers, make your own independent decisions and seek investment advice from licensed professionals.   Michael: Hey, everyone, welcome to another episode of the Remote Real Estate Investor. I'm Michael Albaum, and today I'm joined by AJ Osborne, who is a maniac in the self-storage industry, absolutely killing it and he's going to be talking to us today about some mindset shifts that we can be making as investors, as well as what we should be aware of if we're interested in getting into the self-storage industry, so let's get into it.   AJ Osborne, what's going on, man? Thanks so much for coming to hang out with me today. Appreciate it.   AJ: Thanks for having me on, I appreciate it. This is gonna be fun though.   Michael: It's gonna be a lot of fun, I'm really looking forward to it. So I know a little bit about your background. I know you spoke very recently at the BP conference in Denver, Colorado in the spring. Give us all the quick background, who you are, where you come from, what is it you're doing in real estate today?   AJ: Yeah, so I'm up here in Boise, Idaho. I'm like, I don't know, like sixth generation Idaho and my family came and we're herding sheep over the mountains here and we grew up to see the big change that's happened in Idaho, which has been crazy over the last 20 years. But my dad grew up in extreme poverty in the southern, I mean, nothing like no running water, like poached to eat. They didn't have you know, they took baths with a pot of hot water to try that they boil over the fired. Try to get it like poverty that, you know, we don't, nobody knows that America today, right doesn't even exist anymore and that wasn't that long ago. He's only 64 years, so he's not even that old. Yeah nut when he was growing up, you know, he had it really brought this father died and early and so he married my mom and he wanted to get out of that. So he started selling insurance and then I grew up and I followed in his footsteps and I sold insurance too and we did that for a long time and you know, I quickly realized that selling insurance is awesome. I loved it, it taught me so much broke away.   But it I called it the treadmill, you know, you got to run, you got to run hard and the end of the day just didn't feel like we're going anywhere and it was like, You know what happens when this treadmill stops. So we started to really invest in real estate. In a big way, after a wait, we started in prior 2004-2005 and then we stopped in 2006/ 7 because things didn't make sense, started back up in 2010-11 and we have been building ever since then I but we like the asset class self-storage. When we got into self-storage, it was very much looked down upon people were like, you want a junkyard? My has that changed today. So storage is so hot and seems like every investor wants in and wants a piece of it. That that's not at all how it was when we started, banks didn't want to give us money. You didn't know really what to do with them. But we liked them because it was more of a BIST business than real estate. That made a lot more sense to me. I don't even view myself as a real estate investor. We own and operate businesses and that's our approach we took to self-storage. We didn't take the approach of traditional real estate, things that people viewed and hold it standards on valuations like cap rates, things like that. I couldn't tell you what a cap rate was on any property that I've ever bought, don't have any clue. We just fundamentally looked at it differently. We focused on revenue, only improving those revenues and cash flows due to operations technology, training and we needed because we didn't have anybody to manage these assets. We had to manage them ourselves.   There was no third party management at the time and that meant we needed to get our velocity of money, meaning we needed to turn our money over. We didn't want to have it trapped because we needed it to grow. But at the same time we had to pay for the management. So we needed the cash flow. So our strategy became that we would buy really underperforming assets, we turn them around, we'd have a capital event at the refinance time and that would give us our money back plus profit to go redeploy it, but we still would have the asset. We still own it. It was still making money and it could pay for everything we needed to and we did that out of necessity and so we grew that way and We did really well and that models worked very, very well for us and we did that for a long time. I became paralyzed from head to toe about five years ago and I was working for major brokerage firm out of Chicago $40 billion company or something like that I can remember and I was let go in the hospital, but I didn't need to worry about it because we had our real estate and I was put on life support at the hospital, I was put into a coma, then put on life support for months and then I had to relearn how to do everything.   I had to relearn how to talk, I'd relearn how to eat, oh, my god, occupational therapy, speech therapy, everything else in between and I spent the following. Six months from the time I got into the hospital, trying to learn all that kind of stuff, again, going home, paralyzed, and just kind of relearning things from scratch and it, you know, it obviously changed the direction of my life, for obvious reasons. But as well, it really changed the way that I view investing and financial security and wealth, and income and from there, we thought, you know, this is really important. I'm like, we need to share this with the rest of the world. So we started to allow investors to come in and invest with us alongside us. We started different things like podcasts, we do it, we just need to openly share information and that kind of became my passion, financial independence and, and education. Overall, my wife started a school that blew up, she has hundreds of students, it's OK through high school that focuses very largely on economic functions a way the world works and financial literacy and I started to do three companies out of my wheelchair and we've just been going strong sense. So that's yeah, so I am, that's what I do.   Michael: That is amazing, AJ, and I mean, there's just so much there to unpack but before we even get there, I mean, before we hit record here, I was telling you how good you were looking and I had no idea that you were paralyzed, so you've clearly come a long way. Good for you, man. That's, that's amazing.   AJ:   Thank you. It's been a long, long road, but been very, very fortunate and the gains that we've seen and had so not over yet, I still have paralysis in my lower legs, I still have pain, because my nerves were destroyed. So I have to deal with that but I mean, it's not that point complain about where we couldn't be happier with what I have to deal with, we do that as a blessing. So it's, you know, we are just so fortunate and excited to be doing what we're doing.   Michael: Awesome. So talk to us a little bit about kind of the new perspective that you got on investing that you had as a result of being paralyzed. What was that, like?   AJ: I think I didn't realize probably the entire position of where I was at in life, what that meant, and tell that happened and that changed the way I viewed my own position, maybe the value that I inherently had, and the knowledge and things that we could do and it also changed kind of the idea where it was like, you know, at the end of the day, we all stop working at some point in society, we call this retirement and I didn't have really a choice and when that happened to me, and it the whole idea of it just kind of became a little silly, to me, this this path that we came on and this idea of risk that, you know, entrepreneurship or investing is risky and I'm like, but it doesn't make sense when I think actually probably having a job is the riskiest thing you could do.   It's a single point of failure, so meaning you have no control over that income or that revenue at all and it's one single point that everything else is predicated on. So the moment it's gone, everything else falls apart, right? It's not diversified you so you have no control. It has no you don't own the source or the means you aren't diversified. It's, you know, I'm like that's, that's the risk. That's the risk right there and it was something I obviously always knew, but I interpreted it in a very different way and I thought there is no reason why people shouldn't be participant eating in the economy, and we have to change people from being economic consumers to economic participants and that's how we're supposed to be. This idea of us being economic consumers and holding a job is actually relatively new in society. This isn't something that has been around for a long time. The idea of retirement is no, I don't believe in it, I will never retire, like, what am I supposed to do? Go sit on a beach.   If I'm retiring, I'm dying, right? You know, we're supposed to do things that give us purpose, and we're supposed to be participants, and we're supposed to be delivering value to society and if you're not, you should really start to think about what the heck you're doing with life because you can tell people feel fulfilled, and it's in who we are. As humans we want to be busy, we want to work, we want to be participating. We are not meant to sit around and watch Netflix, we are not meant to not be in control of our lives. Yeah, that's we're not meant for that and we've seen in society, particularly over the past 20 years where, although problems across society have tanked. Like we have this viewpoint that there's so many problems in society today and that's just unequivocally not true. I mean, everything from murderers to it, just name it any metric you can think of in society, and we are 10 times better off than we were 50 years ago. We are you go back 150 years ago, and there's nobody I don't think anybody could survive. That's alive today, just 150 years ago, right, and you keep going back, and you're just like, wow, us as humans, we live so differently in such a very short period of time and yet, during this time, of incredible prosperity, and during this time of incredible lack of risk in anything, I mean, anything, you we live so long, you there financial safety nets in this country, are crazy to even think about, and yet mental health has skyrocketed and people are unhappier than they've ever been and when you start to look at these problems, it's because people lack purpose and they lack drive, and they lack control and, and it's we're not meant to be like that and I think when you look at financial independence and financial prosperity, it's about dealing with means like it's not money, it's just means like, money is this weird intangible thing that makes no sense at all and people give different meaning to it, depending on their own experiences, or whatever, it's but it's nothing, it's just debt, all money is debt. Paper money is a fraction of anything we even have everything else is ones and zeros on a computer.   All it is, is a means to accomplish something and it's crazy that no one knows how to use this means it would be the equivalent of you know, a few 100 years ago, you're not understanding how to grow food or hunt, you're dead. You just die, right? Like, and so if this is a means or a tool that we have, yet society, we don't know how to work within it. We don't know how to function it. It's not taught. It's not. And I think that makes so many people feel out of control. They feel helpless and they're stuck in this position that, you know, we just weren't meant to be in and so I get, I got really passionate about this stuff, and rethinking you know, what we're doing and why we're doing it and we're made to be creators and we're, you know, we are made to be driving after our passion to take care of each other. That's just so core and fundamental to our being and I want people to have that power, to feel that they are driving towards a purpose that they're caring for the ones that they love and they have the ability to do that and in today's modern society, that's an economic function.   It's not a natural function, which thank goodness, it's not because if it was a natural function, that means you would have to be the biggest and strongest to really accomplish that, right and if it was a natural function, I'd be dead long fires because I would never, I would have never been put into a coma I would have just died. So you know, it we have to rethink in today's society, all of that, and it just seems like nobody is and our school systems are failing. Clearly they're failing and society where we're concerned with things that don't matter and it's, it's making us all very unhappy and we don't we don't need to be like that.   Michael: Kind of, in that same vein, AJ, you have a little bit of a different view on leverage, wondering if you could talk to us a little bit about what that is.   AJ: Yeah. So leverage is a very interesting thing. When you look at when we're talking about creation, right? Leverage, leverage is synonymous qith capital, and it shouldn't be because no matter what you do in life, you're leveraging something. We leverage each other, we leverage knowledge, we leverage time we leverage resources, right and leverage is a component that we all have to use. We have to, you cannot do everything by yourself. That doesn't exist this idea, I think that we have these stereotypical entrepreneurs that were like, oh, I started in my garage, and now I'm a billionaire, right? It's just all by myself.       Michael: I did all by myself, right?   AJ: That's never happened once. That's not how it happens and I also think that that makes people feel really inadequate because they're like, Well, I'm not like that and you're, of course, you're not because nobody is right now.   Michael: Have you read Outliers?   AJ: No.   Michael: Oh, it's such a good book, it talks about things like exactly this point about, like the circumstances surrounding all of these people's rise from seeming, you know, rags to riches, and there's so much more there than meets the eye that that isn't talked about. So for anyone listening, if you're feeling that way, check out the book, Outliers. Great read, super interesting.   AJ: Well, and, you know, I felt that way and I think a lot of people do and it's a component of marketing. You know, aside the idea that Steve Jobs created apple, and he was just this Renegade, that, you know, it's a great marketing ploy, but it's not at all and, you know, you're gonna have a lot of haters out there for saying this, but it's just the truth. Venture Capitalist had way more to do with Apple success, and Steve Jobs rights than he ever did. You know, he was working on nothing in a garage. Like, it's not like they were really building a business. They were toying around with something and a venture capitalist was driving by saw them and said, hey, why don't I actually make this into something and that's how Apple came to be and then he went back, and he had all of their resources and their tools and their employees, and they really built something from nothing. But that's what it takes. It takes way more than you, you aren't enough. You never will be enough and that's okay. That's not a bad thing. People say that. And then they get upset and I'm like, don't win when you use this like, hurrah, hurrah stuff of No, I am good enough. No, I am I can accomplish anything.   You always feel let down and actually does great damage because you're not, you never will be, and no one is. And so like, you need like, you need to be totally okay and understanding that you're not like, why would you think that you are? We can't do everything all the time? I don't think I am and because I realized that when I hear that voice in the back of my head that says, AJ, you can't do this. Instead of saying, Oh, shut up, I can write that's pride. First of all, I actually lean into it, say, okay, you're right. Why, so I either need to find someone, or something that can help me accomplish this, because this isn't either a natural skill set that I possess. Now, I can either really take the time to learn it and do it. But if you had to do that, for every single thing, you would be stuck. You would never function in life or society. And so it's like, nope, lean into those, though your insecurities is the voice of reason. That's a good thing, right? I'm a dyslexic ADHD kid, right?   Do you think that I really care and think that I have to be able to spell to function in life? No, it's not something I'm going to work on my brain doesn't work like that. I don't need to worry about it. It's I find somebody else that can do those things and move on. Those insecurities are actually just things that are telling you, hey, you need to improve here, or you need to figure out ways around it. Listen to him, don't fight them, say great, thank you, and then get to work. But I mean, you're not bestowed upon you anything and you're not some great person, and neither was any of those entrepreneurs, right? It takes a lot a lot of people and you have to leverage talents. You have to leverage knowledge. You have to leverage time you have to leverage structure infrastructure, you have to leverage technology and then yeah, there's capital to you need to leverage capital, but it's all about identifying needs, and then figuring out solutions around those needs that isn't strictly designed around you. If I couldn't leverage other resources like I am, no one else could ever accomplish anything in life. So get rid of that kind of that fluffy stuff, right? That's supposed to be feel good and you read the story about some amazing person, like you're just not getting the whole thing and that's not reality and that's okay. It shouldn't be it doesn't need to be you don't need to be successful. It's not about you being more, right. It's about you having access to more and that is the key differentiator. You need to put yourself in circles with other people. You need to change your circle stances because you're leveraging your circumstances, whether you want to or not, you're hanging around a lot of deadbeats, you're leveraging deadbeats, and you're going to become what I like, call me curl, but it's true and if you're, that's fine.   But if you're not, okay, if you don't want that to be your outcome, why are you leveraging that the moment you spend time around it, the moment you're around it, that's the outcome. So like, you need to really take seriously who you're surrounding yourself with what you're doing, right, where you spend your time, and what you spend your time doing because little things are leveraged in time, meaning the things you do today, the impact is not direct, it's in 10 years, it's 100 times whatever impact that is one piece of knowledge that you can obtain today, you can leverage that through 10 years and so the outcome is 100 times what it was. But that's the same thing, if you just sit around and watch Netflix, or if you just, you know, hang out with deadbeats or people that complain. That effect is also 10 times in the future and you really got to look at that leverage, because you use it no matter what. It's just how you're using it.   Michael: Yeah, I love that and I think something we talk a lot about in the Academy is just being having the ability to get out of your own way. Which it sounds like you know, you're definitely touching on and so for people I think a lot of our listeners, something I hear regularly is I don't know anyone that does real estate, I don't know how to get started, how can people change their circumstances, like you were saying, how can they start to get around other people that they can then look to leverage for their own growth?   AJ: The circumstances are versatile, interesting enough, people feel like they don't have control over their circumstances, which is the greatest lie ever told. I mean, that is so stupid to even think about considering that, first of all circumstances are very much dictated right now by online, literally, just go unfollow everybody that you don't want to be like, follow everybody you do and you're immediately just now you just changed your circumstances, because I don't know what the average person spends on their phone, but it's probably eight hours a day at this point. So think about the impact of that and then on and then from there. Your friend group, like, just because they're your friends doesn't mean you're obligated to be around them and just because you don't want to spend time and take on their problems that are mostly self-caused, doesn't mean that you're mean, right? Like, you're not mean because you don't serve an alcoholic alcohol. No, you're a good friend. So stop, stop serving them social alcohol, like, right, they're alcoholics and get away from it. If you're an alcohol, don't go to the fricking bar, right? Just change your circumstances and when I say I'm obviously not alcohol, I mean, everything in life that you want to become or don't want to be moved. You live in a bad area move. Like, it's shocking to me that people are like, I have no opportunity where I'm where I live and I'm like, leave. All my friends are here, like, okay, then you don't care. Like, it's not that you like opportunity, because you want opportunity to come in the way that you want it and this is that pride thing again, why do you think anybody cares about you? Like, why do you think that they should deliver you something, right? We're not entitled to that we're entitled a slap on the butt when we come into the world and then maybe you gravestone I don't know, you know, and then a quick death.   Hopefully, you're not entitled to anything. So if you don't like your circumstances, but don't want to change them, and then complain about not having opportunity that's on you. Nobody else, stop complaining and you've got to move you got to get out of them. I'm shocked at how many people that you know, live in places where they're drowning in debt, they can't get ahead or, and they don't and then you ask them, why don't you? Oh, yeah, but I just love this area. It's so beautiful. It's like, so you're making a choice there, right? So first of all online, you can do that immediately. That's very simple. Stop spending time with friends that are deadbeat. That doesn't mean you're not their friend. You can still love that person. But you don't have to give that person your future. If they require you to give your future to them. They're not your friend and so stop it and then you know, family members the same. I have family members that I love dearly, and I'll always be there for them. But I don't want to be like them. Yeah and I'm not going to spend my life. Those are two totally different things. So you have so much control over your circumstances. It's the easiest thing to do. Go online, go to in real estate meetups, start going to events I went to I didn't know anything about storage. We started we want to get into storage. I started going to all the associations and all the event meetups right. We started to get into contact and I call people that had been in the business, but it's all about your actions and if you don't create the circumstances, no one's going to do it for you…   Michael: I dig it, this is there's so much good stuff in here. I want to transition a little bit to self-storage, because I think it's a super interesting asset class, it's being talked about and spoken about all over the place, yet why self-storage?   AJ: Yeah, so self-storage, I think offers the number one opportunity for anybody wanting to get into commercial real estate and here's why. First, the first reason is just structural. So prior to when we got into the business, 91% of everyone in the business was Mom and Pop operators, because this asset class had not been institutionalized. It was the newest asset class, as far as commercial real estate goes in the United States, institutional money couldn't operate it and they also had no way to model out what would happen in a credit crisis or anything else. So they couldn't invest in it. So institutional money didn't come into 2008, that all changed. With that said, a huge portion of the industry is still majorly mom and pops and that allows you to buy assets, that's value is crazy low, and they're not being operated well, and to very simply change that value around but so the two opportunities is firstly opportunity to actually change the asset but the second, the first one is just access. So if I, you know, when I was looking at trying to go into multifamily, well, multifamily over 80% is all owned by institutional, that means I have to compete to try to get limited supply of assets, I was at a disadvantage, right and there wasn't a lot of them. There's so many storage facilities, they're just everywhere and they're in every small town there. So your access to the industry, and your access to assets that can be improved, are just so plentiful in self-storage but the opportunity is that it's been institutionalized now, and it is a consolidating industry, meaning that's changing fast and because it's institutionalized, the value spread is crazy in them. That means there's institutional demand, right? Yeah, underperforming Mom and Pop properties that you can buy, and set them up to be institutional quality and that value offering is enormous.   Michael: Interesting and so if someone wanted to get someone's interested in, in self-storage, and they want to look to go get involved, I mean, it sounds very expensive as an individual to go buy a self-storage facility, do the value add play, as opposed to single family rental, people understand that usually have lived in them at some point in their life, or at least in apartments that understand kind of the guts and inner workings of it? How should people start to get educated about self-storage if they're interested in operating and owning one for themselves?   AJ: So firstly, you're in Northern California, right? Bay Area?   Michael: Yep.   AJ: So in the Bay Area? Well, I can guarantee you that most third tier market storage facilities are cheaper than any single family home, anywhere near you. So our perspective of cost with these and I think people have a very wrong way you can go buy a small storage facility that has 60 doors for under a million dollars, Miley, in most places in the United States, that is substantially lower than upper middle house, housing, right in today's world, right? So all of a sudden, you go, oh, well, that's not costly and I'm getting all these doors. It's a cash producing business. We don't value self-storage because somebody wants to own it. No, it's valued on our return. So when you buy it, it has its cashflow positive, right, or you wouldn't buy it, as opposed to like single family homes. Nobody cares if the cash flows, the demand functionality of it is due to wants and desires and needs that have nothing to do with revenue. That's not how storage works. So for the most part, I can find storage facilities all over the place that are cheaper than lots and lots of homes across the United States.   Second of all, you can raise capital, nobody wants to give you money, not in a big way to buy homes, right? Well, commercial real estate's different, because here, here's the investment and here's how it produces. Investors want to get money to buy a business, and a cash flowing investment. So the demand for other people to give you money to go into an asset that is cash flowing, and as upside potential is a lot higher. So I actually think it's much easier to get into commercial real estate than it is to get into single family homes. Now, the only reason why people think otherwise isn't there. They know single family homes, and they're everywhere, right? So it's an inventory thing. Oh, I can see lots of them, right but when you look at actually trying to scale or build a bit businesses needing to get capital, that's gonna be really hard to get people to give you money to go into a business, that for the most part, cash flows very, very little, if at all in most areas, whereas you're buying a diversified portfolio of tenants 60 doors as compared to two or four or 10, right, that have low capital expenditures, and as a way that you can improve the revenue. As investors, that's a great idea. So, you know, when you look at it from one side, meaning well, either they're expensive, or, you know, it's easier, multifarious single family, you're, you're only seeing what you understand and no, but when you look from a business or an investment standpoint, it's much easier to grow, build a business, or invest in a real estate asset like that, than it is the other one.   Michael: Got it, got it and then what about the operational side of things? I know that you said, when you first got started, you were doing it hands on, are there management companies like you have in the residential space that you can just plug and play into your existing asset?   AJ: Yeah, there are. So we, you know, after 2,008 third party management became institutionalized, meaning big companies got into it. There's also regional players, right, things like that to do third party management. I'm a fully vertically integrated private equity company, meaning we do everything from asset management to funding to all of it right, you don't need to do that anymore though, you can get a third party manager to come in and operate it, you need to make sure that they're on the same page as you and understanding the value proposition but management is the hard part, right? But it's so managing a single family home, obviously, much easier. Managing a self-storage facility is much harder, I view it more like retail than anything. These are short term leases, right and we have turnover all the time. So that I can see as being scary, or people not understanding but to have a third party manager that is great at what they do. Now, it's even easier. You don't even have to worry about it. You can hire somebody else to take care of it all.   Michael: Awesome, awesome. AJ, this has been super fun man, where if people want to learn more about you your story, self-storage, what it is you're doing, what's the best way for them to get a hold of you?   AJ: Yeah, so you know, I have self-storage income, which is the largest self-storage podcast in the world. I also wrote the number one best-selling book in our space, growing wealth in self-storage, and YouTube. If you want to learn about self-storage, all our contents free go out there and we have endless amounts of it and then Instagram is showing you everything we're doing. That's probably the easiest way it's AJ Osborne and you can go to any of my company self-storage, income cedar creek wealth, that's my private equity company but yeah, we're all over the internet. So AJ Osborne self-storage and there's no way you're not going to find me. But any of those resources, podcasts, YouTube, the book, or once again, my Instagram, which I'm always populating and uploading to learn more.   Michael: Love it at. Well, thanks again for hanging out with me. I really appreciate you taking the time.   AJ: Hey, thanks for having me on, I appreciate it.   Michael: Hey take care, we will talk soon!   Alright, everyone, that was our episode for today, a big thank you to AJ for sharing all those nuggets of wisdom, his background, where he come from, where he's been and where he's going. As always, if you'd liked the episode, feel free to leave us a rating or review wherever you get your podcast anything focusing on the next one. Happy investing…