How to Scale Commercial Real Estate

Mar 12, 2022

Is it advisable to leave a niche where you had been dubbed as the “king?”

Joseph Evangelisti did leave his kingdom as the “Flip King” and turned his attention to the self-storage space because of the advantages he discovered along the way. He will discuss those advantages in this episode and share some tips on how to capitalize on all of them.

Now a business investor, peak performance coach, and 4x best-selling author, Joe can be heard in the Legacy Blueprint Podcast, where he meets with industry leaders to discuss the life-changing strategies they implemented to be successful. 

[00:01 - 02:26] Opening Segment

• Why the former “Flip King” Joseph Evangelisti stop flipping houses
• What made him fall in love with the self-storage niche

[02:27 - 07:37] Investing in Self-Storage

• Joe shares his daily experience as a self-storage developer
• This is where real estate opportunities arise according to Joe
• The big changes in the self-storage space new investors should know

[07:38 - 12:24] Holding Self-Storage Properties in the Long-Term

• Joe considers his team as developers and not operators,
• • What’s the difference then?
• He  reveals their secret to holding self-storage properties in the long-term
• Joe talks about the current biggest challenge in the self-storage space

[12:25 - 15:12] Building a Portfolio of Self-Storage Properties

• The importance of building a portfolio according to Joe
• What’s happening on the supply chain side of self-storage?
• • Joe gives a sneak peek

[15:13 - 17:26] Closing Segment

• A tool or resource you can’t live without
• • His phone
  • Google products
• A real estate mistake you want our listeners to avoid
• • Not thinking about your end goal first
  • Think about your end goal first then plan backward
• Your way to make the world a better place
• • Giving back to the community where they are investing
• Reach out to Joe 
• • See links below 
• Final words

Tweetable Quotes

My biggest opportunities in life have come from relationships, whether it's through investors or partners or joint venture operators or even the people that work in our team and our culture.” - Joseph Evangelisti  

“...the [self-storage] industry itself is absolutely on fire…if you put the right management in place and you fill it up, you have a cash-flowing asset.” - Joseph Evangelisti  

“I would start with the end [goal] in mind…what's the exit? What are you doing it for?” - Joseph Evangelisti  

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Email joseph.evangelisti@gmail.com to connect with Joe or follow him on LinkedIn. Listen to the Legacy Blueprint Podcast to learn from industry leaders on how they achieved what Joe calls a “life-changing transformation.”

 

Join the Storage Syndicate Mastermind to grow your network and pick the brain of real estate’s best!

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Email me → sam@brickeninvestmentgroup.com

Want to read the full show notes of the episode? Check it out below:

Joseph Evangelisti  00:00

I think whenever we're trying to decide, like, what's the feasibility of a site and what's going to fill up, obviously, you want to rent every square foot and you want to come up with a blended rate that makes sense. You can't just build all five by fives, you know, you have a site that works and makes sense. So you got to blend it in, you got to make sense of it. But you know, let's say you have 100,000 square foot facility and you have, you know, 10 or 15 of those RV spots. That's taken up a significant amount of square foot that's kind of almost guaranteed to be rented in certain areas. So there's that trade-off, or it might be a little bit less per square foot, but it's gonna stay occupied.

 

Sam  00:30

Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.

 

Sam Wilson  00:42

Joseph Evangelisti, he is once known as the flip king. He is now the host of the Legacy Blueprint Podcast and a leading expert in real estate investing, specifically in the self-storage industry. Joe, welcome to the show. 

 

Joseph Evangelisti  00:54

Thanks, Sam. Appreciate for having me. Hey, man,

 

Sam Wilson  00:55

Thanks for coming on. Same three questions I ask every guest who comes on the show. In 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?

 

Joseph Evangelisti  01:02

Man, where do I start? So long story, construction background general contractor dad went in the military was a builder in the military, US Navy Seabees, came out, flipped about 1000 houses over 12 years, got burnout on volume and the turnover and tried to find something more scalable, three, four years ago flipped entirely into self-storage development and never looked back.

 

Sam Wilson  01:23

Wow, that's a handful all at once, flipped 1,000 houses.

 

Joseph Evangelisti  01:26

Yep. Over a 12-year career, you know, we did wholesale retail brokerage fix and flip the whole gamut of things over for a long time. But you know, it just wasn't a scalable model. We were doing up to 100 houses a year towards the end of it. And it was just churn and burn and churn and burn and chase closings. And you know, we just got to a point where it's like, how do I leverage the opportunity, we have such great investors and partners that we have and create bigger for them. Right? You know, we started looking into commercial. This is pre-COVID. And you know, I had retail and apartments to choose from and, you know, office and all that type of thing. And somehow I stumbled into self-storage. And I remember every call, actually telling somebody this story. Last week, I talked to what is now one of my mentors a couple of years ago, and he said to me, he had a similar background. He was a fix and flipper, and a developer and he restaurant tour, build all kinds of stuff. And he said to me, Joe, the first time you build a self-storage, you'll never touch a single family house again for the rest of your life. You want to build your own house, you'll hire someone to build your own house going forward. And he wasn't wrong.

 

Sam Wilson  02:27

That's a good prediction. I like that. So you guys got into self-storage. I mean, it's one thing to shut down everything you shut down, which I'm sure it was hard in and of its own right to finally just pull the plug on it right. But then what was the next thing you did? If somebody wanted to copy your footsteps? And the next thing you did? You said, Hey, I'm getting to self-storage. But now you're going into self-storage developer. That's a brand new game.

 

Joseph Evangelisti  02:47

Yeah, we actually cut the bold we started with development from scratch. So you know, construction was our game. We knew what our strong suits were. I knew I wanted to get into the industry. And you know, since then, we've obviously, we've looked at existing structures, and we've gotten involved in existing deals, but we knew we wanted to be ground up. Like it's always been something I wanted to control I wanted to build, I wanted to make sure I ended up with the product that I wanted to end up with. And it's kind of been our model ever since I think a lot of people are kind of shy away from it because of the numbers and how big it is. And you know, it's a little bit scary. And it is scary. Trust me. Don't get me wrong, but you first do it the first time. But the results are just enormous. They're incredible. And you know, I'm glad we did it that way.

 

Sam Wilson  03:25

Yeah, absolutely. So you know, doing ground-up development, but you weren't a ground-up developer in single family. You guys were all fix and flip.

 

Joseph Evangelisti  03:33

I did a lot of new construction houses we've probably built, I say a lot. I mean, we probably built 40 or 50 new construction houses in the last decade. Most of them were fix and flip. But we've done a lot of granite construction. And back when I said I was in the military, I got out I did commercial contract management for Defense Intelligence Agency, big government contract work. So I'm not shy or, you know, I'm knowledgeable about big commercial construction and things like that, you know, so it wasn't something that we weren't afraid to tackle.

 

Sam Wilson  03:58

Talk to me about defining what opportunity looks like for you guys, because there's land everywhere. And there's people everywhere. How do you guys say, “Hey, here's an opportunity for self-storage build.”

 

Joseph Evangelisti  04:08

Self-storage is one opportunity. I really think the opportunity, Sam, is in relationships, right? Like we've actually, my biggest opportunities in life have come from relationships, whether it's, you know, through investors, or partners, or joint venture operators, or even the people that work in our team and our culture, you know, so for me, it's always about how do I build relationships that are going to last over the course of time and we can benefit from each other, we can help each other grow. Storage is like the byproduct, right? It's like the thing that comes off the assembly line when you do it, right. But for me, it's about trying to find great people to team up with. So we've actually culminated that into a mastermind, which we could talk about, but you know, the whole idea was, how do I teach people what we do, help people understand the concept, help bring them along in some way, shape, or form, whether they have very little real estate experience, whether they have development experience, whether they're designers, contractors, or they're in the game already, or whether they're accredited investors and they just don't know where to put their money in safely and how I bring all those people into like an atmosphere where, you know, they can create more opportunity for each other. Right? Not just, you know, ultimately for legacy and for our construction company, but you know, where not every opportunity is the right fit for me, not every opportunity, the right fit for you. So like, why waste that opportunity if somebody else can take advantage of it? And so, yeah, we've created a mastermind group around that. And it's been really successful to watch people grow just by making connections inside of that group. It's kind of like a partnership.

 

Sam Wilson  05:27

Right. That's really, really intriguing. What are some things that you've done in order to nurture those relationships that are mutually beneficial for you?

 

Joseph Evangelisti  05:35

Yeah, we're, we're nurturing every single day. In fact, that was just got off a live call, my team does three live calls a week with that group. And my acquisitions guy just spent an hour talking about, you know, different MSAs in different areas that we're looking in, and why we're looking in areas that are shifting and what the nature of the business is doing, you know, a lot of storage is moving into outdoor storage, RV boats, I mean, it's a massive influx, obviously, you know, COVID drove a lot of that, but it was a big shift in the way Americans are vacationing and deciding on what to do with their excess money. And, you know, that obviously affects storage, right, it affects where they're going to put their stuff and how they're going to store their stuff. So, you know, our acquisitions guys are on top of that and trying to find the best locations, best sites, and you know, teaching it to others, so we can all learn together.

 

Sam Wilson  06:18

Yeah, that's really, really intriguing. Talk to us about that a little bit. Are there some shifts you guys are taking? You know, because of the increased demand in RVs and boats? Are there, I mean, are you guys building those facilities now?

 

Joseph Evangelisti  06:30

Yeah, we're actually, most of our facilities are, they have what we call XXL, we have these oversized units available now. And we can charge a premium for them. And they're essentially big enough to park an RV, you know, they're at 14 by 45, right. And we're finding that people are willing to pay a premium to be able to store their RV, and either climate control or non-climate control some of our climate control, just so they can pull in and have a heated space, where you know, they want to go for, take their RV out, it's like, they can keep their clothes, they can keep the thing stock, they can plug it into the wall, like they don't have to de-winterize to use it. Right, they can just pull up, parked their car in the parking lot hop in and go for a ride. So there's a big premium for that, but they're willing to pay. And so yeah, we're incorporating that into a lot of our sites. The other big shift that's happening is where we're buying our sites, right? Like, you know, Florida and Texas are the two fastest-growing states in the top five fastest-growing states. So we're a lot of our stuff is shifting down kind of like the southeast, where the people are when where the product is needed.

 

Sam Wilson  07:27

That's interesting. Talk to us about I mean, the per square foot basis, I would think in an RV storage, it would be less than say, if you're renting somebody on a 10 by 10 unit no? 

 

Joseph Evangelisti  07:38

Well, it is obviously because obviously, the smaller the unit, the more dense the income level per square foot. But that doesn't mean that you can't blend it out over the course of the site. Right? You know, it's just an opportunity to add, you know, when I think whenever we're trying to decide, like, what's the feasibility of a site, and what's going to fill up, obviously, you want to rent every square foot and you want to come up with a blended rate, that makes sense, you can't just build all five by fives, you know, you have a site that works and makes sense. So you got to blend it in, you got to make sense of it. But you know, let's say you have 100,000 square foot facility, and you have, you know, 10 or 15 of those RV spots, that's taken up a significant amount of square foot, that's going to almost guarantee to be rented in certain areas. So there's that trade-off, or it might be a little bit less per square foot, but it's gonna stay occupied.

 

Sam Wilson  08:19

Right. Yeah, less per square foot. But 100% occupancy is worse, or better than more per square foot but not occupied. So that's really, really intriguing. Talk to us about your business plan. I mean, self-storage isn't tremendously operationally complex, but you guys do not self-operate. So talk to us about that.

 

Joseph Evangelisti  08:36

Yeah, I always tell people I look at us as pure developers. I mean, my job is, you know, people will say, like, you know, not that we're, you know, naive to lease-up terms and all that type of thing. But people will say, “Well, you know, what do you do for marketing? What do you do for lease up? What kind of specials you have to run? Like, you know, what do you have to sell people to get,” and I tell him, I don't know, that's not my job. That's not what we do, right? Like our job is to go build them really, really well try to build them within a budget that makes sense. Get them stabilized, get them to refinance, and then turn the keys off to the guys that are awesome at operating that understand, you know, marketing, some of these companies, the bigger ones, you know, the cube smarts, extra space, the life storage, they're so deep into SEO and a website lead gen and you know, that literally send a targeted ad to you, that's different from me, because maybe I like to golf, and maybe you like to boat, and they know it, right? So they're just so advanced at it. It's just not our game. Like, I can't compete with it, I have no interest in competing with it. And frankly, I'm great at what we do. So let's do that. So yes, I look at us as pure developers, we're going to keep the asset long-term, most likely is the goal. But we're going to hand it off and get it managed by the proper, you know,

 

Sam Wilson  09:42

how are you guys holding the asset long-term? A lot of developers I know, you know, buy it or you know, develop the land, get it up, get it, get SEO and then you know, sell it because that's just maybe you're able to get it stabilized and then sell it. So how are you guys? What's your secret sauce to hold it for the long term?

 

Joseph Evangelisti  09:59

I mean, so the real secret sauce that made the self-storage game right now, 2021 has been the best year of recorded history for self-storage, you know, price per square foot rents are at all-time high, they can see percentage at all-time low, that something like $9 billion in self-storage changed hands up until like November of 2021. I don't think I've seen the final numbers yet. It's just the industry itself is absolutely on fire. And so, you know, stabilizing and keeping it's not hard. You know, if you put the right management in place, and you fill it up, you have a cash-flowing asset, which, you know, when we started out to do this, that was the goal, it was, you know, how do we create a billion dollars in assets and keep them under management and keep them cash flowing? The challenge, frankly, Sam, like we were talking about before hit record is, you know, it's the competitive nature of the people who are buying right now, some of these big REITs, you know, they have billions and billions of dollars, and they're paying two points, you know, to hold the money. It's like, it's free money, you know, so they're in this absolute acquisitions buy-up mode. And, you know, frankly, they don't want to develop, that's not their game, just like my game is not management. So, you know, they're looking to acquire everything that they can, including the stuff that they have under management agreement with us. So it's getting quite interesting, you know, when we go to compete the management agreement, now we're just now we're competing the management agreement with like, you know, who wants the best first right of refusal, along with their management agreement? Who might buy us in the first couple of years, that type of thing? So just an interesting shift, just in the last six to nine months, frankly.

 

Sam Wilson  11:23

Yeah, no, that's a thought I hadn't crossed my mind yet, in this asset class, is that somebody like Cubesmart or would they watch the life storage or somebody like that, they may want to just be a direct buyer from you, when you're ready to dispose of it or move it, you know, in two or three years, is that right? 

 

Joseph Evangelisti  11:39

They're really our target buyer. Like when we build these facilities. And again, I'm not doing anything, I don't think that's what we do a lot of things that are unique. But when I say when we build, like, my goal is to build a Class A asset. I want 80,000 square foot plus asset, I'm doing that not because I'm greedy, or I want to just only build big stuff, I'm doing it because that's the stuff that the REITs are looking at, right? The big players are looking at those numbers, they're not looking at stuff that's 20,000-square-foot, or 30,000-square-foot, unless they can package it up and portfolio it with, you know, three other sites nearby, and call that a package. And it's over 100,000 or 200,000 square feet. So I'm trying to build the things that those guys are going to want to fight over. Right? That's the end game, right? So that's kind of why we build bigger facilities is again, it's not an ego trip, it's more of what's the best ROI for us and for our investors.

 

Sam Wilson  12:25

That's kind of the thrust of the show is How to Scale Commercial Real Estate. It's like, the reason we scale is for all the things you just mentioned, because your ROI is better at scale, and it is building something half of that size. So it is absolutely, yeah, that's really, really intriguing. What are you guys doing right now, when you're getting stupid offers, you know, right at, you know, say stabilization?

 

Joseph Evangelisti  12:45

Yeah, we're smiling first. We're kind of patting ourselves on the back a little bit. But no, I mean, the reality of it is, you know, our goal, like I said, to set out the beginning was to build a portfolio. So it's kind of a challenge, you know, you kind of got to pick, what's the best site to sell? Which ones are we going to sell? Are we going to sell? Are we going to leave them in a management agreement? So yeah, we have to pick and choose site by site, what's the best again, it's always the best thing for us and our investors, right. So sometimes you have the investors on board, and they're like, No, I want long-term money. You know, is it going to be a good tax advantage to sell? You know, there's a lot of components that go into it. But yeah, I mean, frankly, if we're gonna sit there and get an offer, that's above what we conceptualize that a pro forma, you know, two years ago, it's kind of hard to pass up on that.

 

Sam Wilson  13:25

Right. It sure is, what are some challenges or potential headwinds you guys are facing right now?

 

Joseph Evangelisti  13:30

I think what a lot of people are analysis materials, its people, its labor, its resources. It's timing. You know, weather is always a factor in construction, but it's something we live with, we deal with, you know, the steel industry threw us for a loop last year, you know, went up 40%, came back down. 15%. I mean, we're kind of in a place where, you know, we're making things happen. Luckily, we're still at or below budget on just about everything we're building. But that comes from a lot of like, it's day by day, you know, like our steel guys will literally say like, “Hey, let's execute on this deposit and it's good for the next three months. Let's wait let's wait let's wait let's wait okay, go” you know, and that extra 10% might be a couple $100,000 or more just a material savings. So we're literally communicating on a daily basis with all of our teams. Most of our, a lot of our builders are nationwide, which is really good because we can lock in rates on multiple sites even though we're building across six different states. So you know, it's good to have really good relationships and the kind that are there because they want to build long term with us as well. You know, so we're just doing our best to stay ahead of it whenever we can see, you know, shifts like that coming in the supply chain.

 

Sam Wilson  14:34

Yeah, that's absolutely intriguing. And I don't know I mean, I guess you'd use the futures market to kind of hedge some of that if you wanted to, but that adds another layer of complexity to your business as well. So that's really intriguing. I love what you guys are doing, I love how you're doing it. I think it's a unique gang, a lot of you know seeing this done a lot of different ways you know, they bring construction in-house or they bring you know management in-house I've seen you know the value add strategy. I love just a pure, I am a developer that's what I do and I stay in my lane. Mindset, I think that's something that would serve most of us, you know, take the little page out of your book and apply it to our own life. Joe, let's jump here to the final four questions. What is one tool resource think digital thing software that you find you can't live without?

 

Joseph Evangelisti  15:13

My cell phone? Obviously, I could run my entire business off my cell phone. But I know a lot of people probably could do that. I think that's, you know, number one digital resource, honestly, is the Google products. I mean, we went to Google all the time, Google Calendar, Google Notes, Google Tasks, Google Docs. I mean, they do such a great job of making that free and just sucking you into their environment. I have to say, the probably number one for most of my businesses.

 

Sam Wilson  15:33

Right. Yeah. Understood. When it comes to investing in real estate, what's one mistake you can help our listeners avoid? And how would you avoid it?

 

Joseph Evangelisti  15:39

I would start with the end in mind. You know, when I started my fix and flip business, it was just for cash. It was like, “How can I create a cash machine?” And I never really thought about what was the end game. The end game was just let me flip more houses. Let me flip more houses. Let me flip more houses. And then finally, we just got burned out. You know, we have a clear and definitive end game in this business, which is we want to stack resources and build a billion-dollar portfolio. We sell a few off between now and then it might happen. But you know, start with the end of mind, what's the exit? What are you doing it for?

 

Sam Wilson  16:05

Right? I love that. Question number three, when it comes to investing in the world, what's one thing you're doing right now to make the world a better place?

 

Joseph Evangelisti  16:11

Yeah, we're big givers, love to give back. Every time we build a site, you know, we're thinking about what's the local charity, we can help. I'm a veteran. So we do a lot for veterans charities. One of my, I'm on the board with a company right now that's actually placing, in fact, we placed a ball last week, 47-unit apartment complex in Northeast Philadelphia for veterans. So, you know, my big thing is, you know, growth and contribution. Like I think all of us as leaders should be growing and listening to good stuff like this every day. And you know, also at the same time, how can we contribute to give back to our communities and our, you know, the people around us.

 

Sam Wilson  16:41

I love it. Joe, if our listeners want to get in touch with you or learn more about you, what is the best way to do that?

 

Joseph Evangelisti  16:45

I mean, they can find me on Facebook, go to Joe Evangelisti at and if they're interested in tapping into our mastermind, our partnership, they can go to storagesyndicate.com, we call it the Storage Syndicate. They can go there visit and they can see what we got going on.

 

Sam Wilson  16:57

Fantastic. Joe, thanks for taking the day. Certainly appreciate it. 

 

Joseph Evangelisti  17:01

Thanks, Sam. Appreciate it. 

 

Sam Wilson  17:02

Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners, as well as rank higher on those directories. So I appreciate you listening. Thanks so much and hope to catch you on the next episode.