00;00;00;00 - 00;00;18;19

David Richter

You have Alex Pardo on today? He is a self-storage magnate who, like he did an incredible job in the wholesale fix and flip world. And then he tells his story of transitioning into self-storage. So if you are interested in this at all, or if you're currently in the real estate world and you're wondering how the heck can I get into that?

00;00;18;19 - 00;00;37;03

David Richter

Does it take a lot of my time, energy, effort? Then he also talks about profit first and how that's helped him over the years from wholesaling and then going into self-storage. So this is something you want to hear. He also talks about the emotional journey of how profits has helped him in his personal life, and what they're doing in their personal finances, and how it got him and his wife on the same page.

00;00;37;03 - 00;00;52;24

David Richter

So you want to hear those stories and you want to know I can I, as a real estate investor, also add self-storage and like, is that something that would even be a possibility? Well, if you're stuck on your rat race, then that wheel and just going round and round, you want to listen to this one. Enjoy the episode.

00;00;52;26 - 00;00;55;29

David Richter

Alex, welcome back to the podcast, man. Thanks for being on.

00;00;56;02 - 00;01;02;15

Alex Pardo

David, always a pleasure connecting with you, my friend. So selfishly, I'm pumped to be here just because I get to talk to you. But I'm looking forward to this conversation.

00;01;02;15 - 00;01;16;01

David Richter

Yeah, yeah. And I now love your wall behind you. Yeah. If you can't see it, if you're only listening to this. He's got like some monopoly type things. Obviously really good books behind him as well too. So I do love that setup. So you win like a ten out of ten for like the background as well.

00;01;16;01 - 00;01;26;16

Alex Pardo

Thank you. I grew up playing monopoly. It's funny Mike, nobody in my family wants to play monopoly with me because they say you always monopolize everything. I'm like, well, that's the whole objective. And point of the game, so I can never find anybody to play with.

00;01;26;22 - 00;01;42;04

David Richter

Oh man. So we need to go and have a monopoly tournament or something, because that's what I hear from my family too, because like, you know, think that no one wants to play that. Yeah. Oh man. We do have Bluey monopoly though because I have an eight year old. So that one's way faster. And she'll actually pay attention for 20 minutes during my.

00;01;42;04 - 00;01;42;22

Alex Pardo

Yeah nice.

00;01;42;28 - 00;01;59;10

David Richter

I love that that gets my little fix in. But just with Bluey characters but pretty cool. Good stuff. So you have been honestly an influence in me over the years too, because you were one of the first people when I was going down the profit first road that you said you liked it, you'd been implementing it. So we'll talk about that and go down that road.

00;01;59;10 - 00;02;17;12

David Richter

But then to just your journey and that that you've stuck around for all these years, like you and I now been through like several, I feel like ups and downs, you know, I can see other people through it and that you're still through it. So I'd like to know, like, okay, you're in, you've implemented profit first in your companies and you've tweaked it to your business and all that.

00;02;17;14 - 00;02;24;16

David Richter

Tell me about that journey. Like when did you first get introduced to it and like, how did things start to shift when you first got introduced the for profit?

00;02;24;22 - 00;02;44;27

Alex Pardo

Yeah. Great question David. So Trevor Mock, who I believe is a mutual friend of ours, he's had a big impact and influence on my life. He recommended the pumpkin plan to me by my MacLeods many, many years ago. And I remember when I read that book, I was like, I love this concept. And that led me to other Mike Markowitz books, one of which was Profit First.

00;02;44;27 - 00;02;58;07

Alex Pardo

And so I said, well, if Pumpkin Plan is a really good book, this has to be a pretty good book. Nobody really recommended it to me. I just picked it up and I read it, and right when I read it, it's one of those books I put down, David that I'm like, how have I not known about this?

00;02;58;07 - 00;03;18;11

Alex Pardo

And why have I not implemented this in my business? Because, dude, before I used to do exactly what he talks about, like basically like checking account balancing, like how much money do I have in there? Okay, I can spend money on this. I can't spend money on this. I can do a distribution. I can't do distribution. And so really what that book did for me was just give me a very simple, basic framework.

00;03;18;13 - 00;03;26;11

Alex Pardo

Now, initially, I remember having a little bit of resistance in terms of, like finding a bank that would allow me to create all the necessary accounts.

00;03;26;11 - 00;03;26;25

David Richter

Yeah.

00;03;26;27 - 00;03;45;25

Alex Pardo

And it took a little bit to get up and running. But one of the things I realized from implementing frameworks and systems, whether it's Profit First or iOS, the entrepreneur operating system from Gina Wickman in the book traction, is that they they provide the the roadmap, the blueprint. But at the end of the day, the system has to work for you.

00;03;45;25 - 00;04;06;22

Alex Pardo

You don't work for the system. And I don't know if you would agree or disagree with that. I'd be curious your thoughts, but for me, I find that whenever you read something like a profit first and it resonates with you, the concept makes sense. Implement it the way they they teach it and give yourself some grace to be able to tweak and modify it to work for you and your business.

00;04;06;24 - 00;04;12;27

Alex Pardo

If you find that it's just too rigid or is too challenging because of one reason or the other. So that's kind of what I've done. When.

00;04;13;00 - 00;04;33;03

David Richter

Yeah, and I would agree, as long as you have the core principles in place. But then the worst part is when you try to set it up, then you don't follow it. Whether it is profit first or iOS or any type of system like that. It's like you have to, you know, put it into where you'll actually do when people say, oh, I've got to set up all these bank accounts I like, just start with one.

00;04;33;03 - 00;04;58;05

David Richter

Like the core principle is the is the getting that good habits in place with money. So then since you've had profit first in these types of systems, I now I'm curious on the iOS side too. So we'll maybe we'll go there. Okay. But on the profit first side, if you've been running it for a few years, have you seen where Profit First has either helped you like in a cash crunch or it's helped you cover some things or have you done anything cool with profits, like with a profit do you have in a company?

00;04;58;05 - 00;05;00;02

David Richter

So I just I'm very curious.

00;05;00;02 - 00;05;25;06

Alex Pardo

Yeah, there's several things that come to mind, like I'll give you. So I own a facility with a partner in Amelia Island, which is just north of Jacksonville. Really affluent area, just great location. It's a deal we found on seller financing and we set up the profit for system. Now, when we bought that facility, we anticipated, David, that we were going to probably have to spend about 100 to $150,000 in what we calling commercial CapEx, capital expenditures, basically repairs.

00;05;25;08 - 00;05;45;14

Alex Pardo

And so right away we set up, you know, our income account, right. And then the opex account, well, how we tweaked it is we set up our CapEx account because we didn't have the 150 right out of the gate. And so we basically just started saving for it. And every time money would come into our serving platter, which is our income account, we would just take a certain percentage.

00;05;45;14 - 00;06;06;13

Alex Pardo

And we were aggressive at first. Yeah. And we were trying to shovel as much money into that CapEx. And then when we had enough of money to, to feel comfortable, like embarking on that journey, hiring a GC and starting the project, because we had a healthy CapEx budget and account, we were able to take on that project prior to implementing profit first.

00;06;06;15 - 00;06;24;27

Alex Pardo

You know, we've owned that facility almost three years. I probably still wouldn't have started the budget or still would have started the CapEx project. And even worse, had I started it, I might have put myself in a really tight financial spot because I didn't allocate the proper funds to having that. And I think what profit first for me anyways, I can't speak for you or anybody else.

00;06;24;27 - 00;06;49;07

Alex Pardo

I think what it's allowed me to do is it's giving me clarity. It's giving me peace of mind knowing that, you know, money comes into our income account and then based on our projections, based on our goals, based on certain projects, we can tweak and allocate certain percentages to the different accounts. And it just gives me flexibility as an operator to be able to run the business, not ever having to worry like, oh, are we going to have enough money for this?

00;06;49;14 - 00;07;12;02

Alex Pardo

Are we putting ourselves in a very tight or precarious position because we're underfunded in this particular area? And by the way, I don't claim to have everything figured out with profit first. In fact, I'm sure you can take a look at my situation for ten minutes and probably say, Alex, do this, do that, do this. Having said that, it's I think what it's done is given me peace of mind and clarity.

00;07;12;04 - 00;07;27;13

David Richter

But yeah, no, I love hearing that too. Well, and I think there was even, like a hidden gem there where you said you went into a new project like that, that's, you know, facility. And since you had that mindset, you like went into it with that, like with the. Yeah. The first set up sounds like your partner was on board too.

00;07;27;17 - 00;07;56;13

David Richter

And like he willing that. Yeah. Which is great. It's great that a partner that's on board with the systems for that. And then you were able to see like okay, I've done this in the past, I want clarity on this project. So kind of like you were borrowing from the past experience, you know, to make sure that profits going forward was going to serve you for this project, which I love what you said, it sounds like it helped you actually do the CapEx when you were supposed to, not just when like, oh, shoot, we got to either start this and then, you know, blowing everything up or blowing your cash position out of the water,

00;07;56;13 - 00;08;00;27

David Richter

or just like putting yourself in a more precarious situation like that. Yeah. For sure.

00;08;00;27 - 00;08;17;22

Alex Pardo

By the way, man, I, I follow the system so much that like, my wife and I have incorporated profit first into how we do our personal finances. That's awesome. Now, so instead of a CapEx budget like we have, we like to travel. So we have a vacation budget. Cool. Right now we have a Christmas and gift giving and holidays, charity, things like that.

00;08;17;22 - 00;08;39;23

Alex Pardo

So every single month we just have a certain fixed. Like we don't really use percentages in our personal finances. We have like a certain amount that we know we budget. So, you know, we know Christmas is coming every single year and we're going to be giving gifts to our kids and other people. And so it's like in the past when we first got married, we would like come August, September, start buying stuff and not really having a budget.

00;08;40;00 - 00;09;02;20

Alex Pardo

And then we sat down and we said, why don't we just implement profit first and let's just figure out, hey, what's the amount of money? What's our budget for gift giving or for vacations or for whatever, and say, hey, let's just divide it out over the year and we'll just have dedicated accounts for these things. And so when I look back to how we previously used to run our finances was basically just one account that everything would go into.

00;09;02;20 - 00;09;07;25

Alex Pardo

Everything would go out of brother I, it starts to give me a headache. I'm like, how did we even manage that?

00;09;07;28 - 00;09;10;24

David Richter

Yeah. So how long ago did you do that in the personal finances.

00;09;10;24 - 00;09;15;20

Alex Pardo

Man, it's been years. It's probably been 2000, 17, 1801 there.

00;09;15;20 - 00;09;30;20

David Richter

Yeah, yeah, because the book came out a few years before that too. So it's like, yeah, yeah, that's awesome. I love hearing stuff like that because what you did was take the principles, like you just took the principles and you put it into your personal life. And like you said now, like, how were we able at managing this before?

00;09;30;20 - 00;09;45;01

David Richter

Because I've heard a lot of people that if they go down the profit first road in their business, then they do it in their personal life, which it's almost like reverse engineering, like the, personal finance space. Right? Like, if I could get my business under control, like, I was like, I need to do this in my personal life, too.

00;09;45;08 - 00;09;58;13

David Richter

So I love what you did there. And that's awesome. It sounds like for your your marriage that it helped just get on the same page with money to like, divvy up. This is what we're going to do. So do you see that like being more on the same page?

00;09;58;13 - 00;10;16;21

Alex Pardo

Yeah, yeah 100%. Like for for me, my wife and I, you know, when we first got married and we made the mistake of not having a really in-depth, detailed conversation about how we wanted to manage our finances. Unfortunately for us, like, we were able to figure it out pretty quickly. But, you know, I have a lot of friends.

00;10;16;21 - 00;10;31;29

Alex Pardo

And by the way, if you're listening or watching and this is you, like I say, this was zero judgment. Like everybody, you know, kind of operates and runs and, you know, has their their setup the way that, you know, they feel comfortable. But for us, we were on the same page like, I, I don't need to have my own accounts.

00;10;31;29 - 00;10;51;04

Alex Pardo

I'm taking personal business. Yeah. She doesn't have her own accounts like we're one like everything flows through. And for us that has given us just, again, a lot of peace, clarity, transparency. Right. And and because if I had my own accounts and she had her own accounts and I was running profit first, but she was running something else.

00;10;51;06 - 00;10;56;01

Alex Pardo

I'm not saying you can't make it work. I know people do. I just it wasn't the path that we chose.

00;10;56;01 - 00;11;12;10

David Richter

Yeah, yeah. It sounds like you chose a better path for you guys. Like, this is what worked for both of you to come together to do this, you know, to be able to then run it and sounds like you're on the same page. It's like what you said, that transparency, like being transparent with each other. And, you know, it's like that big word, right?

00;11;12;10 - 00;11;15;06

David Richter

Communication like it helps with the communication side and like.

00;11;15;06 - 00;11;45;09

Alex Pardo

Communication tends to be a good thing for any relationship, especially marriages. So I know I'm not breaking any ground here. But you know, obviously a lot of relationships, whether it's personal or business, suffer because I think when you go into relationships, there has to be, expectations that are discussed upfront. I mentor of mine, David told me years ago, like, if you're willing to have an uncomfortable or somewhat awkward conversation before the relationship really gets going, you can avoid a really, really uncomfortable and awkward conversation in the future.

00;11;45;11 - 00;11;57;22

Alex Pardo

And that's that's really served me just being super transparent with my wife, with business partners, with coaching clients, anybody I work with. And that doesn't eliminate all problems, but I think it eliminates or drastically reduces most.

00;11;57;24 - 00;12;19;06

David Richter

Yeah. Yeah, that's that is really, really good. Because a lot of people just suffer and they suffer needlessly when they could have had courage upfront, like, here's what we need to talk about. Well, and sometimes too, they don't know like your eyes were open. It sounds like once you read the pumpkin plan, you read profit first. And that's why I really appreciate you coming on and telling about your story, because some people don't even know this is out there.

00;12;19;06 - 00;12;21;02

David Richter

And they're like, where the heck was this? You know?

00;12;21;02 - 00;12;24;03

Alex Pardo

Yeah, that's how I felt when I finished reading the book. Yeah, man.

00;12;24;05 - 00;12;42;05

David Richter

Exactly right. That's awesome. And I really appreciate you doing that. Now, saying that with Profit First, because I love when people actually implement it and they actually, you know, follow it and follow it for what is good for their business. Yeah, that helps me respect them as an owner as well to like, you care about the financial end and like you want to button up the back end.

00;12;42;05 - 00;12;52;12

David Richter

So tell us now, you've been in real estate for a long time. You've you've wholesale lots of houses. You've done a lot of that. Now you're in the self-storage base and like doing that for the last, what is it, five years now?

00;12;52;13 - 00;12;53;25

Alex Pardo

Yeah, I'm almost five years.

00;12;53;25 - 00;13;11;04

David Richter

Five years. That's crazy. That. Yeah. So we've I've known you probably for almost that whole entire time, maybe even a little bit longer than a London. So yeah, a little bit longer than that. So now tell us about the self-storage. Like do you mind me asking going from like the residential and the wholesale and that type of side.

00;13;11;06 - 00;13;13;20

David Richter

What made you jump into self-storage? Yeah.

00;13;13;22 - 00;13;25;14

Alex Pardo

Man, that's a great question. By the way, I'm an open book, brother, so literally anything you want to ask me, I'm happy to share. You know, the scars that I, that I've developed over the years from hard lessons learned and wins and everything in between.

00;13;25;14 - 00;13;28;21

David Richter

But let me scratch out all these other questions I had. Then I'll get the real ones.

00;13;28;25 - 00;13;51;22

Alex Pardo

Just here you go. So no, man, you know, for me, it's ironic, brother, because I got into real estate, like, I'm sure many people watching and listening, because really, it wasn't so much about the money. It's what the money could do for you, right? It's just options, right? Having living a certain way. Freedom. And ironically, I ended up playing the wrong game I discovered many, many years later.

00;13;51;22 - 00;14;16;09

Alex Pardo

So I think wholesaling is great. Fixing flip can be awesome if you're viewing it as a cash generator. The challenge for me is that I wasn't taking that hard earned active income and putting it into cash flowing, producing assets. I ended up playing the rat race game within my business of chasing deal after deal after deal, and have been fortunate to do very, very well throughout the years.

00;14;16;09 - 00;14;35;19

Alex Pardo

And, you know, 700 plus wholesale deals later, I started telling my wife I'm like, I don't know that I want to keep doing this. Yeah. You know, it's like it just it's a grind. And yes, it provides for us. And again, unfortunately we do well, but it's like it just felt like I was like climbing, a mud mountain, if that makes sense.

00;14;35;19 - 00;14;55;26

Alex Pardo

Like, I just, I would climb up and then I would slip back down and climb up and slip back down. And I said, you know, we got to start buying assets. So I shifted the focus. After joining, I joined the high level, mastermind back in late 2017. And I saw everybody in this community like using the word scale and throwing it around very irresponsibly, by the way.

00;14;55;26 - 00;15;18;03

Alex Pardo

And I don't pass that as a judgment. It was me that fell, you know, I fell into that path of like, well, if that guy can, can do ten, 12, 15 deals a month and have a team and an increased overhead. And this I can do that. And so I started doing that. And around the same time, while I was trying to, quote unquote, scale my wholesaling business, I started buying rental properties, thinking that was going to be my path to freedom.

00;15;18;05 - 00;15;43;20

Alex Pardo

Except I didn't factor in. Well, there's still tenants and toilets and I still have to manage these assets. And I eventually I got a third party management company. I still had to manage them. It just felt like there was a better way for me. And so I started coaching somebody. I ran a mastermind along with a friend of mine at that time, and I was coaching somebody who owned the storage facility, and it really opened my eyes to that asset class.

00;15;43;20 - 00;16;02;07

Alex Pardo

And the fact that he had everything I was looking for, he had time, freedom. He had financial freedom. You know, he didn't have high, high overhead. He didn't have high volume business. He didn't have any employees. But yet he was generating a nice cash flow from 1 or 2 facilities. And he didn't have a lot of the pain points I was currently going through.

00;16;02;07 - 00;16;23;18

Alex Pardo

So I just started to research that asset class. And when Covid came, in fact, the year prior 2019, I decided I'm going to start to wind down this, this beast of a business that I felt I had to I had created, I felt I had to feed. So for perspective, David, our overhead was 40, 45 grand a month, which so some people listening, that's nothing.

00;16;23;18 - 00;16;43;20

Alex Pardo

That's a weeks payroll, right? For others, that's crazy. For me, that meant I had to wholesale two deals just to break even. And that's not why I got in this business. Right. I had the office, I had the, implementer and the CEO and all this and I'm like, I want to simplify. Right. Like I, I had scaled irresponsibly.

00;16;43;25 - 00;17;03;20

Alex Pardo

I just added, added, added and I wasn't growing the right way. By the way, had I not had profit first implemented, it would have been a complete trainwreck, even though we were making money it. So when I Covid came and it was just an accelerator, it was a blessing in disguise. I said, you want to know what I asked myself one important question.

00;17;03;20 - 00;17;21;02

Alex Pardo

I said, If I'm still running this wholesaling business 12 months from now, how would I feel? And I almost got that feeling in my gut, like I did when I worked in corporate finance. And it was Sunday evening and I had to go into the job the next day. But except this was much worse because it was the business I had built and created.

00;17;21;05 - 00;17;38;22

Alex Pardo

And I'm like, something has to change. So man, I've always been a ready fire engine type of guy. My biggest thing at that point was my team was creating a soft landing for them, making sure that they were going to be okay. So in about 4 to 6 months, I had ended up just winding down the business, shutting it down.

00;17;38;24 - 00;17;42;23

Alex Pardo

And it was later that year, in 2020 that I transitioned into self storage.

00;17;42;26 - 00;17;53;29

David Richter

Okay. Wow. That is a roller coaster. So now looking back though, yeah. Do you wish you wouldn't have because of the craziness that ensued during Covid and right after Covid?

00;17;54;01 - 00;18;18;01

Alex Pardo

You know, I have had quite a few friends locally here because obviously real estate exploded right post-Covid and I have I have friends that would make nothing and then were killing it all of a sudden, okay. And every now and then I ask them like they ask me like, do you regret it? And honestly, I don't I know, I quote unquote left a lot of money on the table, but I also would have sacrificed a lot of peace.

00;18;18;03 - 00;18;39;08

Alex Pardo

And for me, it wasn't worth it. Like I knew that that wasn't the business I wanted to be in long term. Now, having said that, even though I don't regret it, knowing what I know now, I think one of the things that holds people back from getting involved in storage or limiting beliefs, they're either intimidated because it's a bigger asset class, or they think they need to have a bunch of money to buy these deals.

00;18;39;11 - 00;18;58;21

Alex Pardo

For me, I didn't realize that the skill sets that I had acquired as a single family wholesaler, as an investor, were going to translate over into storage. I incorrectly assumed I was going to have to develop a whole new set of skills and basically start from zero, and knowing what I know now, I could have built a bridge.

00;18;58;21 - 00;19;20;10

Alex Pardo

I could have scaled down the wholesaling business, I could have still done some deals here and there while I was building my wholesaling or my my storage business. So I don't regret it. And I probably could have done things a little differently back then when I was making the transition. Yeah, but Brother God doesn't make mistakes, so the path that he took me down was the path I was supposed to go down.

00;19;20;13 - 00;19;22;06

Alex Pardo

So I hope that answers your question.

00;19;22;06 - 00;19;43;22

David Richter

All right, well, I think it was a very mature answer of. No, I don't regret it because I would have stolen more peace, and the money's not worth it. You know, that's what I really heard there. And that's that's really good. I think another thing that you touched on that I think I need to beat into, if you're listening to this, like beat over your head, something he said there, he said he asked himself a very important question.

00;19;43;22 - 00;20;09;00

David Richter

And to me that was like the turning point. You ask yourself, do I want to be here like 12 months from now or like doing this thing? Or like, what do I do? And it's asking those deep, hard questions and you took time to think. And it's like, that's what I think is separates you. Then most other entrepreneurs and business owners like you actually ask yourself some of the tough questions and made the pivots like you actually went into it and then you don't regret, you know, going down that road.

00;20;09;00 - 00;20;24;18

David Richter

So now that we've gotten through that, what about now in self storage? Like, how is that journey gone since you started? Like do you own a bunch of assets now? Are you into like now? Are you teaching people like tell me about like that journey since.

00;20;24;21 - 00;20;43;04

Alex Pardo

Yeah, yeah. I, you know, I want to tie it back to something you mentioned that I appreciate you reflecting on what I shared because I don't even know that I the undercurrent of what I was saying is I think it's really important that you, you, you have awareness about yourself, that the gifts and God given talent that you received.

00;20;43;06 - 00;21;04;02

Alex Pardo

And I've been somebody who I, I've invested in myself a lot from a personal development perspective. You know, I do my best to try to spend time in the word every morning and just reflect and just, and I think because I've gone down that path, it's allowed me to ask myself important questions. And so I, I've always kind of attached myself to this framework of playing the movie forward.

00;21;04;02 - 00;21;20;19

Alex Pardo

Right. Like if I was sitting down in a movie theater and I had already seen the movie and I knew what was coming, would I make the same decision or different decisions? And I think that can be a helpful mindset and framework for people listening, regardless of what business you're in or if you're in a 9 to 5 looking to get into real estate.

00;21;20;21 - 00;21;39;06

Alex Pardo

And so, yeah, I mean, look, the journey has been fun. I've learned a ton. I was able to sell I had acquired, a storage portfolio in Mississippi of about 800. And actually now, I'm sorry, 638 units, which I just, finished selling at the end of the year and so fortunately, did very, very well on that.

00;21;39;08 - 00;21;59;20

Alex Pardo

I own a facility in Ford. I'm part owner on two more. I have a coaching client closing on one. Ironically tomorrow. But because of that awareness, because of the personal development work I've done. And this might surprise a lot of people, I am not passionate about real estate or even storage. I like it, I'm good at it, but I view it for what it's intended to be.

00;21;59;20 - 00;22;22;15

Alex Pardo

For me, it's it's a vehicle that God gave me to be able to do the work that I think is most meaningful, which in my case is coaching. Like I've taken, Trevor Mock, who I, who I referenced earlier. You know, he talks about this energy audit and the energy audit is taking inventory and stock of the things that give you energy, and also taking stock in inventory of the things that drain you from energy.

00;22;22;21 - 00;22;43;05

Alex Pardo

Well, this conversation with you, like this is energy giving to me. Yeah. You know, doing checking emails or researching logistics like that drains me from energy. So every day I ask myself, what can I do to get closer to the things that give me energy versus the things that drain me? And coaching and working with people and knowing that I'm having a positive impact in their life.

00;22;43;10 - 00;23;06;03

Alex Pardo

That's energy giving. Yeah. And so I've essentially just married the two, right. And I've been fortunate to have been in the, in the coaching space since 2013. Now I'm just applying, you know, what I've learned as a coach to get the most out of people and just I'm doing it now with with storage. Yeah. And the cool thing is, man, it's like this is an asset class where, you know, when I was in wholesaling, it was a volume game.

00;23;06;03 - 00;23;17;17

Alex Pardo

I had to do a bunch of deals every single month. This is different. I look for one, two, maybe three good deals a year, and it doesn't take that many for it to have a significant impact on somebody's life, which is pretty cool.

00;23;17;24 - 00;23;32;22

David Richter

That is cool. So then who would be a good person to get into self storage? Like, is it someone that's coming from a W2 and they want to jump in? Or is it like if they're a real estate investor or like, what type of people would you say that you like to see that jump into you?

00;23;32;25 - 00;23;51;05

Alex Pardo

And I didn't I didn't thank you for the alley oop because I literally did not. We didn't talk about this and I didn't feed you this, but you just nailed it. It's because of the space in the world I've been in many a single family. Real estate investors come to me to learn how to buy their first facility, and there's about 30, 35% of the people in our community are have an active job.

00;23;51;08 - 00;24;08;27

Alex Pardo

But now they're this is their side hustle. Okay. Right. So it's a mix of both, it's either real estate investors and or employees. But at the end of the day, they all want the same thing. They want more cash flow, they want to build wealth, and ultimately, they just want more options. They want more time, freedom.

00;24;08;27 - 00;24;12;00

Alex Pardo

And I and I think that's what this asset class can do for people.

00;24;12;03 - 00;24;32;24

David Richter

So that one guy that like, introduced you to it, where you only, you know, he had a couple storage facilities or one or and and he wasn't doing it. He didn't have nearly as many over as much overhead or people or whatnot to get into it. Have you seen that for yourself as you've gone into it and now done it yours and have done multiple facilities that you see that as like it, it's yeah, it is low overhead.

00;24;32;24 - 00;24;37;25

David Richter

It is a of us, you know, things like that. What you know the maps versus wholesale.

00;24;37;28 - 00;24;58;25

Alex Pardo

Yeah. No 100% I think what I didn't know and then I went into it naively back then was that, you know, storage. It's it's not it's an operators business. Right. It's it's a business that, if you if you're good at operations or if you partner with whether it be a third party management company or somebody who's good at operations, you're going to thrive like anything location, location, location matters.

00;24;59;02 - 00;25;23;02

Alex Pardo

So you got to make sure that you're buying a storage facility in a market that is undersupplied, meaning there's more demand for storage. And there is supply. Yeah. But yeah, look, I had it was 838 units across three storage facilities last year prior to me selling that Mississippi portfolio. Brother, if I told you I spent an hour and a half, maybe two hours a week on that portfolio was probably a lot.

00;25;23;05 - 00;25;41;14

Alex Pardo

Now, now for. I want to be fair. Yeah, I'm not saying that's what it took to acquire and get those I spent significant time and energy to find. Yeah, right. But once you get these properties, you start to increase the occupancy and what we call stable housing them. It can be very I won't use the word passive.

00;25;41;14 - 00;25;46;06

Alex Pardo

It can be semi passive. Right. A couple hours a week and and and you're in a good place.

00;25;46;13 - 00;25;58;21

David Richter

So when you just said that when you coach someone are you focusing then more on the acquisitions part. Because it sounds like if they can get it up and running, you can give them maybe some tools to like keep it running and on. Yeah, autopilot.

00;25;58;22 - 00;26;25;27

Alex Pardo

It's an A to Z process. But think of someone's journey into storage in three phases. Phase one is spent on marketing, lead generation, understanding how to evaluate the opportunity. Yeah, making offers, basically everything needed to to be done to go under contract. Then phase two is like the structuring of the deal. The finance thing going through due diligence all the way through closing phase three is now ownership upgrading.

00;26;25;27 - 00;26;38;20

Alex Pardo

How do you increase the value of the facility that what we call the net operating income? So we break it down in three phases and we focus on all three. But to your point, David, the first 3 to 6 months is pretty much focused on phase one, okay.

00;26;38;20 - 00;26;55;09

David Richter

Phase one, because it sounds like phase one and phase two are basically even before you purchase it. It's the analyze everything, get the deals at the door and then yeah, then actually analyze it. Once you've got one that's on the hook, analyze it and make sure that it's an actual deal and not just something like, oh yeah, we gotta we gotta accept it off.

00;26;55;09 - 00;26;56;16

David Richter

But is this any good?

00;26;56;16 - 00;27;04;02

Alex Pardo

So anybody can go? Believe it or not, anybody can go buy a facility. You gotta buy the right one. You gotta understand what you're buying. And like that's what we go in-depth into.

00;27;04;03 - 00;27;27;08

David Richter

So yeah. Yeah. No that's awesome. And I do like what you said to the underserved and like the, the ones that where there's not a bunch of supply because I, you know, you I'm in Florida. I feel like there's a storage unit facility on every corner, like in some of these places that I'm driving around. So that's got to be one of the biggest pieces because especially in a depressed market, I would think that storage doesn't do as well.

00;27;27;12 - 00;27;31;15

David Richter

Right it for does it do better in a depressed Mario. Like what's your opinion on that?

00;27;31;15 - 00;27;58;29

Alex Pardo

If I have a very strong opinion and fact, so much so that I lived it. So my very first deal, was in a rough part of Mississippi, Jackson, Mississippi. And knowing what I know now, would I have bought that facility? I'm not somebody that lives with regret. Unfortunately, we sold it and did very, very well. But the demographics we look for, like median household income over $50,000 a year, that market was under 30,000 a year.

00;27;58;29 - 00;28;15;29

Alex Pardo

It was in a rough part of town, what we would consider a D area. Yeah. Now, men, I learned early in my real estate journey, David. And you know this, that you make your money when you buy. You just realize it when you sell. Thank God I bought the deal. Right? When I got into that deal, I dealt with break ins.

00;28;15;29 - 00;28;38;11

Alex Pardo

I dealt with higher delinquencies. I dealt with more management headaches than what I had anticipated going in. And the reason I dealt with that was because I was in a rough market. Right? So whether it's storage, single family or anything else, again, the number one rule of real estate, right? Location, location, location, you gotta buy it, right? Again, fortunately, I just it was a good deal.

00;28;38;14 - 00;28;47;12

Alex Pardo

It just it didn't fit my vision of what I was looking for. And I've now used that experience moving forward to build my portfolio and then obviously to coach others as well.

00;28;47;14 - 00;29;03;07

David Richter

I have one more question. Yeah, this one's more around the economy. What about if the economy's up or down. What do you see storage like does it do better when the economy's up or down or like is it pretty stable through that. You know, like because real estate you've got cycles in Napa like is storage different?

00;29;03;09 - 00;29;19;10

Alex Pardo

I've guess that the real. So it's interesting that you ask that question by the way brother. Like I want to give you your flowers. I've been on a lot of podcast and I'm grateful for each opportunity. But like, you ask amazing questions and just love your energy and flow as a host man. So I just I want to recognize you for that.

00;29;19;12 - 00;29;44;08

Alex Pardo

One of the things that really appealed to me when I started looking at storage back in 2019 was the first time I really started to look at it, was that I kept seeing the words recession resistant. Okay, it's not recession proof. It's not the alcohol and tobacco industry. It's not gambling, but recession resistant. Meaning that historically speaking, if you look at when the economy is is down or when the economy's up, storage was pretty stable.

00;29;44;08 - 00;30;05;05

Alex Pardo

In fact, for many, many years, even like through Covid, obviously everything exploded in Covid storage was doing this. Now, the last couple of years, I think we're in the new market, which is not what we experienced during Covid. I think that's a healthy thing. That's a correction like Covid. Was that wasn't realistic and that wasn't sustainable. Yeah, right.

00;30;05;08 - 00;30;28;11

Alex Pardo

But no, historically speaking. And you can fact check me if you do your research. Storage has been very recist in two tough markets. And, and when you think about why it's a very sticky product, what happens when the economy like contracts? Well, people start to, like, contract themselves. Yeah. Oftentimes people downsize, but Americans like to consume and they like to acquire things.

00;30;28;11 - 00;30;28;22

David Richter

They love their.

00;30;28;22 - 00;30;35;11

Alex Pardo

Stuff. Their they have their stuff. So what do they do? They end up getting storage and paying 50 to 350 bucks a month.

00;30;35;12 - 00;30;36;26

David Richter

Versus and or something.

00;30;36;27 - 00;30;50;05

Alex Pardo

Versus moving. And it's a nuisance expense for many people, 50 to 3, 50 a month. It might sting them, but it's not enough with a plan of disconnect is high. And so they keep paying it month over month. And and as an operator I love that.

00;30;50;07 - 00;31;07;14

David Richter

So okay, I know I said one more question, but I got my spark here and then we'll be done. Yeah. This is what about vacancy versus like a portfolio of properties? I feel like since you have less overhead and it's in the operators game and you don't have to have a ton of people at the facility, depending on how big it is of course.

00;31;07;14 - 00;31;24;07

David Richter

But like, I feel like your occupancy, you want it obviously as high as possible. But even in a in a market where you might have more vacancy, you probably depending on the loan and the terms and the debt can probably tolerate more of a vacancy. Is that correct?

00;31;24;13 - 00;31;48;16

Alex Pardo

Yeah. There's something called the debt service coverage ratio, which basically means for like every dollar of debt, how much revenue is coming in. So banks banks like to see a 1.25. So if I have a dollar of debt they want to see that I'm making $1.25 back. Right. So like the SCR is the ratio that if you were to go get a bank loan, generally speaking they're going to want to see 1.25 or higher.

00;31;48;18 - 00;32;05;12

Alex Pardo

But yeah, look, that facility, when we bought that facility, it was like 54% occupancy. And from day one, not only was it covering the monthly debt service, but we were putting a little bit of money into our pocket. It's only 74%. Yeah. And that's at 54%.

00;32;05;16 - 00;32;09;22

David Richter

For the portfolio properties. I don't think you're going to be putting money in your pocket. Yeah.

00;32;09;25 - 00;32;25;24

Alex Pardo

And by the way, we're you know, not to get into a conversation about operating expense ratios, but I incorrectly assumed that whenever I was going to graduate from single family, it was going to be multifamily. Well, one of the cool things about storage is the operating expense ratio is usually between 30 and 40%. So what does that mean?

00;32;25;27 - 00;32;39;26

Alex Pardo

If a facility generates $100,000 in revenue annually for a year, then it's going to take me 30 to $40,000 to operate that facility. If you compare that to multifamily, multifamily is like 45 to 55%.

00;32;39;26 - 00;32;40;14

David Richter

Exactly.

00;32;40;14 - 00;32;48;08

Alex Pardo

So what does that mean? The margin is just there and you have more breathing room. More errors can happen. Like you just have you have a higher profit margin, which.

00;32;48;08 - 00;33;05;25

David Richter

Sounds like more forgive ability, like in the storage facility. Oh, this is awesome. No, I hope this does. If you're listening to this, this will get you excited. Like follow Alex go. And you know like he has where he trains people on this too. Do you want to give the link like how do people get Ahold of you if they want to get into the storage space?

00;33;06;03 - 00;33;26;21

Alex Pardo

Yeah, brother. Appreciate that man. So storage wins. Ecom wins for anybody interested in learning more about how they can get involved in the storage business. And and I put on a lot of content every single week on, on my YouTube channel, my podcast. So, happy. Anything I can do for people, even if they're not interested in, they're just curious, happy to send you free resources and training.

00;33;26;23 - 00;33;42;18

Alex Pardo

Because it is a cool asset class and it's something that people can do part time. It's not something you need to devote, you know, 30, 40 hours a week to so you can keep the focus on what you're currently doing and just learn something that can provide more stability for your cash flow perspective and allow you to build wealth long term.

00;33;42;20 - 00;34;06;12

David Richter

Yeah, no, I know of that. Where you can still keep your maintain the main thing, but add this in, especially if you're on that wholesale grind like you were talking about the rat race. Like I need to start getting out of that. If you're using profit first, like Alex was to, it's like then you could have some of that money to be able to go into the, you know, the storage facilities and those type of things, which sounds a lot better than just buying a single family rental portfolio and like going down or even multifamily at this point, like you've convinced me.

00;34;06;12 - 00;34;24;07

David Richter

Yeah. So this is where I like this stuff a lot. And obviously Alex follows profit first. So he's not just going to teach you how to make it. Like he's got the principles of keeping it at two and at least pointing you that direction. So it was storage wins.com. Go there, get a lease, grab his stuff I can go and follow him and go follow his stuff there if you're interested.

00;34;24;09 - 00;34;40;16

David Richter

Going to storage wins.com. Thank you so much for being on Alex. This was this was really a this was a lot of fun. And I appreciate all the knowledge that you shared here where people, it seems are very doable. And going out there and starting it in the self-storage. And thanks for talking about Profit First as well.

00;34;40;16 - 00;34;41;20

David Richter

Two on your journey on that.

00;34;41;22 - 00;34;57;29

Alex Pardo

Yeah. No man. Again, thank you for having me and fun conversation. It's always great connecting with you. And by the way, men love to see how you, when we first met, how you came in and you had this vision and then where you are today and how many people's lives you've impacted and change through your principles in applying profit first to real estate investing.

00;34;57;29 - 00;35;00;21

Alex Pardo

And so, just love what you're doing, brother love.

00;35;00;23 - 00;35;18;29

David Richter

Yeah. I did not ask him to say that, but that's a great segue into the end here that if you are on that rat race and you're just living deal to deal your wholesaling or flipping or whatever, and you're willing to get out of that and you don't have yours, like I'm just struggling here, we can make sure we can help you keep more of what you're making at simple cfo.com.

00;35;19;04 - 00;35;30;26

David Richter

You can go see if the were a good fit for that, because if you're making the money, we can help you keep it because that's a discipline that you need in your business no matter what. So thank you for listening as well to and then again, thanks so much for coming back on.

00;35;30;28 - 00;35;33;06

Alex Pardo

All right there. Appreciate you man.

00;35;33;09 - 00;36;05;07

Speaker 3

This episode of The Profit First for our podcast is over. But there are plenty more where that came from. Are you ready to learn how David and his team can help implement the prophet? First system in your business? Schedule a discovery call at simplecfo.com right now. We'll see you next time on the Profit First for ROI podcast with David Richter.