20% returns in self-storage, drive-thru animal crematoriums, & Etsy arbitrage
This week's trending topics, ideas and inspiration you need to take action
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Weekly roundup of startup ideas & trends…
Self-storage real estate opportunities💎
Low-tech service businesses you can bank on 💵
Drive-thru pet crematorium business 🔥
How to “arbitrage” Etsy with no operating expenses 📈
20% returns on self-storage opportunities
On the latest My First Million podcast, Shan and Sam interviewed Nick Huber of the Sweaty Startup. Nick is 30 years old, has $10M worth of self-storage facilities, 1,000 units, 8 facilities totaling over 250,000 square feet. He’s shy about publicizing his profits but I calculated he’s probably pulling in $1M per year gross profit with his business partner.
Nick left Ivey League school and started a moving company. He later began investing in self-storage facilities.
How you make money in real estate (6:55)
If you buy $1M self-storage, you should be earning anywhere between $60K to $100K in net operating income (NOI) each year (which is before paying debt and depreciation service). $20K to $30K goes to debt service. The rest is profit.
Banks will finance about 75% of the purchase of the $1M self-storage facility so you only need about 25% of the cash to purchase it.
This does not sound like a super great deal until you learn about the massive tax advantages of real estate and how much benefit you get with economies of scale. The Trump tax cuts included bonus depreciation rules which allows Nick to count 30% of purchase price of the real estate against profits on year one as a tax write off!
So basically, many real estate entrepreneurs pay nothing in tax. Smart!
Nick’s strategy is to buy self-storage facilities in middle-America (better yields) owned by 65 year olds who are very inefficient (paper ledgers and check payments). Nick comes in and automates the facility so you don’t have to pay full time property manager.
Nick uses Easy Storage Solutions software to manage his facilities. It’s about $60/month. Shaan mentioned a competitive software called Open Unit. SiteLink is the most popular software in this space but it’s the old guard and is not as good as the others.
Nick has no employees on-site. He’s only got two employees to manage his 8 facilities and they work from home.
Nick has a contract with cleaners who charge $30/hour and has a relationship with the local police department to prevent break-ins, etc. They also use online security cameras and can monitor them from anywhere in the world.
Nick works about 30 to 40 hours per week.
How do you find self-storage and real estate deals? (13:00)
Nick buys small 30,000 square foot facilities in the upper-midwest and middle America and pays $1.5M to $2M. He avoids buying in big cities. He buys at a 8% capitalization rate (cap rate). So 8% yield on the cost. If you’re buying a place for $1M, that’s about $80K per year in NOI. Nick’s average cash-on-cash return is about 15%-20% on the money he deploys.
To find facilities to purchase, he cold calls older self-storage facilities and tries to find the ones with 65+ years old owners who are ready to retire. The business is more stressful for them than Nick because Nick can automate and make them more efficient easily.
Nick doesn’t go for the high-end, climate controlled units and sticks to very basic storage which also reduces maintenance.
How to bootstrap your way to wealth in real estate (17:30)
Nick started small in real estate and used his profits from his moving business to gradually scale up his real estate empire. He started with $500K plus $250K as a safety net.
Nick says the truth is you need money to start in real estate and assets as collateral.
Once he buys the facility he can instantly increase NOI buy decreasing costs (don’t need a full time manager) and increases rent. So he can go from a NOI of $80,000 to $120,000 in no time. Now the facility is instantly worth more.
(Source: My First Million)
Huge opportunities in low-tech service businesses (43:00)
Nick makes the argument there is huge and growing demand for “sweaty” service based businesses as more and more younger folks choose to outsource even basic household services like lawn care, lawn health (fertilizer, fungicide, etc), window washing, power washing, plumbing, pest control, fencing, pool cleaning, moving, etc.
Nearly all these service businesses are under-optimized. By implementing technology, combined with increasing prices, you’ve got a very nice cash-flow business. In many towns and cities, there are long lead times for these services because of demand. This means their pricing should increase but it’s not happening. You can make this happen.
Drive-thru animal crematoriums was another idea brought up by Nick. He says these businesses are cropping up all over the place. Basically people pay $300 to $400 to cremate their deceased pets and put their ashes in an urn so the owners will always remember them. There is probably higher demand for this service in cities and towns where people can’t burry their pets.
Tiny, last-mile industrial warehouse space is another opportunity. Nick says there’s a huge lack of supply in cities across the country for these. I’m invested in an Amazon last-mile warehouse as a limited partner and am receiving over 11% returns for doing absolutely nothing. There’s demand for smaller warehouses you can get for lower purchase prices you could manage yourself.
(Source: My First Million)
Gig-worker arbitrage on Etsy
Although Etsy is primarily a physical product marketplace where makers sell craft products, there’s a growing demand for digital graphic products. Etsy only charges a 5% fee for selling items on their platform which is cheap for physical products but VERY cheap for digital products. Since margins are typically also VERY high on digital products, this makes for an interesting opportunity.
Online popularity is growing for SVG images (a digital product) on Etsy. SVG images are unique in that you can scale them larger or smaller without reducing the image quality. This makes SVGs perfect for printing images on t-shirts, mugs, etc. Also, the largest buyer of these SVGs are actually other Etsy sellers.
How can you “arbitrage” SVGs on Etsy?
Do a little reasearch on Etsy and find out which SVGs are popular and in demand. Then go to Fiverr or any other gig-worker platform that can produce original digital artwork similar to what’s popular on Etsy. Then, turn around and sell the artwork on Etsy for a higher price than you paid for it. The beauty of this strategy is you don’t have to spend any money on marketing or ads since Etsy is like a lead generator, e-commerce website, and payment processor all in one for only a 5% fee. You essentially will build a $0 fixed cost business on the back of the Etsy platform.
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