DiscoverReal Estate Rookie414: Financial Independence at 29 by Quitting Rentals to Invest in THIS w/Dillon Leonard
414: Financial Independence at 29 by Quitting Rentals to Invest in THIS w/Dillon Leonard

414: Financial Independence at 29 by Quitting Rentals to Invest in THIS w/Dillon Leonard

Update: 2024-06-03
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Dylan Leonard, a Kentucky firefighter, shares his inspiring story of achieving financial independence by age 29 through real estate investing. He initially focused on residential properties, but a fire incident involving a problematic tenant led him to shift his focus to commercial real estate, specifically self-storage. Dylan emphasizes the importance of finding mentors and leveraging their expertise, as he did by connecting with experienced self-storage investors in his market. He also highlights the significance of technology in self-storage, using online platforms for rentals and payments to streamline operations. Dylan's portfolio has grown significantly, with 800 units across seven locations, and he shares his strategies for financing deals, including owner financing, bank loans, and burrowing. He emphasizes the importance of building a team to handle the increasing workload as the portfolio grows. Dylan's journey demonstrates the power of taking action, building systems, and seeking help to achieve financial freedom. He also shares his insights on time management, balancing a full-time job with real estate investing, and the importance of setting goals and finding joy outside of financial pursuits. Dylan's story is a testament to the potential of self-storage as an investment asset class and the importance of finding the right mentors, utilizing technology, and building a strong team to achieve success.

Outlines

00:00:00
Introduction

This Chapter introduces Dylan Leonard, a Kentucky firefighter who achieved financial independence by age 29 through real estate investing. He shares his journey from residential real estate to self-storage, highlighting the importance of finding mentors, utilizing technology, and building a team.

00:00:49
Dylan's Journey to Self-Storage

This Chapter delves into Dylan's transition from residential real estate to self-storage. A fire incident involving a problematic tenant in one of his multi-family properties led him to seek a less tenant-intensive investment. He discovered self-storage through networking with experienced investors in his market and quickly learned the ropes by reading books and attending industry events. Dylan's first self-storage deal involved a 12,000 square foot facility that he purchased for $300,000, well below replacement cost. He refinanced the property after a year, pulling out $400,000 to invest in other properties.

00:10:02
Finding and Financing Self-Storage Deals

This Chapter explores Dylan's strategies for finding and financing self-storage deals. He emphasizes the importance of direct outreach to mom-and-pop owners, often by calling the number listed on the property sign. Dylan also shares his tips for securing bank financing for self-storage properties, highlighting the importance of presenting a comprehensive package that addresses all potential questions and demonstrates a strong understanding of the business. He emphasizes the importance of providing more information than requested and responding quickly to inquiries.

00:15:27
Self-Storage vs. Residential Rentals

This Chapter compares self-storage investing to residential rentals. Dylan highlights the key differences, including tenant base, occupancy rates, and valuation methods. He explains that self-storage offers greater diversification across tenants, making it more resilient to vacancies. He also discusses the importance of understanding market metrics, such as storage capacity and competitor pricing, when evaluating self-storage properties.

00:18:12
Technology and Cap Rates in Self-Storage

This Chapter focuses on the role of technology and cap rates in self-storage investing. Dylan emphasizes the importance of integrating technology, such as online rental platforms and digital payments, to enhance customer experience and increase revenue. He also discusses the significance of cap rates in valuing commercial properties, explaining how they differ from residential valuations. Dylan shares his experience of tripling the value of his first self-storage property within a year by increasing rental rates and maximizing occupancy.

00:26:53
Scaling a Self-Storage Portfolio

This Chapter explores Dylan's journey of scaling his self-storage portfolio from zero to 800 units in a short period. He shares his strategies for financing deals, including owner financing, bank loans, and burrowing. Dylan also discusses the importance of building a team to handle the increasing workload as the portfolio grows. He emphasizes the importance of taking action, building systems, and seeking help to achieve financial freedom.

00:30:27
Time Management and Balancing Work

This Chapter focuses on time management and balancing a full-time job with real estate investing. Dylan shares his strategies for managing his time, including prioritizing tasks, delegating responsibilities, and building systems and processes. He emphasizes the importance of not being afraid to ask for help and building a team to support the growing business.

00:36:38
Financial Independence and Future Goals

This Chapter explores Dylan's thoughts on financial independence and his future goals. He shares his perspective on FIRE (Financial Independence Retire Early) and how it has allowed him to focus on his family and pursue other passions. Dylan emphasizes the importance of setting goals and finding joy outside of financial pursuits. He also discusses his plans for continuing to grow his self-storage business and giving back to the community.

Keywords

Self-Storage
Self-storage is a real estate asset class that involves owning and operating facilities that rent out individual storage units to customers. These facilities provide secure and climate-controlled spaces for individuals and businesses to store their belongings, ranging from household items to business inventory. Self-storage is a popular investment option due to its relatively low operating costs, consistent demand, and potential for high returns.

Financial Independence Retire Early (FIRE)
FIRE is a movement that encourages individuals to achieve financial independence early in life, allowing them to retire from traditional employment and pursue their passions. This typically involves aggressive saving, investing, and minimizing expenses to reach a point where passive income from investments covers living expenses. FIRE strategies often involve real estate investing, stock market investing, and other forms of passive income generation.

Dylan Leonard
Dylan Leonard is a Kentucky firefighter who achieved financial independence by age 29 through real estate investing. He transitioned from residential real estate to self-storage, building a portfolio of 800 units across seven locations. Dylan is known for his entrepreneurial spirit, his passion for self-storage, and his willingness to share his knowledge and experience with other investors.

Cap Rate
Cap rate, or capitalization rate, is a financial metric used to evaluate the profitability of real estate investments. It represents the annual net operating income (NOI) of a property as a percentage of its purchase price. A higher cap rate generally indicates a more profitable investment, as it suggests a higher return on investment. Cap rates are commonly used to compare the relative value of different real estate properties.

Burrowing
Burrowing is a real estate financing strategy that involves refinancing an existing property to pull out equity and use that capital to invest in other properties. This allows investors to leverage their existing assets to acquire additional properties and grow their portfolio. Burrowing can be a powerful tool for accelerating real estate investment growth, but it's important to carefully consider the risks and ensure that the new investments are profitable.

EasyStore Solutions
EasyStore Solutions is a self-storage management software platform offered by Storeable. It provides a comprehensive suite of tools for managing self-storage facilities, including online rentals, payments, and customer communication. EasyStore Solutions helps self-storage operators streamline operations, improve customer experience, and increase revenue.

Mom-and-Pop Owners
Mom-and-pop owners are small business owners who typically operate a business with their family members. In the context of self-storage, mom-and-pop owners often own and operate smaller, independent storage facilities. These owners may be looking to sell their business or retire, making their properties attractive acquisition targets for investors.

Lean Law
Lean law refers to a legal framework that governs the process of lien enforcement in self-storage. It outlines the procedures that storage facility owners must follow when a tenant fails to pay rent or otherwise violates the lease agreement. Lean laws vary by state, and it's crucial for self-storage investors to understand the specific laws in their jurisdiction to ensure compliance.

Third Tier Markets
Third tier markets, also known as secondary markets, are smaller cities or towns that are not considered major metropolitan areas. These markets often offer lower property prices, lower competition, and higher potential for growth. Third tier markets can be attractive investment destinations for real estate investors seeking value and potential for appreciation.

Standard Operating Procedures (SOPs)
SOPs are standardized sets of instructions that outline the steps involved in performing a specific task or process. In the context of self-storage, SOPs can be used to document procedures for handling customer inquiries, processing payments, managing maintenance, and other operational tasks. SOPs help to ensure consistency, efficiency, and compliance within a self-storage business.

Q&A

  • What led Dylan to transition from residential real estate to self-storage?

    A fire incident involving a problematic tenant in one of his multi-family properties led Dylan to seek a less tenant-intensive investment. He found self-storage to be a more predictable and less stressful asset class.

  • How did Dylan find his first self-storage deal?

    Dylan found his first self-storage deal by directly contacting mom-and-pop owners in his market. He used a combination of driving for dollars and virtual driving for dollars to identify potential properties and then called the numbers listed on the signs to speak with the owners.

  • What are some key differences between self-storage and residential rentals?

    Self-storage offers greater diversification across tenants, making it more resilient to vacancies. It also has a more predictable occupancy rate, with tenants typically staying for 18 months or longer. Valuation methods also differ, with self-storage properties being evaluated based on cap rates and market metrics.

  • How did Dylan finance the growth of his self-storage portfolio?

    Dylan used a variety of financing strategies, including owner financing, bank loans, and burrowing. He carefully considered the specific needs of each deal and chose the most appropriate financing option.

  • What are some important systems and processes to put in place when starting a self-storage business?

    It's crucial to understand the lean laws in your state, as they govern lien enforcement procedures. Beyond that, focus on building a customer-centric approach with online rentals, payments, and communication. Consider implementing text-based communication for convenience and record-keeping.

  • What is Dylan's current buy box for self-storage properties?

    Dylan is now looking for properties between 15,000 and 50,000 square feet in third tier markets where he can be the market leader. He prefers properties that are underperforming and offer significant upside potential for revenue growth.

  • What are some key due diligence considerations for self-storage investments?

    Look for properties with significant upside potential for revenue growth, especially those with low rental rates compared to market standards. Consider the property's location, size, and condition, and assess the potential for improvements and upgrades.

  • How does Dylan manage his time and balance his full-time job with real estate investing?

    Dylan prioritizes tasks, delegates responsibilities, and builds systems and processes to streamline operations. He emphasizes the importance of not being afraid to ask for help and building a team to support the growing business.

  • What are Dylan's thoughts on financial independence and his future goals?

    Dylan believes that financial independence provides options and freedom. He plans to continue growing his self-storage business and giving back to the community. He emphasizes the importance of setting goals and finding joy outside of financial pursuits.

  • What advice does Dylan have for rookie investors getting started in self-storage?

    Find mentors, utilize technology, and build a team. Understand the lean laws in your state and focus on building a customer-centric approach. Be prepared to take action, build systems, and seek help as your portfolio grows.

Show Notes

Do you dream of building a real estate empire and reaching financial independence but stop short due to the “tenants and toilets” problem? The irony wasn't lost on twenty-nine-year-old Dillon Leonard when a renter accidentally burned the roof off one of his properties. This incident, along with several others, prompted him to explore self-storage investing as a way to escape residential rentals while still allowing him exposure to real estate.


Knowing little to nothing about this often-forgotten segment of the market, Dillon sought expert advice by taking local self-storage owners out for coffee. He soon took action on a 12,000 sq. ft. property for around $300,000 and tripled his investment in a year’s time. Encouraged, he scaled his portfolio over the next three years and now receives approximately $70,000 in gross monthly revenue from 800 units!


Dillon’s self-storage success story has allowed him to build a team and implement systems to run day-to-day operations. Not yet thirty, he now enjoys options that many twice his age wish they had, including potentially retiring from the fire department, spending more time with family, and leaving a property package as a legacy. Tune into this episode to explore the nuts and bolts of the self-storage industry as well as the inspiring mindset realizations that Dillon has experienced in his journey!


In This Episode We Cover

Finding financial freedom by investing in often-overlooked assets (like self-storage!) 

The exact method Dillon used to find the most lucrative self-storage properties

How to scale in self-storage using a variety of financing methods

The due diligence practices you MUST utilize to be successful

How to know when hiring a team becomes essential – and how to pull it off

Why an entrepreneurial mindset frees you from financial fear no matter what happens

Why it’s never too soon to start crafting your exit strategy 

And So Much More!


(00:00 ) Intro

(01:14 ) Residential Rental Woes

(05:09 ) Escaping Tenants & Toilets

(07:38 ) 1st Self-Storage Deal

(10:34 ) Financing Self-Storage

(12:53 ) Self-Storage vs. Rentals

(19:13 ) Growing His Self-Storage Business

(22:47 ) Time Management Tips & Tricks

(26:04 ) Scaling through Creative Financing

(27:50 ) Hitting Financial Freedom!

(31:09 ) Acquisitions and Due Diligence

(34:55 ) Systems and Processes

(37:23 ) Quitting His Job


Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/rookie-414

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414: Financial Independence at 29 by Quitting Rentals to Invest in THIS w/Dillon Leonard

414: Financial Independence at 29 by Quitting Rentals to Invest in THIS w/Dillon Leonard

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