Neil Henderson - From W2 To Wealth

Neil Henderson is a seasoned real estate investor, co-host of the Truly Passive Income Podcast, and General Partner at Nomad Capital. After nearly two decades as a defense contractor, Neil transformed his career by pursuing financial freedom through real estate investing. Starting with a simple house hack in Las Vegas, he’s now helped investors participate in over $75 million in commercial real estate deals and raised more than $17 million in investor equity. As a thought leader in the FIRE (Financial Independence, Retire Early) movement, Neil shares real, actionable strategies for building passive income, achieving financial independence, and creating time freedom through self-storage syndications and other powerful real estate investing models. Neil’s insights will help you take the next step toward truly passive wealth.

In this episode, you will be able to:

• Discover how transitioning to real estate investing can unlock new opportunities and build lasting wealth.

• Learn why self-storage investments offer a unique edge in maintaining steady income during economic downturns.

• Understand how shifting interest rates reshape real estate strategies and what that means for your portfolio.

• Explore proven strategies that drive commercial real estate appreciation and boost your asset value over time.

• Uncover the hidden potential of secondary and tertiary real estate markets to diversify and grow your investments.

The key moments in this episode are:
00:00:00 - Starting Real Estate Investing Without a Loan: Neil Henderson’s Early Challenges
00:02:17 - From Failed Landlord to Airbnb Success: Building Cash Flow
00:06:47 - Discovering Self Storage: Networking and Strategic Partnerships
00:14:34 - Building Meaningful Business Relationships with Intentional Value
00:18:57 - Why Self Storage Is an Attractive Commercial Real Estate Investment
00:22:28 - Transitioning from Residential to Commercial Real Estate Investing
00:27:03 - The Real Power of Appreciation Over Cash Flow in Real Estate
00:30:54 - Impact of Market Changes and COVID on Self Storage
00:34:01 - Innovative Self Storage Strategy: Converting Existing Buildings
00:36:56 - Target Markets and Facility Specifications for Nomad’s Self Storage Projects

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Full Transcript:

Neil Henderson
How do I get into real estate when I can't get a loan? And as I'm digging in and trying to figure out real estate, I discover commercial real estate around the same time that I discover self storage. And I went to a conference called the Best Ever Conference in the spring of 2017. Saw a man by the name of Scott Myers talking about self storage up on stage and literally went to lunch after that and sat down on a lunch buffet table that I say changed the course of my life.

Mike Swenson
Welcome to the Real Freedom show where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. Let's get some real freedom together. Hello everybody. Welcome to another episode of Real Freedom, Real Estate Leverage Freedom, where we talk about different ways that people are building time and financial freedom through opportunities in real estate. I'm your host, Mike Swenson. If you want to get started on your real estate investing journey, check out our website freedom through realestate.com. it's where we post all of our episodes. Great articles, information. Whether you're outside of real estate, looking to get in or inside of real estate, trying to figure out where you want to go, what path is next. We know it's fail forward and try a lot of different things to figure out what you want to do. And so we're happy to help support you in that. Super excited about today. We've got an awesome guest, Neil Henderson. Neal is a professional real estate investor, co host of the Truly Passive Income podcast and general partner of Nomad Capital. And for you, you guys focus on Self Storage. Based out of Wilmington, N.C. somewhere in the range of 75 million in commercial real estate transactions, raised capital in the realm of 17 million in investor equity and acquired over 311,000 net rentable square feet of self storage facilities. Excited to hear about what you do and where you go. For those folks that that have tuned in for a while, you can go Back to episode 202 where we had Clint Harris who is Neil's business partner and so got a chance to hear his story and share. So Neil, we're excited to have you on to be able to share your story. So welcome to the show.

Neil Henderson
Happy to be here Mike. Thanks for having me.

Mike Swenson
Just start with us. Kind of for you. Let's take us back kind of why real estate and talk about how you got started on things.

Neil Henderson
I was a failed accidental landlord in Las Vegas, Nevada. I bought my first piece of real estate in 2005. A three bedroom, two bath condo in Las Vegas. It was a year old condo that had doubled in value in a year. Should have been my first warning, bought it. But I bought it there to live there and watched it, the value of that property go From I think $205,000 up to 275 at one point. And then in the great financial recession, watched it drop down to about $60,000 when I did a short sale on it. During that period, I got married, was looking for sort of, you know, we were planning to have kids. We ended up buying a house in Las Vegas in 2013 and had a little guest house at the front of that house. And for about 30 seconds it was going to be my ultimate man cave. Until my wife was like, absolutely not. That's going to be where our, our family and friends come to stay. So we built out that little guest house like a little hotel room. We added a coffee bar, a small mini fridge, a microwave. Just a comfortable place for our family and friends to come and stay. No plans beyond that. On Christmas Day of 2013, my mom came to me and she handed me this article about this company called Airbnb. And she said, I think this would be a great thing for you guys to do with your guest house at the front of the house. I was like, yeah, whatever mom. And. But I went away and thought about it that January and I was like, well, what would be the harm? It's just sitting empty most of the time, so I'll give it a try. So went out, took some photos of it, posted it on it on Airbnb, and within 48 hours we had our first day booking. And we were 65% occupied from that date until March of 2020 when Covid shut us down. And we were the hot, one of the highest rated listings in Las Vegas during that period. And that was sort of my intro into real estate, like really real estate. It was kind of mailbox money. I was like, man, this is really good. How do I figure out how to leverage this? How do I do this? How do we do more of this? Well, Las Vegas was a real, by that time became very quickly became hostile to short term rentals. So I, I couldn't really figure out how to scale it, scale short term rentals there in Las Vegas. So I started looking, you know, researching into other real estate, fell into the bigger pockets black hole and started learning about different real estate asset classes and things like that. And then eventually found self storage. And I can go into that story if you want, but I'll Stop there and let you ask any questions?

Mike Swenson
Yeah, I think so. Interesting to hear that a condo purchase for you is what started it all on the way down. Same for us, 2006 we bought a townhouse. We're super excited that we bought it for $2,000 less than the previous owners bought it for two years prior. And then we watched it tank to half the value of we bought it for course. So I get it. And you know what's interesting there, you know, some of those learning lessons is it forces you to figure things out. You know, I talk about holding real estate, you know, you're figuring out problem solving. How do you learn how to problem solve? By solving problems. Problems have to come up for you to learn how to solve them. And so that's part of what real estate is too. Like it's cool to find a property. Maybe oftentimes you hit the nail on the head and you get a good property or asset, you know, whatever asset class you're in in real estate, however things happen and you've got to learn how to think on your feet and adjust. And so yeah, for you guys too then having your, your purchase, flipping it into a, to an Airbnb. I remember the first time we have some short term rentals to. First time I hit to go live on Airbnb I was like how long is this going to take? And pretty quickly we got a booking for like two days later. So it's cool how fast that can happen too. And I think that also speaks to things can happen more quickly, things can happen more slowly. And then two, you gotta dip your toe in different parts of the water inside of real estate to figure out what you like and, and what you're good with. So talk a little bit about the self storage for you. For people that might be considering different asset classes. Talk about what was it for self storage for you that was attractive.

Neil Henderson
Well, before I get into that, I wanna touch on something you just said there, which is problem solving. Because what happened for me in 2014, I ended up having to short sell that condo. I was a defense contractor. I had been renting it out for about two years and I had, it was negative cash flow like 500amonth. And I had, my tenant was military, was on a two year lease but they got PCs so they were able to break the lease and move out. And all of a sudden my fifteen hundred dollar or my five hundred negative cash flow turned into about eighteen hundred dollars a month in negative cash flow. And my wife had recently lost her job because she was pregnant with our son. And suddenly we had this, you know, major financial crisis facing us, and we had to short sell it. Didn't want to do that. You know, it was. It's not quite a foreclosure, but it shows up on your credit report like a foreclosure. But we got it. It was a smart move. Didn't like doing it, but it was a smart move. Had to do it. But suddenly that put me into a position of I'm just now discovering real estate and getting excited about real estate, but now I can't get a loan.

Mike Swenson
Yeah.

Neil Henderson
And I. So I had to figure out, all right, how do I get into real estate when I can't get a loan? And as I'm digging in and trying to figure out real estate, I discover commercial real estate around the same time that I discover self storage. And I went to a conference called the best Conference in the spring of 2017. Saw a man by the name of Scott Myers talking about self storage up on stage, and literally went to lunch after that and sat down on a lunch buffet table that I say changed the course of my life. And I met my partner, one of my partners now, Eric Hemingway. And he was sitting there and telling this story about how he had built a self storage facility from the ground up in 2006 and then gotten on a sailboat in the Mediterranean and sailed around the Mediterranean for three and a half years with his family. And I was like, I need to get to know this guy now. It was a lot more complicated than that. Not nearly as smooth sailing, pun intended.

Mike Swenson
Unintended. Yeah.

Neil Henderson
Yeah. But that was where we made a connection. I started trying to figure out how I could help him. I had been raising a little bit of capital for multifamily syndications. At that point. I knew enough to be dangerous on the multimedia side and started my own podcast with my wife and started learning about real estate investing by actually interviewing people who were experts in real estate investing. And that was sort of how I got exposed to self storage, the commercial asset class. Um, and Eric and I just started. I started trying to figure out ways that I could add value to Eric's business. And Eric was a small operator at the time. He had. He only had one facility. He eventually built his. Right around the time I met him, he built his first conversion. He bought another conversion. And then shortly after, shortly before I moved here, he. He bought another facility that he was looking to expand, but he hadn't done any syndication. And I was constantly telling Eric, hey, man, you got to Syndicate, he's like, nope, I'm not ready. And he was smart because he was proving his business model before he started taking on investor capital. But he also recognized that he didn't want to be on that side of the business because real estate, commercial real estate, especially syndication, is a team sport you're going to have. It's not usually just being a one man operation. You're going to have somebody who specializes in acquisitions, underwriting, capital raising, operations. I mean, it's not usually just going to be one person doing all of that. And so I just look for a way for me to add value and just kept at it until eventually an opportunity arose for, for me, as the Nomad Capital team was coming together, it was a chance for me to come here and be a part of that. And I'm grateful, grateful for that opportunity coming to me and I'm grateful every day for the move that I made.

Mike Swenson
How long was that? From kind of first meeting at the conference to joining up on the team?

Neil Henderson
A long time. It was February of 2020 before we, we were at the conference again. I had, I'd come to visit him several times. We, we stayed in touch all the time. I was trying to make it on my own in Las Vegas with Self storage and just beating my head up against the wall. He was looking for ways to like scale his business and was always kind of running into this problem of, you know, he had deals but he didn't have money. And we sat down at a bar in Colorado at this best ever conference with him and his son Levi, who's the man who co founded the Nomad Capital with. And I said very drunkenly at the time, I said, hey, I want to help you guys get to a hundred million dollars in assets under management. And I meant it. And they said, all right, let's go. And we left that conference just fired up, ready to go. We were going to take on the world. And then we went back in that March of 2020, Covid hit and it just absolutely blew up my world, blew up their world. And that delayed us about a year. But I sold my house in Las Vegas in June of 2020 because the unemployment rate in Las Vegas was 25% at the time. I had huge amounts of equity in that home because that Airbnb was allowing me to basically pay down my mortgage faster. So we owned, we almost owned that house free and clear. It had gone up in value a huge amount. My dad died the same day that Covid became a thing. My mom was a widow and we Sort of. We moved in with my mom and formed our little own little Covid podcast and sat back trying to figure out, oh, what's our next move? And I Finally, in late 2020, made the decision that I was going to move to Wilmington and talked to my partner Clint, whose wife is a real estate agent. I said, hey, I want to buy a multi, small, multi family property in Carolina Beach, North Carolina, and we're going to house hack it. And he said, yeah, get in line. But I eventually went to a mortgage broker and said, hey, give me, you know, tell me what I can afford. And went to him and said, hey, let's do this. And so that was the first step. Bought a house. Bought a house across the street from the beach in Carolina beach and told Eric and Levi that, hey, I'm serious, I'm coming there, we're going to make this happen. And moved. Finally moved in October of 2020, arrived here on October 24th of 2021. We syndicated our first deal that fall and we were off to the races.

Mike Swenson
So many things that I want to want to chat about there real quickly because this isn't something that, you know, often gets talked about, is kind of the networking piece. So, you know, we go to conferences, we meet people. A lot of times we don't follow up with people. You collect the business cards or the digital business cards and you don't follow up and stay in touch. So for you, you had mentioned, you know, really trying to find ways to Eric and then keeping in touch over time. How much of that was, I would say, actively intentional on your part? How much? It was maybe just mutual connection and relationship, like, oh, we really bonded or it really worked well, because I'd love to hear that because so many people meet these people at conferences and obviously sometimes things work out. Things don't work out. So I was just kind of curious to hear how much of it is like, yeah, we just stayed in touch because we enjoyed each other's company and did that. Or how much of it is like my next business decision, my five year plan is add value to Eric. You know, like that's obviously super intentional. So kind of how, how would you see that maybe that relationship going from we meet at a conference to now I'm on his team. Obviously you had to take some big steps and you moved to North Carolina, which is huge as well. But just curious to hear kind of how that first meeting turns into business partnership.

Neil Henderson
It was much more a mutual bond. I'd have to say. I was very intentional about trying to Add value without the expectation of getting anything back from it. And I think that's really what you need to go into things with is, and, and then just have a little bit of faith that if it's something that's going to be mutual, beneficial, that things will work out. I did not come in into this relationship with Eric going, all right, I'm just going to add value and then we're, you know, he's going to eventually bring me on at all. I, it was very much. And I told them multiple times throughout a relationship, I don't know what this is going to look like. I just love being around you and I love what you're doing and I enjoy the value that I'm bringing to the relationship and then just hope it's going to work out and not really go in with an expectation that it is. And that's hard because I was giving a lot of my time, but he was also giving a lot of his time back. I mean, we would have, I would come to visit him, we would have calls where he would be giving me advice on storage deals that I was looking at with no expectation that he was going to get anything out of it. And that's sort of where I think you need to approach it is that how do I add value without any expectation that I'm going to get anything back from it? You know, give, you know, the whole idea is to give, give, give without expecting anything back, but with the faith that if you do that honestly and with good intentions that eventually it will come back to you.

Mike Swenson
And I think part of it too, and maybe I'm wrong here, is, you know, he was on the early side of his journey too. So it's kind of like your similar path, similar spots, trying to figure things out. It's not like he was, you know, hey, I've got this hundred million dollar portfolio. Who's this guy Neil? What can he add value for me? You were growing separately forward and then decided to come together too.

Neil Henderson
Correct. And that really he was not, he was a bit of a close carrot for me. He wasn't so far ahead of me. You know, I didn't go up to a guy who had $3.5 billion in multifamily assets under management and say, hey, let me partner with you. He was a guy who at the time, he owned one self storage facility. Once I met him, he, he built his second and then a third and a fourth. And I just stayed in touch with him, not expecting anything out of that relationship other than he was just A really cool guy. I mean anybody who's been around the Hemingways for any period of time comes away kind of changed. And, and a bit of, you know, we talk about it, you know, sort of like drinking the Hemingway Kool Aid because they're just good, they're good people. The whole family is great. And I'm not blowing SM and I'm not saying that to like, I don't know, I would say overly complimentary, but that's just who they are. They're just good people. And I. Life's too short to spend time with jerks and I always tend to just gravitate towards those people who are just good people.

Mike Swenson
So, so touch on the self storage piece. You'd had some Airbnbs. You talked about the challenge of trying to scale that. You talked about commercial loan versus you know, having the, the ding on your credit and personal loans. So what was it, you know, kind of about self storage as you looked at where you're going to spend your time that was attractive and interesting to you?

Neil Henderson
Well, the first eye opening moment was just the whole idea of commercial real estate is that it is a very, it's a very mathematical formula. I mean it's not, you look at, at residential real estate and it's very squishy. You know, the value of the property is very much based on the comps in the area. Like you, if you have a, a $200,000 house and you improve it by $50,000, you put $50,000 into it. It's not necessarily just, it's not going to like increase the value by $100,000. That's not guaranteed. Whereas with commercial real estate there's a very concrete formula. It's, it's the net operating income divided by the cap rate pretty much. And, and you can see that if you, if you're able to either increase the revenue or decrease the expenses to increase the noi and you've got a cap rate that is either coming, that's coming down, that's going to increase the increase one, increase the cash flow on the property and two, increase the, the value of the property. So that was the first eye opening moment. It was just the, the whole idea of commercial real estate is that it's, it's a lot. I can understand the value and the formula that an asset is based off of. It's very repeatable formula. And then the second thing with self storage was it's such a simple business model. I mean you're essentially taking, you're renting a box of Air to people. There's no toilets, there's no trash. You know, there's tenants. But it's month to month. Whereas, you know, you get into multifamily and there's nothing wrong with multifamily. People need a roof over their. But it's much more comp. It's much more complicated. You've got plumbing.

Mike Swenson
I agree. I'm in it.

Neil Henderson
Yeah. I mean, no, no, no offense to it. It's, it's. I love it. I'm an investor in multifamily self storage. It's got a lower expense ratio. With multi family, you're typically looking at about a 50% expense ratio not including the, the debt service, whereas self storage is anywhere from 35 to 40%. And what we've seen is that the longer you own a self storage asset, that expense ratio actually comes down. Eric's facility in Arizona that he built in 2006, expense ratio is like 20%. So that means 80 cents of every dollar that comes through that door comes to him, not including the debt service. So it was just a, I just got it. You know, self storage was, it's a, it was a simple business model in a commercial real estate that I could see the way you can push the value, you can force the appreciation in simple ways. So that was really what drew me to it. And it's also a, it's an asset that I see has demographic tailwinds behind it. Just like, just like multifamily does, just like assisted living, you know, things like that. And that's really kind of where I want. That's the pond I want to play in.

Mike Swenson
I fully get it. I, you know, I naturally migrated from being a residential agent to working with investors in small multifamily to then scaling up to apartments. And there's a piece of me that looks over and is like, that sounds pretty cool. And yet I have the experience in what I've done. And so I totally understand that. I was going to quick mention too, when you talked about commercial commercial lending. I still remember my first conversation with a commercial bank when I was looking at getting a loan for some commercial property. All of my background was less than 4 units. And so yeah, we're, we're looking at the credit report, we're looking at the, the in debt to income ratios and all that. And when the lender was telling me like, yeah, we look at the income of the property and the expenses and you know, depending on how that plays out, we decide on the loan. And obviously it's, you know, Important who you are in terms of who we're investing in, but like your income is less important in those regards. And I remember I said, so you're taking a commonsensical approach to giving a loan on the property? And he said yes. And it's like that was a light bulb moment for me because yeah, I realized like I grew up in this, you know, I, we had a, a second property as a rental or you know, whatever over time, the 10 years prior to being in real estate full time. And I was so just wired with debt to income ratios and how do we get that up and I need to make more income to qualify for more and all that. And then when you see this commercial lending it's like, oh, that kind of doesn't matter as long as the property matters. And you go find good deals and find those down payments and learn how to manage them and run them. The sky's the limit.

Neil Henderson
Absolutely. It's just a, There's a great analogy that I heard from another self storage investor named Ryan Smith from Elevation. I want to give full credit where credit's due. And he talked about taking his kids to a Walmart parking lot. And he said, all right, I want you to go around and I want you to find me a dollar and change. And the kids like, oh dad, this is stupid. And so those kids walked around and they found change and eventually came back to their dad with a dollar and change. And he said, okay, now let me explain to you how this works in commercial real estate. So you just found an extra dollar that's now take that and multiply it by 12 months. So that's $12. So now you've increased, you've increased your income by $12 and divide that by a cap rate of 5 and you've just increased the value by $240. Now take that and multiply that by, you know, 500 units where you've just increased the, the rent or the, the revenue on 500 units by $1 and multiply by 12 months and then divide that by a cap rate and you've just, in one, you've just increased the cash flow significantly. You've also increased the value of that property significantly. That you can then go to a bank, a commercial lender and say, hey, I've increased the value on this property by X amount. And they will, they'll lend on that amount. You can do a cash out refinance which by the way, you know, you can pull money out of that deal which comes to you tax free, which you can then redeploy into another asset or, or just take it, take it out and whatever. That's essentially how, you know, this is how rich people live now. They basically they, they buy, they borrow and they die. And that's really, that's so much of what commercial real estate is about. And it's one of the things I love about it.

Mike Swenson
Yeah, I heard a recent interview with Pace Morby and he was talking about that like he put money into a, I think a personal residence or vacation residence. And he's like, yeah, the, the money that we got for that was because we refied this other property, pulled the money out tax free, and that's the money that we used in that property. And so, yeah, as you grow over time and add that value, your income can come from your refis at different times, you know, and it's just another tool in the tool belt. Right. And so that's what I love is there's so many different ways to win in real estate and there's so many benefits.

Neil Henderson
So sorry to interrupt. So many newbie real estate investors are focused on cash flow. I want to, I want to get to 10 rental properties that are, you know, making $500 a month in cash flow and that's going to pay me $5,000 a month and I'm going to be able to retire. The reality is, is the cash flow in real estate is what keeps you alive while appreciation does its work. More millionaires in real estate were made by appreciation that were ever made by cash flow. That doesn't mean that you count on appreciation, but it's, it's so often that so many newbie investors get trapped in this sort of cash flow mentality. Like, I need to buy 10 rental properties and they're going to each pay me such and such. I'm going to pay off one at a time. Then eventually I'm going to end up with $10,000 a month in cash flow and I'm going to be making 10, 100, $120,000 a year and I'll be able to retire and live on a beach. Well, you know, that's, that's not really, that can work. And there are plenty of people who've done that. But the real sauce happens when you start really looking at appreciation and figure out ways to force appreciation. And that's one of the things I love commercial real estate is because it's a very repeatable model where you can force the appreciation by literally doing something as simple as lowering the expenses or increasing the revenue.

Mike Swenson
Are you looking to get started or scale in real estate investing but don't know your next step? Are you overwhelmed thinking about finding deals, analyzing deals, doing due diligence and managing properties on top of it? Go ahead and push the easy button and invest with us. Real estate investing is what we do full time. We've done dozens of deals with hundreds of doors. We have the knowledge and experience to hand pick the best deals that most investors can't find. We've at large off market deals all the time where you can hopefully find returns and economies of scale that you just can't find on on your own. The best thing is it's 100% passive to you for less capital than you put down trying to acquire a property on your own. Don't let this year go by where you don't make the leap, add to your portfolio or you just sit in analysis by paralysis. To find out more, visit freedomthroughrealestate.com and click on Invest. You can book a call and learn more there. So get to scaling your portfolio now with us by your side. So talk a little bit about Nomad and what you guys are focusing obviously self storage, but talk about the locations, maybe even just the markets and, and self storage as a whole. You had talked about, you know, seeing kind of long term while self storage is going. I'd love to hear more of your thoughts on just kind of the, the industry, where it's going and kind of what you guys are focusing on.

Neil Henderson
Sure. Well, first let me talk about sort of where the state of the self storage industry is right now. Self storage has been a very recession resilient asset class. I've heard some people, you know, some of the self storage gurus will say it's recession proof bs. It's recession resilient. It's a trauma and transition business. Typically you're going to be, you know, 30 to 50% of all storage customers come by people moving. It is, it is people either they're moving because times are hard or they're moving because times are good. They're moving because they're getting divorced, someone's died, they've got a new job, whatever, and that's why it's been a very resilient asset class because in good times people are renovating their houses, they're you know, moving from a smaller house into a bigger house. They're buying toys that they don't have room to store. And then in bad times people are, you know, they're moving into smaller places, they don't want to get rid of their stuff, they're moving to a new location because they've got a new job somewhere. But an unusual thing. We're in an unusual environment. The last three years in self storage, we were sort of coming into a period of a market reset in self storage. Towards the end of 2019, it's sort of, we'd sort of reached this kind of peak supply and storage had been too many storage facilities built and things were starting to kind of come down. And then all of a sudden Covid hit. And that was like throwing gasoline on a smoldering fire with, with storage because all of a sudden everybody was moving around, People were turning bedrooms into home offices, homeschool rooms. And suddenly storage had this brief explosion and it went crazy. For a period where occupancies went like this, all these groups that were had been sort of pulling back on building new storage all of a sudden started throwing money at storage. Well then coming out of COVID the home prices shot through the roof. And at the same time, interest rates rose faster than they have in decades. You know, some people say it was the fastest time ever. I don't think that's true, but it was, it's one of the fastest rise in interest rates ever. So suddenly home affordability became a massive issue, and it's still a big issue. And all of a sudden people stopped moving. And that really Starting in about 20, late 2022, early 23, 2023, we. It became sort of a bear market for storage. And we saw it, you know, facilities that were already stabilized, that already had, you know, 95% occupancy, their occupancy dropped down below 90% down into, but not, you know, nothing terrible. But a lot of our facilities were in lease up. And anybody who is in lease up, you know, you have traditionally storage leased up at, you know, a very consistent 3% per month. You could pretty much count on it. You know, if you, if you wanted to lease up a brand new facility, it would typically take you about 28 to 30 months to lease that up to 85 to 90%. Well, all of a sudden, you know, we started seeing facilities that had been leasing up for 3% per month all of a sudden drop down to 1% per month. Now that doesn't sound like that big of a deal, but that's a 66% drop in lease up velocity. And now you're suddenly talking about a facility that you're expecting to lease up. And 30 months is now going to take 60 months or longer. And that created a Real problem for a lot of people. It really, it, I won't say that we didn't get impacted by it. We really struggled to lease up. But what then happened was a lot of groups that had been looking to build new self storage all of a sudden rapidly pulled back, became very expensive to, you know, the debt became very expensive. It became very difficult to underwrite facilities because the rental rates that groups were charging were all over the map. You couldn't underwrite it so you couldn't get lenders. We do self storage a little different. We do it with a little bit of a twist. We don't, we don't buy self storage, we don't build self storage. We convert self storage. We buy existing buildings that are vacant that have, you know, been vacant for years. We can buy them typically for below replacement cost and then we convert them to climate controlled self storage. Now that gives us a little bit of an advantage over building self storage. If you or I, Mike, wanted to build a ground up self storage facility, it's usually going to take us about 120 to 130 dollars a square foot to build it. And that does not include the price of the land. It's also going to take us on average anywhere from 2412 to 24 months just for the land and entitlement to get it permitted to do the, to build the infrastructure there and then another 12 to 14 or 12 to, you know, 12 to 18 months to build it. The average time to build a ground up self storage facility right now this month is two years and 10 months. So almost three years. We on average it is our last eight facilities we've built for. We bought them and converted them for an average of 64, 65 a square foot. And it takes us on average 12 to 15 months to build them now. So we're building them for almost half the cost of ground up development and in about a third of the time. And that makes a huge difference right now with where interest rates are because the holding costs are what kill you in, in new storage development. You're gonna, you're gonna get to a point where you, you build it out and you're open and now you're trying to lease up and you have an interest only period that's going to come to an end and you're going to have interest reserves that come to an end and suddenly you're having to pay that from the income that that property is producing and that's gotten a lot of operators in trouble.

Mike Swenson
Yeah, no, that makes a lot of Sense and size wise. Just for the folks listening, how many units and how many square feet are the facilities that you're looking at?

Neil Henderson
Yeah, we're typically, we want to be above 50,000 square feet net rentable. Any smaller than that and you're usually, you know, the ju worth the squeeze. So we're usually targeting buildings that are 75,000 square foot and above because with a conversion, you're going to lose about 20, 25% to doors and hallways. So, you know, if we have a, if we buy 100,000 square foot building, that's usually going to Net us about 75,000 net rentable square feet of self storage and on average about 7750 units. The average unit size is going to be about 100 square feet. Got it.

Mike Swenson
And then in terms of markets or, you know, locations within a market that you're targeting.

Neil Henderson
Yeah, we were primarily playing in the Southeast. We're in Virginia, North Carolina, South Carolina, Georgia. We're looking in Tennessee. We're, we love the Florida market, but the Florida insurance market has just got us spooked right now. We're kind of staying away from that. We are typically going to be in secondary and tertiary markets. You're not going to typically see us in a Charlotte, but you are going to maybe see us in a Gastonia. You might not see us in a Raleigh, but you're going to see us in a Kernersville or a Rocky Mount where it's, you know, those really hot markets that are starting to, to force people out where they're, you know, people are expanding into the excerpts and things like that.

Mike Swenson
Awesome. Well, Neil, it's been awesome to hear your story. The personal side, you know, kind of why self storage and then and obviously talking about Nomad. You guys are doing some awesome things. Cool to hear how the, the market market's going as well. And, and yeah, there's some tough conditions in the market. Obviously, interest rates are huge for, for anybody in real estate because it impacts everything that we can do and, you know, what's feasible and what's not feasible. But yeah, excited to see you guys continue to grow and, and thanks for your time coming on the show and best of luck to you guys in the future.

Neil Henderson
Thanks, Mike. It's my pleasure.