After entrepreneur Ben Frein sold his online retail company in 2010, a year after graduating from the University of Northern Iowa, he set his sights on real estate investment. But he had trouble deciding on the asset type.
Frein (pictured in top photo) checked out apartment complexes, strip malls and other properties. When he stumbled across a sale listing for a storage facility, he figured that was the right sort of real estate investment. Now, he’s building a small self-storage empire in Iowa.
“With apartments, you have a lot of maintenance responsibilities, with water leaks and toilets overflowing in the middle of the night. With strip malls, you could have a tenant move out and it could take up to a year to find someone new to lease that space. Or a restaurant needs you to change up the interior,” Frein said. “I was looking for a light-maintenance business investment with diversity in tenants and strong cash flow. Storage facilities seemed to fit that order.”
As his first foray into the storage business, Frein bought Adel Self Storage in Adel, IA, in 2010, followed by Waukee Self Storage in neighboring Waukee. He then bought a piece of land near Adel where he built Metro Boat & RV Storage from the ground up.
After that, he purchased an 80-unit facility called Tri-City Self Storage, between Des Moines and the suburbs of Johnston and Ankeny. Frein recently finished an addition at Tri-City of more than 8,700 feet; a similar addition is in the works for next spring.
I was looking for a light-maintenance business investment with diversity in tenants and strong cash flow. Storage facilities seemed to fit that order.
— Self-storage owner Ben Frein
Meanwhile, Frein is negotiating to buy a parcel in the eastern suburbs of Des Moines for development of another facility. Frein said the facility will be built in phases, with the property eventually encompassing about 40,000 square feet.
“Storage facilities,” Frein said, “are hidden gems.”
Frein, who lives in the Des Moines suburb of Urbandale with his wife, credits his success in self-storage to embracing technology. For example, he’s installed kiosks where people can make rental payments with a credit or debit card. Technology has enabled him to manage the storage facilities remotely or by appointment — and without a single person on the payroll. This means Frein handles everything from keeping the books to removing snow.
“This efficiency has allowed me to invest in continuing to grow the business,” he said.
Later this year, however, he’ll likely outsource some tasks, such as lawn care. And in the next six to 12 months, Frein plans to hire a part-time manager.
“Storage facilities used to be considered an old-school business, a mom-and-pop type business,” he said. “But I’ve bought and built storage facilities, and technology has been crucial to the success of the business. It keeps business operations running smoothly and our costs low.”
The 29-year-old Frein said that handling day-to-day duties on his own has given him “the flexibility to do what I want for my clients. I get to know them and vice versa.”
Marketing in the right channels also boosts business, Frein said.
“We strive to keep our websites ranked high on Google and to show up on Google Maps. People will often type in the area they’re moving to followed by the phrase ‘self-storage,’ and we pop up on their Google Map,” he said.
Building vs. buying
One thing Frein has learned is that building a storage facility instead of buying one involves lots of heavy lifting.
“From the development process to the planning, permitting and site work, it’s a lot. If you’d told me five years ago that dirt would be a big expense, I wouldn’t believe you. You’re either bringing in dirt to build up the site or paying a truck to take it away,” he said.
If a potential buyer finds a storage facility in good shape with a history of high occupancy, Frein would recommend checking that out first versus building your own.
“You will pay a premium for the existing facility, but when you build one, you don’t know if it will be half full or completely full in a year,” he said. “You’d have to project how quickly you need it filled to help with the cost of building.”
What does the future hold?
With four storage facilities in his portfolio and a fifth facility on the drawing board, storage now represents a full-time venture for Frein. That stands in contrast to his initial goal, which was to build a decent passive income that would let him pursue other interests.
Looking down the road, Frein said he wants to build a few more facilities in the Des Moines area and to buy more facilities as they come on the market. Frein said he might expand beyond Des Moines into other regional markets, including Cedar Falls, Cedar Rapids, Omaha, NE/Council Bluffs, Waterloo and the Quad Cities. He already tried buying a self-storage portfolio with facilities in Cedar Falls, Cedar Rapids and Waterloo, but U-Haul won the bidding contest.
So far, Frein has assembled his portfolio without any outside money. But that could change as his business grows.
“Do I want to keep it just me and continue slowly adding facilities, or do I want to take on investment and grow quicker and more regional or national?” Frein said. “I’ve been lucky that I’ve been able to quickly fill up the facilities and expansion projects that I’ve completed. I’ve been able to complete these projects for very reasonable budgets, and now that they are full or nearly full, I’ve built a fair amount of equity that I can tap to pursue future acquisitions or developments.”
Wherever and whenever he decides to grow his self-storage holdings, Frein said it would be easy for him to travel, as he holds a pilot’s license.
“Flying is one of my biggest hobbies,” he said, “so this seems like a good excuse to fly more.”
John Egan contributed information to this story.