Neighbor.com is a marketplace disrupting the $500 billion self-storage industry, and today, I'm talking with the company's CEO, Joseph Woodbury.
Joseph started this company by raising more than $65 million in funding with participation from the world’s top investors, including the creators of Airbnb, Uber, and DoorDash, to name a few.
Joseph and his team have grown Neighbor’s user base to cover all 50 states, with more storage options than any other storage company, and the hosts on Neighbor.com are earning tens of thousands of dollars annually.
In this conversation, we will talk about what this company brings to the table, how it's changing the self-storage industry, and how you can get started in the self-storage business!
Links and Resources
- Neighbor.com Review: Peer-to-Peer Storage & Parking
- Discover Neighbor.com, an innovative, peer-to-peer self-storage marketplace.
- Find out how it can help create a passive income stream and connect you to various storage solutions in your neighborhood.
- Explore how connecting with neighbors can not only save you money on storage but also open up opportunities for other related services.
- Learn how Neighbor.com is disrupting the self-storage industry and how you can benefit from these changes.
Editor's note: This transcript has been lightly edited for clarity.
Seth: Hey, everybody. How's it going? This is Seth Williams, and you're listening to the REtipster podcast.
So today, I'm talking with Joseph Woodbury, the founder and CEO of Neighbor.com. So Neighbor.com is a marketplace that is disrupting the $500 billion self-storage industry. And Joseph started this by raising more than $65 million in funding with part participation from the world's top investors, including the creators of Airbnb, Uber, and DoorDash, to name just a few. And Joseph and his team have grown Neighbor's user base to cover all 50 states with more storage options than any other storage company out there. And the hosts on Neighbor.com are earning tens of thousands of dollars annually.
And when I first got an email from one of the reps from Neighbor, I honestly had some mixed feelings about this because I am a new self-storage facility owner and I'm all excited about getting into this business.
And when I heard about Neighbor, on one hand, it was like, this is a brilliant idea. Like, I can't believe nobody's thought of this sooner. And I downloaded the app, and it's very, very well-designed. I mean, it is crazy easy for anybody with extra space to get started with this. By the way, we have an affiliate link retipster.com/neighbor, if you want to check it out.
But on the other hand, it's kind of like, man, this could be terrible. What if this totally ruins the self-storage industry? What if all of my neighbors around my property decide to lease out their space and then I can't get tenants? Are we in huge trouble here? I don't know, but we're going to find out in this interview.
And I think I ultimately thought it would be a big disservice to not tell the world about this because this is an amazing opportunity for anybody out there who has space to dip their foot in the water and just figure out, do I like this? Could this be a thing for me? And there's a lot of people I know who have actual businesses making money with things like Turo and Airbnb and all these other things, and this is that kind of thing for self-storage. And just seeing how well the app was put together, I was like, man, these guys are doing it right. Like, this is going to go somewhere.
So I'm excited for this. Joseph, welcome to the show. How are you doing?
Joseph: Great. Thanks for having me, Seth.
Seth: Yeah, absolutely. So let's start at the very beginning. How did you first get this idea? Did you work in the self-storage industry yourself then? Or what made you come up with this?
Joseph: So I wish I could say it was my idea. I'll tell you, I had the exact same reaction that you described when I first heard it from my co-founder, and that the first thing out of my mouth was, how has someone not built this already? How does this not exist? So my co-founder, he had the idea from just having the pain himself. He felt the pain that I think a lot of Americans feel when they go to purchase a self-storage unit. He and his wife had just gotten married, and shortly after getting married, they flew down to South America to work for a humanitarian organization. And of course, you just get married. You go to South America for four months, you need a storage unit for your items while you're gone. And they looked into getting one and had a very similar experience to most Americans where the storage facility close by them was totally full. So they were going to have to drive like a half hour to the next city just to find one with any vacancy, and they were going to charge him several hundred dollars a month.
And as a college student, he said, I don't pay several hundred dollars a month for anything. My Netflix is $10 a month, my Internet is $30 a month. So he found a friend who was willing to let him store his items for the summer in his garage. And so they dropped the items off, and it was actually not until he got back that he had the idea. He went to pick his items up, and as he was getting the items out of his friend's garage four months later, he was just thinking, this was such a better experience. I felt so much more peace of mind knowing my items were in a nice, clean garage in a neighborhood I trusted than in a storage facility on the outskirts of town. Plus, I saved a ton of money. Why doesn't everyone do this? There's got to be empty space in every neighborhood in the country. Why isn't there a directory or a marketplace where you could search out what space is available?
And he approached me and our other co-founder and told us about the idea. We both said you're brilliant. This is amazing. He let us come along for the ride. And we've been building ever since. And it's been a lot of fun.
Seth: So I know when I first downloaded the mobile app and tried to sign up as a host, I was struck by how easy it was. Like, it is dead nuts simple to use, which I think is crucial for something like this to gain mass appeal and get adoption from the masses.
But I also know from experience that when you make something that easy to use, there's a reason it's that easy to use, because a ton of thought and effort and design went into that to make it really natural and intuitive. So is that hard to do? How much work did it take to make this app and this website that just functions really, really well?
Joseph: Yeah, it's definitely been years in the making, but I'd say when we read our user feedback, we thought when we first started this that the predominant feedback we would get be how cheap it is or how close it is to my home.
But like you've said, the most frequent piece of user feedback we get is just how easy it is to use. Self-storage has never been done through a mobile app. A few of the larger companies have started, but we're the number one ranked mobile app. So we're kind of bringing self-storage to the people so they can have it on their phone.
As far as getting to that point, we really have our users to thank for getting us there. When we first started this over six years ago, we really focused on our home market of Utah. We're now in all 50 states. But we didn't start that way. We started in Salt Lake City. And what we did for the first year of being in existence is we didn't spend on marketing campaigns. We didn't try to grow the business. We just let users organically come to us. And we listened to that user feedback and anything they said sucked about the product. And there was a lot that sucked about the product. We would go and modify that and fix it.
And we really built it as a user-first company. Because ultimately, marketplaces are a very unique businesses. We don't have a product that we sell. Instead, our hosts, they have a product that they sell to our renters. We have two types of users: hosts and renters. And so it's all about getting those users to interact well with each other. And we, as a platform, what do we bring? We bring trust. We bring insurance, we bring the payments. We bring all the systems you need to make that transaction as smooth and easy as possible. So we're actually not the product. What we do is we make that interaction between a host and a renter easy.
That is, what we're paid to do is to make it easy. And so it's got to be the center of our attention and the forefront of everything we do at Neighbor.
Seth: Now, why did you choose this name, “Neighbor,” in the first place? Is there some story behind that?
Joseph: Yeah, it ties in with our vision for where we'd like the company to go. It's actually not often that we're able to talk about it, but the name Neighbor, we could have called this company Store-this or Stash-that or Space-something. And there are many companies in the storage space that have named the company after the space or the items being stored.
The reason we called it Neighbor is we're the first marketplace to ever really have neighbors interact with each other. If you think about Airbnb, you're staying in some other country or in some other state, some destination. Same thing with an Uber. You get an Uber when you're in Chicago and you need a car, your DoorDasher typically isn't your neighbor. They may live in the same city as you, but they probably live in a different part of the city.
With Neighbor, though, you want storage as close to your home as physically possible. So we'll have two people that live two doors down from each other that may or may not have spoken with each other before. Maybe they've said hi or run into each other on the sidewalk, but they'll rent from each other because that makes it very convenient to access.
And now we have neighbors in almost every neighborhood in the entire country renting from each other. That's kind of a fulfillment of this original name that we chose is we wanted to make it not about the stuff or the space, but about the people.
The last thing I'll say is we have this vision of being far more than storage. Storage is certainly the beginning for us. Just like Amazon.com began with books, and they sold books, and they became the world's largest bookstore, and then they branched out to other items. We think at our core, what we are is a platform that connects neighbors. And right now we do that with storage. And it's this huge, you mentioned it's a $500 billion industry. And so we can make a very big, well-run company just in the storage space.
But what else could neighbors do for each other now that they're renting out space to their neighbors? What else could they rent out to their neighbors? Perhaps you have a basketball court that I want to come use and I could rent that from you. Or I have a $2,000 table saw. And you don't want to buy a $2,000 table saw, so you just come over to my house and use it and pay me instead. We eventually want to be the platform that enables neighbors to bring back a more hyper-local economy and serve each other in that way.
And so that's why we chose the name Neighbor.
Seth: Nice. Do you have any timetable or plan for when that other stuff is going to start happening? Or is that just kind of a “someday we'll do it” kind of thing?
Joseph: It's definitely part of the vision, but we're laser-focused on what we do today, which is storage. It's such a big industry. I mean, storage does about eight times the amount of revenue on an annual basis than the entire taxi and limo industry that Uber and Lyft disrupted. So it's just massive.
And you've seen how large Uber and Lyft have become as companies, how globally encompassing. And so we could spend a decade just in the storage space. It's so big and the user base is growing.
You mentioned at the start of the call, your worry about how does this affect your storage facility that you're building? And I'd argue that it doesn't affect it at all. Storage is an extremely supply-constrained industry. I think the average occupancy nationwide is 95%. You probably knew this; this is probably why you built the storage facility. Because storage facilities, they have the highest occupancy of any real estate asset class. Way higher occupancy than retail or hospitality or certainly office. Today, no one even comes close. No other asset class comes close to a 95% occupancy.
And the industry builds, I want to say, $4.5 billion to $5 billion a year, is spent on new construction of storage facilities. By the end of the year, all of them are filled and the occupancy rate is still 95%. And so this is an industry that just needs more supply. There are millions of consumers every year who are unable to find the right storage unit for them. We just need more space.
And what we're doing is unlocking a bunch more space that hopefully helps take the pressure off the problem. I think your storage facility, we could unlock half the doors in the neighborhood and your storage facility would still get full. That's how pervasive this storage problem in the United States is.
Seth: A year from now, when that happens, if things don't go well for me, I'm going to hold you personally responsible, Joseph. So I'm going to remember this.
Joseph: We honestly don't discriminate. So if you really want to hold me personally responsible, just list your storage units on our website and we'll get them filled for you. We don't discriminate on the space type. We'll take all types of space and get it leased out.
Seth: That leads into my next question. When I was first getting into self-storage, I went through demos from all the different self-storage property management software companies. Not all of them, but probably like 80% of them, almost all of them were just terrible. I mean, just laughably bad. Like, looks like it was designed in the late 90s and it only works on a Windows desktop computer.
I mean, it's just terrible. I don't know how they survive. I think the only reason they do survive is because there are not that many options and the ones out there are all really bad. And then once people sign up with them, they kind of hold you hostage, so it's really hard to move to another one.
It makes me wonder, seeing how well Neighbor has done at putting this together. I mean, it is light years ahead of anything else I've seen out there. Although I know a lot of the reasons why people use these self-storage property management software is because it integrates with the gate company, it controls their gate, and it assigns a unit number, and all this stuff. But it just makes you wonder, do you know of any legit storage facilities with 100 or more units that are using Neighbor as their software instead of one of these other terrible software options out there?
Joseph; Absolutely. We have storage operators in most states that have listed on our site, and that's not our primary customer type. That's just been a byproduct of building it.
I was at a conference last month and I had a guy come up to me who was a large storage operator and he said, “I was checking out your platform.” And he mentioned very similar comments to you about how outdated and archaic all the software is, super legacy. And he said, “It seems to me that in building tools for your customers, you have built basically self-storage SaaS. And let me get this straight. You give it away for free?” And I was like, “Yeah, I'd never actually thought of it in that light. But basically we do. Anyone can sign up, list their units, we'll get them booked, we'll keep track of which units are booked and all that stuff. And we do it for free. We don't charge you for the outdated legacy software like everyone else does.”
And so, again, certainly not our target customer base, but there have been some smart kind of tech-savvy storage operators in most states that have noticed that. And I don't want to say they have taken advantage of us because they're welcome, but they really have just taken advantage of basically free software by signing up.
Seth: So how does Neighbor make money? Like, where are you guys getting your revenue in this process?
Joseph: Yeah, and it's a novel concept for the self-storage industry because they've never thought about our monetization model. But it's not a novel concept. In most other industries, we just use the Airbnb model. So when you list space on our platform, say you list your garage or say you have a parking lot, and you list it for vehicle storage, you will set the price that you want for each of those units. And then we'll take that and we'll charge the renter that price plus a service fee. And that service fee is what we make.
So it's just like Airbnb where you go to checkout and you see the host fee and then you see the service fee that Airbnb gets. And that's how Airbnb makes money. And so we just make this little piece of each transaction. Almost all the money that we process goes to our hosts. It's pretty amazing to see all the money that our hosts make every year.
Seth: So the money is made from the renter, not the host. And what is that fee?
Joseph: It's not a set percentage. It depends on the price. So for lower price spaces, like, we have some people, they list spaces like a closet on our website. I saw a fun listing the other day in New York City—it's just amazing how tight space is in New York City—someone listed the storage space under their bed on the platform and it's been booked for like a year and a half.
And so a space like that where you're listing it, you may list it for $20 a month. And so our fee, if we applied a flat percentage to that, say the percentage was 10%, then that would only be $2. So we charge a higher fee for those smaller dollar spaces. And then we have big retail REITs and office REITs that list large spaces on our platform, and they can be $1,000, $2,000, $5,000 a month. And our fee just slides down. So it starts out and slides down.
But to give you an example, for a $100 space, we may charge the renter $120 or something like that.
Seth: Like on top of the cost of rent?
Joseph: That's right. So if the host’s price were $100, we may charge $118 or $119 to the renter and make our portion.
One thing people unfortunately find out too late when they store it in a storage unit is that storage facilities don't provide protection for your items. I don't know if this is something you've considered for your storage facility, but 90-plus percent of storage operators don't offer any sort of protection.
And so when you're entering a storage unit, you're signing a contract that says if anything happens to these items, flood, fire, if the whole place burns down, theft, then you're on the hook for replacing your own items. There are some forward-looking storage operators that have started to offer tenant insurance options to their customers where you can get $1,000 or $3,000 or sometimes even like $5,000 in coverage for the items that you store. We're the only platform in the country that offers up to $50,000 in item protection or vehicle protection in all 50 states.
Seth: Is that part of the cost or do they have to pay extra for that?
Joseph: So that's something you can select at checkout. You could book your garage or you could book your storage unit, or you could book your parking space on Neighbor. And at checkout, we’ll provide you an economical option and a mid-level option and a premium option. And you can select your plan, or you can select no plan at all. And then if anything happens to your items, we'll replace it.
It's also worth mentioning, Neighbor tends to be a much safer platform than traditional storage. Oftentimes, traditional storage is built in industrial parks on the outskirts of town. Most people don't know that one in ten storage facilities is broken into every year. So pretty high break-in rates.
Whereas residential areas or commercial areas have much, much lower break-in rates because there's a lot of people there than in those industrial parks. FBI statistics say that residential commercial areas have seven times lower break-in rates. So not only are items typically more safe stored in one of our commercial businesses or our residential homes, but also we provide the best protection in the industry for them as well, the highest replacement cost. So we like to talk about Neighbors as the safest place you can possibly store your items.
Seth: So it sounds like just like renters insurance, right? Like the tenant has the option to pay extra for that if they want that coverage, but if they don't want to pay the extra, they just don't have it and just shoulder the risk of something having to do it. Is that accurate?
Joseph: Yeah, it's totally optional. You're not obligated to pay for it at all.
Seth: Yeah, I mean, most of the self-storage facility and owners I know offer something like that because it's very small, but it's an extra revenue source and that kind of thing.
It is kind of funny how that works, where it's like, you can store your stuff here, but if anything goes wrong with it's not our fault. It's like, well, what's the point of storage then, if it's not going to actually protect it from anything? But I guess that's the cost of just having a roof over this stuff and having it enclosed and that kind of thing. But it doesn't mean it's going to be safe per se.
Joseph: Yeah. When we first did our map of this industry and identified what are the big consumer pain points, what are the big frustrations a consumer might have? That was one of the big ones that jumped out to us, this expectation that when you're renting a storage unit, you're just renting a place to stay. You're not actually renting safety. There are no guarantees being made about your items. It's just there's a roof over your items.
One was the price. It's the single largest subscription payment that most Americans will make in their lifetime. I mentioned earlier Netflix, your Internet bill, there's not much you pay $200, $300 a month for. The closest thing to it is like a car payment. And storage is going to have a higher penetration. Most Americans will use storage at some point in their lifetime, and at any given moment, like today, one in nine Americans is in a storage unit. And again, that's not the percent that will use storage in their lifetime. That's just today, one in nine Americans is currently paying for a storage unit. So it's one of the highest penetration items in the country.
So price, safety, the proximity was another thing that we saw as a major consumer pain point where because of being zoned industrial, oftentimes… I think the self-storage almanac says the average drive time to a storage facility is 30 minutes or more.
Seth: Oh, really? Wow.
Joseph: And for millennials, that boosts up to closer to 40 minutes because they're a little more price-sensitive, so they'll drive further. Whereas the older generation, they tend to pick the storage facility that's just closest to them regardless of price. And so these drive times can be burdensome. Neighbor, by crowdsourcing, can really localize the storage to you.
So again, these three value props we like to talk about cheaper, safer, closer. And everything we try to do is to try and bring it cheaper, safer, and closer to you, or at least provide that option.
And then we also have, as I mentioned, actual self-storage operators that will list on our platform. And so the consumer has all the choice right before them. We just want to be this super consumer-friendly platform where all of your options, anything you could ever want, it's right there for you to evaluate the pros and cons of each and make the best decision for your situation.
Seth: Random question. As a storage facility owner, if I wanted to use Neighbor.com for my software, say, if it was a non-gated facility or even just like a personal vacant land where people can park stuff, is there a way to create a website URL that just contains the units that I have at my facility? Not just the main Neighbor.com thing where you can see all the storage stuff all over the place, but like, here's just my facility, here's what I have available. Does that happen?
Joseph: There is, and that's actually a fairly recent development, something we've rolled out just earlier this year. You can create a dedicated page for your storage facility. You can have a unique URL where you can send people to, where they'll see all of your units listed. It's quite good. We can do a lot of the management in setting up Google Maps listing for you. So you drive Google Maps traffic and it drives directly to this URL. We can do a lot of that kind of site-specific.
We'll even send you signage. Some people, they've built the units or they have the parking spaces, they don't want to think about branding or signage. And so we'll send them out signage that's actually got QR codes that link directly to these pages. It's very cool.
Seth: Another random question that just came up as you were talking. So I know some of the complaints I've heard about the big self-storage property management software companies is that not only do you kind of get held hostage by them, once you start using them just because it's so difficult to leave and migrate to a new platform, but they also take a lot of your data and share it around in ways that may not necessarily be in your best interest. And it's really valuable data because it tells anybody who wants to know in the market how many storage facilities are in this area and what's the supply and demand and what's the pricing and all this stuff. A lot of people don't like it.
But I'm curious, does Neighbor.com do that kind of thing? Like, does your data get shared anywhere? And I guess what I'm thinking of specifically is market data companies like Radius Plus or Storetrack that you can go to to find out like, okay, how many facilities are in this geographic area and what's the square footage of that facility and what's all this pricing and all this stuff. But I'm just curious, how would those companies or would those companies have any way of saying, yeah, in this market area there are these storage spaces hosted on Neighbor.com. So be aware of that as well because that affects the supply and demand in the market.
Joseph: Super familiar with Radius, actually a big admirer of what they've done. I think they've really changed the face of how the storage industry operates. Neighbor is a consumer of Radius data, so we pull that Radius data down. Fascinating.
I will say, in many ways, Neighbor itself has the best pricing data of any operator because of the pricing variability and also the geographic distribution. You look at like a public storage, large company, $55 billion publicly traded company, huge. Amazing to think that they only have 5% or 7% market share. That's how big this industry is, is that this $55 billion company only has 7% market share.
But as large as they are, they only have facilities in 39 states. We're the only operator in the country that has active people in almost every city in all 50 states. Furthermore, we see a lot more price testing because if you're a self-storage business, your appetite for testing is smaller. You might do some price testing plus 5% plus 10%, minus 10%, but ultimately, you need to somewhat play it safe and just make sure your units get filled.
Whereas residential users that are listing out their space, we actually don't require them to list at our recommended price. We'll give you a recommended price and we give you the price that makes you 90% more likely to get reserved. But you can set the price at whatever you want.
And you'll see consumers test all sorts of stuff on our platform. You'll have people try to list it really low. You'll have people that will say, “I think I can charge $800 a month for this 10x10.”
Seth: That'd be nice.
Joseph: And it would be nice. And our system will tell them like, we don't recommend you list at this price, but they can try it anyway and it gets listed. And then we get to observe as a platform what works. And so we get to see a lot more pricing variability than almost any other platform in the country. I'd say more than any other platform in the country.
And that goes back to Feed, our pricing recommendation engine. So we have one of the best pricing recommendation engines in the country for those that are looking to optimize their prices because we just see more experimentation than most platforms do.
Seth: It's actually really interesting when you say that, because I know I'm looking at a new possible facility right now, like a development from the ground up. And one of the huge questions in that, that can make or break the deal, is what can I rent each of these unit sizes for in this market?
And currently the only way I know of to do that is to look at the other facilities in the area and figure out, well, what are they charging and are they full? But Neighbor might even have a better way to do that. Because like you said, you have so much information out there of what different people are doing, which probably includes facility owners and just somebody who's listing their closet for rent. So it would be interesting to use that to do the property research and figure out, okay, what is the going rate? For real, not just looking at storage facilities, but everything else that's out there.
Joseph: Yeah, absolutely.
Seth: So if I go into Radius Plus right now and I do market research to figure out how many facilities are in this area, the listings from Neighbor.com will not show up in Radius Plus, or they will?
Joseph: They will not.
Seth: Yeah, I mean, I guess that's good or bad, depending on who you are and where you're coming from on that.
But you mentioned a little bit about the types of spaces people are listing on Neighbor. Like I've heard under somebody's bed in New York City, which is crazy, I never even thought about that. But what is the smallest space a person could legitimately rent out? What are the most common types of storage spaces people are renting out? Is it like garages or like closets or barns or just under your bed? What's normal?
Joseph: I'll talk about different asset classes because they're going to have different common spaces.
To answer your first question, there's a small, call it 5% of the storage industry, that's like student renters, very small contingent, but we have hosts that will serve those people. So they'll rent out a closet and a student will come store one box in that closet for the three months they're gone for the summer because that's all the items they have. It's just like fits all in this big kind of tote box. And so that's the smallest you're going to get, where it's like a 3x3 or something like that.
As far as most common spaces, certainly those are not the most common spaces on the platform. In the residential space, hands down, the two most popular spaces on the platform are the garage, because you can store items in it, you can store vehicles indoor in it, and then also the adjacent kind of driveway or RV pad.
There's a huge shortage in RV boat storage in the country. And so being able to, instead of having to drive down to some RV lot, being able to park your trailer, your camper trailer, or your boat on the side of your neighbor's house and be able to go get it whenever you want is extremely convenient. And so those are very popular spaces, the residential garage probably being the most popular space.
Actually, we're seeing a huge surge in sheds as well. People renting out, they have a shed adjacent to their house and they rent out that shed for individuals in their neighborhood to store whatever they'd like in that shed. They may not have room for a shed at their own house and so they just walk a couple of doors down and rent their neighbor's shed.
In the commercial space. It's going to vary by asset type. So in the retail space, you'll often have strip malls where they'll take, they rent out 80% of their units but they've always got the 20% of their retail suites that they just struggle to get a tenant in. And they're typically around 5,000 square feet. They'll give us the retail suites in the back, they'll list them on our platform and we'll rent it out. Sometimes we'll dice it up and rent it out for individual 10x10s, sometimes we'll rent the space as-is to someone who's looking for small warehousing and they want the full 5,000 sqft.
For small business, inventory can be a great option. And then also these retail spaces will often rent out parking spaces because they're required by the city to build X number of parking spaces, but they don't ever use them all. And they've got the parking spaces behind the retail. They'll rent those out and we'll fill them with long-term boat, RV, and car storage.
You get a very similar thing with office. Typically when we do office, we are doing some sort of build-out of the space. You'll get a lot of high-rise office buildings where they struggle to rent the first floor and the second floor, especially. They get those top floors all rented out, but no one wants the first or the second floor. And so they'll give us the first or second floor, we'll convert it to storage. These are often located in very central kind of urban downtown areas and so they get rented very fast.
I think of one office building we did in downtown SF, there was a WeWork on one floor, there was a tech company on another. We took the first floor, converted it to storage, and we had it to full occupancy in 60 days after launch. So that's something that office providers will do.
The multifamily space—oftentimes multifamily builders, they actually have built storage cages or storage lockers in the multifamily complex that were supposed to be for the tenants to use, but the tenants never use them. They stay like 30% occupied, and so they'll list them on our platform and we'll fill them with the broader community.
And then as well you'll see multifamily where again they have that problem. They're required to build so much parking, they assign a parking stall to each tenant, but then they have a bunch left over and they'll list it on our platform. And we'll rent it, some to their tenants, some to people that live elsewhere and we'll make sure every parking stall is revenue-generating for that multifamily provider.
So it really depends on the asset class, what type of space is most popular.
Seth: When you say you convert the first floor to storage or just that word “convert,” what does that mean? Does the property owner need to build infrastructure so that it's storage unit, like put roll-up doors and that kind of stuff in, or how much work does it take?
Say, if I've got an empty office space floor like you mentioned, do I have to change anything or just leave it as offices? And people can kind of come and go when they want and that kind of thing?
Joseph: Yeah. In an office building like that, we'll typically build out actual units, and we handle that process on behalf of the office provider. So the office provider has to contribute some capital for that, but we go and manage all of the contracting and everything, and we get it done. It's typically about a two-month process.
Seth: Wow. I mean, what does it cost for you to do that?
Joseph: It's going to depend on the area in the building. It can be as cheap as $10 a square foot, as much as $20 to $25 a square foot, but it's very minimal.
Seth: Wow, that's awesome.
When you were talking earlier, you mentioned people renting out their sheds. So I have a shed in my backyard, and I put myself in that position, and I think, suppose I rent this shed out, do I need to let that tenant access the shed at any point? Like, they can just show up and whatever they want unannounced walk into my backyard and get their stuff? Or can I set hours when they're allowed to show up or restrict times when they can access it?
I might not necessarily want people to just kind of show up when we're having a family picnic and they're getting this stuff out of my shed, or worse yet, if it's in a closet in my house or under my bed. How do you control that? Or is there a way to control that?
Joseph: Yeah, so access is set entirely by the host, and it's actually a required question when you're signing up your space. We'll ask you how often would you like the renter to be able to access their items? And there are some standard selections that you can choose from, such as “business hours only” or “after hours only,” or “by appointment only.” Many hosts will say, you have to set up an appointment with me before you can come over.
Some people will have a large…For example, we have a middle school teacher that had a large (kind of) side yard, a big plot of land next to their home. She's now making $10,000 a year renting that out for vehicle storage, and it's very accessible. That's an area where you're able to allow 24/7 access. Just come get your trailer when you need it, that sort of thing.
And so we have 24/7 access available as well. Many of our commercial spaces will grant 24/7 access, so it completely depends on the host. The renter is able to see the access before they book the unit, so it's really prominently displayed on each listing. And so the renter can kind of shop for what's right for them.
In the storage industry, fortunately, most people are not storing things that they need frequent access to. They keep those items in their home. If you're going to use something every day, are you going to go put it in a storage unit? No, you may go put the Christmas decorations in the storage unit, and once a year you go trek down, get them. You may put your boat in a storage unit once a year. You go grab it in May, you get it out, you use it for the summer, you go put it back in September, and then you don't touch it for the rest of the year.
And so we provide a bunch of variability and access options for consumers. Again, it's like the perfect consumer place. You can find exactly what you're looking for.
Seth: How many of your hosts just rent out vacant land for outdoor parking? Like that example you just mentioned. Because I know as a land investor, this is an awesome idea. And I suppose it depends on maybe the zoning of the property, maybe and what the local municipality will let you do with it. But for example, would you have to paint parking spaces on the land and make it a gravel parking lot first? Or put a fence up? Or literally just take raw land and rolling hills and say, there you go, park whatever you want there. I don't care. How involved is that?
Joseph: Yeah, it's very common on our platform. We're actually trying to spread the word more and more about this because as an investment opportunity…
I'll just use my home market of Salt Lake. If you had $500,000 to deploy and you wanted to deploy it into real estate, you could purchase a rental property, get yourself a $500,000 townhome, and that would yield, in the Salt Lake market, somewhere between $2,000 to $2,500 a month in rent. So call it $30,000 a year.
If you converted it to a short-term rental, if you put the furniture in, it's a little more investment, but maybe you return $40,000 or $45,000 a year in rent from making it a short-term rental. But that same $500,000, that could purchase you somewhere between an acre to a two-acre lot in Utah, which on Neighbor would earn you around $100,000 a year. So just a much better cash-on-cash return profile than just buying another rental property. So it's really attractive.
As far as improvements that have to be made, it really depends on the municipality. We have many people that have literally listed unpaved lots, just dirt lots, on our platform, and they get booked full. There is so much demand for this. We recommend putting down some sort of either gravel or pavement. It's not very expensive. Even nice asphalt is only around 50 cents a square foot, so it's pretty cheap to put down. But it's not required. You can increase your prices the more you improve it.
Seth: When I signed up as a host, I was trying to go through the process of listing a vacant lot. Maybe I was doing it wrong, but I noticed that it seemed to require me to put an address in. Which, with vacant lots, a lot of times there is no address yet, there's just a parcel number. And if you don't know the coordinates of that thing or the address next door, you can't really find it.
So does Neighbor have any plans to add like, yeah, put the parcel number in or tell us the coordinates of it and we'll do that. Or you would have to register a physical address before you could officially start using it?
Joseph: So this may be a feature we need to make a little more prominent in the flow. But if you type in an address, it will show you a map of where that pin is and it'll prompt you and it'll say you can actually move the pin. So if it didn't land exactly where you wanted it to, you can actually drag the map and drag the pin exactly to where you want it. So as long as you have an address that's close.
We don't have any plans to do like a parcel number system or anything like that, since many times that's going to be local to the county. We have to operate off of a kind of national mapping structure. But you can drag your pin to exactly where the lot is.
Seth: I guess if you're going to rent to somebody and then you want to give them directions, you would have to say, go to this house next door. But that's not it. It's actually over here to the right.
Joseph: You can send, just like an Airbnb, you can send detailed check-in instructions, but also, if you put that pin in the right place, we'll show them that pin and so they'll be able to navigate directly to that.
Seth: Does the app show like parcel lines of each property?
Joseph: It doesn't, no.
Seth: Okay, because I know that's another big thing with vacant land. Because there's nothing to go by, there's no building there, if you don't know the parcel lines, you don't really know when you're at it. So anyway, it might be another idea.
And that kind of data is actually not that hard to get. There's a bunch of databases out there that can provide it to you.
Joseph: We've built a really cool tool that actually allows you to use to actually pull up in addition to uploading photos of the space, we encourage hosts to upload detailed photos of their space, five or six photos.
We've also built a tool that allows you as a host to see the parcel on a kind of a satellite map and to layer on actual digital parking stalls to that parcel. And the user, the renter, will be able to see that, and you can even label them. You can even say, this is parking stall A1 or B2, and they'll be able to see that, and they'll be able to see exactly where that is and where A1 is on the lot itself.
So all of these things to help the user identify where the right spot for their RV is, is kind of built into the product.
Seth: If anybody out there is listening to this and they have a vacant lot they want to use for this purpose, as Joseph is mentioning, it's very helpful to indicate, like, hey, here's parking spot number one, number two, and that kind of thing.
So I actually spent a lot of time trying to figure out the right way to do this. How do you actually indicate on-site where is the parking spot? Do you have a post there or a bumper or paint lines or what do you do? And I'm sure there are many different ways to do it, but it can depend on does this place get snow that's going to cover up whatever you put on the ground or not?
And I have a video that I'm putting together as we speak that thoroughly explains how I handled this. So assuming that video is published by the time this episode goes live, I'll put that in the show notes. And this is retipsier.com/169, if you want to check that out. Just if you need some inspiration for how to handle that.
We talked a little bit about the different types of spaces that people rent out. Have you seen any creative ways that people have repurposed their properties for this kind of store? I remember hearing years ago about somebody on Airbnb who built a snow fort in New York City and rented that out on Airbnb.
I don't think you're allowed to do that anymore. But it was just one of these, like, oh, wow, that was unexpected, but I didn't realize you could do that. Can you think of any weird things people have done to create storage space? I guess that thing under the bed was kind of creative. I'd never heard of that. But anything else come to mind?
Joseph: Yeah, I mentioned some already that are fairly unique. I think the principle here is that there is a shortage of space in the United States, and Americans are really hurting. We live in a world where space has gotten extremely expensive, especially living space. I think we've all run into this.
There used to be that there was this affordable housing crisis that existed in coastal cities, New York and San Francisco. That over the last decade has really spread into the interior of the United States. You now hear about the affordable housing crisis in Austin, and Salt Lake, and Milwaukee, and everywhere across the country. There's an affordable housing crisis in almost every major city.
And so that's why the storage industry is booming as it is. Millennials are using storage at much higher rates than their parents did, which is surprising given that what we thought about millennials is that there are these minimalist individuals. And to see that their usage is outpacing both generations before them just shows how big of a problem this is. People use storage because while expensive, it's still a cheaper cost per square foot than buying additional living space. And so that's why they shift to storage.
So the reason I bring this up is to say if individuals have space that they're not using, no matter how unique that is, whether it’s a closet or a space under a bed in New York City or whether it's a large lot in Austin or Salt Lake City or Michigan, or whether—we've had individuals list barns where they bought a property with a big barn, but they don't have animals; they just liked it for the aesthetic—and now they store a bunch of their neighbor's vehicles in the barn.
Really, we're at a shortage for space. People are willing to pay for that space, and there are ways to make that space extremely safe and protected. In fact, oftentimes the more unique spaces are safer than traditional spaces. And so we can solve this space shortage problem in the United States by coming together as neighbors.
That's the thesis of everything we do is that neighbors can help neighbors. We've seen people come from the residential community. We've seen office buildings come and say, I'm not using this space. I can't get anyone to rent this space. Why not give it to someone for storage instead of for office? Because there are not many people renting office right now. So let's help solve this storage problem which continues to grow. We've seen people come from all different walks of life and different real estate backgrounds. And we've even had self-storage operators who have built purpose-built self-storage space, list that space on the platform. And then consumers are able to come onto the marketplace and see all these different options and not feel so stressed as my co-founder did when he first went out to find storage and all the spaces near him were full.
That's a common experience. 50% of storage facilities in the country or close to it are completely full. It's an average occupancy of 95%, which means that everyone above the average is pretty close to 100% full. And then you have about half below the average that are somewhere in the high 80s, low 90s. And so it's a common problem to go look for storage and not be able to find any space available. And we can solve this problem.
Seth: I know people who have gone out and bought cars for the sole purpose of renting them out on Turo. I also know many people who have bought houses for the sole purpose of renting them out on Airbnb. I know people who have bought cars for the purpose of being an Uber or Lyft driver.
Are there a lot of people who build barns for this purpose? Because in their mind they're thinking, I'm going to list this on Neighbor.com and make money that way. Is that a normal thing? I'm not sure if you have that information or not.
Joseph: Absolutely. And I'll say I'm a Neighbor host, I'm also a Turo host and absolutely love the program that Turo provides. It's great way to earn income on an idle asset.
And as you mentioned, people will start with one car and then they'll get to three, and then they'll end up with ten cars in a fleet that they go park by the airport because you can make so much money off your cars. And we see the exact same thing on our platform. We actually have dedicated landing pages that we can send to you that help real estate investors think through how to evaluate a real estate investment. We'll have individuals that'll, as I mentioned, instead of deploying money into a short-term rental or into a rental property, they'll buy a lot instead in a central area and they'll rent that out. And it's a higher yield return, it's a higher cash-on-cash return.
We have individuals that have rental properties already. Maybe they've got 15 rental properties in a portfolio and their ability to increase their cash-on-cash return on those properties is limited. They can increase the rents each year, but that's about the options they have. But we can come in and we can consult them and we can help them see that you could rent out that space or that shed, or there's a third car separated garage that you could rent out on Neighbor.
And all of a sudden we're able to double their cash-on-cash return in many instances because they make $2,500 and the mortgage is $2,200, they're making $300 a month. And so if we can add an extra $300 a month on each property, that's really meaningful, and in most cases we can.
Seth: So I would love to use Neighbor to manage my self-storage facility, to get tenants and collect payments and all this stuff, but my problem is I have a gate on my facility and currently the way it works is it hooks up with the gate software, which communicates with our self-storage property management software. They all work together to assign each tenant a gate code and then assign them a unit. It's honestly a huge pain to do this stuff, but that's what you get if you're going to have a gate, to give people this illusion of security.
Am I correct that given that's my situation, I can't really use Neighbor.com because there's this gate factor that Neighbor doesn't control? Or is there a way to use Neighbor but just have a separate system that somehow manages the gate? Do you know anything about that?
Joseph: Yeah, so we've had individuals do both. In most scenarios, the storage operator will say, I'm going to use Neighbor and I'm just going to separately manage the gate code. I'll just have the gate system generate a code and that'll be my one message that I send to the renter through the Neighbor platform, is I'll just send them their gate code.
In some limited instances, depending on who the provider is, I'm happy to have my team sit down with you. We may be able to actually connect with that provider, but it's not one of our main offerings. So in most instances, it's kind of separate.
Seth: Yeah. Interesting.
How often can a host increase their rent? I know this is a strategy a lot of self-storage owners use where they'll get somebody in at a super low price. Maybe it's half off on the first month or free for the first month, but then, like clockwork, every couple of months they increase it by $5 a month. Low enough that nobody's going to move out because of that, but they can.
I mean, it's a serious, powerful strategy for increasing the value of your storage facility because $5 times 200 units is a lot. I mean, that adds up when you keep doing it. So are there any limits on how often you can increase people's rents?
Joseph: Yeah, so that's actually one of the huge advantages of using Neighbor as a renter. When we went and did this map and identified a bunch of the pain points, one of the big pain points that most renters do not realize is exactly what you're talking about.
I saw an interview with the extra space storage. It was an earnings call or something, and they were kind of bragging about how they increase rents like 144,000 times a month or something like that. They increase price 144,000 units each month, they increase their prices.
So to explain this in layman's term to the average renter, you'll get advertised a move-in price, and that price may be $100 a month or even free. And then you'll pay that for the first month and it'll revert to the normal price, which may be $150. And then every four to six months on average, although some are more frequent, some are less frequent, you're going to get a price increase and that'll be more nominal. So it may go from 150 to 170 to 190 to 210. Three years in, in some scenarios, you're paying double what you started paying.
And to answer your question, Seth, that's not something we do on the platform. So when renters join Neighbor, the price they pay is the price that they pay. Now, if a host absolutely needs to increase the price on them, then what they can do is they can have a conversation about it. They can message them and say, “Hey, I'm going to be increasing my price to X if you're not okay with that you'll need to move out.”
We require hosts to provide renters with 30 days notice before evicting them. So as long as that notice is provided, then that's good. But the host can confirm that that's okay with the renter. And if the renter is okay with it, we can actually enable a host to increase the price on the renter, but we require that that acknowledgment take place. We don't love the idea of these kind of blind your-price-is-this-suck-it sort of mentality.
So we don't allow that because we believe in kind of protecting the consumer that way unless there's an explicit acknowledgment that's taken place where the host has proposed it in advance.
Seth: Yeah, it's interesting. With a platform like what you're running, how do you decide who to prioritize since their interests are often at odds with each other? Maybe not often, but sometimes they are. Like, do you focus on we want to make the hosts happy or no, we want to make the tenants happy?
At the end of the day, how do you decide which side you're going to give preference to?
Joseph; Our philosophy has been always to treat both sides as adults. You can talk about preferencing one side or the other, but think of this example that I just described.
We don't do one thing or the other. It's not like we don't allow hosts to increase prices if they want to. What we do is we require them to be explicit about it. I don't know that that preferences one side or the other insomuch as it kind of does what's right, it necessitates that that conversation take place so that the two individuals can interact as adults in a marketplace. Because at the end of the day, our hosts, they're business owners and our renters are individuals purchasing something for a fee.
And we can be adults about this. We don't need to dupe our hosts into doing something. We don't need to dupe our renters into doing something. We can have them come together and transact and ultimately that's again, our job as a platform, we're not a storage company. Neighbor is not a storage company. We don't sell storage. Our hosts sell storage. And what we sell is easiness. We sell trust. We sell the ability for transactions to happen quickly, safely, easy, cheaply for both parties because that's going to produce the biggest scale possible.
And so that's what we focus on is just we're not really in the host camp or the renter camp. We're in the transaction-taking-place camp. So whatever we can do to make that transaction happen and happen safely so that both parties are satisfied, that's our incentive as a company because that's how we make money.
Seth: So if there was a situation where somebody's going to walk away upset, is that person going to be the tenant or the host? And I don't know hoff that even happens, but I'm sure there are probably disputes from time to time, but ultimately, who wins?
Joseph: We believe in doing the, as I mentioned, we believe in doing the customer justice. So for example, we've had situations before where a renter, they said, and this happens in the storage industry, this is actually a benefit of using Neighbor where a renter will stop paying, right? One of the things we do to benefit our hosts is that even though the renter has stopped paying us, we keep paying you while the items are in your space.
Seth: How does that work? Where are you getting the money to do that? Or why would you do that?
Joseph: That's because we want hosts, especially a lot of these residential hosts that are not a large storage business. We want them to feel comfortable listing their space, knowing their items, that they're not just going to get stuck with items in their space that they're not earning money for.
And so we foot the bill. As a company, it's part of our host payment payout guarantee that we'll foot the bill and eat the cost and then we actually run the entire auction and eviction process on behalf of our hosts.
So many storage facilities are aware that different states require different procedures in order to dispose of items. When a renter stops paying, you can't just take those items and throw them away. There's actually a proper process and procedure to follow, and we do that on behalf of our hosts. We take care of that entire process and we take care of the auction and we're able to recoup our costs for protecting your payouts, when we sell those items in an auction. Occasionally though, the items don't sell for much and we're out. We take a loss and that's fine.
Again, it helps more transactions happen because people feel safer and they feel like they're taken care of. So that's an area where hosts are benefited.
We've had scenarios where a renter, they'll say, oh, I was charged for this, but I don't want to pay that. Because they decide to move out and they try to get a bunch of months back or something like that. And we take a look at it and they may say, oh, I'm going to give everyone a bad review or something.
And we just look at like what's just? And if your items were in a space, you should pay for that space. And so we're always going to come down on what's just. So that is going to benefit the host and not benefit the renter. Whereas if a host says, I want to jack the price on our renter, again, we come down on the side of what's just. Well, what's just is you should have to tell the renter that you're planning to jack prices on them and they should have to acknowledge that. And so that comes down on the side of the renter.
So again we don't really care about renter or host. We care about what's just, because ultimately that's going to be the most in our favor over the long term if everyone can trust that our platform is just going to be the safe place to interact and that no party, whether the host or the renter, is ever going to be able to take advantage of it. They're all going to have to transact in a very honest, straightforward manner that's going to invite more and more people. And it has! I mean that's the reason we're the only storage provider in the country that operates in every city in all 50 states.
Seth: Yeah that's an interesting thing, coming down on what's just, because what's just kind of depends on who you are and what's in your best interests and it's kind of presupposing this moral standard but it's like whose moral standard? Who gets to decide that?
But I hear what you're saying, though. I mean I think 98% of the time it's obvious.
Joseph: This is going to get existential real fast. We need to get into absolute versus relative truth. This is going to be a philosophy podcast pretty quickly here.
Seth: Yeah well it's truth. I mean everybody has a moral standard. It's just a question of where is that coming from? Is there an objective basis for that or is that just kind of am I using society or is it just my feelings this morning or where does that come from?
So anyway it's kind of interesting.
Joseph: I'm a big believer in absolute truth.
Seth: I am too. Glad to hear that. Not everybody is. So anytime somebody says they don't believe in absolute truth I'm like are you absolutely sure about that?
So I'm wondering are there any particular kinds of markets where this makes the most sense? Say I have a spare garage but I live in the middle of Brooklyn or I live way out in the middle of nowhere. Does the current supply of storage have something to do with that or the population? I have a feeling your answer is going to be, “Yeah I can work anywhere.” And I'm just curious if I was going to go out of my way to build three extra sheds in my backyard for this purpose what would I want to see in the market to make sure yeah this is probably a good idea.
Joseph” Certainly the markets where we have… well I'll just say what you just said. And that is we have users getting rented everywhere. We have users in cities that are like 2,000 people. They don't even have a post office where they've signed up space. And it has gotten rented through Neighbor because those areas are kind of neglected by traditional self-storage operators because there's not a big enough market to justify an investment. And so these individual guys can take advantage and get rented.
Hands down, though, where we have the most excess demand, we… Actually on Neighbor, we're a supply-constrained marketplace. We have millions of renters that come to our site every year that go unserviced. Meaning like we just don't have enough space for them. Even us with all this crowdsourced, like we need more supply in the United States. I think anyone who's spent any time in the storage industry has realized this reality. It's severely undersupplied.
So hands down where we're going to have the most excess demand is going to be top 25 CBSAs [core-based statistical area) in the country. So many people in such a dense area, it's just impossible to build as much.
So oftentimes when investors are coming to us and we're setting them up with our account executive team that will walk investors through, help them purchase in the right locations and stuff like that, we'll help them see that some of the biggest return opportunities are in these major cities.
Seth: Could I sublease space for this? Like say if I was renting, I don't know, an office somewhere and all of a sudden I don't need that space anymore, but I'm going to lease it to somebody else. Is that something people do?
Joseph: Absolutely. And in most cases this doesn't qualify as like a sublease. Obviously check with your attorney, don't take our word for it, but some contracts will have prohibitions on sublease. You can't sublease this space. Typically they're referring to having another person, another individual, sublease the space. If you're still the primary user of the space and you're just taking a portion of it and letting people store some items there, that's typically an allowable use for your space.
So it happens all the time. We have renters, we have many renters on our platform that have listed part of their space that they're renting on our platform and helps earn them money and helps pay their rent, right? We pay part of their rent for them.
Seth: And one interesting thing about this is based on everything I've heard you say, sounds like your property does not need to be zoned commercial in order to use it for this purpose. Whereas if you were actually running a storage facility, it would need to be. So it's kind of convenient that you don't really have to rezone your property just to use it for this purpose.
Joseph: It's very convenient and again, often comes down to primary use of the property. And that's why self-storage facilities have to deal with this as their primary use of self-storage.
But every municipality is different. So we do tell all of our users, make sure to check with your municipality because states tend to have similarities across states, but municipalities can get very different. You'll get some municipalities have a lot of authority to go one way or the other. And so it's always good to check with your municipality to see what local zoning is.
Seth: Now I know we've talked a little bit about the supply and demand and how your opinion is that this is not going to hurt a self-storage facility owner long-term.
But I'm just curious, let's pretend for a moment that you're wrong and this actually is going to totally screw up supply and demand, or it's just going to change things. Like Airbnb, it didn't destroy all hotels, but it did kind of change the landscape. I mean, there's just different options out there. And in some ways, hotels have kind of had to up their game to make it worth people's while to come there.
And I'm just wondering, as a self-storage facility owner who wants to stay competitive with Neighbor out there now, what do you think I need to, like, how can I up my game to make sure people want to come and rent for me instead of John Smith down the road who has a old barn to rent out. Is there anything I could do to stay relevant and stay attractive without having to lower my prices?
Joseph: Well, it comes back to a lot of these pain points that we identified. I think, if anything, Uber, when they disrupted the taxi and limo industries, taxis and limos in all of North America were doing around $5 billion in annual revenue. Uber today, just one company, does over $50 billion in gross bookings. Well over that.
So how did that happen, given that the entire North American taxi and limo industry was only doing five? And guess what? The entire North American taxi and limo industry, ten years later, 15 years later, still does almost five. So how did that happen? Uber provided a different service, a more convenient service, at a different price point than what taxis and limos were offering, and it expanded the market.
There's a famous guy, Bill Gurley, he's one of the partners at Benchmark, one of the early investors in Uber. He wrote a famous essay on the ability to attract new people, blue ocean, to the industry. And so I'll start with that and say we view ourselves as doing something very similar. Storage is a much larger market. Instead of $5 billion in North America, storage does $50 billion just in the U.S. in annual revenue. So just a huge, huge industry.
And we don't think we're going to contract that at all. We think we're going to expand it. We think we're going to open up the amount of people that feel like storage is now within their budget. And so we're generating new customers.
We did a survey early on. It's been several years, but we found that many of our customers had never used self-storage before, so they were entirely net new to the industry. So that's the first thing I'll say.
If there is one thing we're forcing, though, that I think you're seeing is just enhanced customer service. I think there was a belief in the industry before that you were going to get filled regardless, and you kind of do whatever to your customers, you didn't need to pay attention. Storage is famous for being super low OpEx. You don't need to do much.
Actually, one of our investors from Andreessen Horowitz, shortly after investing in Neighbor, we had told them about some of these stats on crime and other things like that, and he called me a few months after he invested. He said, I remember you presenting, and my son just called me, and he had a storage facility in SF San Francisco, and the storage facility got broken into. And he, of course, was super mad. So he marched down to the storage facility and he said, hey, all my items were stolen. You're going to replace them, right? And the storage facility was like, no, we don't cover that. Like you're on the hook.
And he was enraged and said something along the lines of, well, I'm never going to store at your place again. To which the operator responded something like, I've got a waiting list of 20 people for your unit. I don't care. Leave. I'll just call the next guy on the waiting list, and the unit will be filled tomorrow.
And so if there's one thing Neighbor’s bringing to the industry, I don't think it's much change in occupancy, but it is a little more focused on customer service and customer support and doing right by the customer.
You mentioned that it's becoming much more popular to offer some sort of property protection. I like to think that Neighbor is in part driving that trend because we offered early on, I mean, since the very beginning, since we first started out, we offered $25,000 in protection. Now we offer $50,000 in protection. We've been doing this for six or seven years now. And I like to think that over the years, that percentage of storage facilities that are really looking into offering this to their customers, they've realized it can actually drive revenue for their company.
So that's part of the adoption, but also part of it is it's, I think, becoming more expected because we've advertised this aspect so much. So I like to think of that as our impact.
And that's to answer your question, how you can compete in the marketplace is just be the storage facility that's not just profit-motivated, but also cares about the customer and is willing to offer things like property protection, is willing to be transparent about price increases, things like that.
Seth: Yeah. And I know a lot of new storage facility owners. They'll look at very basic metrics, like how many square foot square feet per person are there in this area? And that kind of thing. And they may see something like Neighbor and be like, oh, all these new square feet are going to come to the market and saturate everything.
But it's so much more granular than that. Like, is it climate-controlled or not? Are they 5x10 units or 10x30 foot units? There's so many different kinds of storage. So whatever comes out of the market, understand what is that, what kind of customer is that serving, and how can I serve a different kind of customer if I need to?
Joseph: One customer type, that is typically a lower price per square foot. And so most storage facilities have kind of neglected it to build interior space, which makes a higher price per square foot. But RV and boat storage has been highly neglected. Again, it makes a lower price per square foot.
So there's a huge opportunity for those, especially in areas where RVs and boats are very popular, maybe close to national parks or lakes or things like that. It's a huge opportunity to build very custom solutions for them.
We actually have a large operator that's listed on our platform, a group called Rec Nation. They've listed their spaces through us, and we help fill them. They are entirely focused on RV and boat storage. I think it's really cool what they're doing and the vision that their CEO has had to focus entirely on that segment of the market that's been underutilized. And I want to say they've been able to raise over $500 million from investors to go deploy into this area. And they're offering a great service. I think they're being very successful.
Seth: Yeah, I know we're probably going to be looking at that when we expand to phase two of our facility. I don't know if we'll go that direction or not, but you're right. I mean, RV and boat storage is pretty severely neglected. And I think historically it's been because even though the cost per square foot to build that kind of storage is pretty cheap. In a lot of cases, the amount of rent you can charge for it doesn't justify the cost.
But I feel like that's changed a lot since the pandemic. A lot of people have boats and RVs that didn't have them before, and they don't want to park them in their own yard. And there's a huge need for that. So I think it is definitely worth looking at.
Well, I know you've been very gracious with your time, Joseph. One last question here as we wrap this up. So I know whenever a company like Airbnb or Uber gets huge and adopted by the masses, inevitably you start to see news articles that talk about horror stories on the platform. Like, I remember hearing about Airbnb owners who couldn't get rid of tenants who would like, squat in their property and that kind of thing.
I mean, I don't know if Neighbor has encountered that kind of thing yet, but what are some of the biggest, unexpected challenges that you've had in trying to create and run this kind of platform? Does anything weird like that happen, or do you anticipate any of those kinds of, I don't know, PR nightmare issues coming up or what do you think?
Joseph: Yeah, I count my blessings every day that we're in the business of storing items and not in the business of storing people, as we like to refer to Airbnb, they're in the business of storing people. Uber is in the business of transporting people. And anytime you deal with people, the regulatory scrutiny goes way up and you have all these restrictions, these kind of tenant laws to deal with.
Storage is much, much more simple. In the vast majority of states, within a 60-day period of non-payment, you can have a renter out of the unit. There's no sort of kind of long-term squatter stuff like you talked about that Airbnb has to deal with. You don't have to deal with a lot of the tax burden, the room and board tax.
So I definitely count my blessings every day that we're in storage and not hospitality. That's a nightmare of a world with a lot of liability involved. For our business, what's been unexpected to have to encounter most things are just fairly straightforward that you'd expect in the storage industry. Like, a tenant stops paying, and so you have to deal with a tenant that's no longer paying for their unit. Or a renter's items get damaged in some way.
And those are things that's why we exist, right? That's why we are able to have a company, is because those things happen and because we're able to provide things that make them better.
So nothing crazy yet. I wish I had a better soundbite for you.
Seth: No, I mean, that lack of controversy and lack of drama and lack of excitement is why a lot of people get into self-storage. Just because you're right.
I mean, you're not storing if the people aren't living there in the property and if it's boring, that's ultimately a good thing as an investor.
Joseph: Yeah, we do occasionally and we'll filter these out, we'll occasionally have individuals come under our platform and they'll say, hey, can I live in this space? And we strictly prohibit that. Even if a host was willing, even if a host said, yeah, we don't allow that to take place on our platform for those very reasons. We're just not interested in ever dealing with any of the rules and regulations around living.
Seth: Yeah, that makes sense. So, Joseph, thank you so much for spending your time here with me. I know it's been fascinating. I think it's an amazing thing that you're doing. The app is very well made.
If anybody out there wants to give it a retipster.com/neighbor, I'll have links to that and a lot of other stuff we talked about in the show notes for this episode, retipster.com/169.
And I'm really excited to see where this goes. I mean, it's just a brilliant idea, and I'm shocked nobody else has done it yet, but maybe it's that whole thing of an idea is only worth so much as it's multiplied by action. Like, there are lots of great ideas out there that never get anywhere because nobody will do anything about it.
But this is one of those things where the idea was there and the action was there and look what we have now. It's pretty cool. Thanks again, Joseph. Appreciate it.
Joseph: Thank you, Seth.
Seth: Yeah, absolutely. I'm excited to keep an eye on Neighbor and see where it goes.
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