Key Metrics for Self-Storage Success - TractIQ CEO Noah Starr

THE SELF STORAGE REPORT — EPISODE TRANSCRIPT Episode: Key Metrics for Self-Storage Success — TractIQ CEO Noah Starr Guest: Noah Starr — CEO, TractIQ Host: Chris Berg — Abernathey Development Recorded: May 21, 2025 Video: https://www.youtube.com/watch?v=VmZ-sENUbvM Key topics: median home value as a storage demand predictor; the Modern Storage Media article; qualitative site screen (negative adjacencies, traffic counts, visibility); supply per capita (10 square feet per capita); supply, median income, population growth and market rents as criteria; exit strategy and exit cap rate; Rosewood Self Storage, first acquisition April 2022 for under $1 million; I-10 frontage and traffic counts; the Chevron plant under construction in Orange, Texas; 60% to 85% occupancy; a $200,000 friends-and-family equity raise; the two ways to lose in storage (overpay/overlever and new competition); TractIQ permit-level development tracking and yellow pins; lack of storage data transparency vs. Smith Travel Research in hotels; month-to-month leases as an inflation hedge; the TractIQ Q1 REIT report Note: Speaker attribution reconstructed from raw captions. Light cleanup of transcription errors only; wording preserved. Timestamps and YouTube chapter markers removed. Turns marked [attribution inferred] could not be attributed with certainty. ————————————————————————————— Chris Berg: Welcome to the commercial real estate report. Very excited for our guest today. He is the CEO of TractIQ. Prior to that, acquired 12 self-storage properties, roughly about 650,000 square feet, 4,000 units, and then before that was in private equity. Has underwritten over 10 billion with a B, 10 billion in assets and different asset classes. Uh, and he's also a Hall of Fame lacrosse player from the University of Texas Austin, which I love. Noah Starr. Noah, it's great to have you. Noah Starr: Chris, thanks for having me. That's probably my most proud one right there and we could talk all about sports and lacrosse, but really grateful to be here and appreciate you having me. Chris Berg: Yeah, you got a great story and I know you had a chance to tell it on some different podcasts. So, if we get to that, great. What I really want to do is provide a ton of value for people that are kicking around self-storage and, you know, so many people now I think really appreciate the asset class. So what would be interesting and really what caught my eye is you put out a great piece recently in Modern Storage Media called a key metric predicting storage demand, uh, with median home value. So we can obviously dive into this article but just because you've done over 10 billion dollars in underwriting assets. What I'd love to do today is just give people an idea as you approach an asset like what is, what is your process? I was on Thaddius Campbell's podcast recently and just talked about how being a quarterback like putting together a game plan really transferred to how I approach sites for development. I'm curious what your process is just because you've got so much experience in underwriting. Noah Starr: Yeah. So, I would say we can talk a lot about investment criteria and buy boxes and a funnel of actually how to find deals and once you found them, how do you screen them out and then all that whole process is, but really it depends on what your goals are because that can dictate a lot of how you think about this. But I'd say with real estate, there's of course an important data component that we can come to in a second, but there's a huge qualitative aspect of real estate. So, if I were looking at a property, the first thing I would look for is, is this an area that I want to invest in? Meaning, would I want to, is there a prison or a negative adjacency next to the site? Is it located off a major road with good traffic counts and good visibility? Is it in a growing area where there's been a lot of new developments nearby, maybe some positive press? You know, is this an area that is ripe for continued storage demand and future growth holistically? And that could take a couple of minutes. And you know, right after you understand really what's the qualitative nature of real estate, then you can dive into the data. And you know we work with some of the largest investment companies in the world and a lot of smaller newer investors in storage and you can have wildly different strategies but you know there are a number of metrics that I've seen self-storage professionals leverage such as supply per capita and median income and population growth and rents in the market, things like that. So you'd really want to dial in a criteria that matches your goals. But as you pointed out in that article, not all demographic criteria are equal and not all correlate the highest with successful outcomes. So that's what we dove into there in that piece. Chris Berg: So let's talk a little bit about the goal aspect because I think it's really important in my opinion for people to realize like because I don't see this a lot, know maybe you do, but I'd like to see it more is people understand what their exit strategy is before they even start to underwrite a site, right? Like, hey, am I going to get out of this in 5 to 7 or is this a buy and hold or so some people obviously are pretty adept at that, but other people like, oh, it's storage. This is going to be a great asset, but they're not really clear in their exit strategy. So, they may buy a pretty decent asset and then they want to exit and they realize, oh my gosh, I can't exit in this because I'm not in the right market to have someone come in and buy, you know, this kind of asset or this kind of property. Noah Starr: Absolutely. There's a spectrum, right? Right? And if you have over here someone who's looking to buy their first facility, you know, maybe they have a W2 today and they want some passive income, right? Versus Public Storage who has a 50 to 100 year hold. Thinking, you know, across that spectrum, you obviously need to figure out where you fit in and what your goals are. If you're on the smaller side and looking to buy, you know, one or two facilities for a passive income stream, you might not want to exit in 5 years because if you're, you know, in your 30s to 50s and you want to find a really good site that you can pass down to your kids or it could fund your lifestyle, you might, you know, 5 to 7 years from now, you might not care what the exit cap rate is if it's kicking off a yield on your cost basis that is sufficient for your life. So that's where it really depends on what is the goal. I think we, we work with a lot of institutional and larger investment companies where you know maybe a life cycle for them is a 5 to 7 year hold if not shorter. So of course if you're looking from that perspective the exit means a lot more. Understanding what your exit cap rate is. Who would your likely buyer be? All of those things, you know, matter and and really come back to what your goal is holistically. Chris Berg: So, let's do a real life example. Again, you mentioned you acquired 12 properties. I think I heard since you've taken over TractIQ, you're not doing that anymore because you obviously don't want to compete against your TractIQ clients. But so just from a real life example, maybe walk us through what made you say yes to the properties you did and let's start again where you said before, yeah, I did kind of this qualitative piece, but then these are the metrics, especially now that you've got more experience. These are some of the key metrics I'm really focused on as I'm about to make a decision to, to purchase or not. Noah Starr: Absolutely. I think we can do it. And why don't I even look at this live example because it's a property that it's the first property that I ever bought. Um and we might sell it here shortly. But can you see this? Chris Berg: Okay. Uh yes. And I just, before presenting screen, remove other me. [attribution inferred] Noah Starr: Oh, okay. So we got to remove this. And there you go. There we go. Okay. So this facility here is called Rosewood Self Storage. And it's a property that this was the first property I ever bought. So this was in April 2022. I was super stressed at my corporate job. Always wanted to be an entrepreneur. So I left my corporate job the same week that I bought a house, the same week that I got engaged to my now wife, and the same week that I bought this, my first self-storage property. So, I wouldn't recommend throwing all your life events in one week, but it's kind of how it went. But for this site in particular, you know, we bought it under a million dollars. It was owned by a husband and wife who owned it and managed it for many years. You know, no sophisticated operations. Rents were below market. You can see here it's got really good frontage off, um, off I-10 which, you know, has, um, has some good traffic counts here. And let me even just traffic. There we go. Here. Yeah. This in. Here we go. Really good traffic counts where, you know, 2,000, 2,500 cars a day but it's a major road. There wasn't that much competition where within, you know, 5 miles now there's, you know, around a 10 square foot per capita. The rental rates were pretty decent in this market and we were seriously below market. And there was a new, you know, multi-billion dollar Chevron plant that's currently under construction in Orange just to our east within 10 minutes. And then the last piece, this was within a 4 hour drive of my house here in Austin, Texas. So, you know, this was the first property that we bought it. You know, I think we bought it for a fair price. We bought it where it was, you know, 60% occupied. Today, it's, you know, 85% occupied. You know, stabilized, good tenant base, you know, managed pretty well. And, you know, we're looking to exit this year. But this matched my goals. It was a small enough price point where I could raise funds from friends and family and really learn a lot more about, sure I can understand it from an institutional side, but it's way different when you own it yourself. You got to figure out a lot more. Chris Berg: I want to get into the friends and family raise in a moment, but again, if you would, um, and I know it's going to be probably a little bit different for each asset, but for this one, as you were ranking some of these different metrics, like you talked about, hey, rental rates are below market, there was the Chevron, like how were you putting this puzzle together and then saying, okay, rental rates, this is the, my top priority, maybe it's supply. Like, how are you starting to rank these things to help people transfer some of these skill sets and ideas into their own business? Noah Starr: Yeah, I think it's, you know, ranking is interesting because, you know, a lot of people will say there's a price for anything, right? A declining market with really bad job prospects, but if I could buy it at a 30 cap, you'd probably get all excited about that, right? So price obviously is, is an important factor. I would say there are two main ways to lose in storage. The first way is to overpay and overlever your property. So, you know, if you're going to do that and overpay and over lever, the market won't save you. That's a really hard thing to, to deal with. The second is new competition. And so, what we do, at least in TractIQ, all of the yellow pins are facilities that are under development. And you know, I was super, um, focused on were there any new developments coming in my immediate trade area. And you can see here there hasn't been any new developments within 5 miles of our site. You know, within 10 miles of our site, there's one that looks to be under development in some phase, but it hasn't, the planning commission hasn't viewed it in a number of years. So, this was back in 2022. I probably called the county commissioner and you know Hatal Patel here wasn't moving forward so I probably got comfortable and that thesis has proven out where we haven't had a new entrant in our hyper market which you know would crater rents and would make it a lot more challenging for us to lease up the asset. Chris Berg: So I'm curious, you said you bought it in 22 and you're looking to sell it this year. Did you know in 2022 that you wanted to exit in 2025? Noah Starr: No, we, we initially my thesis was a 5 year hold across the board. I think now I publicly committed to no longer buying properties because to your point I don't want to have any conflicts with our customer base and um you know we think we can get a price that satisfies what our investors need to get out just because the property has performed at such a high level. So hopefully that's the case but yeah ideally I think the last three years has shown everyone that 3, 5 years is not actually that long and if you think of huge macroeconomic cycles they take that long. So ideally if you can structure it whereby you can hold it for a longer period of time and you know not necessarily time the market because there's no such thing but just give yourself more breathing room and more patience. That's obviously I think preferable. Chris Berg: You know one of the things I love you, you said kind of in a roundabout way too is the risk mitigation piece is hey Chris there's only two things that can really end up really hurting you in self storage. So yes you saw the upside but you also like okay how do I protect my downside? Um, and then you went into more of a defensive strategy around what currently could be coming on the market. I'm also curious because one of the things that we do is we're looking at dirt around the site that we want to buy and go, hey, is this zone for self storage? Could someone come in and as you are kind of alluding to as well, it's maybe the nicest way I can say when you've got irresponsible developers that just start plopping self storage everywhere and you're like, "Wait, wait, wait. You know what's going on here?" So my question to you is as you were evaluating the site, did you also speak to this county commissioner or somebody within the city around, hey, what's the zoning of this dirt around my site? Noah Starr: I think you're bringing up a really good point and I actually think, you know, the industry will say there's irresponsible development, right? And I hear this term a lot and I understand it. But I also understand why developers do that because there isn't transparency in self-storage data. You think of hospitality, they have Smith Travel Research reports where all the hotels actually share their in place metrics and you can, anyone can buy a report. In storage, you know, maybe you can call facilities and ask what your occupancy is. Maybe, maybe someone will give you some local intel and maybe the REITs will give you something if you're friendly with them, but in reality, we are all flying blind in a major way. And you know, that's at least a thesis that that we have and what we're trying to bring to the forefront. Um, you know, in terms of the extra due diligence, yes, like calling the city and the local municipality, they can share not just what new storage is coming into the area, but what new housing projects, you know, what new commercial construction. And of course, TractIQ can do that, too, where we track all of this at the permit level, um, where you can actually see all of the, you know, all of the new retail or educational projects or you know all of the new housing projects that are coming into the area like this 60 unit, you know, project. But I'd say once you get through your deal funnel and it checks the high level boxes, you're close enough on price, due diligence is super important. You making sure you have a good lawyer, making sure you're looking at the title, the survey, you're looking at zoning, you're looking at property condition assessments, environmental reports, all of that is really important to figure out because, you know, if there's land next door to you that you didn't know was about to be turned into storage, that's, that's really tough to, to face. Chris Berg: Yeah. Trying to battle that lease-up fight with another person that's trying lease-up phase is, um, it's not a battle you want to fight too often. So, you also talked about friends and family. I'm curious, we can walk people through the process. Did you go find the site and then go raise the money or did you just go raise a bunch of money and then go find the site? Noah Starr: Yeah. So my situation where I came from the institutional world, building models, building presentations, understanding what investment criteria, institutional quality investment groups would want to invest in. I knew that if I found assets in high growth markets, a lot of new housing developing in the next 18 months, median incomes, high rents in a good trajectory, you know, unsophisticated managers that we'd be able to come in. If we were to find all of those and buy it at a fair price with defensible underwriting, we'd be able, I'd be able to raise the funds. And so I found the deal first and trusted that I'd be able to raise in this case like you know 200,000 of, of equity from friends and family. But you know not everyone has the same level of knowledge and, and there's some great educational resources out there, this podcast in particular. So I think it is different depending on how confident, how much conviction you have, experience you have. But in my case, it was, you know, trusting that I would find a good opportunity to be able to raise capital. Chris Berg: So, just to have some fun and again to continue to help people grow and develop in this asset class. Give me your pitch. You went and found the site. Um, you've got a bunch of experience with underwriting. I'm curious what your, what was your pitch back then to let's say I was a friend, had some capital. Hey, Chris, give me your pitch man. I'd love to hear it. Noah Starr: Sure. I'll, I'll do it quickly of, of what I remember, but back in 2022, inflation was a concern and we knew that interest rates were likely to rise. But self-storage, uh, historically, this did not prove out over the last three years. But self-storage holistically was a really interesting hedge against inflation because of the month-to-month contracts. In theory, you could, if your cost basis is increasing, you can, you know, raise your prices on new and existing customers instantaneously versus office or industrial where you're locked into 10, 20 year leases that you can never adjust. So, that was a macro point of attack from the entire US, not to mention all the historical resilience that self-storage has had. You know, a bet on American dynamism, American mobility, and you know, buying from, you know, mom and pop operators. In this case, it was actually really sad, but um husband and wife, really sweet people. The husband actually passed away in our due diligence period. So, you know, just to give you a sense, like it was obviously tragic and horrible, and I felt so badly for the wife who we really worked hand in hand to get this closed. But you just think of, you know, their perspective. It was really their retirement plan. You know, we were going to attack the property from a different lens. So this area was, you know, in Texas, kind of outside of Houston, the new Chevron plant, you know, $3 billion plant forecast to bring thousands of jobs, located off a major highway, really good frontage, accessibility, no new competition coming into the market. You're going to manage it better, and it has good risk adjusted returns at a fair price point. Chris Berg: So, one of the things I appreciate what you just said, I know to be respectful of your time, we got to go here in a minute, but like, hey, Chris, this was my thesis, but it didn't bear out to be true. And I think it's important for people to realize that because pro formas can tell any story they want, but they're often don't end the way they were presented. I just want to get your quick comment on that. Noah Starr: Yeah, I mean we can't predict the future and you know I certainly learned a lot over the last three to four years that I'm now applying and trying to help you know our clients and the rest of the industry in terms of understanding. You know, you don't want to fall in love with your underwriting. You don't want to fall in love with your prediction of the future. You know what you really should be focusing on is things I mentioned, but the in place cash flow stream, the historic profitability of the store. And you know, I think I certainly fell into this trap of, well, yeah, we'll come in, we'll manage it better. Rents are x% below market, so we'll bump that up. We're going to, expenses are going to lower. All these things. And, you know, once you fall in love with the deal, that's a bad sign. And I certainly fell in love with, you know, not this project. This one, the obviously rental rate growth wasn't as, um, as good for the industry as I thought it might be, but we did lease up the asset. It is, you know, doing really well. It is in a good market. So, we got most of the things of this thesis right for this property. And, you know, that's why storage is so great because you don't need to bat a thousand. Uh, you just need to make sure you're, you got the foundations good and you most of the time will be okay. Chris Berg: To sort of summarize what I'm hearing the takeaway from you today is you haven't said it but I think a good way to summarize this is hey you're always looking for those asymmetrical returns like remember everybody he started with hey how do I mitigate my risk right like don't overleverage, is there people coming in to help the, so now I've lowered my, my, my risk or help mitigate I should say but also you were saying okay then how do I ensure that I can get some asymmetrical returns here by buying the asset at a good price and and doing what you were going to do. So got 60 seconds left I'm wanting give you the last word. There's anything else you want to add or share we haven't talked about? And of course, how can people get a hold of you? Noah Starr: Yeah, I'm grateful to be here and and definitely would love to do this again both on this podcast and and privately as we talked about, you know, I'm very active on LinkedIn. So, you can find me at Noah Starr and then uh you can visit tractiq.com to check out our, our research. We're coming out with our Q1 REIT report next week which has a lot of really great data. And you know, we're always doing, you know, data releases and always happy to answer any questions. So, uh, I'm around. Don't be a stranger. Chris Berg: Thank you. And he does a great job. He actually mentioned this earlier in the show about, uh, transparency, flying blind. He puts out great stuff here on this modernstoragemedia.com. So, you can find him there as well. But, no, we just really appreciate what you're doing for the industry. Appreciate your time and insight today. And it was fun to go through this exercise. I hope people can, uh, get a lot of value out of that. So, thank you and keep up the great work. Noah Starr: Yeah, thanks for all that you do and I'm excited to continue the conversation. Chris Berg: Amen to that. All right, this is the commercial real estate report. 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