Today’s guest is Travis Baucom.
Travis is the founder, and CEO of Balcomie Capital. Balcomie Capital is a boutique firm for high-net-worth and high-income individuals that specializes in a seldomly invested but well-known property type that performs better than most others.
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The Challenges of Managing Rental Properties [00:02:25]
Transitioning to Self-Storage Facilities [00:01:54]
Unloading the Rental Portfolio [00:07:15]
The challenges of managing a large portfolio [00:10:05]
Transitioning to self-storage facilities [00:11:45]
Working on a self-storage development deal [00:16:33]
High Net Worth Individuals and Ultra High Net Worth Individuals [00:20:20]
Lessons from Flipping Houses [00:21:33]
Contact Information [00:22:00]
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Connect with Travis:
Instagram: https://www.instagram.com/travis_baucom/
Facebook: https://www.facebook.com/people/Travis-Baucom/8359225/
Twitter: https://twitter.com/TravisBaucom?s=20
LinkedIn: https://www.linkedin.com/in/travisbaucom/
Website: https://balcomiecapital.com/
Connect with Sam:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Facebook: https://www.facebook.com/HowtoscaleCRE/
LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/
Email me → sam@brickeninvestmentgroup.com
SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson
Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234
Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f
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Want to read the full show notes of the episode? Check it out below:
Travis Baucom ([00:00:00]) – Like the short term middle business is just like the flipping business in the sense that you’re always on, you’re always game, you’re always having to, you know, focus on customer service, etcetera, etcetera. Storage is like managed. It really is. You set it and forget it. One of my I have 50,000ft² that’s managed by one person. 396 tenants. She’s awesome. And I call her maybe once a month. Welcome to the How to scale commercial real estate show.
Sam Wilson ([00:00:27]) – Whether you are an active or passive investor, we’ll teach you how to scale your real estate investing business into something big. Travis Barker is the founder and CEO of Alchemy Capital. Alchemy Capital is a boutique firm for high net worth and high income individuals that specializes in the seldomly invested in but well known property type that performs a lot better than others. Travis, welcome to the show.
Travis Baucom ([00:00:51]) – Hey, nice. Nice to. Nice to meet you. Thanks for having me.
Sam Wilson ([00:00:54]) – Absolutely. Travis. I appreciate it. There are three questions, the three questions I ask every guest that comes on the show in 90s or less.
Sam Wilson ([00:01:01]) – Can you tell me, where did you start? Where are you now and how did you get there?
Travis Baucom ([00:01:04]) – Yeah, so I started in the residential space buying single family homes, specifically foreclosures back in 2012. I didn’t have a lot of money, so that was kind of that that’s if I was going to get into real estate investing, that was going to be the only way to do it. Or at least that’s how I saw it. And I really wanted to be in the residential space. Over the next eight years, we bought over 400 houses and then we realized that, you know, this is probably not where we want to be long term. It was going to be a hard place to ever retire from because of the the plate spinning and the wheels that are always spinning. And the residential space made a big switch to self-storage for the most part exclusively self storage. We have a few, you know, hobby projects that we do. But yeah, we, we own over 1800 units of self storage facilities in Texas, one in Oklahoma, very large.
Travis Baucom ([00:01:54]) – We we focus on buying like a mom and pop property and then expanding it. You can make tremendous yield doing that. And as far as moving forward, we’re going to focus on the acquisition and the development of Class A self storage facilities.
Sam Wilson ([00:02:11]) – And that’s really, really cool. I love that the 400 houses, that’s that’s a lot of houses to buy. A lot of closings. That’s a lot of paperwork. Like how in the world and do you still mean with those rentals with those houses.
Travis Baucom ([00:02:25]) – Yeah So so you had you had to buy it and that’s 400 transactions and then you had to sell them, which is another 400 transactions and not including the utility payments and the constructions and the massive amount of employees it takes to manage that stuff. And so, yeah, that’s we bought, like I said, in 2012, we bought our first house, bought another house late 2012, 2013, about four houses we started. We kind of were tripping up or falling forward or failing forward, whatever you have have.
Travis Baucom ([00:02:53]) – So we mess up and be like, Man on the next one. We’re going to fix that. And then we get to a point where we were buying 5 to 7 houses a month, then 10 to 15 houses a month. It was kind of backloaded, meaning that we kind of, you know, ramped it up. And then 2016, 17, 18, we bought a ton of houses. So 2016, but 56, 2017 was 87, then 2018 was 91 until October of 2018. And then I got I was so burned out of trying to keep it all together, I hadn’t been able to take a break. No. Vacation. We didn’t have money for vacation. We were just continually putting money back into the system. And I was like, This sucks. Like like give me a job for 75,000 bucks. Like, like, I’ll take it immediately. You know, that wasn’t even what we lived on, you know, It was just like I was just so miserable that I was willing.
Travis Baucom ([00:03:46]) – Like, I remember seeing a homeless guy once panhandling, and I’m like, man, like, dude, just got it. He’s got it so easy. All he has to do is hold out his hat and get paid money and have some sob story. You know, here I am, like trying to keep every banker and construction guy or, you know, contractor at bay and in private investors and employees afloat. Like it was like all on me. It’s like that that statue with the dude with the world on his shoulders. You know, it’s a horrible way of making wealth and making income. I’ll just tell you that. And I will I will debate anyone on that topic because I have the stories to prove it. But yeah, it was there was we made a hard decision in 2018 to quit and just like started we had at that time, we had 40 renovations going, 42 renovations and 72 single family home rentals. And we just I was like, I’m just going to wind down and restart.
Travis Baucom ([00:04:41]) – I like in my head I was like, We should have like 700 grand. When all this is done, everyone will be paid back. Debit card or credit cards will be paid back. In reality, that’s not what happened. When we like the the values were greatly skewed. The renovation budgets were way under budget. And you know, when you go 20 grand off of a renovation, it’s not like that money just comes out of nowhere. That’s a profit from another deal. You had to put in that and you’re not able to live on that. You’re not able to pay payroll on that. And so no. One, I have not met anyone. There’s three operators in America and I know most of the massive house flipping operators. There’s three operators that I think actually do well on it. Otherwise, everyone has struggles. I see more people struggle on this single family game. Then I see people successful in the single family.
Sam Wilson ([00:05:32]) – Game and that way you guys were strictly flipping or were you? I heard you say rentals or Yeah.
Travis Baucom ([00:05:37]) – We had 72 rentals to go. We were to my before everything just kind of dried up. I was planning on just like we’re going to buy rentals and, and then when I get to 300 rentals I’m not flipping houses anymore and I’m firing everybody. I’m going to hire a really smart person to manage all three of those. And I’m and I’m going to retire because I hate this so much. But you have issues like when you have 72 rentals and they’re class C, class B rentals and you have Hvac s, those tenants are too busy surviving to replace the filter. Yep. You know, and if they’re not surviving, they’re probably, you know, like just doing other things that will cause them to forget to take care of the property or they just don’t care. And, and so your AC goes out and then that’s all the landlord fault because he put in a crappy AC even though that the AC was new 12 months ago they just, you know like we had this really rough small apartment complex.
Travis Baucom ([00:06:33]) – The tenants would actually take the fiberglass. Uh. A filter out and like strip it and put it in their joints. So. Because he knows why. Why are y’all doing this? Like what? What the hell? This is not good for you. Like, oh, guess it’s a little higher. I’m like, Gosh, Oh, my God. Just give me just leave. I just want to be out of this so fast. It was that was that was the worst. I think it’s still the worst property in that in that market. Just such a I don’t the guy I sold it to is a friend of mine now and he still every time talked to me he hasn’t gotten it full so.
Sam Wilson ([00:07:07]) – All right so now we the 65 seven.
Travis Baucom ([00:07:08]) – Yeah. So that’s why get out of it.
Sam Wilson ([00:07:10]) – Now we know why you got out of it. What did you do with the rental portfolio? How did you unload that?
Travis Baucom ([00:07:15]) – Just sold. Yeah. So? So 2018 In October 2018, I actually ran out of money.
Travis Baucom ([00:07:19]) – We just were so because everything, everything had just explained, just we were out of cash. And so I was like, well, I can’t make payroll and I don’t really even like these employees anymore because they they’re, you know, that guy is the one that under underbid the property. He paid too much for the property. This guy is the one that paid the drywall bill three times the same guy. I didn’t realize that. You know, like all y’all are fired. And so I fired everybody on one one day. And I took I went home. 42 renovations, 72 houses. I list everything we had. And so, like, I spent 2 or 3 days. I was a real I’m a real estate broker and I listed everything I had. And if it was a half done project, we would list it like somebody wants to buy it for what we owe on it, we’ll take it. And so at that point, I just took tranches of five. Like, I’ll take these five houses and I’ll renovate these five houses with these five crews and then these five houses and these five houses.
Travis Baucom ([00:08:12]) – And eventually the crews didn’t like the way all of a sudden they had the gravy train. They would just submitted invoice get paid and was like, No, you missed the spot, missus. I was just all of a sudden running my business like a business. And they were used to my construction manager just writing a check whenever they needed any money for anything, for whatever reason. And then. Yeah, And then the 72 houses, like we sold some tranches of those, you know, the property manager was still money. We found out, I found out after every every can everybody that the property manager was actually just kind of milking us, you know, like not, you know, telling us to replace final plant that had been using his construction company to replace all do all the work. So real bad. Just real environment, honestly, was the worst. That’s the only word I can think about using. Um, and yeah. And so we just it took me 28 months to unwind all that and then we were out of it.
Travis Baucom ([00:09:03]) – We didn’t have most of it. Most of the debt was paid off if the debt hadn’t been paid off. We had agreements for those people. And so every bank, despite that catastrophe, every bank got paid back plus interest, every hard money lender got paid back plus interest. Every investor get paid back plus interest. And if they didn’t get paid back plus interest and we were setting up monthly payments with them. And so my thought is if I could just took care of the people that helped me get to where I was, then they will help me get to where I want to go.
Sam Wilson ([00:09:31]) – And so and so you said, all right, you had enough enough of the housing game that were you out that killed you. What what did what are you going to do differently? Because, I mean, it’s one thing and I’m going to I’m going to offend you here maybe a little bit. But you seem like somebody who likes to shoot straight. So it’s one thing to say, well, you know, employees did this, employees did that, employees did this.
Sam Wilson ([00:09:52]) – But there has to be some lessons for you in there as well, like from a from a leadership perspective and also from a in my next company, in my next version of real estate, I’m going to do something differently. What are some of those?
Travis Baucom ([00:10:05]) – Yeah, yeah. And thank you for calling me out on the the the finger pointing. So to say that a different way is not everything that happened in my business was my fault. I did you know, there was so much going on. I didn’t know the guy was the drywall guy was getting paid three times for one job, you know, But everything was my responsibility. And that’s when I took, you know, and I was so burned out, I’d have been like, just slagging and slagging. And then then I’m like, all right. Like, for me to get out of this without losing everything, gotta make some hard decisions. And so that’s when so the 28 months of me like, you know, the first 7 or 8 months of that was pretty painful because we were still out of cash, people wanting money.
Travis Baucom ([00:10:44]) – We were having to explain the same story over and over. And so one thing that I did to choose, you know, I chose not to do. One thing that happened when I decided to take everything home is I read Ray Dalio’s book Principles. Um. Good news for everybody that doesn’t want to read a book that’s 1800 pages, whatever. You can just get on YouTube and Google. Ray Dalio principles. There’s actually an animated version of that entire book that goes that’s covered, very entertaining. That’s done in 34 minutes, so you can learn all the principles. In the book principles that you need to. And so one of those principles for me is if I’m going to invest in something, it has to be making money every day, every week or every month that it has to pay cash flow every day, every week, every month. So flipping a house is just out of the question. Like we might flip a house Just. Just to make a quick buck. But we’re not going to build a business flipping houses ever again.
Travis Baucom ([00:11:45]) – Right. And I don’t recommend anyone doing that if you’re listening to this. And so. So by focusing on assets that make money every day, every week, every month, we eliminated most of the stuff we had been doing. And so the highly speculative, highly value add house buying business. And so. So originally we started buying short term rentals before Airbnb took off. Those are working really well. Those make money every day or every week. And then we’re like, All right, hospitality assets are pretty risky in a recession. They don’t perform very well. So we’re going to need a hedge. So how do we hedge? Just find the most. What is the opposite of a really, you know, hospitality makes really great yield in a good, good market, especially in a good, a good, good economy and a good market. What’s the market or what’s the asset class that we need to buy in to make sure we hedge for this? And that’s where we found storage. And then after we bought our first portfolio storage portfolio, I’m like, I’m selling the short term rentals because because self storage is so easy compared to, you know, driving Friday evening when I’m hanging out with my son and having to fix a whatever, you know, whatever the heck Wi-Fi password issue or something like that, driving 20 minutes and 20 minutes, it goes an hour of my life.
Travis Baucom ([00:13:00]) – And just also, that lady might give me a five star review, you know, And I’m like, that’s not the life I want to live. I want to set it and forget it. Like, this is like the short term middle business is just like the flipping business in the sense that you’re always on, you’re always game, you’re always having to, you know, focus on customer service, etcetera, etcetera. Storage is like manage. It really is. You set it and forget it. One of my I have 50,000ft² that’s managed by one person, 396 tenants. She’s awesome. And I call her maybe once a month. And so like if I think of I need to call, see what’s going on, sometimes it’s just send a text because she has it down. I can pull up immediately, I can pull up the dashboard and realize, oh, 98.1% of our tenants have paid on the fifth part of fifth of the month. I don’t have to worry about it. She’ll call me if there’s a fire, a robbery or a theft, or if something catastrophic is happening.
Travis Baucom ([00:13:54]) – Otherwise I just need to call her and make sure she knows I’m thinking of her and that she’s valuable to my company and that we really think are thankful for her, that sort of thing. So. Right. It’s the opposite of like having to like do massive operations and take care of human beings in short term rentals.
Sam Wilson ([00:14:12]) – Oh, human beings and short term rentals or even I mean, just just looking at.
Travis Baucom ([00:14:17]) – Generally.
Sam Wilson ([00:14:18]) – Well, just going back to the flipping business. I mean, my gosh, like, I’m with you, man. I did a lot of it. Not nearly as much as you did, but I did a lot of it. And it’s like I just I couldn’t go back to it. I couldn’t go back to it. Too many moving parts. And I think I think part of what I hear you saying here is building, because for some people, flipping is fun. Like, they want to do that. They want the phones, they want they want the busyness, they want the contractors and the painters and this and that and the closings.
Sam Wilson ([00:14:43]) – And there’s something they just enjoy that frenetic activity. But it sounds like for you, you’ve really want to build a business. It kind of suits who you are, maybe not so much necessarily chasing the like.
Travis Baucom ([00:14:55]) – Hey, totally.
Sam Wilson ([00:14:57]) – Massive empire you’re building.
Travis Baucom ([00:14:59]) – So, you know, in 2018, when I wrote down Principles of How I Want my Life to look, yeah, I also wrote down like, because I was so frustrated and sad and angry that I hadn’t been able to create the life I wanted in eight years of flipping houses or six years of flipping houses. And so I’m like, What do I really want? I’m like, Well, I want stars. Season passes. I want maps, season passes, I want this, I want that. I want to be able to mountain bike. I want to go for vacations a year with my family. I want to go on four getaways with my wife. All this stuff that I’m writing down, I’m like, I’m going to create this now and fund this environment as opposed to my business owning me.
Travis Baucom ([00:15:33]) – I’m going to actually own the business and it’s going to serve me the way I want it to serve. And so that’s that’s another reason why short term rentals are gone. And self-storage is is where we’re headed because we just you know, I can go mountain biking on Monday and I can go mountain biking on Friday and then Tuesday, Wednesday, Thursday can knock all the stuff out I need. And sometimes I don’t even have those three things. When we’re raising capital, we’re really busy. But when when we aren’t raising capital, we’re just looking for the next deal. And that takes 3 or 4 to five hours a week to do. Right.
Sam Wilson ([00:16:02]) – What’s the deal you’re working on right now? You know, there has been incredible interest, obviously, in the self storage space. Yeah, I’m thinking back from when I first started really learning about and investing in commercial real estate, which is now seven years ago, you know, self storage was it was warm ish, you know, and it became a very hot asset class.
Sam Wilson ([00:16:22]) – I think it is still has a lot of attraction for a lot of people. But what’s a deal you’re working on right now? And why is why is it in particular a great deal?
Travis Baucom ([00:16:33]) – Sure. Sure. Yeah. Would like to hit on the reason why self-storage is hot right now is just to work from home is primarily the reason. And then there’s a lot of traffic, a lot of trains transitioning of housing. So those two things are driving a ton of demand because if you’re if you’re at home and Airbnb, who pays a ton of money since you’re talking about short term rentals, they pay a ton of money for their employees. And they literally said, hey, indefinitely, you can work remotely, you can work wherever you want. We’re not going to tier your salary like Facebook is tearing people’s salary depending on where they live. So me living in Waco, Texas, if you work for Facebook, you’re going to make a lot less than if you were. San Francisco is call it. They call it like the work work market algorithm or something like that.
Travis Baucom ([00:17:16]) – But Airbnb is like you can work indefinitely. So several buddies of mine in Waco that it would never work for like a national company now just they work for a California company and they make like $130,000. It’s a huge salary in Waco. And so so what that says now that you can work at home indefinitely, you just cleared out the room that you had all your boxes in your storage room and now that’s your office. And so a lot of that’s happening. The deal we’re working on right now is in Texas. It’s an Austin MSA. It’s a city called Georgetown, Texas. It’s the wealthy or most expensive, fastest growing. Suburb of Boston. Um, and it is it’s grown 35% in five years. So healthy growth is 2% a year according to Gallup. Um, so should have grown 10% it three and a half. That so we’re building a huge one of the last C1 zone areas meaning C1 is a zoning that allows storage by special use permit. So there’s not going to be that many places that anyone can even build a storage facility or get permission to build a storage facility.
Travis Baucom ([00:18:27]) – So we’re building it at the corner at a major intersection in one of the last zoning plots that is allowed to build storage. It’s 967 units. It’s 107,000ft². It’s main. It’s going to be managed by extra space, which is about to be soon to be the largest facility owner in America. Um, they have some of the highest or some of the most advanced technology. We’re going to get that thing filled up really quick. It’s going to be awesome. Um, it looks more like a hotel than it does a self storage facility. It is gorgeous. It’s beautiful. And, you know, our our cost is somewhere around 17 million for that stabilized value on the five years, 26 million stabilized value on a ten years closer to 33 million. And that is based on a five and a half cap, which is where public rates are. So buying.
Sam Wilson ([00:19:18]) – Wow, that’s cool. I wish we had more time to dig in to have you back on the show here in a few months and just follow up and and get the update on on that project because that mean that’s one.
Sam Wilson ([00:19:31]) – So it’s a development deal, right? Yeah. There’s a lot of ground out there. Yeah. Ground up deal. So people are afraid of development right now. In general, you’re in self storage, But yes, it’s a hot asset class. But I think on a on a probably dollar for dollar, you know, multifamily to self storage, the dollars probably don’t even compare self storage still doesn’t hasn’t been trading nearly as much as maybe what multifamily has. So I think you’re still in a really cool asset class on that front. You’re in a booming town in a in a C1, What do you call it? The C one Zoning, Yeah, all of those things together sound like a really fantastic project. Give us just maybe the 22nd version of, Let’s see, we’re recording this on May 30th. What what, what is capital doing right now? Like, what are, what are someone you have an awesome project like this. Any challenges on that front? Any successes on raising capital in this environment?
Travis Baucom ([00:20:20]) – Yeah.
Travis Baucom ([00:20:20]) – So I’d break it down to people with high net worth individuals and then ultra high net worth individuals, high net worth individuals, which probably were me and you would fall in. We our available cash is either on the sidelines we’re not gonna put anywhere or it’s in deals. Right. And we’re living off of our income don’t have an income. But um, ultra high net worth individuals, they are still interested sporadically. The hard thing about storage is, you know, most people’s visual or mental picture of a storage facility is just a crappy, like metal building with some boats around it. Maybe a. Breaking Bad meth or something like that. And so it’s not really well, well appreciated it at this point. But but yeah, ultra high net worth individuals are still are still committing for deals they are running bigger checks. You also have you have private equity. You get family offices. Those come with a lot of strings attached. A lot of you basically lose a lot of your control that way. But if it’s, you know, if you want to get a deal done in 2023, 8.25% interest with wherever the heck inflation is, that might be your only option.
Travis Baucom ([00:21:32]) – Right?
Sam Wilson ([00:21:33]) – Right. Very, very cool. I love it. Travis, thank you for taking the time to come on the show today. I certainly appreciate it. I learned a lot from you, certainly from the pains of flipping 400 houses and then exiting that finding what you’re into now, why you love it. I mean, the idea that your phone doesn’t ring certainly speaks to my heart. That’s a that’s an amazing asset class to be. And I’ll call you once a month and we’ll see see how things are going. So very, very cool if our listeners want to get in touch with you and learn more about you, what is the best way to do that?
Travis Baucom ([00:22:00]) – Yeah, the best way is on our website. It’s dot invest in storage deals, dot com.
Sam Wilson ([00:22:09]) – Invest in storage deals. We will make sure we put that there in the show notes. Travis, thank you again for coming on today. I do appreciate it.
Travis Baucom ([00:22:15]) – Yeah, appreciate it, man. Thank you.
Sam Wilson ([00:22:17]) – Hey, thanks for listening to the How to Scale Commercial Real Estate podcast.
Sam Wilson ([00:22:21]) – If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.
