Every self-storage facility seller has two basic traits that guide their decision-making: 1) emotional and 2) rational. How you appeal to and guide these factors can be a key ingredient to forging a successful deal. In this Self-Storage University podcast we’re going to drill down on how to use these attributes to your benefit.
Episode 115: Understanding Emotional Vs. Rational Seller Behavior Transcript
So you're trying to buy a self storage facility. Let's get inside the brain of that seller and understand what's truly going on. Because if the seller is going to sell you the property, you have to appeal to two different items. Number one, emotional issues and the other, rational issues. And your success in being able to understand this and to convince them to sell to you, hinges on those two issues. This is Frank Rolfe with the Self Storage University Podcast. We're going to talk about the emotional and the rational issues, those two factors that every seller is going to harness on whether or not they want to sell you their facility.
Now, I started off in the advertising business. That's what I did initially when I started my first company, owned a big billboard company. And when you're in the billboard business, you learn all about selling and how things work and what motivates people to do things. And here's what the studies show. The studies show that most of the time, like 99.9% of the time, people decide to do things based on emotion. And then after they've done them, they have to figure out how to rationalize to others why they did it.
For example, someone goes to the automobile lot to buy a new car and they see on that lot, a beautiful, bright-red two seater convertible sports car. And their emotional side said, oh, I like the sports car, I think I want to buy that one. But then they have to rationalize. Wait a minute though, how do I explain why I did this? Because I've got a family of four and they won't fit in the car. So what am I going to do with this now? How do I sell this to everyone? And they're trying to rapidly come up with some solutions. Well, let's see. I'll say that we wanted to get the sports car because it's got more fuel economy. That's it. And we can drop the top because, sun exposure is good for you, it makes you happier, it releases all kinds of endorphins into the system. So that's why we need the convertible top on it, right? Oh, yeah. And also it's smaller, so it'll fit in the garage better. And the big car would hardly clear the door. And now because this is smaller, we can still have the lawnmower in front of it.
Yeah, yeah, that's it. And that's how decisions are made. And the same is true with self storage properties as far as how someone decides they want to go ahead there and sell it. So let's start off with that emotional side of the transaction. How can I appeal to the seller on an emotional basis? Well, the first one is bonding. Bonding is a very, very powerful force in self storage investing. If mom and pop like you, they're definitely much more willing to give you a lower price, maybe carry the financing. All kinds of good things emanate from bonding.
So bonding is certainly a great start. And that's an emotional appeal because they'll say, oh, I kind of like this person. I think I want to sell to them. So that's a good one. Another is simply to remind the seller of all the great things they can do with the money from the sale. Now that one's not very hard for you to sell because they're already thinking about that for the minute you say, I might want to buy your property, they're already kind of spending that money. They're saying, let's see, if I sold this storage facility, I'm gonna go buy a big yacht and I am just going to float around in that thing and maybe just quit my day job and sail around the world. Or they may think, well, you know, if I sell that, I'll put a bunch of money in the bank. I'll take some fancier trips and I'll buy a better car.
And the next person may think, well, if I get this thing sold, I'll have a lot more free time. So instead of managing the old storage property, I think I'll just go fishing. Whatever it is that turns the seller on, they will happily start spending the money in their mind. And you don't have to really push it much on that frontier to get some movement. So that's another good way to appeal to the emotions. And then finally, if you're very, very enthusiastic about buying it, typically they like that a lot because it makes them feel good, like what they spent their life building is valued by somebody else. And so that makes them again, emotionally say, you know, I think I like this person. I'm going to sell this thing to this person. Because you know what, they just seem a lot more fun to be around. And they seem to have the grit and determination to maybe get the loan and get the thing closed.
So that's the emotional part of it. But then we also have to look at the rationalization part of it because they'll have to explain to everyone why they sold that self storage facility. And they can't say, well, I sold it because I basically want to go and buy a yacht, that's not going to cut it maybe with their spouse or their business partners. So a lot of times when you're trying to buy the self storage facility, other than appealing to those emotional items, a lot of which they do themselves by how they mainly want to spend the money. But you have to go ahead and help reinforce the rational reasons that they can then tell spouses and partners and their trusted experts of a CPA, maybe an attorney, as to why they are selling.
So what would be some of those good rational reasons why they might want to sell? Well, the first one is that they're getting a great price, so keep reinforcing to them. Yeah, you know, I've run the numbers and this is about as high as it could be sold. This is a really good deal for you, particularly when you start identifying the problems with the property, paving issues, other issues with the structure itself, reinforcing with the man, you're getting top dollar price based on this condition. That's a good one to sell everybody on. Hey, hey, Mr. Partner, here's the deal. We're selling the facility because I'm getting a great price. It's a super great deal for us.
Another rational reason right now would be that you're still falling under among the lowest capital gains tax in American history. And yes, I'm aware that Trump won the election, but you can't get anything done without congressional approval. And that's what scares all of us because even though Trump has a large mandate when all the swing states still, you got the filibuster issue in the Senate and it's a crazy pile of grouping going on, you know, in all of our congressional and Senate seats anymore. So can they get the job done and get those capital gains taxes extended? I don't know. Nobody really knows. We all hope so. And that's again, a motivating factor to some sellers. You can say, look, you sure are lucky getting this thing sold before the capital gains tax ends because it does truly end in the not too distant future. And so that's a very good rational reason. You can go back to your spouse and say, yeah, I think we better sell the storage facility right now because I'm kind of worried the capital gains tax is going to expire and then we'll pay in a huge additional amount in tax. That's a very, very reasonable item.
And then you have the regular risk of weather events that all property owners face today. We've seen such a bunch of terrible things happen from coast to coast. On one coast, the horrific fires in Los Angeles area, on the east coast, you've got all the terrible flooding in North Carolina and Florida from most recent hurricane and those can infect self storage facilities. I'm sure there were a number that were wiped out back down there in North Carolina and as a result, I'm sure there are people who think, man, I wish I had sold that before that storm hit. So that's another good rational reason that someone might want to sell.
And then if they're carrying the paper on the deal, and people often will carry paper on a self storage facility sale, they're going to look at that and you can rationalize that they're going to get a superior monthly income compared to the existing CD rates if they go ahead and sell. So again, that's another good rational reason why they might want to sell is they say, oh well, you know, I'm going to go ahead and get much more a month than I would get if I waited around. And you can also throw on that CD rates are going down, which they are, yet you'll pay them a nice meaty 5% or 6% of interest locked on for X number of years, hopefully at least 10. And that may again be a big motivating factor to them.
The bottom line to it all, it's a one, two punch when you're trying to really get people over the finish line on selling their storage facility, you've got the emotional side, that's what really triggers them to do it. That's the real driver. Visualizing their life in a post sale world, that's what really turns them on a whole lot. But that's not going to do you any good. If they can't then rationalize the decision to others. Without those good rational points, then they may be too embarrassed to go forward with what they want to do emotionally.
And don't, for a minute, think that they know these points, they don't. Many of them need reinforcement because they want to have things to sell spouses and partners and their qualified experts on this concept beyond the emotional, when the emotional is really all they care about. If you keep reinforcing with them what a great deal they're getting and that they're getting out ahead of capital gains tax, getting out ahead of weather events, if they're carrying paper, superior rate of return, those are the kind of things that they can go and tell others and rationalize why they did it. So if you're trying to get a storage facility deal done, don't forget you have to hit both the emotional and the rational. This is Frank Rolfe, the Self Storage University Podcast. Hope you enjoyed this. Talk to you again soon.