The Greatest Solution for Monetizing Unused Space: Neighbor

Today’s guest is Joseph Woodbury.

 

Joseph Woodbury, Founder and CEO of Neighbor.com, is redefining the $500 billion self-storage landscape by empowering individuals and businesses to monetize their unused space and generate tens of thousands of dollars a month in passive income.

 

Show summary: 

In this episode Joseph Woodbury explains how Neighbors started as a manual process and evolved into a software company that builds trust in the shared economy. Woodbury highlights the various customer groups that benefit from their platform, including homeowners, small businesses, and large real estate portfolios. He also shares the story behind acquiring the domain name "neighbor" and how Neighbors stands out as the first hyper-local marketplace.

 

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Intro (00:00:00)

The early days of Neighbors (00:01:14)

Scaling the business through automation (00:03:08)

The $300 Monthly Increase (00:09:43)

Investing in Neighbor Properties (00:09:43)

Small Businesses and Ancillary Income (00:10:54)

Acquiring the rights to Neighbor (00:20:50)

The significance of the Neighbor brand (00:22:05)

How to get in touch with Neighbor (00:23:25)

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Connect with Joseph:

Web: https://www.neighbor.com/

 

FB: https://www.facebook.com/storewithneighbor/

 

IG: @tryneighbor

 

TW: @neighborstorage

 

LI: https://www.linkedin.com/company/neighbor

 

LI: https://www.linkedin.com/in/josephwoodbury/

 

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 → [email protected]

 

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:

Joseph Woodbury (00:00:00) - This space is sitting there totally unused. Whether they're a small business or a homeowner, or even a large commercial office. They're not earning any money off of this space. So we can go to them and say, look, this is an ancillary revenue opportunity. You could earn meaningful cash every single month. Let's post your space.

 

Intro (00:00:19) - Welcome to the How to Scale Commercial Real Estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.

 

Sam Wilson (00:00:32) - Joseph Woodbury is the founder and CEO of neighbors. They are redefining the $500 billion self-storage landscape by empowering individuals and businesses to monetize their unused space and generate tens of thousands of dollars a month in passive income. Joseph, welcome to the show.

 

Joseph Woodbury (00:00:49) - Hey, thanks for having me.

 

Sam Wilson (00:00:51) - Absolutely. The pleasure is mine, Joseph. There's so many questions I have as we looked at. If you're listening, if you've not checked out, neighbor, go check it out. But as I even looked at your website, I'm like, oh man, this is going to be a fun episode and I'm really looking forward to this before.

 

Sam Wilson (00:01:05) - But before we jump in, there are three questions I ask every guest who comes on the show in 90s or less. Can you tell me where did you start? Where are you now and how did you get there?

 

Joseph Woodbury (00:01:14) - Yeah. So we started from having the problem ourselves. My co-founder needed a storage unit and had the same experience. I think most people have where, you know, all the facilities close by were full and they were expensive. So he found a friend that let him store in his garage. And four months later, when he picks his items up, he just thought this was such a better experience. I saved a bunch of money. I felt a lot more, you know, security, having it in a nice neighborhood than in a dirty storage facility. There's got to be empty space in every neighborhood in the country. Why doesn't someone create a directory or a marketplace where you can go find it? So we started working on it. It turns out a lot of people have the same problem, and now we're the only storage provider in the country that offers storage in all 50 states.

 

Sam Wilson (00:01:58) - Wow. And that's really cool. I mean, so you say you're the only storage provider and yes, you are providing storage, but what you guys have built really is, is a software company more than necessarily storage, is that right?

 

Joseph Woodbury (00:02:12) - Yeah, that's a great point. And that's something we talk about internally is actually our hosts. They're the ones running a business and renting storage. Our business is trust. That's what we sell.

 

Sam Wilson (00:02:25) - Got it. Yeah. And it goes back to the shared economy sort of idea between Airbnb to Uber to whatever it is. I mean, all of these different. Services like what you guys have built. It's just this happens to be in the storage space. Well, tell me about it. I mean, how do you go from. All right. Cool. Hey, you know, I want to store stuff in my buddy's buddy space. And then I think that was an easy deal to. Now you own a full fledged website. I mean, you even had to buy the domain neighbor, which I want to hear.

 

Sam Wilson (00:02:56) - How in the world you secured the rights to that one? Because I'm sure that was an inexpensive purchase. But, you know, how did you go about turning this from just a, hey, great experience into the business that it is today?

 

Joseph Woodbury (00:03:08) - Well, you know, like a lot of businesses, we started with a super manual process. Those that wanted to use our service, we literally would call them and ask them how much they wanted to rent their space for, and we would connect them with renters who we called as well and ask what they were willing to store. And over time, as we got more customers, that became non scalable. So then we had to build in software processes. We built a, you know, a map where they could find each other and and know what the price is day one. And they could book it all without ever talking to us. We built full payment systems in place. We built all sorts of trust and identity verification systems. We, you know, took over all of the customer support between the two so they don't have to worry about dealing with anything.

 

Joseph Woodbury (00:03:56) - We're happy to to help facilitate any conversations they need to have. We actually built a full messaging platform where they could easily talk back and forth without ever having to leave our platform. And so just over time, what I'd say is we took things that we were doing. With humans, and we automated them through software. And that's how it's scaled nationwide. Yeah.

 

Sam Wilson (00:04:17) - No, I love that. I mean, so in the early days, you guys were manually calling potential hosts and manually calling potential people to rent that space and seeing if you could pair them up with the right spot.

 

Joseph Woodbury (00:04:31) - Yeah, yeah. In the very early days when we were only focused on homeowners and residential, before we moved into commercial, we were processing payments through Venmo. The renter would Venmo us and we would Venmo out the host. And and that's how it worked. And and of course, now we use major payment providers. We use the same payment provider that Amazon does to process payments.

 

Sam Wilson (00:04:55) - Sure, sure. Wow. At what point in time or what at what point in time did you know you were on to something? And maybe if you maybe if the answer to that is day one, was there ever a point in in building this business that you're like.

 

Sam Wilson (00:05:07) - Man, this isn't going to work.

 

Joseph Woodbury (00:05:11) - Yeah.

 

Joseph Woodbury (00:05:12) - Definitely. Marketplaces in general are very difficult businesses to get off the ground because unlike every other business where you have one customer in a marketplace, you have two customers. And if you can imagine a city, I think you said you're in Memphis. If you've got a host on one side of Memphis and a renter on the other side of Memphis, those don't work for each other. And so a host has no reason to join the platform if there's no renters, and a renter has no reason to join the platform if there's no host. So how do you ever even get that started? And in launching new markets, there was always this thought of, how are we ever going to get these, these people to trust us and join our platform with no promise of any success until we can get critical mass, and then the platform really starts moving.

 

Sam Wilson (00:06:07) - Right? How did you do that?

 

Joseph Woodbury (00:06:10) - I mean, we, you know, we go after the hosts first in these markets because the hosts, this space is sitting there totally unused, whether they're a small business or a homeowner or even a large commercial office.

 

Joseph Woodbury (00:06:25) - They're not earning any money off of this space. So we can go to them and say, look, this is an ancillary revenue opportunity. You could earn meaningful cash every single month. Let's post your space. It may be a while before you get your first reservation. And then we start driving the renters to their space, and then the flywheel starts and later hosts that we acquire in the market. We don't have to tell them that, because we know they're going to get booked very quickly, because consumers have found out in that market that we're the best, cheapest, safest, closest storage option in their city.

 

Sam Wilson (00:06:58) - When you enter a new market, what is that ramp up period or what? Have you seen it historically? Maybe you're over that hump where you don't have to worry about it as much anymore.

 

Joseph Woodbury (00:07:07) - Yeah, we we are pretty much in the early days, we would launch markets individually where we had a market launcher and a GM in the market, very similar to how Uber launched City to City.

 

Joseph Woodbury (00:07:21) - And we did a lot of kind of guerrilla marketing in the city, you know, just getting the word out flyers, door mailers, events, things like that. And we were able to continually accelerate that process. We got to a point, kind of, as you hinted at, where we became well known enough that we stopped launching individual markets and we just pursue a nationwide strategy right now. So we do we do large marketing campaigns across the country, and we actually have a lot of word of mouth on the platform as well. It turns out if you're a small business and you're in $50,000 a year on neighbor, you're probably going to tell your friends about.

 

Sam Wilson (00:08:02) - It, probably going to tell your friends. Absolutely. You're going to tell your friends about it. How long ago was it that you guys launched NBA.com.

 

Joseph Woodbury (00:08:10) - We launched in 2017. So that's what 5 or 6 years ago.

 

Sam Wilson (00:08:14) - 5 or 6 years ago. And now you're in all 50 states, which that's I think that's that's fantastic. And I mean let's talk a little bit about just the opportunity, I think I think we all get the idea of maybe an unused driveway or something like that where it's like, okay, so somebody wants to maybe it's not covered, but they can park a boat, they can park an RV, something along those lines.

 

Sam Wilson (00:08:34) - But your business has gone way beyond that, I would imagine. So break down some of the other kind of ancillary revenue streams that you guys have figured out in this business. And yeah, just just give us some color on that if you can.

 

Joseph Woodbury (00:08:47) - Yeah, yeah. I think we have kind of four different types of customers. There's the residential hosts that you talked about renting out a garage, an RV pad, a bedroom, and we'll put someone's boat or someone's boxes from your neighborhood mean it's very close proximity in your space. And you may earn 200, $500 a month. You're earning several thousand dollars a year. Then the second would be real estate investors. These are individuals that buy rental properties. They're kind of investing locally. Maybe they have ten, 15 rental properties, and they're kind of capped on how much they can make mean they can increase the rents at the end of the contract each year, but that's about their ability to increase prices. If you think about a property, you know, in Salt Lake, if you own a townhome, you may make the mortgage is $2,000 a month and you make 2300 a month and rent off of that.

 

Joseph Woodbury (00:09:43) - Your delta is $300 a month. So if you can earn an additional $300 a month on each property through neighbor, you've now doubled your net returns on every single property. So it's really meaningful for those guys. In addition, some of them start even investing just in neighbor properties. I'll use another Salt Lake example. $500,000 would buy you roughly a townhome here. Um, and you maybe make 2530 K in rents off of that a year if you did it for short term rentals instead, like Airbnb, you can maybe earn 40 K a year off that property. If you instead took that $500,000 and bought an empty lot, that would get you about an acre and a half to two acre lot here. That would earn you $100,000 a year on neighbor. So we're talking meaningfully more returns. So we get some investors. They just start acquiring neighbor properties. That's the second group. The third group is going to be small businesses, gyms, nail salons, uh, where they're they've got space inside in the back they're not using.

 

Joseph Woodbury (00:10:54) - They would love to rent that out to another business to small store their business inventory. It's closer anyway. They've got parking spaces that the city required them to build, but no one ever parks in them, and half of them are in the back of the store. They love to rent those out for long term vehicle or even fleet storage and and they can earn, like I said, you know, we've got a gym in LA that earns $50,000 a year just renting out space around their gym. That's game changing for that small business owner. And then the final category would be large real estate portfolios, large multifamily groups, large retail groups, large office groups. We work with most of the large most of the billion dollar retail REITs in the country. We work with the largest owner of multifamily in the country. And similarly, we'll go to them and we'll say, hey, you've got properties in 50 cities. Give us the 10% of your spaces that never rent out. You've they've all got those two retail pads in the back that no one wants, or that office space on the ground floor that no one wants, or those storage lockers you built in your multifamily unit for the residents, but they never rent them.

 

Joseph Woodbury (00:12:08) - And so we can rent them out to the community. And then all three office, they've got empty parking garages because no one's coming to the office multifamily. They've got space around their building that the city required them to build. And for a large portfolio that can result in millions of dollars in ancillary income, which is a game changer to your IRR.

 

Sam Wilson (00:12:30) - What are people doing? Let's go back to your $100,000 on two acres in Salt Lake City example. What are they doing with that to drive that amount of revenue on a two acre parcel that's on a vacant two acre parcel? What? What are they doing?

 

Joseph Woodbury (00:12:47) - Almost nothing. So they've got to sometimes make improvements like if it's a if it's just a dirt lot, then we'll recommend putting down gravel or even asphalt, which is fairly cheap. We're talking a dollar to a square foot. We also recommend putting up a fence around the perimeter that's not required. We have we have literally empty dirt lots that are fully occupied because there's such a demand for vehicle storage.

 

Joseph Woodbury (00:13:12) - There's we get millions of renters a year on our platform that we are unable to service because there's not enough space for them in their location.

 

Sam Wilson (00:13:22) - I mean, are they storing what types of vehicles are getting stored? I mean, is this all tractor trailer storage? Is this I mean, what's that?

 

Joseph Woodbury (00:13:30) - It completely depends on the market and it also depends on the host. So some hosts are very particular about what types of vehicles they want to store. And so they can select on our platform. They can say I only want RVs and boats or I'm in a downtown area, I want only cars. Or, you know, I like dealing with the fleet guys because they're bigger. I only want the semi trucks or the box trucks. Most hosts though, they just want to earn as much money as possible. It's an empty lot. So what we fill it up with is first come, first serve. We're just renting out their spaces for the highest price possible and getting their lot full as fast as possible.

 

Sam Wilson (00:14:09) - That's kind of wild. Yeah. I mean, and that would go again. I'm going back to the to the, to the vacant lot idea. Like you would think that you would have to have dedicated tractor trailer parking or dedicated box truck parking or dedicated. But it sounds like you're saying you fill it up and then figure out what you're going to put in there and how you're going to.

 

Joseph Woodbury (00:14:27) - We actually have this really cool tool that we built for these people. We call it blueprint. You can go on our website and you can put in your address and some specs about it, and we will actually pull up a satellite view of the lot. And we have a tool that allows you to drag out parking stalls and select the length of those parking stalls, so you can put some ten by 50 over here. For large tractor trailers, you can put some ten by 20 over here. For cars you can put some ten by 30 for for like camper trailers and boats. And our system will automatically tell you what you should price each space at.

 

Joseph Woodbury (00:15:09) - And it'll sum it up and we'll say here's how much you can expect to earn on this total lot. And then you can push publish on that. And we will literally take what you what you designed through our blueprint tool, and we'll just publish all those spaces for you so you don't have to do anything.

 

Sam Wilson (00:15:27) - Oh, that's really, really cool. Do you have a background in software or tech? I mean, is this is this just second nature to you or how did you guys how have you successfully scaled all of these different aspects of your business?

 

Joseph Woodbury (00:15:43) - Yeah, I have absolutely no background. You know, my backgrounds and, you know, a little bit of an investment banking and private equity. And then ultimately I worked for a consulting firm called Bain and Company. So, you know, boring professional services. Super grateful to our, you know, the engineering team, the software engineering team that we've built out. You know, our VP of engineering. He was long time, worked for Microsoft for a decade plus, ran the largest genealogy organization in the country website, worked for the largest edtech company in the country.

 

Joseph Woodbury (00:16:21) - So he understands software like the back of his hand. And that's how we've been able to build the really cool software that we have.

 

Sam Wilson (00:16:29) - Man, that's awesome. That's very, very cool. I love what you're doing. What are some applications or some problems you guys are solving that I haven't thought about yet?

 

Joseph Woodbury (00:16:40) - I mean, just generally I kind of touched on this, but a lot of, a lot of real estate industries are seeing decline right now. Office is is really in a world of hurt, especially with term loans starting to come due. You're you're literally getting a lot of these office buildings just handed over to the bank right now. Retail is kind of in a longer term trend. With the advent of e-commerce. It's put a lot of pressure on retail over the last ten years. Storage however, is this very stable non cyclical industry zero eight recession when all of real estate collapsed by 60 to 80%. Storage grew by 5%. I mean it is it's had a 15% kegger for 30 years.

 

Joseph Woodbury (00:17:27) - And so demand consistently outpaces supply. So it's got the highest occupancy rate of any real estate asset class. 95% is the nationwide average right now. And if you're 95% occupied, you should be building more. I mean, there's money left on the table. We spend about $5 billion a year just on new construction of storage in the United States. And it's still not enough. The occupancy rate still keeps going up, even with $5 billion in capital deployed every year for new builds. Here's a here's a crazy one for you because. Our brains aren't very good at understanding billions and all of that. But we have now built and I'm not talking neighbor. I'm talking the industry we've now built in the US more storage facilities than we have McDonald's, Starbucks, Dunkin Donuts, Burger King's, Wendy's, Domino's, Walmarts, Home Depots and Costcos combined. Wow.

 

Sam Wilson (00:18:28) - That's crazy. That's crazy. And we're. And you're telling me that there's there's still more demand, but obviously you guys are filling this. And would you what's the ratio? Let me ask you that because I was going to say, obviously you're filling this with a lot of vehicle storage it sounds like.

 

Sam Wilson (00:18:43) - But what's the ratio from good storage to vehicle storage to the other things that you guys are storing, like how do those percentages break down on the whole?

 

Joseph Woodbury (00:18:53) - Yeah, that's a good question. I don't have the exact percentages handy. It's definitely going to vary by market. So like in a in a New York you're going to see a lot of demand for goods storage. I mean there's just not enough space in a more rural market. You're going to see more demand for vehicle storage because you tend to have more space in homes for items, but you still just don't have room for those vehicles or those toys that you buy. Um, I'll tell you a crazy story. Again, we work with a lot of these large, very professional, pristine spaces where we'll actually build out units in the space. At the same time, we also work with some very unique spaces. I saw a listing the other day. This woman has a studio apartment in New York City and downtown Manhattan, and she listed her closet for rent, and she listed the space under her bed for rent.

 

Joseph Woodbury (00:19:54) - And she listed like a spot in the corner. And all three of her listings are completely booked. That's how that's how crazy the the demand is in downtown Manhattan, because the storage companies, they can't build space there. There's no way.

 

Sam Wilson (00:20:14) - That's hysterical. That's mean. You're renting the storage under your bed. Who would have thought? Who would have thought? Man, that's wild. I love what you've put together here, Joseph. This is really cool. I guess my last question here for you is acquiring the rights. I mean, you guys have you guys have clearly spent a lot of money and a lot of time building the product that you have. I know this this required a lot of upfront both time and money investment. But how in the world did you guys secure the rights to neighbor? That seems like a tough one to to have come across here in the last, I guess seven years or six years even.

 

Joseph Woodbury (00:20:50) - Yeah, it it took us a bit after we started the, the domain was owned by a guy who had owned it since 1997.

 

Joseph Woodbury (00:21:00) - So a long time I mean, over what is that? Over 20 years he'd owned it and he'd never done anything with it. He literally just been sitting on it for 20 years. This amazing domain. We reached out a few times, wasn't willing to talk. We reached out again. And finally, you know, he gave us a price that was just absolutely so high. And were these these recent, you know, founders that have, you know, we've raised a small seed round at that point. And so we just had to walk away. We just kept reaching out every 3 to 6 months. And finally he said, you know what, here's a reasonable price. And we got to terms. And he was willing to meet us, and we were willing to meet him, and we acquired it. And it's amazing. I mean, it just really speaks to our brand. We've we've been called neighbor even before we got the domain. That's what we've been from day one. And that's because we view our platform as connecting people who are close to each other.

 

Joseph Woodbury (00:22:05) - We're the first hyper local marketplace. You know, you stay in an Airbnb in another city. You're probably never going to talk to that host again. You use an Uber, you're probably never going to talk to your driver again. But neighbor, we're connecting people that live two doors down from each other to do storage, or small businesses that are literally in the same office park, but one doesn't have enough space and the other does. And now they're connected. And I mean, you talk about opportunity, some of these small businesses that rent out to the community, it's a great way to get to to help people become aware of their business. You go, you've never heard of this small business and then you rent their space on neighbor. You go store your stuff and then you're walking through and you're like, oh, this is a cool business. And then you become a customer of that business. We love the concept of community and bringing people together that way.

 

Sam Wilson (00:22:56) - That's cool man. Great story. On how you guys acquired the the domain there.

 

Sam Wilson (00:22:59) - I'm always curious how that how that works out. There's a few in my back pocket that I've been trying to get for a while, and just haven't seemed to figure out the the secret sauce yet. So for those of you who are listening, that that can be a very challenging and very expensive process. So I'm very, very glad you guys were able to find NBA.com. And I guess that is the last question I always have for guests to come on the show. Joseph, if our listeners want to get in touch with you and learn more about your business, what is the best way to do that?

 

Joseph Woodbury (00:23:25) - Yeah, we've tried to make it as easy as possible. So as mentioned, we're not hard to find. If you go to the App Store or the Google Play Store or the Apple App Store, where the number one ranked storage app. So just type in storage or neighbor or RV storage or boat storage, whatever will come up first on our website. On our homepage, you'll notice there's a spot for residential where you can easily go access our residential.

 

Joseph Woodbury (00:23:51) - If you scroll down further on the page, there's a neighbor for business section. So if you're a larger business, especially a major real estate portfolio, you can apply there. And we'll actually have set you up with more of an account management solution where we'll help you onboard lots of space. All the residential stuff is very easy. Self serve if you own a lot. Like I mentioned we have this blueprint tool that's it's all self serve. You never have to talk to us. It will help you lay out your space and design it. It takes about ten minutes and then you know you're on your way to make an 20, 30, 40, $50,000 a year or more off of this space.

 

Sam Wilson (00:24:28) - That's fantastic. Joseph, thank you again for your time today. Certainly appreciate it. It was great to have you on the show.

 

Joseph Woodbury (00:24:34) - Yeah. Thanks to you as well.

 

Sam Wilson (00:24:35) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast. 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.

 

Sam Wilson (00:24:48) - 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.