191. THIS is The Most Practical Passive Income Strategy

0:00Have you ever wondered how your unused garage or spare bedroom could turn into a steady stream of income? What if you could tap into a$40 billion industry without owning a single storage unit? We started this company in college, and it has become the only storage company in all 50 states. Passive income is totally possible if you just have the property. This is Ryan Atkinson, and you're listening to Help the Podcast, where we uncover the groundbreaking business ideas and the entrepreneurs behind them. Today, we're joined by Joseph Woodbury, the co-founder and CEO of neighbor.com, a unique platform that's disrupting the self-service industry by connecting people with extra space to those who need it.

0:37Joseph and his team began developing the Airbnb of self-storage when he was a college senior. I'm super excited to talk about that today. And he's here to share his secrets to creating a business that not only solves a problem, but creates passive income for you. Joseph, thank you so much for the opportunity today. So, so excited to have you on here. Yeah, thanks for having me on. It's going to be a great one. And as I alluded in that intro, Neighbor.com started in your college days. So let's kind of rewind the clock here. Let's go back to those college days. How did the idea for Neighbor.com first come about?

1:04Tell us more about Neighbor.com as a whole. Sure, yeah. I mean, it was, as you can imagine, a crazy time. It was actually my co-founder that came up with the idea for Neighbor. He and his wife had just gotten married. And about a week after they got married, they flew down to South America to work for this humanitarian org. And as you can imagine, they need a place to put their items while they're gone. And so he starts calling storage facilities. Can't find one that has any openings. He's going to have to drive to another town and pay a lot of money. So he starts calling around to his friends, family, and he finds a friend that's willing to let him store his items in his garage for the summer.

1:40Fast forward, you know, four months later, they get back from South America and he goes to pick his items up. And he's just having this thought of 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. 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 space where you can go find that? So, you know, that's where the idea came from. He looped me in. I had just gotten back. I'd worked for a consulting firm that summer.

2:16I was totally planning on doing the management consulting thing, just accepted a full-time job. Got back for my senior year expecting to have fun and kind of just, you know, I had a job lined up and everything. And Preston, my co-founder, told me about this idea. And I was like, this is amazing. How has someone not done this before? We start working on it. And, you know, fast forward, what is it, seven, eight years later? And we have users in every city in the country. Dude, that is so, so cool. I want to ask about like doing this then your senior year, because obviously, you know, you have a job offer.

2:51You're good to go, man. Like let the partying happen. But this neighbors comes up essentially. I'm curious, what did you guys do senior year to set you guys up for success? Like talk to us about that. Well, initially it started as a side project. We set up a platform where people could list space, mostly working with college students and homes that were around this university town. And it was really scrappy. We were knocking doors, putting flyers on doors, telling people they could make a little extra income by renting out their garage or bedroom or driveway. way. And then we were putting up ads for students who wanted to store their items for the summer.

3:28And that got us so far. And we built out this little website framework. We couldn't even process payments. We were using our own personal Venmos to do the payments. And eventually our Venmos got shut down because you're not supposed to do that. And we got locked out. And so then we had to build payments into the platform. And it just started snowballing to where the last semester we looked at each other and we said, okay, this is a real thing. People are really enjoying using this. Do we go all in? And so we both called our jobs and said, Hey, we're not going to show up. We're doing this startup thing.

4:05Well, talk to us about like those feelings. Cause I'm sure, you know, that's one call to call a recruiter. It's kind of whatever, but it's a whole nother thing to like tell your parents, your family partners at the time, like, Hey, like I'm not going to go into management consulting. I'm actually going to try out this startup thing. Take us to that time. And like this feelings you're having, I'd love to uncover that as well. Sure, yeah. So the firm I'd accepted a job at was called Bain & Company. Oh, wow. I was supposed to start in July, and I called them, I think, in April of that year. And I called them my partner, and I was wondering how they were going to take it.

4:37The business school where I was at at my university wasn't super happy. They were like, you're going to ruin our reputation with Bain by reneging on your offer. And so I called them up, and my partner at Bain, I said, hey, I'm going to do this startup. and he told me, he said, you know, I think it's a great decision. When I was starting at Bain, he said, my friends started this little cooler company and they asked me to come be the COO. And I told them no. And I said, no, I've got to do Bain. It's the best job in the world. And he said, I've always kind of regretted turning them down because that cooler company is called Yeti Coolers.

5:11So that was a fun story to hear from my partner in Bain. And then, yeah, family was awesome interesting. My wife and I had an eight-month-old that we had while we were in school. So family and doing a startup with no income is definitely daunting, but she was super supportive and for some reason was on board with all this. Oh, that's so funny. I mean, going back to that, because when you're a senior in college, you're like 21, 22, something like that. I mean, looking back, did you think you underestimated or overestimated the risk of actually launching into this full-time? Oh, definitely, definitely underestimated.

5:45I saw a quote the other day that said, we didn't do this because it was easy, but because we thought it would be easy. That's very much the case. You just don't know how hard a startup is going to be. It's one of the hardest things you can do, but also, of course, one of the highest growth, you know, just personal growth things that you could do. Yeah, that's what I think is like so cool about starting your own company. And like, even talking from experience here, like once you start your own company, it like truly is that like journey of like personal development. Like every day you are growing, every day you're overcoming a challenge.

6:20That's why I think like startups, like if you want to really grow personally, start a company. You never really know what you're going to get out as you mentioned there as well. Yeah, you'll find your weaknesses fast. That is so, so true. Starting a startup, it can be a lot of sweat equity to begin. And like, as you said earlier, like you guys were literally knocking on doors to promote your platform. Like walk us through those first months. What was the most surprising response you got from a potential host or renter? We'd love to hear that feedback early on as you're a senior grinding your way through this.

6:49Yeah. I mean, honestly, the biggest surprise for us was that people were even interested in doing this. We kind of thought, oh, this is a cool idea. But to see people actually engage and start to do it was a surprise every single time, especially because as a marketplace, it's unlike any other business where if I invent a new water bottle or whatever, I can stock up on those water bottles and then sell them. And it's a fairly straightforward process if I can find people that want to buy those water bottles. But in a marketplace, when you have no hosts, when you have no people with property, there's really no reason for renters to come onto your platform because the likelihood of them finding something, you know, it doesn't do them any good if they're a renter in Los Angeles and you have a host in San Diego.

7:36They can't pair. And likewise, it doesn't do the hosts any good to list on your platform. If there's no renters coming, they want to be able to earn money quickly. And so there's this severe chicken and egg problem. So it was just surprising to see these early adopters come on that were willing to list their space and be very patient until we brought them a renter. And these renters that were willing to say, hey, I have a need, I need storage. I'd like to get it cheaper than I can at a storage facility. I'm willing to wait as you find the space for me. Of course, that's not a problem today. We have hosts all over the country, but kickstarting that was really hard.

8:16And those early adopters are massive surprise. Yeah, I think that is what's so important about building like a marketplace. I was just reading Hangry by Mike Evans, who's the founder of Grubhub. And he was explaining like, you know, you have to have demand for both sides, essentially, like for his example, you need to get the restaurants and you need to get people that want delivery quick. Was that like one of the biggest challenges for you guys early on was getting demand from both places and getting people on the platform early on? Absolutely. It still is. We're the only storage company in the world that operates in all 50 states at this point.

8:48And we really operate every city. And even still, we have millions of renters that come to our website every year that we do not service because because we don't have enough supply to match them in their area. So that problem just never goes away. It gets better. And there's this network effect that kicks in where the more hosts you get, the more satisfied your renters are because they find cheaper prices closer to them. And then the more renters you bring on, the more satisfied your hosts are because they're earning way more money. You know, we have hosts that earn seven figures on our platform today.

9:24in addition to the hosts that are earning$200 a month and everything in between. And so that creates a really happy host base. And of course, when they're happy, they're going to go tell their friends about it and say, hey, I'm earning$30K a year on Neighbor. I'm going to do this too. So there's a snowball effect, but even still, it's a problem. Yeah. Well, Joseph, you segue us into our next segment that I want to talk about, and that is actually building passive income on Neighbor.com. So let's talk a little bit more. First, we're going to share numbers here. Listeners, stay tuned on like how what you could potentially make here.

9:57But how does your platform work from both the host and like renter perspective? Talk to us about like, what are really like those renters looking for? What are the host providing? Talk to us about that just so people can start spinning in their head. Yeah, so at its core, neighbor's a storage and parking platform. So renters will come on, they're looking to store, you know, maybe a boat or an RV or a car or some furniture or some items. And they're gonna search, they're gonna tell us what they're looking to store. We're gonna show them options close by to them. And the options on our platform, there's a lot of variety.

10:29So this could be the garage that's two doors down from them. They may not even know that their neighbor is renting out space on our platform. We also work with small businesses. So this could be the gym or the nail salon downtown where they can store their items in the parking lot or in the back. This could be a large commercial property like a big office parking garage or a hotel parking garage where we've worked out an agreement where they could store their car long term or do monthly parking through our website. So it's all types of space. And then for the host, we try to be a full service platform.

11:07Our mantra is passive income. We feel like a lot of the marketplaces are not really passive income. If you want to earn money on Uber or DoorDash, you've got to drive around. Even Airbnb, there's this constant, you know, the customer stays for two days and then you got to clean up after them and there's a lot of management involved. And so for the host, we do everything. You list your space, but we bring you the renter. We take care of that renter. We collect the payments. We help get the renter out if you ever need the space back. Everything in between, we provide the insurance so that you can just collect a direct deposit into your bank account every month for renting out your passive real estate.

11:44You guys make it so simple. And that's what I like love about what you guys are offering here. And speaking about direct deposits, people care a lot here about numbers. So can you share some numbers with us? What kind of income potential are hosting on your platform? Yeah, so I'll talk about three different host types. The first is just your average residential that just wants to do this with their home. I actually do this. At my home, I rent out my RV pad. I don't have an RV, but my home has a nice big 50-foot RV pad next to it. And I rent that out to someone to store his camper trailer. And I've stored boats on there before.

12:21It's funny, my neighbors, they'll come up to me and say, hey, I didn't know you had a camper trailer or a boat or whatever I'm bringing at the time. Like, I don't. This is a... So it depends on the market, of course. You know, some markets, like if you're in New York, you could earn$300,$400,$500 a month for that spot. In other more rural markets, you may earn$80,$90,$100 a month for that spot. So we're talking somewhere between, you know, $2 ,000 to$3 ,000 a year for your average residential person that just wants to do this with some space in and around their home. Then we get individuals that have larger properties, which would be the second type.

13:02We sometimes call them power hosts or investor hosts. A good example is we have literally a school teacher on our platform. She's a middle school teacher and she earns$30 ,000 a year on the platform because she's got a large lot next to her home. She rents that out to store multiple vehicles. And so she's pulling in almost as much income from neighbor as she is from her main job, which is pretty awesome. A lot of times people that start with those larger properties, they start to get addicted to the income and maybe invest in that. And so we had a user that started small with us. She runs a lot in Hawaii.

13:41She's now purchased property specifically for neighbor. She's pulling in$120 ,000 a year on neighbor and she just keeps buying, right? When she fills up, she's like, okay, I'm going to go find another property because I make more money on this per dollar invested than I would buying a rental property. That third category is it's just these big businesses. So we work with 10, 20,$30 billion real estate REITs, publicly traded REITs that own properties in every state. And we'll take all of their excess space, whether it's a big multifamily portfolio or a big retail portfolio or a big office portfolio, we'll take all of their excess space and we'll rent it out for storage or parking.

14:25and they can earn millions of dollars in ancillary income. So those are the three types. Oh my gosh, that is so, so crazy. I just wanna ask for perspective. When you guys were originally getting started out with this, you know, seven, eight years ago, was it just like individual homes and like garages or I'm just like curious on that one? Yeah, it was. I mean, that was the vision and it's still, by the way, that is the majority of our revenue. Just comes from normal, everyday, average people renting out space then and around their homes. And we didn't do any of this stuff with businesses until we had scaled that up to all 50 states.

15:01So we got those residential users in every city in the country. We have users in towns that have like 2 ,000 people in them because you're never going to be able to justify building a storage facility in that town. But if someone's got an extra space by their house, people need storage there too. And so they rent that out. So we can justify being in these cities that have 2 ,000 people. Of course, our largest markets are going to be New York, LA, Miami, these big cities. And then around the time of the pandemic, 2020, commercial real estate owners really started looking for ancillary income. Revenue slowed down for them.

15:36They were in real trouble. And so we started getting calls from people saying, hey, we know you're doing this on a pretty wide scale with residential real estate owners. Could we do this? And that's when we said, you know what, that actually fits really nice with our mission, which is to take space rather than build all these storage facilities. Let's just take space that's already been built, that's already sitting empty, and let's use it more efficiently and earn people money and get people storage for cheaper. So that's how that happened. Thank you for breaking down those three. I want to talk specifically about like, you know, the average person, they don't have those commercial real estate lots, like, They just kind of want to do their house or look around.

16:14Let's do an audit of a home. If someone is considering doing neighbor.com, what are questions they should ask themselves about potential renting out options, I guess you can say? Well, first of all, I'd say some spaces are more desirable than others. So hands down, the most valuable space in your home is going to be your garage. It's indoors. It's enclosed. It's very accessible. so you should know that by using that garage space there's an opportunity cost there if you're able to keep one half of your garage open you could be generating thousands of dollars a year that helps pay your mortgage we have really fun use cases like they'll write us in and say hey i have a bank account called vacation and the only thing that goes into it is neighbor and every time neighbor fills it up to two thousand dollars we go on a vacation and then it resets to zero so really fun stuff like that.

17:05Other spaces that are very in high demand are those driveway or RV pad spaces. Sheds are also very desirable spaces on a residential property. We've even had individuals that like fill up one shed and then they're like, oh, a shed only costs me, you know, 800 bucks or a thousand bucks at Costco and they buy another shed. They literally just like put three or four sheds in their backyard to earn more money on neighbor. So that's the first thing I'd say is evaluate the space you've got. What's the most desirable space? So how does the pricing work on the platform? Let's just say I have a shed compared to a garage.

17:41Is it like by square foot? Is it like how many boxes you can put in there? Like how does like the pricing work on the platform? Yeah. So one of the advantages to working with neighbor is we have this really great pricing data because we watch all these transactions happen all over the country. And because we have users that want to accept a diverse amount of prices, we get to see what works in each market. we'll have one user ignore our pricing recommendations and price way higher than we tell them to. And we'll have another user that prices way lower than we tell them to. Our system, you know, it's just kind of a machine learning system gets to watch and see what gets rented.

18:16And so we're constantly refining those pricing recommendations. When you get on the platform, according to your square footage, say you're going to list a 10 by 20 space, we'll tell you for your area and the features that you're offering, you know, is it enclosed? Is it covered? Is it climate controlled? Here's what you should charge that will make you 90 % more likely to be reserved. Going a step further, we encourage most of our users to opt into what we call smart pricing, which is where they just hand over pricing control to us and we'll price the space for them on any given day and make sure they're earning the max amount that they can off the space.

18:55So we offer that as well. Dude, that is so, so cool. I absolutely love what you guys are doing. I'm just thinking about like my own house back home in Iowa. Like I know we have like an extra garage space. I'm going to literally be texting my mom after this saying like, Hey, do I have the platform for you? I want to ask you, obviously there's so many different usage cases with that. As you just said here, I want to ask you what's like the most creative usage case you've seen. I'm sure you guys have seen everything under the sun here. What's one that sticks out to you guys? I want to like really be mindful of listeners about like being creative on how they can do this right.

19:24So some fun residential spaces. is we've seen people list barns on our platform where they have an empty barn they're not using. On the commercial side, we've had churches list their space. You know, it's sitting empty every day, but Sunday. We even had one of the larger church organizations, I want to say it was the Methodist Church or the Lutheran Church, their nationwide organization, like blasted this out to all of their congregations and said, hey, we've got a way for you to pay for your building expenses. I think, you know, in general, churches are seeing kind of a decline in some of the income that they're getting.

20:01And so this can be a great way to keep that local church in their community to pay for the building so that they're able to continue to operate, which we love to see. It's so fun to see. It's really any type of space you can imagine. We've had it listed on the platform. Yeah, I think there's like so many different ways to do this and obviously passive income. Everyone wants passive income and it could speak to others more than others, essentially, what I'm trying to say here. Before we dive into like user demographics and all of that, who's using your platform, how you do all that. I want to ask like, how does someone maximize their space to like get it reserved?

20:34They need to have it be climate controlled. Do they need to have certain floors in there? Like talk to us about like actual setting up a space to maximize revenue on your platform. I'll say two things here. The first is, you know, don't let the space deter you from listing. We have individuals that list unpaved, literally dirt lots on our platform and they get totally filled up. That said, you can earn a lot more money per square foot if you're able to put nice gravel down or even pave the lot. It's not that expensive. Put a fence up around it. You know, it costs like 50 cents a square foot to put a fence around the perimeter of a property.

21:13You're gonna recoup that investment really fast. And if you join and we see you getting rented, we'll often offer some of these tips. you'll get an email from us that says, hey, we recommend you do X, Y, and Z. So the biggest thing I'd say is just get started. See if you're earning money. See if you like it. See if you're enjoying it. Most people get addicted to that at passive income. And the most frequent thing we hear from people is, I got my check last month and I did not do anything. I didn't hear from a printer. I did literally nothing. And on average, we've surveyed our users. the average user is spending about 30 minutes a month maximum on neighbor.

21:57I kind of want to like be silent for a sec to like let that sit into all the listeners. Like that is like literally so amazing. This is such a cool platform. I want to ask, obviously you guys do like a lot of like feedback and everything. Like who does this like primarily serve? Like what are some of your general like user demographics that you guys are seeing? Is it families? Is it single people? I mean like talk just about that. I'm super curious on this. Yeah. So again, I'll just caveat and say it really depends on the area. Of course, yeah. In some markets, we see a lot of RV storage, where in other more urban markets, we see a lot of daily driver.

22:31They just want their car close to them. With that said, broadly speaking, our users tend to skew mail, although we have a hunch that there's actually a pretty even split, but that in many cases, you know, the wife is the one setting it up, but then she tells her husband to get the account in his name just because she wants his picture out there and not hers. But we have some anecdotal data that it's oftentimes a female that's kind of running the operation behind the scenes. Space types vary. So in more suburban markets, we see a lot more of these lots that people are listing where they just own a property that they're not using.

23:10Maybe they just have four acres around their house. Whereas in these urban areas, it's oftentimes a garage stall that they own or a parking spot that they pay for as part of their apartment that they don't use. Maybe they got two parking spaces at their apartment, they don't use one of them. And so they're willing to get the other one up and rent it out to someone from the community. In New York, we do a lot of that self-storage spaces at such a premium there. Just to show you how extreme this gets. We had someone in New York rent out the space underneath their bed, and it's always reserved. Think of how crazy that is.

23:50I can't imagine ever storing my items there, but in Manhattan spaces, it's such a premium. Someone is literally willing to slide their boxes under someone's bed and pay 50 or 100 bucks a month for that. That's so good. Yeah. And one thing that I love about this is a lot of this is the sharing economy. Like that's like what this is like really coming down to. And those trends have been there probably since like the started, essentially, like you guys are truly at like the forefront of this. I want to ask like the sharing economy itself, like how is it reshaping consumer attitude towards like storage, towards doing something like this?