Has anyone had any luck with obtaining bank financing on a storage facility in which there are no financials? The seller can provide rent rolls, but not traditional financials. Tax returns are useless as well because the seller lumps multiple investments into an LLC for tax purposes. The facility has historically ran at a high occupancy (around 90%) with 111 units. Thanks in advance.
* Self Storage* Not certain how to edit the title.
I once purchased a facility from a court order auction with 0% occupancy and there were no financials. The bank who financed the deal, did an "AS IS" appraisal which covered the purchase price.
The Farmers National Bank - Smaller regional bank in North East Ohio
As I've learned, for self storage, expenses with management company is about 40%. What year built?
Built in 2008.
@Allen Hudson Call smaller/local lenders. Ideally banks near the property. I don’t foresee it being a huge issue.
An appraiser doesn’t look at tax returns.
I would try banks that specialize in self-storage: https://www.selfstorage.org/Events-Education/Virtual-Trade-Show (click financing in the dropdown). Live Oak and Jernigan Capital are two I've spoken with in the past.
Talk with a small local bank, especially the one the seller banks with. They will want to
keep the business if they are familiar with it.
We just purchased our sixth property, five of which we were able to negotiate seller financing. This allows you time to get the financials where they need to be and make it easily financible for any lender. Another way to do it is look for SBA financing and have a solid business plan in place. This usually requires you to have some experience or an advisor that is experienced in self storage.
Similar to what @Mark Byrge said, might be an opportunity to try and negotiate seller financing or a lease option to give you time to sort out the financials.
"I can't take these to a bank to get traditional financing? They'll want to value the property based on the income and the underwriters will want to see expenses and income statements, probably from a tax return."
It amazes me the number of mom and pop self storage owners who will step over dollars to pick up pennies when it comes to reporting income to the IRS. "Congratulations, you cheated the IRS out of $100,000 in taxes over the last 25 years of ownership and yourself out of $1,000,000 in valuation when it came time to sell."
@Allen Hudson what is the purchase price? There may be ways to get it financed.