There is a self storage facility for sale near where I live. The facility is right near the interstate. Part of the sale includes and additional 2 acres of land which is right beside the facility. The price is $600,000 for the 1.7 acre facility (60 units) and the 2 acres. I want to buy the facility and land but plan to develop a medium sized hotel. I have developed several over the past few years. The question I have is I don't want to have both the facility and land under one lien since I want to do a separate development. I spoke with the seller and they said they would accept two prices. I would pay $1 for the 2 acres of land and the remaining for the storage facility. This way the land I would own without a lien. Then my goal is to go to a bank and have the land used as equity for a downpayment. Is this possible or will the bank not consider the land since I only payed $1 for it?
I don't think any bank will do this with the land/improvement as the only collateral. They want to see your skin in the game. Do you have another asset you can use as additional collateral? Or put the first portion of construction funds into the deal yourself? Or sit on the land and season it. Perhaps a bank will use the appraisal alone after a year or so.
@Jimmy Klein Banks usually don't like land as collateral since it does not produce income, is not liquid and a liability (taxes). But you never know until you ask, wouldn't hurt to go to the bank and see what sort of financing can be made out of it.
The question is not about the guaranty. We will have additional pieces of collateral, but I am referring to the land being used as equity.
Jimmy, have you considered selling the self storage facility? I or one of my associates may be interested.
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