The 5 Rules of Thumb to Successfully Navigate Self-Storage – Financing

Finding your dream property is just the first step to obtaining your next self-storage facility. Financing, the fourth rule of thumb, is critical to whether or not you will get to keep the great opportunity that you found.

You may only have a vague idea of how you are going to buy a self-storage property when you first find it, but part of your due diligence needs to be finding the money. You may be getting traditional financing, or you may be bringing in private investors. Either way, as soon as you know you have a viable opportunity, and it is under contract, start talking to lenders and investors about working with you.

One thing about commercial lending is that you don’t need to get caught up in getting a pre-approval letter to put in your offer. Most lenders and private investors want to see the self-storage deal first and then they will tell you if they are willing to give you the money.

The lenders want to know what the property is currently producing and what it will bring in in the future after you have made your renovations. Lenders want to see your business plan for the property. You need to know what your vision is for the property.

You want to find lenders who specialize in self-storage properties or SBA loans if applicable. An SBA loan is a loan from the Small Business Administration that was created to help small businesses find financing for the purchase of real estate. The interest rates are usually below the current market rates and last for much longer than traditional loans. In most cases, commercial financing has to be refinanced over and over. However, SBA loans last for 25 years. This saves you the uncertainty of whether or not you will qualify for your next loan in 5-7 years.

If you have a great opportunity, you will be able to find the financing. Don’t wait to start looking for properties because you are worried about the money. As soon as you have a property under contract, start the process. You will find partners or lenders as long as you have a great opportunity. As always, happy investing.