Self Storage Financing
Member since 2025 · 23 posts · 5 votes
Self Storage Financing
6 Replies
- Accountant · San Francisco, CA · Member since 2026 · 30 posts · 15 votes3w
As a CPA rather than a lender or syndicator, I look at self-storage partnerships purely through an underwriting and capital structuring lens.
Self-storage deals require substantial equity, so operators typically pair their deal flow with outside capital partners. When structuring these partnerships, three items need clear definition upfront:
Waterfalls and Promote: Define preferred returns, hurdles, and sponsor promote before funding.
Capital Call Terms: Outline exact remedies or dilution formulas if a partner fails to fund future capital requirements.
Tax Allocations: Ensure the operating agreement handles K-1 reporting and tax distributions correctly for mixed investor classes.
- 3wAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Charlie, if you’re going into a self-storage deal with partners, I’d spend just as much time on the partnership structure and capital stack as the property itself.
Before anyone funds the deal, I’d want the agreement to clearly spell out who contributes what, ownership percentages, whether any capital is preferred, how cash distributions work, who guarantees debt, who controls major decisions, what happens if additional capital is needed, and how someone exits later. Those details tend to matter a lot more once the deal is operating than they do while everyone is excited about acquiring it.
From the tax side, self-storage can also create some interesting planning opportunities. The building itself is generally commercial real estate, but a cost segregation study may identify shorter-life components that can be depreciated faster. With multiple partners, you also want the tax allocations and K-1 treatment aligned with the economics of the deal rather than assuming everything should automatically be split evenly.
If there’s a mix of investor equity, sponsor equity, and outside debt, I’d get the CPA and attorney involved before the structure is finalized so you’re not trying to fix the allocations after closing.
Happy to connect!
INVESTOR FRIENDLY CPA®5241 Reviews - Real Estate Consultant · Destin, FL · Member since 2026 · 14 posts · 12 votes2w
Charlie,
Yes. Partners and outside capital are very common in self-storage, but I'd be careful about starting with the question, “How do I find the money?”
I'd start with, “Why should someone else's money want to be in my deal?”
Those are two very different questions.
Self-storage can be attractive because the operating model is relatively simple compared with many other real estate assets. But simple doesn't mean easy. You're still buying an income stream, and the value of that income stream depends on occupancy, achieved rents, expenses, competition, supply, management and the basis you're paying for the facility.
The capital structure comes after you've established that you actually have something worth financing.
For a first acquisition, I'd think about the capital stack in three buckets: debt, your own equity, and outside equity.
The outside equity partner doesn't necessarily need you to have 50% of the purchase price sitting in your checking account. They need to understand what you're bringing to the table.
Maybe it's the deal.
Maybe it's the sourcing.
Maybe it's the local market knowledge.
Maybe it's the operating plan.
Maybe it's the ability to execute the business plan.
Ideally, it's several of those.
What I wouldn't do is show up with, “I found a storage facility. You bring the money and we'll split it.”
That's not a partnership. That's a financial hostage situation with nicer stationery.
If you're bringing the operating expertise and your partner is bringing most of the equity, there are plenty of ways to structure that relationship. But the economics should reflect the actual contribution and the risk each party is taking.
And before you worry too much about finding partners, I'd get very good at underwriting the facilities yourself.
I'd want to know:
What is the current physical and economic occupancy?
What are the actual achieved rents—not the asking rents?
How much competing supply is coming?
What's the historical move-in/move-out activity?
What does the expense structure really look like?
How much capital expenditure is coming?
What does the facility look like operationally if your projected rent growth doesn't happen?
And perhaps most importantly:
What has to be true for this deal to produce the return you're promising your equity partner?
That's the question I'd spend a lot of time with.
Because if the answer is, “Occupancy needs to go from 72% to 92%, rents need to increase 15%, expenses need to stay flat, and the market needs to support my exit cap,” you've got a story.
If the deal still works when some of those things don't happen, you've got an investment.
There's also nothing wrong with starting smaller than you think you need to.
A smaller facility where you can learn the business, establish a track record and demonstrate that you can actually execute may be worth considerably more to your career than jumping into a larger acquisition because the larger one looked impressive on the offering memorandum.
Your first deal isn't just an investment.
It's your résumé for the second one.
And that's particularly important when you're asking somebody else to put meaningful capital beside yours.
I'd spend less time worrying about whether there are people willing to invest in self-storage.
There are.
I'd spend more time becoming the person those investors would be comfortable investing with.
That's the part of the capital stack nobody puts in Excel.
-DC Dobbs
Gulf Coast Emerald, LLC
- Member since 2025 · 23 posts · 5 votes2w
@DC Dobbs thank you very much for your input. Appreciate you putting in the time to give a great response.
- Lender · Washington DC · Member since 2026 · 61 posts · 15 votes6d
Charlie, I’d definitely be interested in exploring this with you. I’m open to investing alongside the right partner on self-storage acquisitions, particularly where the numbers and financing structure make sense. If you’re currently looking at a specific facility or have a deal in the pipeline, I’d be happy to connect and go over it with you. Feel free to DM me.
- 6dHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
OP. Start small and Make Your Big Mistakes Early.
Don't do partners.
How much money can you invest? Don’t
Answer.
What is your financing mechanism? 10% down SBA loan? 25% commercial loan?
Deal size- use the two above to determine your deal size. If you have $100,000 and do a 10% down, then a $1mm deal. If 25% down then a $400k deal. This will narrow down your deal search and approach so you don’t waste your time.
What city or state are you near. Lots of options depending on locale.
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