Understanding Commercial Real Estate Loan

[Joseph Russell]

Hello

I am looking into getting my first commercial property. I want to buy a self storage facility but there is very few available. I am looking at land to buy to build one on my own. I believe that the bank will hold off payments until the end of construction but will they also give a grace period after construction to allow the facility to gain tentants?

Thank you

Joe

[Henry Clark]

@Joseph Russell

Sounds like first time investor or in Self Storage.  Start small.  This will help you to get all of your systems down, develop a business model and banking relationship, and teach you most of what you need to know on Self Storage.

Before you head down buying or building determine the following:  a.  Collateral at 65% of value or cash in hand., b.  Financing method  SBA 10%, Conventional 25%, Conventional 40%, c.  Take the two together and decide on your deal size. Say you have $50,000 with Conventional 25%, then you can do a $200,000 deal.  Do this so you don't waste yours or seller's time.

Not many locations available?  Don't know where you are at, but there are probably 20 available, they just don't know they want to sell.  Make a list of locations that fit your parameters.  Say $200,000.  Within 40 miles of your house.  Etc.  Start stopping by and chatting with the "Owner", not the "Manager" every six months.  Develop a deal option list for them.  Within one year, one of them will want to sell.  Don't try to buy, just let them get to know you.  Your best option is to buy and not build.

If you decide to build, use the "Search" and magnifying box above and type in Self Storage.  Read every post that start with "Self Storage".  Even if you only have $10,000; you can get into Storage, just have to know how to do it.

Get with a bank that understands Apartments.  They will do Interest only on the construction and Interest only on rent up phase (we do 60% occupancy or 18 months, whichever comes first).

Start small and Make Your Big Mistakes Early.