Self storage financing terms these days?

Question

Anyone have an idea of what conventional financing terms (rates, term, LTV) are available these days for refis? We have a facility in Southern Cal that we are looking to refi out our SBA tranche (long story on why we want to explore taking this out).

Any bank suggestions appreciated too!

TIA

Henry Clark · Answer

You need to check local and also have the current bank put a package together.  Ask them what their Loan Cap rate is, see if that is the issue.

We are in Iowa and I have noticed the market is different by state.  We can do 25% down conventional LTC loan to cost, 5 year with 20 year amort, Interest rate x.xx%.

Helping out on a deal in Texas.  They won't do a construction loan.  Won't do SBA.  Want to wait till 70% occupancy.  Three banks want 40% LTC, 5 year with 20 year amort.  Didn't discuss interest %.  Since this doesn't work for us.

Your market looks tight already and sounds like you won't have an existing banking relationship to work from.  You will have to check locally.  Each person will be different based on years in that RE class, personal wealth statement and existing Storage cash flow.

Back to refi out of an SBA loan.  The only reasons to refi out are:  A.  You want to use the property for collateral on another Non-SBA type project, B. Your needing short term personal cash flow.  If you move to a Conventional Loan, you have to pay in more LTV and/or LTC; higher interest rate; no 20 to 25 year fixed term loan; and you have to pay in new mortgage costs (appraisals) and effort.  If you took Covid relief SBA 6 month funding, you will probably need to repay that.

We are just closing on an SBA loan for one of our Storage locations and filing for two other locations.  I'm interested, what is your justification?  If its just to pull out Personal money, I don't need to know the situation.

Henry Clark · Answer

@Stephen Cucc

I would develop around San Diego. Or any of those larger cities.

Get outside the city limits along major roads.

Find county or small town municipalities within 1 to 10 miles of the San Diego City limits.

Learn their zoning and zoning map.

Look for the biggest/nastiest piece of ground that you can bulldoze and flatten.  2 acres or greater.

Do two business models.  A.  They bring their stuff and store., B.  You have a depot in the larger town where they take their items to portable storage units and then you haul to your storage location.

Why would they go to small town USA 20 miles away?   Traditional Self Storage logic says your market is 1 to 3 miles.  Think about it.  Check your potential rental rates.  Storage availability.

Another option for land purchase is to find Railroad ground available for sale.  Look along the rail lines for suitable ground.  Ask them to sale.  Almost all RE people drive by this every day, not knowing it is for sale.  Don't worry it is zoned Residential.  If you find it, contact me and I will tell you how to get it re-zoned.

Remember the harder it is to find a location, the better investment it is.  Harder for competition to build next to you.

Jared Rine · Answer

@Peter Lee..did you find what you were initially looking for?  I noticed the thread got somewhat hijacked as I read through it.  Thanks,

Henry Clark · Answer

@Eddie L.  Please read my post;  Self Storage- new investors.  Good luck.

Remember in Texas counties there is no zoning.  All of your neighbors can do self storage and RV parking.  If in cities, check zoning.

Eddie L. · Answer

@Henry Clark I am considering self storage with RV parking in Texas. Thanks for the advice. Any additional thoughts on financing or additional pitfalls?

Henry Clark · Answer

@Stephen Cucc

Most of that market is $5mm and up; controlled climate and your playing with the REITS.  As long as you have a strong RE and financial background; you might jump in the ring.  Usually I tell people to Start Small and Make Their Big Mistakes Early.

You might look back at some of the responses I have given around San Diego to get started.  There are several opportunities I would look at around there.

Stephen Cucc · Answer

@Henry Clark

Mini Storage Newbie

In Southern California looking at 360 unit mini storage (Small I know)

Best rate 65% LTV 3.7% i/o 10 years

Looking for higher LTV

Best place to look for self/mini storage for sale?

Any feedback would be appreciated

Stephen

John Lenhart · Answer

Have you looked at a life insurance loan?

Peter Lee · Answer

Good suggestion and we've been trying that but they were straight up with us and told us they weren't a good option for conventional as their niche was SBA.  LTV would be at best 60% but who knows maybe w the appreciation it's possible.  We are keeping that in our back pocket for now.

Self storage financing terms these days?

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