The 4th Rule of Thumb & Finding Financing for Self-Storage Projects

Now that you have found your self-storage project, you must find the money to buy it. Whether you are planning on using commercial financing or partners to do this, you need to know how you are going to buy the property before you start making offers. The reason for this is that you need to know how long you are going to need to get your financing approval in place. Commercial financing can take anywhere from a few weeks to several months to get in place. If you are going to need 6 to 8 months to get your financing in place, then you need that kind of time written into your contract.

If you cannot find the financing, it doesn’t matter how great a deal you have found. However, if you have found a good deal, you can usually find the investors to back you up so that you can purchase the property and move forward on the property.

Start by talking to a commercial lender. You should start by getting referrals from commercial Realtors or other self-storage facility owners. You need to know who is good at lending on self-storage facilities. You not only want someone who is well educated on what loan programs are available for you, you want someone who is well educated on the area and what is happening in the self-storage world. For example, we found a self-storage property that we really liked. On paper, everything looked great. We went to our lender, and he told us that they had already turned down this particular self-storage facility because of the number of properties currently under construction in that area. You want a lender that knows what is going on in your market.

Next, find partners to help you with the down payment. Paying cash for a property may not be the best use of your funds. In some cases, it will be exactly what you want to do. However, if you are able to take the cash that you would have used to pay for one property and instead spread that out to buy 3 or 4 properties then you can start building equity in 3 or 4 properties instead of one. This gives you that much more cash flow, appreciation, and potential profit.

Start looking for a good lender. Ask for referrals from prominent people in the industry. Get references, make sure that they know what they are doing. Once you have established that they are a great self-storage commercial lender then it is time to prepare for the interview. As always, happy investing.