The 4th Rule of Thumb & the 3rd Key to Talking to Self-Storage Lenders

Now that you know that your credit is intact and how much you can afford to purchase, you need to know how much they are going to require you to put down. This can range from 10% with an SBA loan to the entire amount if you have terrible credit. The amount that a lender requires from you is dependent on the property, the market and your credit. If you are lucky, you can get into the property with smallest required amount so that you can buy as many self-storage properties as possible.

While the property will help you with your monthly payments, you are still going to be required to have skin in the game. The lender wants you to have a down-payment. The lender wants to know how much you are putting down and where that down payment is coming from. If all the money is coming from your investors, the lender may be nervous that you don’t have anything invested in the loan.

The lender doesn’t want you to feel like you can walk away from a property as soon as things get tough. By forcing you to put money into the project, they feel like you are more likely to stick around. They want to know that you are going to hang around no matter what.

In commercial financing, the loans are typically for 5 to 7 years. This means that you will be refinancing every few years. The lenders want to make sure that the property is going to perform well enough that when the time comes to refinance, you have enough equity in the property to do that. If you don’t, they don’t want to get stuck with the property. You need to make sure that you are managing the property and keeping it running at maximum performance so that you can always get the best appraisal possible

When you are looking at self-storage facilities, make sure that you keep the downpayment in mind. You don’t want to look at properties that you don’t have enough collateral for. As always, happy investing.