How Long Do You Need Before You Close On A Self-Storage Contract?

When you are making your offer, you need to gather a lot of information before you set your dates. Each contract usually has a due diligence timeline, a financing timeline, and a closing deadline. If you don’t know the people that you are working with, you might want to give yourself some wiggle room in case they are unable to complete their portion on time.

For example, when you are looking at your due diligence timeline, you may want to talk to your feasibility study company to find out how far out they are. You need to give yourself enough time to not only get the report, but to review the report and see how much it may cost you to make suggested changes. You need to know if this project still works. You should give yourself enough time to be able to do that.

When you are looking at your financing timeline, ask your lender how long an appraisal will take. If you are getting an SBA loan, how long does it take to get approval back from the committee. How often do they meet and when will your project be presented in an ideal situation? Give yourself enough time to back out if you can’t get your financing done in time.

Your closing needs to be after your deadlines and each deadline needs to stack a little. For example, you don’t want to pay for an appraisal until you know if the project is feasible. This means that you may not order your appraisal until you have your feasibility study back. If it takes 2 months to get your feasibility study, then you will want to push your financing out another month or two after that deadline.

Finally, you will need to push your closing out past those dates. Something you may want to consider is having a way to extend your closing. You can write the contract with non-refundable extensions. For example, if you are 5 months into your deal and discover that you are going to need another 30 days to close, you don’t want to lose all the money that you have already invested in the project. At that point, you may put down another $5,000 that is non-refundable just to have them give you the 30 days. If this is all built into the contract at the beginning, then you don’t have to worry about a seller getting angry or getting a better offer. You will know that you have time. Put automatic extensions into your contract any time that you think you might need them and sometimes even when you don’t.

Planning ahead and allowing yourself enough time to get all of the information that you need will allow you to make sure that this is a great opportunity. It will also allow you to cancel the contract without fear of a seller trying to make you perform on the contract. Before you start making offers, talk to your team. Find out how much time you are going to need so that you can plan accordingly. As always, happy investing.