How to Finance Your Next Self-Storage Property!

You have done the hard part, you have found a self-storage opportunity, you have evaluated the numbers and you know that this is a great opportunity. Now you need to find the money. How are you going to do that? Part of that answer depends on if you are a brand new self-storage investor or if you have been in the commercial world of real estate for a while.

If you are brand new to commercial real estate – specifically self-storage, then you have 3 options. You can finance the property yourself; you can bring in a partner, or you can wholesale the project to a more experienced investor. One type of financing that you might want to consider for your first project is an SBA loan. This type of loan allows you to put down less money on your self-storage project. This is a good option when you have less money to put down. This is a very specific loan and so you have to jump through hoops to get the loan and you, and the property, have to meet a lot of qualifications, but if you can qualify, you should consider this loan.

Traditional commercial loans are always an option as well, you will just have to put down substantially more money on your self-storage facility. If you don’t have that kind of money, then you might want to consider bringing in a partner who does. If you are bringing in a financial partner, you want to decide beforehand who is going to run the property, who is going to have the final say in how the property is run, when it is sold, what changes will be made. How are you going to improve the profitability of the project? You need to decide this before you approach potential partners so that you know what you are offering them.

Even if you are just using your knowledge, and time, that is a lot. Don’t feel like you are not bringing anything to the table. You deserve to be paid just like the person who is helping you with the down payment. Evaluate what they are bringing to the table. Some of your self-storage partners may have experience and money while other are just going to be silent financial partners while others will want a complete say in what happens with their investment. Plan on offering different types of investment opportunities to your potential investors. We will cover more on this in the next blog.

Finally, you can jumpstart your self-storage investing business by assigning contracts to build up capital for your own project. There are a lot of investors out there who are willing to pay substantial finders fees for great opportunities. Your job as a wholesaler is to find a great deal, get the property under contract and then sell that contract to a new investor. In order for the contract to be appealing, you need to make sure that there is a good ROI, or a great upside potential to the property. You need to be able to present the project to the new investor so that they know what they are buying and why they want it.

Don’t feel like you can’t start making offers if you don’t know where the money is going to come from. You will be able to find the money if you find a great opportunity. The key is to make sure that you are finding great deals not mediocre ones. Self-storage is a great business to be in. As always, happy investing.