Commercial Storage Building Loans

Why should you be interested in self storage buildings? The answer is plumbing. If you have experience with residential real estate, you know what I mean. There are many headaches related to dealing with tenants. There are neighborhood gangs, prostitution and drugs. How did all of these unsavory people get into your rental property? Well, that is another story.

All that self storage buildings are composed of is walls and a roof. The space is then broken down into multiple units of varying sizes that can be rented for a nominal fee. The renters are usually people that live in the area and sometimes small businesses as well as those who need the extra space to store their junk or their product for a short period of time.

Getting a commercial storage building loan depends on certain factors. The facility should be located on a high traffic street and also have a potential for profitability. So, be prepared. No matter where you go for capital you will need to provide solid documentation that your business concept is sound.

As we talked about previously, self storage properties that are stable and located in a high traffic metropolitan area are desirable. The construction should be concrete block, brick or wood framed. Preference is shown toward single story buildings unless a drive-up access is provided. Metal self storage facilities may be acceptable under certain circumstance. Mezzanine and Bridge loans are available for properties in the lease-up stage or that require substantial rehabilitation.

Commercial storage building loans have various avenues. Fixed rate loans carry an unchanged interest rate for their entire term. They allow you to lock in rates when they are low but you must pay that same rate even if the rate goes down. You can always refinance a fixed rate if the rate changes significantly.

Commercial storage building loans can come with a variable rate. Variable rates offer lower initial rates than fixed rate loans. But, you are subject to fluctuating market conditions. If the rates go down, your rates will be lower; if the rates spike, you will make progressively larger payments.

Many lenders that provide commercial storage building loans start with fixed rates for three to five years, and then switch to variable rates for the remainder of the loan. This type of loan is called a two-step loan. This keeps your payments predictable until you are better equipped to handle the higher payments.

You may apply for an interest only loan to finance your storage building. Interest only simply refers to making payments only towards the interest for the first three to five years. This initially reduces your monthly payments so you can concentrate on improving your cash flow. However, since you are not paying on the principal during this time, your monthly payments will be much larger once the interest-only period ends.

You might also consider a commercial storage building loan with balloon payments. This shorter-term loan, which can range from 5 to 15 years, requires small monthly principal and interest payments. Balloon payments are risky for any business, particularly if you’re applying for a commercial storage building loan for the first time.

If growing you business quickly is important to you, hard money loans or bridge loans might suit you better. There are many avenues to obtaining a commercial storage building loan.