Self Storage Units Financing

Most banks and other conventional lending sources all over the country often turn down small amount loan requests for self storage units financing. Many times the borrower’s credit is good and the property is sound. They just don’t want to handle a small loan. Most of these are very good investments.

The statistics for investing in self storage units are encouraging. Lenders financing purchase and refinance loans of self storage units take note that the number of these properties that went into the FDIC or RTC for sale due to foreclosure was quite less than other real estate properties. Of the 8% in self storage facility failures, a large number of properties were taken back because they were collateral for other people.

Lenders of self storage units financing like the numbers. The real story in comparing these properties to other real estate investments is that the investor can realize a much higher return on investment. The investor’s initial investment is a third or half of other investments.

The actual cost of operating and managing the property is another factor that is appealing to investors and lenders. Self storage units operating costs can range from $1.50 to $2.00 per leasable square foot. Apartments, office warehouses, and retail shopping properties have to continually keep up the grounds, plumbing, electrical fixtures and a variety of other maintenance items. The costs of operating these properties usually run from $2.50 to $3.50 per square foot.

It is possible to get self storage units financing. Your business depends on your ability to secure adequate financing. The application for self storage unit financing is different from that of a residential loan. The main difference is that a commercial loan is not based on your income. For this reason, the details of your personal finances are not the basis of determining whether the loan is approved or not.

You can get the process started by obtaining the financial situation of the building itself. This means that the records showing income and expenses of the property for the last two years will need to be collected. Another important item will be the amount of rent being collected every month. This will be the basis for how much of a loan for which you will qualify. The main consideration here is that there is a sufficient income to be able to provide the commercial property with a profit. Lenders providing self storage unit financing want to make sure that there is at least a 1:1.1 to 1:1.25 ratio of the monthly payment to the amount of profit that is brought in after all other expenses.

In economic good times, employment opportunities increase and sales of single-family homes start to rise. Research by lenders show a higher percentage of mobile customers and people moving into the market for the first time. On the commercial side, increased business activity means an increase in volume of self storage tenants.

On the other hand, when the economy slows down, the same happens to business, employment, and other markets in general. The opposite effect still causes the same mobility that benefits self storage units. People begin to move or sell their house and move into smaller houses or apartment. Commercial businesses pullback or look to these properties for strong inventories. Approving self storage unit financing is attractive to commercial lenders.