Commercial real estate financing can be a complicated process, but all in all is just like leasing anything else. A lot of the time financing self-storage involves taking out a hard money commercial loan, which is based off assets. In a hard money commercial loan, the one receiving the loans secures the funds via the value of real estate, which in this case is self-storage real estate.
When financing in the world of self-storage and commercial real estate, it is important to look at commercial loan rates. Commercial loan rates vary by lenders and banks. They are much like personal loans, and most often need you to have some sort of collateral. To be approved for a commercial loan, you will have to pass a credit score check, and have you assets appraised. Lenders are known for giving a commercial loan rate of about 80 percent of the property's overall value.
So how does this tie into financing self-storage property? This ties in because financing is a big part of owning a self-storage facility. Many questions arise regarding how to get a commercial loan for this commercial real estate that has a rising market and demand. First off, to improve your odds of getting a loan, deal with any maintenance needed at the facility. Do this before you have your assets evaluated, as you may need to take pictures of the photography for the lenders. Also make it clear to lenders that you understand the market and management systems. Although, you do not need experience in owning commercial real estate to own self-storage, it is good to have managerial experience. Before you get a quote from the lender take pictures of the property and the things around it. Also provide all information about the facility that seems relevant, such as how much space is on the property, and what you plan on doing business and price-wise.
Unfortunately, before getting your loan you will need a bit of cash in-pocket already for different third-party services. For example, you will need to pay appraisers for an appraisal report. They will tell you the overall value of the property you plan on financing. You may also need to get a three-stage environmental assessment to determine if there are any hazards regarding the land the facility is on. Part of the risk assessment is on paper, and the other parts are more physical related and involve tests and walk-through. Other fees include some legal fees, around $5,000 to $10,000, assuming there are no slip-ups or complications. There will also be a loan fee (similar to a personal loan) of about one percent of the loan, which could be sizable depending on how big of a loan you are trying to take out.
The loan process can take sometimes at least 60 days, unless you are a veteran when it comes to self-storage financing. In the end, just do your research and be prepared. If you're prepared, and have a good grip on what you're doing and what you need to do, you will be a self-storage owner in no time and will be happy with your investment.