These are changes that could impact cashflow.

The revisions to the SBA rules make it easier for borrowers to meet the 10% equity requirement for loans, allowing seller debt to count towards the full 10% equity injection.

Other changes include the acceptance of Home Equity Line of Credit (HELOC) or cash-out refinance of real property as equity, and the simplification of debt refinance.

And a newly implemented rule limits loan terms for partner buyouts to 10 years.

5:18 Use of HELOC and Cash-out Refinance for Equity
6:30 Clarification of SBA 7(a) vs. 504 Loans
17:40 SBA’s New 10-year Loan Term Limit
26:21 REITs Management Approval

Leave a positive rating for this podcast with one click

Website | LinkedIn | Email

Website | You Tube | Facebook | X | LinkedIn | Instagram

What are the banks looking for right now when it comes to loans?

In this episode, Scott warms up the conversation with proven strategies for securing self-storage loans amidst a challenging economic climate.

He explains the evolving lending environment, the criteria lenders use to assess loan applications, and provides actionable strategies for presenting strong loan requests.

Scott emphasizes the importance of having a solid business plan, understanding market conditions, and shopping loan requests to multiple lenders.  

05:46 – Qualifying for a Loan: Key Criteria
10:58 – Creating a Compelling Business Plan
18:38 – Conventional Loans vs. SBA Loans
27:37 – Improving Profitability and Operations

Leave a positive rating for this podcast with one click

Website | You Tube | Facebook | X | LinkedIn | Instagram

Follow so you never miss a NEW episode! Leave a rating and review on Apple or Spotify.

Apple Podcasts
iHeart Radio
Pocket Cast
Podcast Addict
Listen Notes
Episode Transcript

Announcer (00:07):

This is the Self-Storage Podcast where we share the knowledge and skills from the industry’s leading investors, developers, and operators to help you launch and grow your self-storage business. Your host, Scott Meyers, over the past 18 years has acquired, developed, converted and syndicated nearly 5 million square feet of Self – storage nationwide with the help of his incredible team at, who has helped thousands of people achieve greatness in Self-storage.

Scott Meyers (00:42):

Hello everyone, and welcome back to the Self-Storage Podcast. I’m your host at Scott Meyers, and today what we’re going to be talking about is the lending environment. We know that it is a challenging one at best, and so here’s where we’re going to approach this today. Climate’s change, climate’s change in the economy, climate’s changed in the lending environment, and right now, just depending upon where banks are, it really depends upon what you’re going to wear when you go into the bank. And so we have a number of lenders out there right now that they recognize self-storage as the recession resistant asset class, and so they’re clamoring for self-storage loans. They want them on their balance sheet as we head into the recession or to weather the recession, pun intended. We also have some lenders that are just pencils down right now because the lending environment is one in which, well, the interest rates are high and they’re going to come down.


So do they really want to lock in rates right now? Are they looking at adjustable? Are we’re heading into an election year? And so there’s a lot of flux, if you will. There’s a lot of variables in the economy right now and in the market, and so many of these lenders are taking a step back and others are just business as usual. They’ve got good relationships with their borrowers, and so the only thing that is different is that the interest rates have changed, and so it’s just business as usual for them. So what are you going to wear when you head into the lenders or when you really head out the door and you’ve got a property that you’re looking to obtain a loan for knowing that you’re going to most likely be taking? Well, you should be taking your loan request to at least three lenders, as we’ve discussed before many, many times to not only shop the best rates and terms, but also because of today’s lending environment, which is a little more challenging.


We don’t want to head down the path with one lender only for them to turn around and say, well, yeah, we are heading into an election and interest rates are going up and down a little bit, and there are some variables. There’s wars out there, and so we’re going to take a step back and in the 11th hour they decide not to grant you your loan request or they’ve already requested and they pulled it the day before closing. What we want to do is to not only A put our best foot forward, but B, put you in the best light so that you have options so that you can get your deals across the finish line. So what we’re going to be focusing on today are some of the tried and true steps and our success secrets that have allowed ourselves and so many of our students and folks that are in our masterminds to be able to obtain loans for their first or multiple self-storage projects, not only with our Rolodex of lenders that we work with that we open up to our folks, but any lender that you’re going out and creating a new relationship with, whether it’s your community bank, the lender that you’re already doing business with, or maybe they have the existing loan on a facility and now you’re looking to create that relationship with them and have them, well carry another new loan onto this property since they already like the facility and they already like the area.


And so there are some nuances and a few tips and tricks and some of the old, well, I think some of the strategies that we’ve had to pull out of the grab bag from years past that are now working in this environment that we wanted to share to once again, make sure that you’re successful in getting your deals across the finish line and getting approved for funding. First of all, let’s take a look at what it takes to qualify for a loan. What are the lenders looking for? And we’ve worked with a number of folks from SBA lenders to the community banks, saving loans to commercial mortgage-backed securities, the CMBS lenders, private equity insurance companies, pension funds we’ve worked with and have loans with all of the above credit unions, you name it. There isn’t a lending source out there that we are aware of that we haven’t worked with in one way or another to obtain a loan for our facilities.


And really the underwriting or the criteria and the due diligence that they do on us and the property is very, very similar. It’s essentially the same. What it comes down to is what’s going on in the environment, and again, the weather, what we’re seeing out there in the environment, and then packaging a deal up in a way that puts ourselves in the facility in the best light that also meets the rates and the terms and the climate or the lending environment in which this bank is operating in. And hopefully there’s a match. And if there isn’t no harm, no foul, we don’t take a personal, we’ll continue to put projects in front of them as long as they are a operating and lending in self-storage, and B, they like us that we just need to find the right fit in terms of a property or a project to put in front of them.


But here’s a few of the things and here are a few of the criteria that we are looking at that we know the banks are looking at and how much weight they put on each one of them in case you were wondering and from somebody who had put at least, oh my gosh, I think we’re approaching well over a thousand applications and offerings in place in front about lenders on the a hundred plus properties that we have put under contract with a lender and got a loan for. Here’s the things that we found and what data shows us and what we’ve heard from our lenders. And that is that when you’re qualifying for a loan, any lender is going to put about 50% of the strength on you, is the guarantor or the guarantor strength and 50% on the cashflow of the deal, not necessarily the deal itself, but on the cashflow of the deal.


That’s very important. So in other words, in terms of a guarantor strength, meaning you, well, they want to know can you pay it back and will you pay it back? And that includes a lot of things. What does your balance sheet look like? What is your personal financial statement look like? And do you have another operating business or businesses or a W2 that could pay back this loan or at least contribute towards it in and above what this facility is generating? And then the other 50% is the cashflow of the deal itself to support the loan, can the business pay back the debt? And we’ll get into the ratios in just a second here, but those are the two things that they’re first of all looking for, which is different than what we’re looking at in residential real estate. And so for some of you that are getting into commercial real estate for the first time, if you’re looking at buying a single family residence, that’s all they’re looking for.


It doesn’t generate any revenue or income, so they’re only looking to you the strength of the borrower, the guarantor as the repayment of the loan. But the good news is if we’re buying a cash flowing asset, well, it needs to support itself. And oh, by the way, we are a good or a no or a low credit risk individual because we have a habit of paying back our loans. So we have income coming in from other sources in and above what the property is already bringing back. So what the banks are looking for is a good track record of you as a borrower and paying back debt. They want to see your credit report and have you had a history of taking out loans and getting credits of all sorts and then paying it back. They want to see in the US here, for our folks that are US investors, they want to see a minimum credit score of up six 50 or higher.


They also want to see and make sure that you have no bankruptcies, judgments or liens against you. Those are obviously no-nos and that does not vote well for your ability to repay a loan. They want to see that you have a stable employment history even if you own your own company, even if you are a 10 99 or employee of your own company. Well, how long have you been employed by your own company? How stable has that been? They’re going to look at your household income and they want to see roughly two times the household debt, also called a 50% debt to income ratio, which means that you’re bringing in double the amount of money and income that you have in personal debt. So if you’re bringing in partners, the lender’s also going to look at the entire group of folks that are going to be part of the general partners that are the owners of this asset or this project or of this company to make sure that they don’t have any issues somewhere else, and they would take the cashflow from this property and siphon it off.


And so they want to make sure that all of the folks that are included in this project are good borrowers, they have a good credit and that there isn’t anything that the bank would see that would be a problem on the horizon in which they would siphon cash off of this project and take it away from the repayment of the loan. So in order for them to determine whether you are a worthy borrower and if this is a good project, first of all, it involves a personal application and so the documents they’re going to be looking for is at least three years of your personal and business tax returns. That tells most of the picture for lenders. They also want to see a PFS or a personnel financial statement, which shows your assets and your liabilities, and this is where you list out everything that you own.


And I say own, for those of you that are listening in air quotes, because it doesn’t mean that it’s paid off. You don’t own it until you pay it off, but what do you have in terms of assets that you either own or paying on? And then what are your liabilities, which means that loans out there until you own all of those assets. What is the difference? The difference is your personal financial statement or your net worth. Then they want to see all of the affiliate financials that goes along to support all of that. They want to see the loan documents to see what the balance is and they want to see proof, a record of your collectibles that you state on your personnel financial statement. Obviously the schedule of real estate owned all of your real estate that you have any operating businesses, all the way down to this is your personal financial statement.


So all the way down to your spouse’s, jewelry, collectibles, art furs, any collectible, automobiles, vintage wine stocks, bonds, mutual funds, insurance life insurance statements, anything and everything you own that has a value to it, they want to see and have a proof of that. Again, they will pull a personal credit report. That’s how they get the credit score that we mentioned earlier. And then they want to take a look at your bank statements of all of your bank accounts to verify liquidity regardless of not just your personal and not just for this business, but all because they’re going to do what’s called a global underwriting on you, which means that they’re going to look at globally across to all of your bank accounts, across to all of your businesses and understand what your liquidity position is and then again, matching up your liabilities against the assets in each and every one of those companies and personally.


Now, once you have a deal or a project that you’re putting in front of them, they also want to see your business plan. So they want to understand just exactly what are you going to do with this project? What are you going to do with this piece of ground? If it is a development project that you are applying for a loan to build or if it’s an existing facility, they want to see your business plan for your company that shows that this is one of five to 10 to 20 that we plan to put into the portfolio or this is number seven that’s going into our portfolio. We plan to hold for five years and sell, or this is part of a fund and all of our assets in this fund are going to be sold within four years of return to our investors, or this is part of our retirement.


This is just a one-off. My business plan is to buy it and to hold it until it’s fully depreciated after 27 and a half years or 39 years depending upon which CPA you utilize, and then we’re going to sell it off. Either way, they want to know, they want to see your business plan and know how you plan to acquire it, you plan to management manage it, and then what is the exit strategy overall? Is this for retirement purposes or are you going to take cash along the way because you want to replace a W2 income? Okay, now let’s take a look at the key components of a business plan. First of all, I like to create a two pager. It is part of the business plan, but it just summarizes it. We call that the executive summary. That is a term if you’re not familiar with the business plans that most bankers and lenders will want to see at least in the initial stages to see if they have an interest in working with you.


They want to have an understanding of the project, but also a little bit of an understanding about what you do. So it talks about the executive summary, it talks about your business, your intentions for this loan, and what you need to include is how much you are requesting. So this is part of the loan request in this executive summary and then how you intend to use the loan proceeds, and we really call that a sources and uses document. And so that is usually included within the larger business plan, but you can also have, if you put it together in a nice PDF and have a graphic artist put this together, it’ll have a list to show what the proceeds are going towards. So X amount is going towards the acquisition and we have some deferred maintenance that we’re going to put this towards to get caught up on some of the repairs.


We’re going to do an expansion along with this. So we’re requesting a construction loan in addition to or as part of this, whatever that looks for and a lease up or an interest reserve, they need to understand exactly how, they need to understand how you plan to utilize the funds, but also that you’ve thought through those areas as well because if that is omitted, they’re going to ask you for it. So include it anyways, and if you have omitted it, they may wonder why you haven’t and that will be a gauge for them as to how savvy you are and how detailed you are as well. They also want to see the ownership structure of the business and so who’s included, who’s going to be on the general partner side and in the operating agreement who’s going to be making the decisions? They also want to know who you are and why you’ll make a good owner operator.


You almost in this instance, we tell all of our students, you can’t really overstate your successes enough, so this is your hero file. This is where you get to brag a little bit and talk about the things that your mom tells everybody about you and how good you are in certain areas of your business and life. So it’s okay to put it on there that you’re an eagle scouter, that you were very accomplished even in some of those business and athletics. It shows that you have a drive to succeed right on through to your business degree and any other businesses that you’ve been successful in and the status that you hold within a W2 income and a job working for a corporation, whatever that looks like. It doesn’t have to be every minute to detail, and there is a line which it could come across as a bragging or just be if it’s two pages long with bullet points of everything you’ve accomplished, that may be a little too much.


You need to summarize it, but don’t hesitate to hold back with things that you think a lender would want to know that you are a driven, responsible individual that has a history of success in making things happen. That’s the story that you want to tell. They also want to see market insights and what type of market research that you have done already and have you paid for some and then the reasons why after you received the data back from the market studies, why you like this market, they also want to see who your competition is and how is that going to drive your rates and your management plan. Does that mean that you’re going to lower rates to buy occupancy and then gently raise them up or does that mean you plan to be the price leader and bring the rest of the market up with you?


As they say, when the tide rises, it takes all boats out with it. Where do you position yourself in the market and how do you plan to compete against the friendly competitors in your marketplace? They obviously also want to see your financial projections with assumptions in terms of where it is today and where you plan to take it over the next 2, 3, 5 to 10 years if you plan to hold it that long. And an idea of what happens when you take over the business immediately, what are the changes that you plan to implement and what are the plans that are going to change with the new strategy that you bring to the operations of this facility as well? Then the day-to-day operations and marketing plan. First of all, who’s going to carry it out and what does that look like in terms of creating the marketing plan?


How do you plan to management? Who’s going to oversee that? And all of the, as we constantly discuss, do you have the right people in the right seats on the bus and how do you plan to hire and where are you going to obtain these folks? And how is this property if it is going to be at all going to fit into your overall portfolio and the supervision and the management that is already in place? So now it’s important to talk about the equity in what you’re going to be bringing to the table in terms of your liquidity or cash to add on to the loan. So how much do you think you’re going to need? Well, conventional loans right now we’re seeing a loan to value or LTVs anywhere to 60 to 65%, which means that you’re going to have to come up with 35 to 40% of the capital to close the loan SBA loans.


They are still going up to approximately 90% to LTB with you bringing out just a 10% to the table. That’s also the reason why we like facilities that have the opportunity for expansion because it means the expansion, the cost of the construction, we can roll into that same loan with the same amount of down payment. What are the acceptable sources that the bank is going out to look at? Well, obviously cash, because they know that you have it. If the cash goes into the bank, they will take in many cases a seller note, which means a seller carryback, they will carry up to 5% of the loan. Some lenders will take up to 10, but in many cases they need to be on standby for 24 months, which means that they may not get paid or they may not get that paid off in that amount of time, which means that any available cash or extra has to go to the primary lender or that is in the first position, meaning themselves.


They’ll also look at secure debt made to the individual owners of the business in terms of a heloc. So you can take out an equity loan on your own house or a cash out to refinance. If it comes from that, they will obviously then adjust your personal financial statement to account for that, the additional loan, the additional debt in terms of your liabilities, and then the cash that will go into this project then goes towards the investment side or it is a positive provided you’re buying another cash flowing asset with this and it’s not a development. They will take a minority investors or other investors in this project that have a 19% or less ownership, and if they have a greater than 19%, meaning 20% or more, then the lender will require that person to also be a guarantor and go through the same underwriting process and providing the same due diligence materials on themselves.


They’ll also accept gifted funds. In other words, your heirs or in-laws or anybody who wants to gift you money that is accepted accompanied by a notarized gift letter stating that it is a gift and is not a loan in disguise, it has to be paid back. They will also take into consideration any prepaid expenses. I know this is kind of a stretch, which means that you’ve already paid for something in advance and the land value, which means if this is a development project and you’ve already purchased the land, well then they will consider that already equity in the project and the overall cost of the project because if they’re putting a lien on it, that means that they’re putting a lien on the land and that the building that is going on as well. Now let’s take a look at the different lending instruments. So for the most part, what we’re looking at and what you may be looking at as well are a conventional loan from a bank, from a credit union, a community bank.


And rates and terms are typically 20 to 25 year amortization with a five to seven year term, which means that it’s going to reset within five to 70 years. I we’ll take a look at the interest rate at the time from the feds and then add on to that a fee or a percentage points on top of that 25 to 40% equity requirement, which means cash that you bring to the table. And they’ll typically charge an origination fee of approximately half a percent to 1% of the entire amount of the loan. So that’s their fees, that’s how they get paid, and that is typically rolled into the project, but is also part of the equity that you bring to the table. They are a little harder to get these days, and there are some tricky loan covenants and we’ve actually seen in recent years some very tricky loan covenants.


And remember, this is not a time to skimp on attorney’s fees. You are going to have an attorney look over all of your contracts, the purchase and sale agreement and anything associated with the property, but then also the loan itself to review the rates and terms because we’ve seen some tricky loan covenants that have crept into some of these loans that we’ve been looking at, and some of them that are real head scratchers that could get us in a lot of trouble had we not caught them negotiated away or at least get a greater understanding of what this means within this loan document because some of them have begun a little cumbersome. And so make sure that you are reviewing those documents, but more importantly that you have an attorney reviewing them as well. So in addition to conventional sources, conventional lenders, you should be also looking at the SBA seven A or the SBA 5 0 4 loans.


The SBA has been a very bullish on self-storage in our industry because it looks more like a business than just real estate. So the small business administration is very bullish on self-storage. Typical loan structure is 25 year fully amortization, fully amortizing loan, a 10% equity requirement depending on you as a borrower and the project itself, they may require more than 10%. There’s typically a one to 2.5% SBA fee of the loan amount, the entire loan amount that sits on top of that. And there are no loan covenants, which is good. However, they do do an extreme amount of due diligence and underwriting on you as well, and they can include some interest only loans plus operating capital just depending upon the project to get you across the finish line to make sure that you make it to two stabilization and or lease up loan size that we’re typically looking for.


An SBA seven A is $500,000 up to 14 million. They have a prepaid penalty of approximately three years. These are full recourse, so they’re fully underwriting you and they is a personal guarantee and they will, and they basically guarantee and put a lien on roughly everything on your personal financial statement. It is full recourse. And so they have a first, right? If this deal should go sideways or Self -, they will allow third party management. That has changed recently, but it must be SBA compliant and it cannot be managed by any of the REITs, meaning the real estate investment trust like EXO Space and Cheap Smartt public. And there’s no other reason other than giving you an example of who the REITs are and why they want to allow their management and they can do once again up to 100% financing for expansion. When you’re looking at the conventional loans, loan size is 500,000 up to roughly 20 million.


They do have a prepayment penalty, typically five years, whereas the SBA is a three, mostly full recourse, but flexibility with ownership and the guarantee structure, depending upon who you’re bringing into the project and the strength of those borrowers that you are bringing into the project that are coming alongside of you, they will allow for third party management and it can be reeked managed as well. So there is an advantage with conventional loans from that standpoint. Now, for an acquisition, the documents that a lender is typically going to ask for from the seller is they also want to see three years of tax returns for the seller, which includes this entity itself, the project that you’re looking to buy. They want to see a current profit and loss statement meaning for the last 30 days, but then also usually a rolling 12 months’ worth. They want to see a current rent roll so that they can determine just exactly where the property sits right now in terms of an occupancy and a management summary report.


And you may think, well, what does the lender want to see with a self-storage property management summary report? And do they know how to read it? And the answer is, yes, they do. They have a very strong underwriters and they want to see just exactly how this is operating. They want to see if there’s been any dips in occupancy and they want to see any increases in costs. They want to look at the accounts receivable. All those things that we look for on the property management summary report and underwrite is going to look at as if they’re buying it because guess what? They are buying it, they own it, especially if it’s an SBA loan and they own 90% of it and a lender at 65, 70 5% also owns that property until you pay it off. So they do look at these reports and they do underwrite it as if they’re going to own it because they do in terms of a construction project or if you’re adding on, they want to see the general contractor bids.


They want to see that there has been a feasibility study done on a development if it’s a up in a new site to determine that it has been approved and it hasn’t received a thumbs up or a green light from a consultant that has performed this feasibility study. And then they want to see the plans and permits to make sure that this is a real project, meaning that if they give you the loan and the funds for the loan, that you actually have the ability to develop it. So they want to see that those items are already in place to make sure that they have a real deal before they go down that road. Now, in the interest of time, we could go through an entire underwriting exercise to understand what the lenders are looking for, but at the end of the day, which what they will be looking for is occupancy at the facility.


When was the last time they raised rates? How many units are delinquent on rent? How do their customers pay cash or credit? And what percentage of what is their marketing approach? No marketing all online, word of mouth. Do they have a marketing plan? How old are the buildings and what maintenance has been performed over the last few years? Why does the owner want to sell? What assets are being acquired? Is the property all on one parcel? Are they interested in discussing seller financing for a portion of this or the down payment? How many employees do they have? What is their average wage? Do those employees want to stay on after the sale goes through? Who is the primary competition in terms of calculating the net operating income? After looking at the operations, what is the true NOI income minus expenses? Do we need to add back the owner’s salary?


If the owner’s going to take one, meaning you, the borrower, the new one, they’re going to add back the mortgage interest and depreciation, then they’re going to add back the non-recurring expenses to come up with the total net operating income of this facility. And then when looking on the tax returns, they want to see the additional add backs that the seller has in terms of owner compensation salaries that won’t continue under the new ownership. Are there one-time repairs that were not really maintenance, but they were capital expenditures that don’t occur on a regular basis? What was the current mortgage interest or for the past 12 months, what depreciation has been taken and what most likely are they going to see in terms of moving forward? Are there larger than normal expenses that weren’t accounted for in the underwriting that you submitted and that any other deductions that you see from the seller’s tax returns that doesn’t apply to you?


Just know that the underwriter is going to look at this. And so you need to look at that as well because ultimately what they want to find out is, as we said from the beginning, what is the debt surface coverage ratio? And that equals the net income divided by the debt. So for example, if a property’s annual net operating income is a hundred thousand dollars and its total annual debt service payments are $80,000, the debt service coverage ratio or DSCR would be $100,000 divided by $80,000 or 1.25, which means it works, indicates the property generates 1.25 times the income needed to cover its debt payments. So a debt service coverage ratio of 1.15 to 1.25 is usually the minimum for the bank. Seller notes are in this calculation as well. So if they’re carrying this back, just recognize that it is a payment that is being made out outside of the debt to the bank, but it is a liability that needs to show up.


And so they are going to be looking at projections of where you take it, especially if it is a project that has just been neglected. Typically they’re looking backwards at the trailing 12. But lenders that will in certain instances look at the projections or proforma if you have a story to tell as to the reasons why it is not optimized right now or why you feel that you are going to be able to take it to the next level or to this level in your projections in a short amount of time. And then within your business plan, they want to understand how you’re going to improve the profitability. Can you increase rates? They’re going to go back to the market study and take a look at that. You need to show where you’re going to bring your rates up to. Can you increase occupancy? And what is the market showing right now in terms of the average occupancy across your competitors?


And where is this facility? Do you feel you have the ability to raise it from where it is right now? Can you expand at the very least just by adding parking without changing any easements or stepping over any bounds that is already within the fence line? Can you add technology which reduces the expenses and or overhead of a payroll? Can you move all the customers to autopay so that shores up at least tightens up the accounts receivable and lessens that amount that is outstanding every 30 days? And can you just reduce overall staff and have a net operating margin that is more profitable than where it sits right now? So in sales storage, net operating margin is calculated by dividing the NOI by the revenue. And in our industry, a highly efficient business can maintain a net operating margin of 65 to 75%. Again, another reason why we love this asset class, but if the existing net operating margin is at or below 50%, it would be classified as a turnaround.


It doesn’t mean they won’t take it, it just means it’s a lower LTV, and you may have to come up with some more cash and a very strong plan as to how and why you plan to take it from 50 up to 80, 85, 90%. Which brings us to how banks are responding to rate increases. Well, we’re seeing rates right now hovering somewhere around the eight to 9% range depending upon the time that you are listening to or watching this episode. And we’re seeing the variable rate is at prime plus approximately 0.5%. And so what we’re seeing lenders that are fixing rates for three years right now at Prime plus 1.75% or fixed for five years at Prime plus 2% three year prepayment penalty gives us that flexibility if we can get that. So it starts at the time of construction on ground up deals, and there are more interest only turnarounds in the marketplace right now in terms of projects that are in the market.


And projections based lending is the new normal. And so we’re seeing that projects that are tied to a fully amortizing loan at a higher rate just as a pencil, so they’re based projections as well as on intracellular loans, at least that is what we are seeing currently in the marketplace. But the benefits of persevering in a down economy is that there’s less new construction. So fewer square feet are being added to the market and new and existing projects are going to be rewarded because there will be higher rental rates due to less competition relief from the suppression of cap rates. We are already seeing this, which means that as interest rates come down, so do cap rates. And so you’re going to get the benefit, the markets generating an increase in value of your facility without you having to do all of the heavy lifting to get there.


But we’re also seeing, or I should say, and we’re also seeing an increasing availability of distressed deals because people aren’t able to refinance right now because they didn’t create enough value in their facility creating a buying opportunity for us. So what does all this mean? Well, it means that you should not stop. We should not stop in this environment. You can need to continue your marketing efforts for finding good projects to develop and or build, and then begin to put those projects with a solid business plan in front of many lenders to shop for the best rates and terms. And just know that in a difficult environment right now, lenders do love sell storage. They want self-storage on their balance sheet because it is such a strong performing asset class in an underperforming market, meaning a recession or when we’re in a pullback. So you are doing the lenders a favor by bringing these projects in front of all because they are clamoring for more self-storage deals.


But make sure you are prepared when you go in and make sure that you are shopping that loan, that loan request out to as many lenders as possible to get the best rates in terms and to ensure you get the loan closed. So with that, that wraps up our session here on what to Take to Lenders to make sure that you get your loans across the finish line in what some may consider a challenging environment. But what we find is a very opportunistic market in terms of the lending environment. Keep after it. Just know that we are here for you. If you do have any questions on the underwriting side of the business, then reach out to us at We can assist with evaluations and assist with any step along the way, depending upon what you need to get your deals across the finish line, because that is what we exist for. Once again, it’s been great spending time with you, storage Nation, and we look forward to spending more time with you on the next episode. Take care.

Announcer (32:00):

Hey gang, wait three things before you leave. First, don’t forget to follow the Self – Storage Podcast and turn on your notification so you never miss another episode. And while you’re there, please leave us a five star review if you like the show. Second, be sure to share your favorite episodes and more via Instagram, and don’t forget to tag us. And lastly, head to the links in the show description and hit follow on Twitter and Facebook to get a front row seat as we grow and scale our business and bring you along with us.