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Self-storage facilities have been popular since the early 21st century. It became a thing in the 70s when one of the best self-storage unit companies, Uhaul, started its self-storage units. However, nowadays, self-storage unit has become a need, as modern housing does not facilitate a lot of storage space.
Since most people have an affection for their belongings, they look at purchasing a self-storage unit because throwing them away isn’t always the most lucrative option. However, speaking of the business aspect, the self-storage industry is booming.
If you want to step into the business, with a dream of one day becoming a conglomerate, then today’s article is right up your alley. We’re going to talk about self-storage financing and what it is so that you can establish one, yourself.
Loans For Construction
There are certain facilities you have to pay for, amongst which a loan for construction is the most important. Construction loans are not very difficult to get, and also don’t charge a ton of interest.
To get your own storage unit from scratch, you need to find good engineers, architects, and contractors. Looking to buy your first self-storage unit to store your belongings? We highly recommend you to check out ReviewsXP to find out the most convenient self-storage unit which suits you the best.
If you want to calculate the average cost of building, a survey reveals that it’s anywhere between $25 to $40 per square foot to build a storage facility and on top of that you need to pay off the running costs and some unexpected costs as well. Once the construction is complete, the new storage unit will take 3-5 years to stabilize, and reach average occupancy.
These stats are great to take an estimate of your average financial requirement for constructing the storage unit. There are also unexpected costs apart from the mortgage.
These include unexpected costs during site preparation, operating expenses during the lease-up phase, construction down payments, and construction interest payments. Also, the amount of money you spend on your construction is going to be decided by the amount of money you pay off in salaries as well.
Self-storage loans for acquisition
Acquisition loans are required when you’re trying to take over an existing self-storage unit. This is where you have the least amount of work, but the maximum need for heavy capital investment. Usually, this capital requirement is met with an acquisition loan.
This is also one of the most important parts of self-storage financing. This is usually done by major inventors in the industry and bigger companies. However, sometimes a few independent storage companies also take over other independent companies, and hence acquisition loans exist. If you want to go down the other way, there are plenty of financing options.
Self-storage loans for expansion
Well, let’s take into consideration that you have already established your self-storage facility. Now, all that you have to do is expand, which requires further capital investment. This is where loans for expansion come into the equation.
The financing of an acquisition loan is easy, but the running costs can take a turn. This includes money for renovation, beautification, and the maintenance of the self-storage facility. This is why we highly recommend, you factor in this data, referencing it to an actual cost list for your storage facility, and then make a decision of expanding your storage unit.
Also, keep in mind, that occupancy levels must be high and the number of people willing to store their items in your storage unit must also amount to a respectable lot. This is the only way, you can profit from an expansion.
Self-Storage loans for renovation
Since everything needs maintenance, a storage facility that has been running for years also needs renovation. The renovation includes painting, repairing, and adding structures to what is present. Self-storage loans for renovation are pretty common in the US.
This is because most people are looking to make their existing storage facility look new, rather than actually building new structures. This is something that you can try as well. self-storage loans for renovation of your property are easily available and hence must be taken as a measure to make your storage unit look good for years to come.
Types of loans:
Conventional bank loan
If you’re looking to renovate your self-storage units, then taking a conventional bank loan is the best option. This is because when you have good relations with one bank, then it is easy to enable cash flow as soon as possible.
SBA 7(a) loans
SBA 7(a) loans for commercial real estate or CRE, are usually taken for construction expansion and acquisition of real estate. This will help you take larger loan amounts and pay them over a maximum of 25 years. This is why these are the loans that are best recommended for the construction of a new storage company.
SBA 504
It is a lower interest loan type, which will help you refinance your self-storage financing. If you’re coming short on cash, then this is the loan that we recommend taking.
Conclusion
The above-mentioned criteria and loan types are very important aspects of self-storage financing. We have handpicked these loan types to suit the best for self-storage facilities and hence is a must-follow procedure, before establishing any self-storage facility.
We have seen people exponentially grow their self-storage business, with proper financing and that can be replicated with a personalized financial strategy. We’re sure this will help if you’re trying to set up a self-storage facility of your own. Till then, keep scrolling and spread the word.
