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Four Financing Sources for Renovating Self-Storage

Georgia Ragsdale Comments
Continued from page 2

Second Lien Case Study: The owner of a 5-year-old property wanted to address his competition by enlarging the office/retail space and improving signage. The cost to complete was $120,000. The owner placed a second lien, which maxed out at 65 percent LTV. He repaid the line of credit with revenue from increased occupancy and retail sales.

Cash Out of Pocket

If the costs of rehab are extremely small and you have a low interest rate on your current loan (and the cash to spare), then cash is a viable option.

The benefits:

  • Easiest. No forms. No banks. No fees.
  • Fastest. See above!
  • You are in charge.

The drawbacks:

  • Spending reserves. The worst situation of all is when borrowers run out of money before the project is completed and then have no cash reserves when they go to refinance at a bank.
  • Going over budget. You will be overseeing all aspects of the project, so plan for contingency. Unlike a bank loan, there are no protections in place.

Cash Case Study: The owner of a 10-year-old property wanted to install a new gate and secured entry system, which cost $35,000. She took $20,000 out of the property’s reserve account and $15,000 out of her personal savings to fund the improvements. The job was completed in one week and she replaced the funds on a monthly schedule of repayments.

No matter how you do it, the budget for your upgrades should be completed in detail by a qualified self-storage builder who can suggest the most current trends in the look/feel of self-storage properties, and the best use of your funds for a return on investment.

Georgia Ragsdale is CEO of Los Angeles-based Watermark Financial Inc., a boutique commercial brokerage firm placing construction loans and financing self-storage properties nationwide. To reach her, e-mail; visit

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