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The Challenge of Financing a Boat/RV-Storage Operation: Understanding Demand Generators and Today's Lending Parameters

Noel Cain Comments
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Underwriting Standards

Similar to traditional storage underwriting, lenders will always analyze a property’s competitive attributes when considering any boat/RV-storage facility transaction. Their analysis will include the barriers to entry of new developments being built near the property. However, unlike traditional storage facilities, which are more improved and often require stricter municipal approvals, the possibility for new boat/RV-storage competition is often predicated upon the amount of available vacant land in the area.

Any municipal restrictions—zoning or otherwise—that limit competition are important to point out to prospective lenders and will support your financing request. An example of a restriction may be a requirement that any potential new storage property must come before the zoning board to prove sufficient demand for its services. At this hearing, competitors are also allowed to present a counterargument, which is a key advantage in a lender’s eyes.

The level of facility improvements will also be important in determining the lender’s willingness to finance a property. Given their general lack of large-scale improvements at boat/RV-storage facilities, lenders often look at the product as land, which, in today’s lending markets, is not widely financeable without a high percentage of equity. Improvements such as fencing, permanent rental offices, security systems and covered areas improve the property’s value and can increase the available leverage.

The level of improvement is a Catch-22, and you must guard against over improvement. Traditional storage facilities often have units and parking spots that compete with specialized boat/RV-storage properties. However, if you build units specifically for boat and RV storage without smaller, traditional self-storage units, the resulting unit mix will not fit the expected self-storage lending standard. Boat and RV units are larger, deeper and higher than traditional storage sizes; this can lead to obsolescence if there is insufficient perceived demand by intended users.

Lenders will not recognize this level of improvement as creating value, and instead will only make these properties less financeable. An example of a more financeable alternative to large individual units would be a warehouse building that provides multiple indoor storage spaces; this is less specialized from a lender’s point of view.
Tell and Sell Your Story

All things considered, if you’ve found lenders unfamiliar with traditional self-storage financing, the niche subset of boat and RV storage is likely to throw them for an even bigger loop. As a result, there are even fewer lenders willing to finance these properties. Those who are active will require a strong real estate story with an excellent location and strong demand generator.

The bottom line for today’s boat/RV-storage lending is not all that different from traditional self-storage: limited financing availability at higher levels of equity, higher interest rates and a shorter amortization term. While the current environment is difficult, it’s not all bad news, as new lending sources continue to re-enter the market almost daily. This doesn’t suggest lending terms from past years will return anytime soon; but what you could likely expect is the availability of financing for non-core property types including boat and RV storage should continue to improve during the coming months.
Noel Cain is a senior vice president at The BSC Group, where he provides mortgage-brokerage and financial-consulting solutions to commercial real estate owners nationwide. He can be reached at 847.778.4661; e-mail; visit

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