Knowing this borrower could pay back the loan even if the self-storage operation failed allowed the lender to make this loan despite the borrower’s relative inexperience. Making a larger down payment or pledging additional collateral will also strengthen your application.
Show lenders you’re knowledgeable. This doesn’t mean telling them about the books you’ve read or the real estate guru boot camps you’ve attended. It means coming to them fully prepared. Presenting lenders with a complete and professional loan package up front reassures them that you know what you’re doing.
Your package should include a detailed market study, pro forma and business plan. It should also include your résumé that highlights whatever experience you do have, and the résumé or brochure for the third-party management company you’ll hire. If you’re planning to make any changes or rehab the property, you need to include a budget and description of what you’re planning to do and why.
Bring in an experienced partner. If you’ve presented all of the information above and your lender is still not satisfied with your experience, you can always bring in an experienced partner. If you’ve found a good deal and you’re putting up most of the equity, you shouldn’t have trouble finding an experienced operator to join your investment.
It’s important to paint the entire picture for your lender. Don’t try to hide your inexperience; acknowledge it, and then quickly present your case using the points above. While this strategy won’t work with every lender, it gives you the best shot at obtaining a loan on your first self-storage investment.
Joseph Cacciapaglia is a commercial loan officer at BMC Capital. He arranges financing for self-storage owners and investors throughout the United States. To reach him, call 979.218.2286, or read his blog at www.usstoragenews.com .