By Anita Huedepohl
Since the market crash, many local and regional lenders are calling in self-storage notes, even those that have performed perfectly for 10 or 15 years without any late payments. The typical call a self-storage lender receives is from a disillusioned bank customer who just received “the letter” from his local loan officer, the one informing him his loan is no longer needed and he must find a new home for it within 30 to 60 days.
Banks are liquidating commercial loans based on pressure from the federal government to empty their books heavy with mortgage debt in favor of stronger depository relationships. This leaves most borrowers out in the cold, not knowing where to go, since the vast majority of banks are following suit.
What makes an underwriter approve a self-storage loan package? Some facility owners and investors have spent years, sometimes decades, creating the ability to walk into their local bank and sign on the dotted line for millions of dollars based on the relationship they’ve built. Since you may not be familiar with all of the nuts and bolts that make up an appealing loan package, now’s the perfect time to learn about the loan process and how prepare all the necessary documentation.
A loan package must fit a lending institution’s present appetite, meaning it must appeal to the initial underwriter and those beyond. It must also pass a board’s approval for final lending authorization.
A lender is looking for a few key things: good credit, debt-service coverage ratio, strong net operating income, and a seasoned borrower with a resume that speaks volumes about his experience. Translated, this means they're looking for someone who will consistently make that monthly payment. Ask yourself, would you loan money to you?
Make a Good Impression
The first thing an underwriter looks for is a clean, well-kept property. The borrower must provide clear photos of the entry, alleys, lots, cell towers (if any), interior doors, long shots of the alley, and two-way street views leading up to the entry. If the photos aren’t appealing to you, they won’t appeal to the underwriter. First impressions are lasting, so make it count.