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Hard Money Loans


Self-storage facilities are commercial properties where people can rent storage units to store their personal belongings, such as furniture, clothes and other items. These facilities typically offer a range of unit sizes, security measures and amenities, such as climate control and 24-hour access.

Self-storage facilities are a relatively low-risk investment that can provide steady cash flow and long-term appreciation. They have high occupancy rates and low maintenance costs compared to other types of commercial real estate, such as retail or office buildings.

Like other self-storage facilities, RV storage facilities are commercial properties designed specifically for storing recreational vehicles (RVs) such as motorhomes, travel trailers and campers. These facilities offer large outdoor or indoor storage spaces specifically designed to accommodate a range of RV sizes.

RV storage facilities typically provide many storage options, including covered or uncovered parking spaces, enclosed units, and open-air storage areas. Some facilities also offer additional amenities such as security systems, electrical hookups, dump stations and wash bays.

With a growing demand for RV storage, real estate investors who purchase RV storage facilities have the potential for steady cash flow from rental income. Additionally, RV storage facilities are lower maintenance than other types of commercial real estate, and can provide a passive income stream.

Why Self-Storage Investors Use Hard Money Bridge Loans

Hard money loans are the fallback financing option for self-storage and RV storage investors. Most prefer to take out a bank or institutional mortgage against the property. However, there are instances when that isn’t a viable option. These include:

Bridge to Construction Loan (Land Acquisition, Plans, Permits and Entitlements)

An investor may acquire raw land to develop into a self-storage facility. The timeline from purchase to breaking ground on construction might be one to two years, depending on environmental, legal and standard turn times with the local planning department. Investors will use a hard money bridge-to-construction loan to purchase the land to work on entitlements. After the plans and permits are approved, the investor will take out a construction loan through a local bank to start building.

Bridge Loan to Purchase Newly Constructed Self-Storage Facility

Developers may build self-storage facilities and sell the newly constructed properties to end user real estate investors. If the business is brand new and not generating much revenue, the new owner may need to use a hard money bridge loan until the property is stabilized and generating the revenue required to qualify for an institutional long-term mortgage.

Cash Out for Down Payment Funds to Acquire Another Self-Storage Facility

FCTD had an investor client in the Central Valley of California who pulled cash out of their existing self-storage facility to make a down payment on a new facility less than a mile away. In this case, there were multiple offers on the facility, so the buyer needed funds quickly. They did two private money bridge loans:

  1. Cash-out refinance on the existing property to access down payment funds
  2. Purchase money bridge loan

Both loans paid off within five months as the borrower refinanced into long-term SBA loans (see below).

Property Listed For Sale – Cash-Out Refinance

If the property is listed for sale, it’s next to impossible to get a bank loan for cash-out proceeds. On the other hand, hard money loans are used for this scenario all the time. This allows the owner to pull cash out of the property to go toward another investment.

Partner Buyout – Cash-Out Refinance

Business partnerships split all the time. At FCTD, we’ve worked with dozens of businesses with investor partners who parted ways, where one partner needed funds to buy out their former partner.

1031 Exchange – Reverse Exchange

FCTD had a 1031 Exchange client who acquired a self-storage facility as part of a tax-deferred transaction. The problem was the property they were selling wasn’t getting offers — and they needed to close on the storage facility. FCTD did a cross-collateral blanket loan against both the selling and purchasing properties as part of a reverse 1031 exchange. This allowed the investor to acquire the self-storage facility before their other property sold.

RV Storage - Hard Money Lending

Financing Terms for Self-Storage Hard Money Loans

FCTD originates loans for self-storage and RV storage properties nationwide in metropolitan areas. Below are the general terms where the loans come in.

  • Loan Amounts: $250,000 to $20 million
  • Term: 6-24 Months
  • Interest Rates: 9.00% –14.00%
  • LTV / CLTV: 65% max
  • Loan Purpose: Purchase, refinance, rehab
  • Closing Costs: 2-4 Points
  • Lien Position: First or second mortgages
  • Appraisal: Full commercial appraisal or Broker Price Opinion (BPO)
  • Environmental: Case-by-case
  • Recourse: Case-by-case (most of FCTD’s lenders require recourse)

Pricing is dependent on specific loan characteristics, including borrower financial strength, liquidity, credit scores, property condition, value, purpose and loan-to-value.

Exit Strategy – Paying Off the Self Storage Hard Money Loan

Before getting into a hard money loan, the borrower needs to provide a roadmap of their exit strategy, which is usually a property sale or refinance.

Self-Storage Facility Sale

How much does the borrower intend to sell the property for and when? These details tell us how many months to write the loan. If the property is currently for sale, then we’ll discuss the listing with the broker to find out if it’s priced at or over market level..

Refinancing the Self-Storage Facility

If the investor uses the bridge loan for a short period before they take out long-term financing, FCTD will want the borrower to provide a loan commitment or Letter of Intent (LOI) from an institutional lender. Having the refinance exit strategy in motion paves the way for quicker bridge loan approval and funding.

Below are the most common self-storage refinance takeouts:

  • Construction loan
  • SBA - 7(a) & 504
  • Bank loan
  • CMBS loans

Investors in self-storage – or increasingly, popular RV storage facilities – can look to hard money loans as a back-up option when traditional financing isn’t available or is too cumbersome. Common examples include doing a cash-out refinance, acquiring a newly built facility, or buying land that needs time to be permitted before breaking ground. As with any hard money loan, the borrower needs to develop a solid exit strategy, either selling the property or refinancing after the loan term ends. For the right circumstance and buyer, a hard money loan can provide the flexible funding needed to acquire a self-storage facility.

Connect with FCTD today to learn if a self-storage hard money loan is right for you.