Self-Storage
Loans, Required Underwriting Guidelines
Maximum Loan
To Value – 70% to 75%
Maximum Amortization – 25 years
Minimum. DCR
- 1.30x to 1.35x
Minimum Vacancy Reserve – the
greater of actual or market vacancy;
typically 7% to 15%
Minimum Replacement Reserves -
the greater of actual or $0.15
to $0.25 per square foot
Capitalization
Rate – use market-driven capitalization
rate; typically 9% to
11%
Property Condition and Characteristics
The property should be designed
and configured for ease of entry
and egress by tenants including
access by 18-wheel tractor trailers.
The reason for this is most obvious,
to deliver the occupants contents.
Lenders will look very closely
for this when underwriting self-storage
loans
Buildings of low quality construction
or poor insulating capacity are
discouraged. Foundations and driveways
should be reinforced concrete
(4” - 3,000 psi) with fiber mesh
reinforcing.
Property will
be perceived as “safe”. Entry
to the property will be through
an electronic gate with some type
of key-pad entry and exit. The
entire property will be lighted,
especially interior hallways and
outside storage, with all common
area lighting controlled by timers.
Individual units should have
quality hasps and locks. Surveillance
cameras, if provided, will be
installed at the entrance and
exit gates. Lenders want to know
that the property and the valuable
contents of the individual units
are protected while they are underwriting
self-storage loans.
The property should have adequate
traffic exposure and a desirable
Average Daily Traffic (e.g., 15,000
cars per day). Minimum acceptable
occupancy (annualized occupancy
for properties with seasonal fluctuations)
is typically 85%. A stabilized
occupancy and operating
history preferable.
For a No-Obligation Professional
Loan
Analysis for Self-Storage
Loans please fill in the form.
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