Bank Loans for Self-Storage Properties

Financing a commercial real estate investment with the local bank may be an industry staple, but every bank has its own niches, especially when you factor in the differences between community banks, credit unions, regional banks, and national institutions. Some banks may be perfectly willing to offer fully amortizing loans, while others may cap amortizations at 20 years. Your preferred bank may cap leverage at 70% whereas one a block away, a bank you never thought twice about, may be comfortable financing properties at 80% leverage. Bank loans fill the gaps that stricter loan programs may not be able to.

The real beauty of seeking bank financing is finding a loan that is best suited for your unique requirements, and this is typically done more easily with an intermediary. Need a floating-rate bridge loan? A commercial mortgage with no prepayment penalty like yield maintenance or defeasance? Perhaps you have some documentation constraints. For any of the aforementioned reasons, nothing beats working with an intermediary that has hundreds of banking relationships. An intermediary that can leverage those relationships to your benefit. The flexibility of bank loan options make them worthy of substantial consideration by any investor, even when they qualify for some of the more popular agency alternatives.

2022 Commercial Mortgage Terms for Bank Loans

• Minimum Loan: $2 million
• Term: Up to 30 years
• Leverage: Up to 75% LTV
• Amortization: Up to 30 years
• Minimum DSCR: 1.20x
• Interest-Only Option: Partial-term and full-term available

Advantages

• Smaller loan amounts can be negotiated
• Ability to finance troubled assets (though borrowers must have strong supporting financials)
• Faster closing time compared to agency options
• Fixed-rate and floating-rate interest options

Disadvantages

• Stricter down payment, income verification and credit score requirements
• Loans are typically recourse
• Shorter amortizations and shorter fixed periods than CMBS and agency loans
• Stricter cash-out refinance requirements.

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