Self-Storage Market Snapshot
Why self-storage stands apart from other CRE sectors
Industry benchmark
Broad demand base
Know your alternatives
Sources: Self Storage Association, SBA lending data
Self-storage doesn’t quite get the attention showered on apartment buildings and industrial warehouses.
But CRE investors who understand the appeal of operational control and want rents that they can adjust without waiting years for lease rollover keep coming back to this asset, and many seasoned owners never remove it from their portfolios.
In this blog, we’re taking an insider look at why self-storage CRE is one of the best investment classes available, and how you can find your first foray into this segment.
Why is self-storage so resilient?
Self-storage serves practical needs that most of us will run into at some point in our lives, sometimes more than once.
And that activity doesn’t depend on one narrow economic condition.
In stronger markets, people tend to move for new jobs, renovate or buy new homes, and grow their businesses, all of which need temporary storage.
In weaker markets, people tend to downsize and relocate for work, too, as well as combine households or store belongings during financial transitions.
It is precisely this steady demand that gives self-storage a durability that other CRE sectors can’t match.
This asset class has reached a 92% average occupancy rate, and almost four out of every 10 Americans use self-storage.
The lower day-to-day management demands of these properties (especially when compared with multifamily and retail) also appeal to investors.
What’s more, many facilities use month-to-month leases, so as an owner, you have more room to adjust rents as the market changes.
What are the main self-storage financing options?
Financing Options
4 ways to finance a self-storage acquisition
Refinances
Established borrowers
Strict requirements: Banks need strong credit, proven operating history, consistent occupancy, and clean financials. Deals that aren't fully stabilized are often turned down.
Working capital
Smaller owner-operated deals
Slow and selective: Only ~52% of applicants get approved. Expect heavy paperwork, multiple eligibility checks, and a long wait before closing.
Lease-up
Renovations
Short-term transitions
Exit plan required: Bridge lenders need to see a clear path to either permanent refinancing or a sale once the property is stabilized.
Non-stabilized assets
Conversions
Distressed purchases
Higher cost, more flexibility: Rates and fees are higher than bank loans, but you gain speed and access to deals traditional lenders won't touch.
How do conventional bank loans work for self-storage?
Traditional banks and credit unions can finance self-storage acquisitions and construction projects, as well as offer refinancing. Be prepared to show:
- Consistent occupancy
- Reliable net operating income
- Updated property records
- A solid business plan
If you’re trying to finance an existing self-storage facility, the bank will likely ask to review:
- Rent rolls
- Historical income
- Expenses
- Occupancy trends
- Insurance
- Property taxes
The disadvantage of using conventional bank loans is that your deal might be turned down if:
- Occupancy is currently low
- Financials are incomplete
- Property conditions are unusual
- You don’t have enough self-storage ownership history
Private lenders are usually more open to underwriting self-storage deals that don’t arrive perfectly stabilized.
Talk to us here at Private Capital Investors about your project.
Can you buy self-storage CRE using SBA loans?
An SBA 7(a) loan can work well if:
- You meet the requirements of the program
- You would prefer a longer repayment term and a lower down payment
The biggest downside is that these loans take a long time to get approved. Be ready to submit a lot of paperwork and go through multiple eligibility checks.
Approval rates are notoriously low, with only around 52% of applicants making it through the process.
Can you use bridge loans for self-storage financing?
A bridge loan is basically short-term financing that helps you get a self-storage property from where it is now to where it needs to be before a long-term lender will take it seriously.
Are you buying a facility that doesn’t quite meet a bank’s standards yet in terms of reported income and/or occupancy?
Maybe the location is strong, but the property still needs to be brought up to a more financeable standard with better security and climate-control upgrades.
Maybe you need to finish construction and need time to lease the units before the income looks stable enough for permanent financing. A bridge loan gives you that time.
Bridge loan lenders are not so much interested in the property’s current imperfections but in how you plan to pay the loan back.
Are you going to refinance once you have stabilized the property? Sell the facility?
Explain what will change during the bridge period and why the property should be worth more once that work is done.
Here at Private Capital Investors, we understand that a lot of self-storage deals are not ready for conventional debt right away.
We can give you the speed and structure to close the deal and improve the property.
What do lenders look for in a self-storage deal?
Self-storage lenders will want to see how the facility earns income and whether that income can keep covering the debt by looking at these underwriting factors:
- Occupancy rate – Shows how much of the facility currently generates rent
- Net operating income – Tells the lender how much income remains after operating expenses
- Market saturation – Helps determine whether the area has too much storage supply already
- Rental rates – Shows whether the facility charges below, at, or above local market levels
- Facility condition– Affects repair costs, tenant appeal, insurance, and long-term value
- Security and access – Impacts tenant trust, pricing power, and operational risk
- Management quality – Strong operations can improve collections and tenant turnover
- Location – Visibility, population growth, housing density, and traffic patterns
Is self-storage suitable for first-time CRE investors?
Self-storage can be a good first CRE investment if (1) you know what you’re buying and (2) you have studied the local market.
- Can the facility turn a profit after you pay for repairs and factor in the costs of management and debt service?
- Are nearby facilities full?
- Are rents strong enough?
- Is the property easy to see from the road?
- Does the unit mix match what people in that area need?
Lenders will also look at your experience. If this is your first self-storage deal, you may need to bring in a strong property manager and show a realistic plan.
The bottom line
Self-storage has earned its place as one of CRE’s most resilient segments, so it deserves a closer look if you want a relatively low-maintenance asset where income comes from many small tenants instead of one major lease.
Private Capital Investors can help you finance a self-storage acquisition or expansion. Use this loan request form to tell us about your project, or call us at 972-865-6206.
