Stacy Rossetti Guide to Creative Financing
When you think of investing in self-storage facilities, securing a loan from a bank might seem like the logical first step. However, my journey has proven that traditional lenders often shy away from financing complex deals, especially when the investor’s financial structure is multifaceted and involves mismanaged properties.
In this post, I’ll share how, despite these challenges, I’ve successfully bought 16 self-storage facilities without relying on banks. My story serves as a guide for both seasoned and aspiring investors looking to build their real estate portfolio using creative funding strategies. By the end of this, you’ll understand why banks won’t lend to investors like me and how you can still achieve your investment goals through owner financing, syndication, and raising private money.
Why Banks Won’t Lend to Self-Storage Investors Like Me
While real estate investments have long been seen as safe bets by banks, self-storage investments—especially when they involve underperforming or mismanaged facilities—tend to give traditional lenders pause. Here’s why:
1. Complex Financial Structure
One of the main reasons banks are hesitant to lend to me is because of my financial complexity. With over 26 businesses under my belt, I have multiple streams of income and a variety of assets. While this might seem like a plus, banks don’t see it that way. They prefer working with straightforward financial profiles where cash flow is predictable and easy to assess.
2. Mismanaged Facilities
Many of the self-storage facilities I acquire are mismanaged or underperforming. While I see this as an opportunity to increase value and boost returns, banks view it as risky. Lenders prefer properties that are already stabilized and generating consistent income. A mismanaged facility may need significant investment to become profitable, which adds another layer of risk for traditional lenders.
3. Lack of Conventional Business Models
When banks evaluate self-storage businesses, they use standard metrics like occupancy rates, historical financial performance, and the creditworthiness of the borrower. However, the type of self-storage deals I engage in doesn’t always align with these metrics. My focus is on distressed properties that require significant turnaround efforts, making it harder to qualify for conventional loans.
Despite these challenges, I’ve been able to sidestep traditional financing hurdles and successfully purchase 16 self-storage facilities. How? By tapping into creative financing methods.
3 Creative Financing Strategies That Work
Instead of letting rejection from banks halt my progress, I turned to alternative funding methods. These strategies have been pivotal in helping me acquire self-storage facilities even when traditional lenders closed their doors.
1. Owner Financing
Owner financing has been one of my go-to strategies for purchasing self-storage facilities. This method involves the seller acting as the lender, allowing you to make payments directly to them instead of through a bank. It’s a win-win situation: the seller can unload the property, and I can acquire it without having to deal with the hassle of a bank loan.
Advantages of Owner Financing:
- No need for bank approval, so you avoid all the red tape.
- Sellers are often more flexible with terms, interest rates, and down payments.
- You can negotiate creative terms that work for both parties.
Here’s a key tip: Look for motivated sellers who own mismanaged or underperforming self-storage facilities. These owners are often willing to accept owner financing because they’re eager to sell the property and might not have many other interested buyers due to the facility’s condition.
2. Syndication
Syndication allows you to pool funds from multiple investors to purchase a larger self-storage facility than you could on your own. In this setup, I usually act as the general partner (GP), handling the day-to-day operations and decision-making, while other investors (limited partners) provide the capital needed for the purchase.
Advantages of Syndication:
- Allows you to acquire larger properties that might be out of reach if you’re investing solo.
- You can leverage the expertise and resources of multiple investors.
- Reduces your financial risk since you’re not solely responsible for funding the deal.
Syndication is particularly useful when purchasing self-storage facilities that need substantial upgrades or repairs. By raising capital from a group of investors, I’m able to fund the necessary improvements while sharing the risk and rewards.
3. Raising Private Money
Another key strategy I use to finance self-storage acquisitions is raising private money from everyday connections—friends, family, colleagues, or acquaintances. Many people are looking for better returns on their money than what traditional savings accounts or stock market investments can offer, and self-storage can be an attractive option for them.
Advantages of Raising Private Money:
- You can offer investors flexible terms that align with their financial goals.
- Private lenders may be more willing to invest based on personal trust and your track record.
- You avoid the bureaucracy and slow timelines associated with traditional bank loans.
Raising private money requires you to build strong relationships and trust with your network. By showcasing your previous successes and demonstrating the potential returns of your deals, you can attract investors who are eager to partner with you.
The Power of Creative Financing in Self-Storage
By using a combination of these creative financing strategies, I’ve been able to build a thriving portfolio of self-storage facilities without ever needing a bank loan. Here’s a breakdown of why these methods are so powerful:
- Control Over Terms: When you negotiate directly with a seller (owner financing) or with private investors, you have far more flexibility in setting terms that suit your business model. You aren’t bound by rigid bank policies or traditional loan structures.
- Speed of Acquisition: Bank loans can take months to secure due to lengthy approval processes and underwriting. With creative financing, you can close deals much faster, allowing you to move quickly on opportunities.
- Expanding Your Network: By leveraging private money and syndication, you build a network of investors and partners who can help fund future deals. These relationships are invaluable as they allow you to continue scaling your investments without relying on banks.
- Greater Opportunities: Self-storage is a highly competitive industry, but many of the best deals are off-market and involve mismanaged properties. Creative financing allows you to capitalize on these opportunities when banks might turn you away.
Building Wealth with Self-Storage: What’s Next?
If you’re serious about building wealth through self-storage investments, it’s time to think beyond traditional financing. While banks can be helpful in certain situations, they aren’t the only path to success. By employing strategies like owner financing, syndication, and raising private money, you can purchase self-storage facilities and grow your portfolio without needing a single loan from a bank.
As I’ve demonstrated through my own experience, creative financing opens up doors that would otherwise be closed. You don’t need perfect credit or a traditional financial profile to get started—you just need the right strategies and the determination to make it happen.
Ready to Start Your Self-Storage Journey?
If you’re inspired by my story and want to learn more about how to get started with self-storage investments, I encourage you to explore my self storage book on Amazon. In my self storage book, I break down my journey in detail, offering insights and actionable steps for anyone looking to follow a similar path.
Grab your copy of my self-storage book on Amazon and start building your wealth today! Don’t let traditional lenders hold you back—take control of your investment journey with creative financing.
