Can I cash-out refinance a self storage facility?
Yes, a stabilized self storage facility can be cash-out refinanced, typically up to 65 to 75 percent of appraised value through bank or agency lenders after 12 or more months of ownership, or through SBA 504 for eligible business expenses if you operate the facility. The coverage ratio, net operating income against the new debt service, generally needs to be 1.25 or better to support the full cash-out amount.
Typical terms
| Item | Typical standard |
|---|---|
| Maximum loan-to-value, cash-out | 65 to 75 percent |
| Seasoning | 12 months of ownership, sometimes less with strong justification |
| Coverage ratio | 1.25 or better on the new debt service |
| Occupancy | 80 to 85 percent physical, sustained |
| Use of proceeds, bank/agency | Unrestricted for the borrower |
| Use of proceeds, SBA 504 | Limited to eligible business expenses under program rules |
Ranges vary by lender.
How the cash-out amount is calculated
The appraiser establishes current value based on trailing income. At 70 percent of a $3 million appraised value, the new loan can be $2.1 million. If the existing debt is $1.5 million, the cash-out proceeds are roughly $600,000 minus closing costs, assuming the coverage ratio supports the new, larger loan.
What limits the cash-out amount
Coverage. Even if the loan-to-value math allows a larger loan, the lender caps it wherever net operating income no longer covers the payment by the required ratio.
Occupancy trend. A facility with occupancy trending down, even if currently stabilized, gets a more conservative valuation.
Market oversupply. New competing storage facilities nearby can pressure future rents, which lenders factor into their valuation and coverage assumptions.
SBA 504 cash-out
Under 504, cash-out refinancing is available for eligible business expenses such as payroll, rent, utilities, and other operating costs, up to program limits on the appraised value, but not for personal use of the funds. This applies only when you operate the facility as your business.
What the lender will want
- 2 to 3 years of trailing operating statements.
- Current rent roll by unit type and rate.
- A new appraisal.
- Evidence of stabilized occupancy over the trailing 12 months.
- Your personal financial statement and, for SBA, business tax returns.
A worked example
Facility purchased 3 years ago for $2 million with a $1.4 million loan, now appraised at $3.2 million after occupancy stabilized at 87 percent. A bank refinance at 70 percent loan-to-value produces a $2.24 million loan, paying off the $1.4 million balance and returning roughly $800,000 before closing costs, assuming the net operating income supports debt service at 1.25 or better on the new loan.
How CommFi handles it
Our lending desk reads the trailing operating history and current appraisal to size the maximum cash-out amount before you apply. It funds direct when it fits, and when a bank, agency, or SBA lender offers better cash-out terms for your facility, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. Zero upfront fees.
Related reading
Related questions
- Can I cash-out refinance a self storage facility?
- Yes, typically up to 65 to 75 percent of appraised value through bank or agency lenders, or through SBA 504 for eligible business expenses.
- How long do I need to own a storage facility before cash-out refinancing?
- Typically 12 months, though some lenders will consider less with strong justification for the increased value.
- What limits how much cash I can take out?
- The coverage ratio. Even if the loan-to-value math allows more, the loan is capped wherever net operating income no longer supports the payment at 1.25 or better.
- Can I use SBA cash-out refinance proceeds for anything I want?
- No. SBA 504 cash-out is limited to eligible business expenses under program rules, not personal use.
- Does occupancy trend affect my cash-out amount?
- Yes. A facility with declining occupancy, even if currently stabilized, typically gets a more conservative appraisal and lower cash-out amount.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.