How to Buy a Forclosed Self-Storage Facility From a Bank
It comes as no surprise that there are foreclosed properties of every description sitting with U.S. banks at the moment, as they attempt to dispose of them in an orderly manner. A big portion of these failed deals are self-storage facilities. Some of these are among the best self-storage facility deals available in the U.S. at the moment. But you have to know how to approach them. So how do you buy a foreclosed self-storage facility from a bank?
Understand the difference between buying a non-performing note and buying a foreclosed property.
The first step in buying a self-storage facility from a bank is understanding exactly what the bank is offering for sale. Often, the bank wants to sell the non-performing mortgage on the property, instead of the self-storage facility itself. So what is the difference? Actually, a lot. When you buy a non-performing note on a self-storage facility, you are stepping into the bank’s shoes – and inherit similar problems. Just because you ask the borrower to give back the property, doesn’t mean they will necessarily do so. It is also possible that the borrower will declare bankruptcy or take some other legal maneuver to block the foreclosure. So when you buy a note – unlike buying a property – you may end up with your money tied up for years with no income while the foreclosure works its way through the court system. Remember the recent problems that lenders had with foreclosing on homes due to “robo-signing”? These are the type of reasons that buying a note is never as good an idea as buying a property outright.
So your first question when talking to a bank is exactly what they are selling; a non-performing note or the actual foreclosed property.
Be ready to move quickly when a deal is offered to you.
When a bank is interested in selling a foreclosed property, one of the prime motivators in their selection of the correct buyer is the speed in which they buyer can close. Banks want to hear the words “I can close on this property within sixty days, and begin due diligence tomorrow” not “I’ll need to find some investors as fast as I can, and get back to you in a few weeks”. In other words, if you want to play the game of buying properties from banks, you better have all your ducks in a row before you begin the process. Not only will you need to line up your capital for a down-payment, you will also need to line up your financing sources.
Speed is of the essence when working with banks to buy foreclosed self-storage facilities.
Understand the limitations of attracting traditional bank debt to foreclosed properties.
Most banks have a preference for deals that come with at least three years of financial statements supporting the value of the property, as well as plenty of time to make a decision and put together the legal documents. The average foreclosed self-storage facility comes with no prior period financial statements and no time to spare in completing the loan process. In addition, it often scares a lender to consider a property that already has the stigma of “failure”.
The moral is that you need to make sure that the lender you are considering truly understands the challenge of financing a foreclosed self-storage facility, and is up to the challenge.
Be extremely easy to sell to.
Bankers are a stuffy group that like to be catered to. If you want to be at the top of your game, you’ll want to be one part buyer and one part concierge. It is up to you to keep the process running smoothly, and to make sure that everything needed has been supplied – even if it is not your responsibility. You have to always remember that the bank employee you are working with does not receive any financial gain from the transaction and, therefore, has no sense of urgency or firm resolve to get the deal done.
So if you want to make sure that you end up buying the property, you have to be in charge.
Conclusion
Buying a foreclosed self-storage facility from a bank represents some of the best bargains you will ever find. It is worth learning and perfecting the process if you want to garner some of the highest returns in self-storage investing.
Frank Rolf is regarded as one of the leading Manufactured Housing Industry experts. Frank is involved with leading websites on Mobile Home Parks and Mobile Homes for Sale.