Self storage has emerged as one of the most resilient commercial real estate asset classes, with the market projected to grow from $68.31 billion in 2025 to $73.54 billion in 2026. Whether you are looking to acquire your first facility, refinance an existing property, or develop a new self storage project, understanding your financing options is critical to success.
This comprehensive guide covers everything you need to know about self storage financing in 2026, including loan types, current rates, qualification requirements, and strategies to maximize your investment returns.
Self Storage Market at a Glance 2026
$73.5B
Market Size 2026
7.7%
Annual Growth Rate
85-90%
Typical Occupancy
6.17%
Current Loan Rates
What Is Self Storage Financing and How Does It Work?
Self storage financing refers to commercial loans specifically designed for the acquisition, construction, refinancing, or expansion of self storage facilities. Unlike residential mortgages, these loans are underwritten based primarily on the property income-generating potential rather than the borrower personal income alone.
Lenders evaluate self storage loans by analyzing the facility net operating income (NOI), occupancy rates, market competition, and the borrower experience in the industry. The debt service coverage ratio (DSCR) - which measures how much cash flow is available to cover loan payments - is a critical metric in this process.
Most self storage loans require a minimum DSCR of 1.20 to 1.25, meaning the property must generate 20-25% more income than needed to cover debt payments. You can use our DSCR calculator to evaluate whether a potential acquisition meets these thresholds.
Key Characteristics of Self Storage Loans
Self storage financing differs from other commercial real estate loans in several important ways:
- Lower default rates - Self storage historically has one of the lowest default rates among CRE asset classes
- Stable cash flows - Monthly rental income from dozens or hundreds of tenants creates diversified revenue
- Shorter lease terms - Month-to-month leases allow for faster rent adjustments to market conditions
- Lower management intensity - Compared to multifamily or retail, storage facilities require less hands-on management
These characteristics make self storage an attractive asset class for lenders, often resulting in more favorable loan terms compared to other commercial property types.
Why Lenders Favor Self Storage
Self storage has one of the lowest default rates among commercial real estate asset classes. The combination of diversified tenant bases, month-to-month leases, and stable cash flows makes these properties attractive to lenders.
What Are the Best Loan Options for Self Storage Facilities?
Several financing options are available for self storage investors in 2026, each with distinct advantages depending on your situation, experience level, and investment goals.
SBA 7(a) Loans
The SBA 7(a) program is one of the most popular financing options for self storage facilities, particularly for owner-operators and first-time investors. These government-backed loans offer several advantages:
- Loan amounts up to $5 million
- Terms up to 25 years
- Down payments as low as 10-15%
- Interest rates tied to WSJ Prime rate
SBA 7(a) loans can be used for acquisition, refinancing, construction, and working capital. The longer terms and lower down payments make them ideal for investors who want to preserve capital. Learn more about this option in our detailed SBA loan for commercial real estate guide.
SBA 504 Loans
The SBA 504 program offers even lower rates than 7(a) loans but comes with stricter requirements and longer processing times. Key features include:
- Loan amounts typically up to $15 million
- Fixed interest rates for 20-25 year terms
- Down payments as low as 10%
- Owner-occupancy requirements apply
SBA 504 loans are structured with a bank providing 50% of the financing, a Certified Development Company (CDC) providing 40%, and the borrower contributing 10%. This structure results in some of the lowest rates available for self storage financing. For a deeper dive, check out our SBA 504 loan guide.
SBA 7(a) vs SBA 504 Loans for Self Storage
SBA 7(a)
- Up to $5M loan amount
- Faster closing 60-90 days
- More flexible use of funds
- Working capital included
- Variable interest rates
- Higher rates than 504
- Personal guarantee required
SBA 504
- Up to $15M loan amount
- Fixed rates lowest available
- Longer terms 20-25 years
- Only 10% down payment
- Slower closing process
- Owner-occupancy required
- More paperwork
- Two lender structure
Conventional Bank Loans
Traditional bank loans remain a popular choice for self storage financing, offering flexibility and relationship-based lending. In 2026, banks are actively competing for self storage deals due to the asset class strong performance.
Typical terms include 5-7 year terms with 20-25 year amortization, interest rates in the mid-6% range over SOFR, LTV ratios of 65-75%, and 3 years of interest-only payments available from some lenders.
Banks like Wells Fargo, Bank OZK, Fulton Bank, Banc of California, Axos Bank, and Fidelity Bank are among the active lenders in the self storage space.
CMBS and Conduit Loans
Commercial mortgage-backed securities (CMBS) loans, also called conduit loans, are ideal for larger, stabilized self storage facilities. These loans are pooled together and sold to investors as bonds.
Key features include loan amounts typically $2 million and above, interest rates ranging from 6.75% to 8%, maximum LTV of 75%, fixed rates for 5, 7, or 10 year terms, and non-recourse options available.
CMBS lenders including Wells Fargo, Bank of America, Barclays, Citi, Goldman Sachs, and Morgan Stanley are actively financing self storage properties in 2026. These loans work best for stabilized properties with strong occupancy and consistent cash flows.
Bridge Loans
Bridge loans provide short-term financing for self storage acquisitions that require renovations, lease-up, or operational improvements before qualifying for permanent financing.
Bridge loan characteristics include terms of 12-36 months, higher interest rates (typically 8-12%), interest-only payments, LTV up to 75-80%, and flexible underwriting for transitional properties.
If you are acquiring a facility that needs improvements or has below-market occupancy, a bridge loan can provide the capital needed while you stabilize the property.
Self Storage Loan Types Comparison
| Loan Type | Loan Amount | Interest Rate | Term | LTV | Best For |
|---|---|---|---|---|---|
| SBA 7(a) | Up to $5M | Prime + 2.25-2.75% | Up to 25 years | Up to 90% | First-time investors |
| SBA 504 | Up to $15M | 6.5-7.5% fixed | 20-25 years | Up to 90% | Owner-operators |
| Bank Loan | $500K-$25M+ | SOFR + 2.5-3.5% | 5-7 years | 65-75% | Experienced investors |
| CMBS | $2M+ | 6.75-8% | 5-10 years | Up to 75% | Stabilized properties |
| Bridge | $1M-$50M+ | 8-12% | 12-36 months | Up to 80% | Value-add deals |
What Are Current Self Storage Loan Rates in 2026?
Self storage loan rates in 2026 have stabilized as the market adjusts to the current interest rate environment. Here is what you can expect across different loan types:
Current Self Storage Loan Rates January 2026
6.17%
Best Available Rate
6.5-7.5%
Bank Loans
6.75-8%
CMBS Loans
8-12%
Bridge Loans
Current rate ranges by loan type:
- SBA 7(a) loans: Prime + 2.25% to 2.75% (approximately 9.75-10.25%)
- SBA 504 loans: 6.5% to 7.5% fixed
- Bank loans: SOFR + 2.5% to 3.5% (approximately 6.5% to 7.5%)
- CMBS loans: 6.75% to 8%
- Bridge loans: 8% to 12%
- Life company loans: 5.5% to 6.5%
According to Select Commercial, self storage loan rates were at 6.17% as of January 2026 for well-qualified borrowers with stabilized properties. The strongest assets in primary markets can achieve rates in the mid-5% to mid-6% range.
For a detailed breakdown of how commercial loan rates are determined and what factors affect your rate, see our guide on commercial loan interest rates.
What Do Lenders Require to Qualify for Self Storage Financing?
Understanding lender requirements is essential for a successful loan application. While specific requirements vary by lender and loan type, here are the general criteria you will need to meet.
Self Storage Loan Qualification Requirements
| Requirement | Minimum | Preferred | Notes |
|---|---|---|---|
| Credit Score | 680 | 720+ | Higher scores get better rates |
| DSCR | 1.20x | 1.35x+ | Property cash flow vs debt payments |
| LTV | 75% | 65% | Lower LTV means better terms |
| Occupancy | 85% | 90%+ | For stabilized properties |
| Net Worth | Equals Loan amount | 1.5x loan | Liquid and total assets |
| Reserves | 6 months | 12 months | Debt service reserves |
Property Requirements
Most lenders require a minimum stabilized occupancy of 85% for permanent financing. Properties below this threshold may need bridge financing first. Facilities should be well-maintained with functional security systems, adequate lighting, and proper drainage. Climate-controlled units are viewed favorably. Lenders also evaluate the competitive landscape, population density, median household income, and new supply in the market.
Borrower Requirements
Credit score minimum is 680 for most conventional loans, though SBA loans may accept lower scores with compensating factors. Net worth should typically equal or exceed the loan amount requested. Most lenders require 6-12 months of debt service in liquid reserves. First-time investors may face additional scrutiny but can qualify with strong financials and property management partnerships.
For a complete overview of what lenders look for, review our commercial real estate loan requirements guide.
Financial Requirements
Debt Service Coverage Ratio (DSCR) minimum is 1.20x to 1.25x for most loans. Loan-to-Value (LTV) maximum is 75% for most loan types, with some lenders going to 80% for strong borrowers. Debt Yield minimum of 8-10% is required by many lenders.
Use our commercial loan calculator to estimate your loan amount and monthly payments based on the property financials.
Self Storage Loan Application Process
Pre-Qualification
Submit basic property and borrower information for initial assessment and rate quote
Application
Complete full loan application with financials tax returns and property documents
Underwriting
Lender reviews all documentation orders appraisal and verifies property income
Approval
Receive loan commitment with terms conditions and closing requirements
Closing
Sign loan documents fund the loan and complete property transfer
How Much Does It Cost to Build or Buy a Self Storage Facility?
Understanding the cost structure is essential for determining how much financing you will need and whether a deal makes financial sense.
Acquisition Costs
Existing self storage facilities typically trade at the following price points:
- Primary markets: $150-$200+ per square foot
- Secondary markets: $100-$150 per square foot
- Tertiary markets: $60-$100 per square foot
After peaking at $174 per square foot in Q1 2023, self storage valuations have declined approximately 12% to an average of $159 per square foot as of Q2 2025, creating potential buying opportunities.
Construction Costs
Building a new self storage facility involves several cost components including land acquisition (highly variable by location), site preparation ($2-$5 per square foot), building construction ($35-$65 per square foot for drive-up units), climate-controlled units ($50-$80 per square foot), security and technology ($50,000-$150,000), and soft costs (15-20% of hard costs).
For ground-up development, construction loans provide the capital needed during the building phase, typically converting to permanent financing upon stabilization.
Self Storage Facility Costs by Market Type
| Cost Component | Primary Markets | Secondary Markets | Tertiary Markets |
|---|---|---|---|
| Acquisition per SF | $150-$200+ | $100-$150 | $60-$100 |
| Construction Drive-up | $45-$65 per SF | $35-$55 per SF | $30-$45 per SF |
| Construction Climate | $60-$80 per SF | $50-$70 per SF | $45-$60 per SF |
| Monthly Rent per SF | $15-$25 | $10-$18 | $8-$15 |
| Cap Rates | 4.5-5.5% | 5.5-7% | 7-8%+ |
What Returns Can You Expect from Self Storage Investments?
Self storage has delivered strong returns for investors, though returns vary based on market conditions, property quality, and operational efficiency.
Cap Rates
Self storage cap rates have stabilized in 2025-2026 after reaching a low of 5.0% in Q4 2022:
- Primary markets (Class A): 4.5% to 5.5%
- Secondary markets: 5.5% to 7%
- Tertiary markets: 7% to 8%+
- Value-add opportunities: 7% to 10%
According to Cushman and Wakefield investor survey, 56% of self storage experts expect little to no change in cap rates over the next 12 months, suggesting market stability.
Cash-on-Cash Returns
Typical cash-on-cash returns for self storage investments range from 8% to 12% for stabilized properties, 12% to 18% for value-add opportunities, and 15% to 25%+ for development projects (with higher risk).
For example, if you invest $400,000 as a down payment and receive $48,000 in annual cash flow after expenses and debt service, your cash-on-cash return is 12%.
Value-Add Strategies
Several strategies can boost returns on self storage investments. Adding climate-controlled units can increase NOI by up to 25%. Implementing technology (smart locks, online reservations) reduces operational costs. Raising rents to market on below-market facilities and adding ancillary income through tenant protection programs, moving supplies, and truck rentals also boost returns.
Self Storage Investment Returns
5-7%
Stabilized Cap Rates
8-12%
Cash-on-Cash Returns
25%
NOI Boost from Climate Units
12%
Avg Value Decline from Peak
How Do You Choose the Right Self Storage Financing Option?
Selecting the best financing option depends on your specific situation. Consider these factors when evaluating your choices:
For First-Time Investors
If you are new to self storage investing, consider SBA 7(a) or 504 loans for lower down payments and longer terms, partnership with experienced operators to strengthen your application, starting with a smaller facility (under $5 million) to build experience, and focusing on stabilized properties rather than development or turnarounds.
For Experienced Investors
With a track record in self storage, you may access better rates and terms from conventional lenders, CMBS loans for larger acquisitions, portfolio financing for multiple properties, and bridge loans for value-add opportunities.
For Development Projects
If you are building a new facility, construction-to-permanent loans simplify the process. SBA 504 loans can finance owner-occupied development. Bank construction loans typically offer 75% LTC, and debt funds may provide higher leverage (75%+ LTC).
Choosing Your Financing Path
First-Time Investor
- SBA loans offer low down payments
- Longer terms preserve cash flow
- Flexible qualification criteria
- Can partner with experienced operators
- May need larger reserves
- Limited to smaller deals initially
- Longer approval process
Experienced Investor
- Access to better rates
- CMBS and portfolio options
- Bridge loans for value-add
- Higher leverage available
- Higher down payment requirements
- More documentation needed
- Recourse requirements vary
What Are the Top Self Storage Markets in 2026?
Location significantly impacts financing terms and investment returns. Here are key market considerations for 2026:
Strong Markets for Investment
Markets with favorable supply-demand dynamics include areas with population growth and limited new construction, markets where occupancy exceeds 90%, and regions with strong employment and household formation.
Markets to Watch Carefully
Exercise caution in markets with high construction pipelines (over 5% of existing inventory), declining rents and occupancy, and oversupply from recent development.
The national under-construction pipeline totaled 54.3 million net rentable square feet in December 2025, accounting for 2.7% of existing inventory. Some local markets have significantly higher development activity.
2026 Market Outlook
According to industry surveys 94.1% of lenders are still targeting self storage acquisitions and 88.2% remain open to ground-up development. With 56% of experts expecting stable cap rates 2026 presents favorable conditions for both acquisition and refinancing strategies.
Ready to Finance Your Self Storage Investment?
Self storage financing offers multiple pathways to investment success, whether you are acquiring an existing facility, refinancing to better terms, or developing a new project. The key is matching the right loan product to your situation and investment goals.
With rates stabilizing in 2026 and lender confidence returning to the market, now may be an opportune time to pursue self storage investments. The asset class continues to demonstrate strong fundamentals with low default rates, stable occupancy, and favorable lending terms compared to other commercial property types.
Ready to explore your self storage financing options? Contact our team to discuss your project. Our experienced advisors can help you navigate the financing landscape and structure the optimal loan for your investment.
Get Expert Self Storage Financing Guidance
Navigating the self storage financing landscape requires expertise. Our team specializes in matching investors with the optimal loan products for their specific situations. Contact us today to discuss your self storage investment goals and explore your financing options.
Frequently Asked Questions About Self Storage Financing
What credit score do I need for a self storage loan?
Most conventional self storage loans require a minimum credit score of 680. SBA loans may accept lower scores with compensating factors such as strong cash reserves, significant collateral, or an experienced management team. Higher credit scores typically result in better rates and terms.
Can I get financing for a self storage facility with no experience?
Yes, first-time investors can obtain self storage financing, though you may face additional requirements. Lenders often want to see partnerships with experienced property managers, strong personal financials, and stabilized properties for first-time buyers. SBA loans are often the best option for new investors due to their more flexible qualification criteria.
How long does it take to close a self storage loan?
Closing timelines vary by loan type. Bank loans typically close in 45-60 days, SBA loans in 60-90 days, and CMBS loans in 60-75 days. Bridge loans can close faster, sometimes in 2-3 weeks with experienced borrowers and straightforward deals.
What down payment is required for self storage financing?
Down payment requirements typically range from 10% for SBA loans to 25-35% for conventional and CMBS loans. The exact requirement depends on the loan program, property quality, borrower experience, and market conditions. Stronger borrowers and properties may qualify for lower down payments.
Is self storage a good investment in 2026?
Self storage continues to be an attractive investment in 2026 due to stable occupancy rates averaging 85-90%, low default rates, and growing demand driven by e-commerce, urbanization, and life transitions. The market has shown resilience through economic cycles and offers favorable risk-adjusted returns compared to other commercial property types.
Have more questions about self storage financing? Schedule a consultation with our team to discuss your specific situation and investment goals.
Clearhouse Lending specializes in commercial real estate financing including self storage facilities. With access to multiple lending sources and deep industry expertise, we help investors secure optimal financing for their projects. Get in touch today to learn how we can help with your next self storage investment.