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  • Self Storage Financing
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Self-Storage Financing in Ontario: What You Need to Know

Financing a self-storage facility in Ontario requires a specialized and well-prepared approach.
Unlike traditional residential financing, self-storage lending in Ontario is based heavily on the property's current financial performance, environmental compliance, and location — not future projections or potential growth.


Whether you are acquiring an existing site, building a new facility, or refinancing an existing project, it's important to understand how lenders view the self-storage sector — and how to prepare your application for success.

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Key Things to Know About Self-Storage Financing:

1. Higher Down Payments Are Common

2. Current Net Operating Income (NOI) is the Primary Lending Basis

2. Current Net Operating Income (NOI) is the Primary Lending Basis

In Ontario, lenders generally require a 30% to 40% down payment for self-storage properties.


This expectation is based on historical lending practices and market risk assessments.


Exact requirements can vary by lender and deal structure, but lower down payment options are rare in this sector.

2. Current Net Operating Income (NOI) is the Primary Lending Basis

2. Current Net Operating Income (NOI) is the Primary Lending Basis

2. Current Net Operating Income (NOI) is the Primary Lending Basis

In Ontario, self-storage lending decisions are typically made based on the current net operating income (NOI), not future projected income.
Lenders prioritize actual occupancy, rental rates, and operating expenses to determine loan eligibility.


Most expect to see a debt service coverage ratio (DSCR) of at least 1.25 to 1.35, depending on the strength of the facility.

3.Environmental Reports Are Mandatory

2. Current Net Operating Income (NOI) is the Primary Lending Basis

3.Environmental Reports Are Mandatory

In Ontario, it is standard practice for lenders to require a Phase 1 Environmental Site Assessment (ESA) from an approved environmental firm.
If any issues are identified, a Phase 2 ESA (more detailed testing) may be required before financing can proceed.


Environmental compliance is a critical part of commercial lending risk management in this province.

4.Minimum Loan Amounts Often Apply

5.Location Heavily Impacts Financing Availability

3.Environmental Reports Are Mandatory

Many lenders in Ontario prefer self-storage financing opportunities where the loan amount exceeds $1 million.


Facilities priced too low — especially those under $1.5 million total value — may be considered too small for many commercial lending programs.
Alternative financing options may be necessary for smaller properties.

5.Location Heavily Impacts Financing Availability

5.Location Heavily Impacts Financing Availability

5.Location Heavily Impacts Financing Availability

In Ontario, lender interest is often focused on self-storage facilities located in major urban centers, fast-growing suburbs, or strong secondary markets.


Facilities in remote or rural areas may face difficulty securing financing, even with solid financial performance.


Market strength and future demand projections play an important role in a lender's underwriting decision.

6. Strong Financial Documentation is Expected

5.Location Heavily Impacts Financing Availability

5.Location Heavily Impacts Financing Availability

In Ontario, borrowers should be prepared to submit comprehensive documentation, including:


  • Three years of historical financial statements (if available)
     
  • Current rent rolls and occupancy reports
     
  • Detailed operating expense statements
     
  • Environmental site assessments
     
  • Borrower resumes, corporate profiles, and net worth statements
     

Solid, transparent documentation can make or break an application.

7. Construction Financing is a Separate, More Complex Process

7. Construction Financing is a Separate, More Complex Process

7. Construction Financing is a Separate, More Complex Process

If you are developing a new self-storage facility in Ontario, you’ll typically require construction financing first, followed by take-out financing once the project is stabilized.
Construction financing usually involves:

  • Higher equity requirements (typically 40% or more)
     
  • Feasibility studies or third-party appraisals
     
  • Pre-leasing strategies and solid exit plans
     

New developments are scrutinized closely by lenders before approvals are issued.

Self-Storage Financing in Ontario | Expert Insights | INVSTY.ca

Explore self-storage financing in Ontario: down payment expectations, environmental requirements, lender criteria, and location challenges. Connect with INVSTY.ca for guidance.

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The information provided above is for general informational purposes only and does not constitute legal, financial, or professional advice. While every effort has been made to ensure accuracy, regulations may change, and individual circumstances may vary. Readers are encouraged to seek independent legal or professional advice specific to their situation. Neither INVSTY.ca nor its representatives assume any liability for reliance on the information provided.


Copyright © 2020 INVSTY | Commercial Real Estate Agents at Royal LePage Real Estate Services Ltd., Brokerage | The trademarks REALTOR®, REALTORS®, and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

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