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Grrrrrr...Waking the monster


monstore garages

Hidden Tax Beneifts of Storage Condominiums (Cost Segregation)

Before diving into Storage Condominium ownership, there are some little known tax benefits lurking out there that are fairly new and worth exploring. Cost-segregation is notable.

Essentially, a cost-segregation analysis allows an owner to depreciate certain types of building components and improvements over a shorter depreciation recovery period than the typical 39 years generally used for self-storage facilities. For instance, most site work (paving, curbing, fencing, lighting, retaining walls, storm drainage and other utilities) can now be depreciated over 15 years. Many systems, such as closed-circuit television, controlled access gates, computerized locking or alarm, can be depreciated over five to seven years.

You're probably wondering, "Why hasn't my accountant told me about this?" First, the concept of cost-segregation is a relatively new one. Second, it requires an engineering skill set and expertise most accounting firms don't have have in-house, such as being able to read construction drawings, and knowing construction systems, cost estimating and how various types of IRS asset classifications relate to existing construction and use. A cost-segregation study does not replace the accountant's role in determining taxes or preparing tax documents and forms. It provides information to the accountant so the proper IRS forms may be prepared and the correct, allowable depreciation calculated.

The following chart is courtesy of my friends at


monstore garagesn lender

First Republic Bank
"Featured Lender - New Contact Info"

First Republic Bank is our construction lender for Monstore Garages. They have several lending progams available for our clients. See below for a summary of their terms.

  • Loan term: 10y with amortization up to 20 years
  • Rate: Prime +1.25% to +2.50% (variable)
  • Fees: 1% origination, plus closing costs
  • Collateral: 1st trust deed
Contact info:
monstore garages

Home Equity Line of Credit (HELOC)

If you desire 100% financing and some tax deductability at the same time, a HELOC may be what you are looking for. Using the equity in your home, you can borrow the necessary funds to purchase your storage condominium. Often you can borrow enough to fund the entire purchase.

A home equity line of credit (often called HELOC, pronounced Hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house (akin to a second mortgage).

Further, (subject to some restrictions), you can deduct the interest portion of your loan from your taxes, where with traditional loans, you cannot (personal use, not business use.)

Here is a link to get you started, but almost all major banks provide this service. Shop around as the rates vary quite a bit. --

monstore garages

SBA 504 and 7(a)Commercial Loans
Low as 10% Down, 25 Year Amortizations - New Contact Info

SBA 504 commercial loans are the darlings of comercial loans. The down payment can be as low as 10%, with long amortizations of up to 25 years, making the monthly payments very low.

The lender listed below has extensive experience lending to owners of Storage Condominiums. We have other lenders listed within this article.

How 504 Loan Funds May Be Used The use of proceeds from 504 Loans must be used for fixed assets (and certain soft costs), including:
  • The purchase of existing buildings;
  • The purchase of land and land improvements, including grading, street improvements, utilities, parking lots and landscaping;
  • The construction of new facilities or modernizing, renovating or converting existing facilities;
  • The purchase of long-term machinery* ; or
  • The refinancing of debt in connection with an expansion of the business through new or renovated facilities or equipment*.
*Note: The 504 Program cannot be used for working capital or inventory, consolidating or repaying debt, or refinancing (except for projects with an expansion component or that meet the temporary refinancing provisions of the Small Business Jobs Act of 2010).

The 504 Loan program offers small businesses both immediate and long-term benefits, so business owners can focus on growing their business. Some of the top-level benefits include:
  • 90% financing;
  • Longer loan amortizations, no balloon payments;
  • Fixed-rate interest rates; and
  • Savings that result in improved cash flow for small businesses.
504 Loan Eligibility

To be eligible for a 504 Loan, your business must be operated for profit and fall within the size standards set by the SBA. Under the 504 Program, a business qualifies if it has a tangible net worth not more than $15 million, and an average net income of $5 million or less after federal income taxes for the preceding two years prior to application.

Loans cannot be made to businesses engaged in nonprofit, passive or speculative activities. For additional information on eligibility criteria and loan application requirements, small business and lenders are encouraged to contact a Certified Development Company in their area.

Here is our recomended SBA Contacts -

The lender listed below has extensive experience lending to owers of Storage Condominiums. While the office is in Santa Cruz, heis located in Corona.

Here are a few other SBA 504 sources to help get you started.