Self-Storage in One Page
Self-storage is a short-duration, unit-by-unit leasing business. That creates a specific investing profile:
Pros
- Leases are usually month-to-month, so you can reprice quickly
- Demand is tied to life events (moves, divorce, downsizing, job changes), which can be resilient
- Unit mix lets you practice revenue management (raise rents on "in-demand" sizes)
Cons
- You're running a retail-like operation: marketing, phones, reviews, conversion rates
- Small leaks compound: promos, delinquency, missed rent increases
- Competition can show up fast (new supply hurts)
The simplified equation:
NOI = (Effective Rental Income + Other Income) - Operating Expenses
Value is primarily a function of NOI and cap rate, plus your financing terms.
Revenue: What Actually Hits the Bank
Physical vs Economic Occupancy
This is where most underwriting errors happen:
- Physical occupancy: % of units occupied
- Economic occupancy: revenue collected vs potential revenue at current street/achieved rates
Example: A facility showing 93% physical occupancy can still have poor economic results if delinquency is high or achieved rents are far below street rates due to aggressive promos.
Achieved vs Street Rates
Achieved rate: what tenants actually pay after promos/discounts
Street rate: advertised rate today
If street is high but achieved is flat, something is off (promos too aggressive, weak demand, or high churn).
Promos and Discounts (The Silent Killer)
Common promos:
- $1 first month
- First month free
- 50% off for 2 months
Promos can be smart, but only if you track:
- Conversion rate (calls/website visits to move-ins)
- Move-in volume
- Average length of stay
If you don't know your conversion and churn, promos are just margin giveaways.
Other Income
Other income can include admin fees, insurance commissions, late fees, and retail sales. Be conservative — some "other income" is cyclical or policy-driven.
Operating Expenses
Property Taxes (The #1 Underwriting Landmine)
If you buy a facility at a higher price than the assessor's basis, taxes may reset upward.
Rule: Always underwrite a post-sale reassessment scenario. Don't assume current taxes hold.
Payroll and Staffing Model
Two common models:
- On-site manager (sometimes with apartment)
- Remote management / kiosks / call center
Watch payroll creep, benefits, and turnover costs.
Marketing and Lead Generation
Storage is demand-capture. Expect marketing spend on Google Ads, local SEO, directory listings, call tracking, and reputation management.
If marketing is near-zero, ask how they're getting move-ins.
Repairs and Maintenance
Key items: gates and access control, cameras, doors/locks, roof, paving, drainage.
Deferred maintenance shows up as churn.
The Underwriting Model That Works for Beginners
You don't need a 20-tab spreadsheet to underwrite your first storage deal. You need a clean view of:
- 1. Current NOI (with adjustments)
- 2. Stabilized NOI (reasonable assumptions)
- 3. Financing terms and DSCR
- 4. Sensitivity to occupancy and achievable rent
Break-Even Occupancy (Simple and Powerful)
Break-even occupancy answers: "How empty can this place get before I'm in trouble?"
Basic approach:
- Break-even revenue = OpEx + Debt Service
- Break-even occupancy = Break-even revenue / Stabilized gross revenue
If break-even occupancy is 70% and you're operating at 86%, you have cushion. If break-even is 85% and the market is adding supply, you're exposed.
DSCR, Debt Yield, and LTV (The Lender Triangle)
- DSCR = NOI / Debt Service
- Debt yield = NOI / Loan Amount
- LTV = Loan / Value
Storage loans can be sensitive to stabilized assumptions. Don't "stabilize by optimism."
Want to run the numbers? Use our investment calculator to stress-test your deal assumptions.
Due Diligence: The Checklist That Saves You
Operational Data You Want
- Rent roll by unit (size, type, rent, move-in date)
- Delinquency report (aging)
- Rate increase log (last 12-24 months)
- Promo history and current promos
- Move-in/move-out reports (churn)
- Call logs and conversion metrics (if available)
Market and Competition
- Competitive set (5-10 closest facilities)
- Street rates by unit type, not just "average rate"
- New supply pipeline (permits, construction)
- Drive-time demographics and residential density
Physical Plant
- Roof condition
- Paving/drainage
- Gate/access system
- Lighting and cameras
- Door condition (bent doors = churn)
Common Mistakes to Avoid
Ignoring Economic Occupancy
"We're 93% occupied" means nothing if delinquency is high or achieved rents are far below street rates.
Not Modeling Tax Reassessment
Assuming current property taxes will hold post-sale is one of the fastest ways to destroy returns.
Permanent Promo Dependency
If your facility needs aggressive promos to stay occupied, you have a demand problem, not a marketing problem.
Underestimating New Supply Impact
A new competitor within 3 miles can significantly impact occupancy and achievable rents. Always check the permit pipeline.
Want the Full Field Guide?
Get the complete Self-Storage Basics Field Guide with downloadable checklists, underwriting worksheets, and broker questions.
Get the Guide ($5) →Related Resources
- Investment Calculator →
Run DSCR, debt yield, and break-even analysis on your deal
- DSCR vs Debt Yield vs LTV: The Underwriting Triangle →
Understand the three metrics lenders care about most
- Tools & Resources →
Curated platforms for underwriting, data, and operations