Please Help - Self Storage Deal Analyze

[Arya Chen]

I’m working on analyzing the following self-storage properties and wanted to see if my approach makes sense. I'm still learning the ropes, so any suggestions or advice would be greatly appreciated!

For these properties, I've calculated the Net Operating Income (NOI) based on 100% occupancy, then subtracted approximately 33% for expenses.

Storage 1

• Unit Number: 105
• Size of Land: Litter under 1acre, probably not expandable
• Population: about 34K within 3 miles,
• Population Growth: 2-5% per year
• Traffic Count: about 4K
• Rent at 100%: $110K
• Projected NOI after deducting 33%: $73.7K
• Asking: $900K
• Offer price: $730-780K?

Storage 2

• Unit Number: 145
• Size of Land: about 0.6acre, not expandable
• Population: about 900K within 3 miles
• Population Growth: declining
• Rent at 100%: 98K
• Projected NOI: 65K
• Asking: 750K
• Offer price: 650-680K?

Storage 3

• Unit Number: 158
• Size of Land: 1.3acre
• Location: close to home, can actually manage from time to time
• Population: about 38K within 3 miles
• Population Growth: Neutral
• Rent at 100%: don’t have exact layout but nearby 5x5 is $25, 5x10 is $45, 10x10 is $65
• Projected NOI: guessing 100K to 120K?
• Capita: 23
• Asking: unpriced
• Offer price: 10 times the 100k-120k? But the capita is high in this location though, how to balance this?

Am I crazy or most of the time the asking price is wayyyy too high? 

[Peter P.]

Hi Arya, some feedback on some of your assumptions in your analysis. Your target occupancy of 100% and expense ratio of 33% is a bit optimistic. The national average for occupancy has fallen to 87% (2023). If you're new to this asset class you might want to use 85%. Expense ratios vary dramatically depending on project size, age and other factors, but basic rule of thumb is the smaller the project the higher the expense ratio's, using a 33% expense ratio for a small facility (less than 150 units) is optimistic, smaller facilities are probably closer to 40%. You are not crazy :) cap rates on storage got pretty crazy in the last decade as the space has become crowded and money was cheap, starting to see some reversal of that now, but its tough to find deals at a true 10 cap (10 x NOI or NOI / .10). Hope this helps!