Storage unit cap rates??

[Jennifer Rysdam]

I'm looking at purchasing a self-storage with 55 units of various sizes. What cap rate should I be looking for? It's not fancy with fences or security, just the units, but they are all full, so I'm thinking there's some rental growth there. It's also close to a University. Thanks!

[Michael Wagner]

Thanks for the shout out Jason!

Jennifer, Jason's comment about CAP rates is spot on. A small property like the one you describe is probably at the higher end of the range (9-10 CAP). Also, given that it is near a university, you want to be sure and look at how full it is after Sept. 1st when all the kids come back to school and take their stuff out of storage. I'm not saying that will definitely affect your occupancy rate but it might. Looking at the rent roll (to see what percentage of current occupants move in this past April/May) as well as at historical occupancy (for any trends in seasonality of occupancy) should shed plenty of light on the situation so that you can make a good decision.

Mike