Most owners have a number in their head, from a neighbor’s sale, a broker’s opinion, or what they need to retire on. None of those is how a buyer arrives at a price. This is how we do it, so that when you get an offer from us, or from anyone, you can see where every dollar came from.
Start with net operating income
A self-storage facility is valued as a business first and a piece of real estate second. The core number is net operating income, or NOI: the rent and fees the facility actually collects in a year, minus the cost of running it. Not the rent it would collect if every unit were full at street rate. Not the expenses you would have if you did the work yourself. Collected income, real expenses.
On the income side that means rental income after discounts and concessions, plus late fees, admin fees, tenant insurance commissions, truck rental, retail sales of locks and boxes, and anything else the facility earns. On the expense side it means property taxes, insurance, utilities, payroll and payroll taxes, management software, marketing, repairs and maintenance, snow removal or landscaping, and a management fee. A buyer will include a management fee even if you have never paid one, because someone has to run the place after you leave and that is a real cost.
Two adjustments come up in almost every deal. Property taxes usually reset at sale, so the buyer projects the new assessment rather than using your current bill. And if you have been undercharging long-term tenants, the buyer will look at the gap between in-place rents and street rates. That gap is upside, and a buyer will pay for some of it, but not all of it, because raising rents has a cost in move-outs.
Then apply a cap rate
A capitalization rate, or cap rate, converts NOI into a price. Divide the NOI by the cap rate and you have the value. The math is simple; the judgement is in the rate. A lower cap rate means a higher price and is what buyers pay for facilities that are safer and easier to own: stable occupancy, a strong market, newer buildings, climate control, good visibility, and few competitors under construction nearby. A higher cap rate means a lower price and applies to facilities with more risk or more work: a small town with limited demand, older drive-up buildings, heavy deferred maintenance, thin records, or a market where new supply is coming.
As a purely illustrative example with round numbers, not a market figure: a facility that produces $300,000 of NOI at a 7% cap rate is worth about $4.3 million; at 8% it is worth $3.75 million. That is why the cap rate conversation matters and why we tell you the rate we used in every offer, so you can push back on it.
Cap rates move with interest rates and with what larger buyers are paying, so rather than quote a figure that will be stale in six months, we tell you what we are seeing in your market when we underwrite your facility.
Occupancy: physical versus economic
Owners usually quote physical occupancy, the share of units that have a lock on them. Buyers care more about economic occupancy, the share of potential rent that is actually being collected. A facility can be 95% physically full and 75% economically full if a lot of tenants are on old rates or discounts. Neither number is wrong; they just answer different questions. Bring both if you can, and if you only track one, bring the rent roll and we will work out the other.
Expansion potential and the physical plant
A facility is worth more if it can produce more tomorrow at a reasonable cost. Unused land for another building, a paved area for boat and RV parking, an office that could become climate-controlled units, or a zoning approval you already hold all add value. So does a well-maintained site: roofs, doors, paving, gates and lighting that do not need immediate money.
The reverse is also true. Deferred maintenance does not stop a sale, but it changes the price. A buyer estimates what it will cost to fix and takes it off the top. If you know a roof or the asphalt is due, say so early; it saves both sides time, and we would rather price it fairly than find it during inspection.
Things that quietly add or subtract value
- Records. Clean management-software reports and bank-reconciled books make a facility easier to finance and easier to underwrite, which means a better price. Shoebox records mean more risk, and risk costs you.
- Length of stay. Long-tenured tenants with rate history are a strength. A rent roll where half the tenants arrived on last quarter’s promotion is not.
- Competition. We drive every competitor within a few miles and check permits for new facilities. If you know what is coming, tell us.
- Your involvement. If the facility only works because you do the marketing, maintenance and collections for free, a buyer has to replace you with paid people, and that shows up in their NOI.
What a buyer needs from you
You do not need a broker package or a glossy offering memorandum. A serious buyer can give you a real number from four things:
- 12 months of rent rolls. Ideally one per month, or at minimum the current one plus the one from a year ago. This shows us the trend: are you filling up, holding steady, or churning? Unit mix, rate per unit, move-in dates and any discounts should be on it.
- A trailing twelve months (T-12) of income and expenses. Your actual collected income and actual expenses, month by month, for the last year. A tax return or a bookkeeper's P&L works. We are looking for what the facility really produces, not a pro forma.
- The most recent property tax bill. Taxes are usually the biggest single expense and they change at sale, so we need the current assessment and rate to project them forward honestly.
- A survey or site plan. Lot lines, building footprints, setbacks and any unused land. This is how we see expansion potential and how the title company confirms what is being sold.
Have some but not all? Send what you have and we will tell you what else we need. Messy records are more common than you would think, and we can usually work from bank statements and management-software exports.
Listing versus selling direct
A listing puts your facility in front of many buyers and can, in a hot market, produce a higher headline price. It also takes months, costs a commission, tells your competitors and tenants you are selling, and often ends with a retrade after diligence. Selling direct to an operator trades some headline for certainty: a number in days and a close on a date you can plan around. We will tell you honestly if we think a listing would get you more.
The short version
Your facility is worth its real NOI divided by a cap rate that reflects its risk, plus something for what it can become, minus what it costs to fix. Everything else is negotiation. Send us the rent roll and the numbers, and we will show you ours.