Quick Self-Storage Deal Analysis Using ‘Back of the Napkin’ Math

One of the most critical skills in self-storage investing is being able to quickly evaluate a deal to determine whether it’s worth pursuing. While full underwriting is essential before purchasing a facility, sometimes you just need to know—on the spot—whether what the seller is asking for is even in the ballpark. At StorageLife, our self-storage mentorship program teaches you how to make these calls fast and confidently using what we call "back of the napkin math."

This quick evaluation method is perfect for situations when a seller gives you either their asking price or gross income but not both. With just a few numbers and basic math, you can determine whether the opportunity is worth a deeper look or whether it’s time to move on.

The First Step: Getting the Right Info

When evaluating a storage facility, you need at least one of two things from the seller:

1. Their asking price.

2. The facility's gross annual revenue.

   
   

Preferably, you want both. But if the seller says something like, “What would you offer me?”—you turn the question around:

"In order for me to make a fair and informed offer, I need to know how much your facility makes annually."

If they respond with monthly numbers, like "I made $16,000 last month," ask for gross annual revenue instead. Monthly revenue can fluctuate, and you want a trailing 12 months (T12) snapshot to evaluate performance more accurately.

Step Two: Estimate Net Operating Income (NOI)

Once you have the gross annual revenue—let’s say $400,000—you’ll estimate the Net Operating Income (NOI) by applying an expense ratio. A good rule of thumb is a 35% expense ratio. So you’d multiply the gross revenue by 0.65 (i.e., 100% - 35%) to get the NOI.

$400,000 x 0.65 = $260,000 NOI

This $260,000 represents the income the property is generating before mortgage payments, taxes, and depreciation—essentially the money you’d use to determine value using cap rates.

What’s a Cap Rate?

A cap rate, or capitalization rate, is a market-driven percentage used to evaluate the value of an income-producing property. It’s an important metric in self-storage investing, and it varies by region, asset class, and even interest rate conditions. In today’s market with higher interest rates, cap rates are typically higher too.

A facility’s value = NOI / Cap Rate

Let’s break it down:

$260,000 / 0.06 (6% cap rate) = $4,333,333

$260,000 / 0.07 (7% cap rate) = $3,714,285

$260,000 / 0.08 (8% cap rate) = $3,250,000

So based on these numbers, the seller's facility could be worth anywhere from $3.25 million to $4.33 million, depending on the cap rate you’re applying.

Give a Price Range, Not Just a Price

One trick we teach at StorageLife, especially for those new to how to start a self-storage business, is to give a price range instead of a hard number. This opens the conversation and avoids turning off a seller.

For example:

"Based on the $400,000 annual revenue you mentioned, I’d estimate the value to be somewhere between $3.25 million and $4.33 million, depending on financing terms and whether you’d consider seller financing."

This range starts the negotiation while giving you wiggle room.

Reverse Engineering a Seller’s Asking Price

Sometimes, a seller will throw out a price but not their revenue. Here’s how you check if their asking price makes sense.

Let’s say they ask for $6 million. You then get their annual revenue—again, let’s assume $400,000—and apply the same 35% expense ratio.

$400,000 x 0.65 = $260,000 NOI

$260,000 / $6,000,000 = 4.3% cap rate

This is a low cap rate in today’s market—too low to make sense unless the facility has tons of upside potential (value-add opportunities). In most cases, this tells you the seller is overpriced.

You can now respond:

"Based on a $260,000 NOI, a $6 million price tag implies a cap rate of just 4.3%. I’m typically looking to purchase around a 7% cap, which puts me closer to $3.7 million."

This makes your position clear and based on logic, not emotion. If the seller is motivated, they’ll continue the conversation. If not, you haven’t wasted your time.

Tools to Make it Easier

At StorageLife, we equip our virtual assistants and students with a proprietary calculator that allows them to plug in gross revenue and instantly generate offer ranges at different cap rates (usually between 7% and 9%). This is the perfect tool for those who are serious about scaling in self-storage as an investment.

You don’t have to be a math whiz or financial analyst to make smart offers. You just need the right training and tools, which is what our self-storage investing course and self-storage mastermind are designed to provide.

Why This Method Works

Using this simple math, you can:

• Evaluate deals faster

• Make offers quicker

• Understand seller expectations

• Filter out unrealistic opportunities

• Identify strong candidates for deeper underwriting

In the competitive world of self-storage investing, speed and clarity are everything. Sellers get tons of calls and inquiries, but until you talk numbers, they won’t take you seriously. With this method, you can confidently put together offer ranges and stand out from the crowd.

Words of Caution

While this method is powerful, it’s not the final step. A full underwriting will require:

• Rent roll analysis

• Occupancy rates

• Expense breakdown

• Competitor surveys

• Market trends

This is where understanding the risks of self-storage investing becomes vital. A property may look good on paper but fall apart under deeper scrutiny. Always move to full underwriting before finalizing any deal.

Final Thoughts

Mastering back-of-the-napkin math is a foundational skill in your journey of learning how to invest in self-storage. Whether you’re working your first deal or your fiftieth, this method helps you filter leads fast, negotiate better, and make smarter decisions.

At StorageLife, our mission is to equip investors with the tools, training, and community needed to thrive in this space. From deal calculators to deal reviews, from group calls to one-on-one guidance with a self-storage mentor, we help you grow faster and avoid costly mistakes.

If you’re ready to accelerate your journey, join our self-storage investing course or apply to our next self-storage mastermind cohort. Together, let’s build the future—one facility at a time.