What Makes a Good Self-Storage Deal? Key Metrics Every Investor Should Know
- StorageLife
- Jun 2
- 3 min read
Self-storage investing has become one of the most attractive real estate asset classes in today’s market. It offers a powerful combination of low operational complexity, recession resistance, and the potential for strong cash flow. But how do you know if a deal is actually a deal?
Whether you're just beginning to explore how to invest in self-storage, or you're looking to sharpen your deal analysis skills, understanding what separates a great deal from a mediocre one is key.
The Core of a Great Self-Storage Investment
A truly strong deal typically shares a few core traits:
Value-Add Potential
The biggest lever in self-storage returns is value add. This might include:
Raising under-market rents
Improving and automating management systems
Reducing operating expenses
Making renovations (like gates, painting, security cameras, or tech upgrades)
Whether you’re doing passive self-storage-investing or taking an active role, the question to ask is: Can I increase net operating income (NOI) without significant risk?
Essential Numbers to Know
To identify a great opportunity, there are a few core numbers you should get comfortable with:
1. Gross Annual Revenue
This is your total income before expenses. Ask for a trailing 12-month (T12) report, not just the most recent month, so you can understand consistent performance.
2. Expense Ratio
Many facilities run around a 30–40% expense ratio. That means for every $1 in revenue, 30–40 cents go to operating costs. If you’re seeing a facility operate at 45% or more, there's probably room to improve.
3. Cap Rate
Your Capitalization Rate (Cap Rate) is your return on investment before the cost of financing. It's calculated as:
Cap Rate = Net Operating Income ÷ Purchase Price
Different markets will have different cap rate expectations. In more competitive areas, cap rates may be as low as 5–6%. In secondary or tertiary markets, you might find deals at 7–9% or higher.
Back-of-the-Napkin Example
Let’s say a facility earns $400,000/year in gross revenue. Assuming a 35% expense ratio:
Net Operating Income (NOI) = $400,000 × 0.65 = $260,000
Now, let’s plug that into cap rate scenarios:
Cap Rate | Estimated Value |
5% | $5.2 million |
6% | $4.33 million |
7% | $3.71 million |
8% | $3.25 million |
9% | $2.88 million |
If a seller is asking $6 million for this facility, but the numbers show it's only worth $3.7 million at a 7-cap, then it’s overpriced. This kind of fast math helps filter deals before diving into full underwriting.
Avoiding Risk in self-storage Investing
No deal is perfect. Even great ones carry risk. Here are common risks of self-storage investing to watch out for:
Market saturation: Too many facilities with not enough demand for storage in one area can drive rents down
Poor management: Operational inefficiencies can eat into profits fast
Inaccurate financials: Always verify the seller’s numbers with your own due diligence
High property taxes or insurance: Can impact your true expense ratio more than expected
Whether you're buying alone or doing passive self-storage investing, understanding these risk factors is critical to long-term success.
Why Virtual Assistants Matter
The best operators know how to scale their lead generation and outreach. That’s where virtual assistants for real estate investing come in. From cold calling to scraping self-storage leads on Google Maps, VAs can help identify mom-and-pop facilities with low tech and high potential—prime value-add targets.
If you're building a pipeline, don't overlook this powerful resource.
Join a Self-storage Mastermind Group
Whether you’re trying to get your first deal or scale from 3 to 30 facilities, nothing beats learning from peers. A good self-storage mastermind group offers:
Access to tools and templates
Live deal reviews
Funding and JV opportunities
A network of seasoned investors
The best way to minimize the risks of self-storage investing is to surround yourself with those who’ve already walked the road ahead.
Final Thoughts: What Makes a Deal a Deal?
A solid self-storage deal isn’t just about a low purchase price—it’s about potential. You want:
Under-market rents
Low expense ratios
Room for operational improvement
A path to raise NOI and exit at a better cap rate
That’s what creates real value in self-storage investing.
Whether you’re learning how to invest in self-storage or actively searching for your next deal, keep your analysis simple and focused. Use tools like cap rate math, VA support, and your network through a self-storage mastermind group to guide your decisions.
This is more than a real estate play—self-storage as an investment can be one of the safest, most scalable ways to build long-term wealth.
Need help analyzing your next deal? Want a list of target markets and tools we use in-house? Drop a message or explore joining our community—we’d love to help you take the next step in your self-storage investing journey.
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