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120 units at 82% occupancy throws $80,590 NOI — and the 8% annual bump on existing tenants adds $8,400 of near-pure NOI every year.
Self-storage is real estate stripped to its compounding core: no tenants to evict, no toilets to fix, month-to-month leases, and customers who stay through rate increases that would empty an apartment building. The example facility — 120 units at $105 average, 82% occupied — produces $80,590 of NOI on 35% OpEx, a 5.8% cap on a $1.4M basis. This calculator underwrites the facility and prices the revenue-management engine that drives the yield.
Storage investors use it in underwriting: 120 units at 82% throw $80,590 NOI at 35% OpEx — and the 8% annual tenant bump is the yield engine apartments can only envy.
The economics explain why institutions piled in: OpEx runs 30–40% versus 45–55% for apartments (no tenant turnover rehab, no unit turns, minimal staffing), demand is driven by the 4Ds (death, divorce, displacement, downsizing) which never recession — storage famously gained occupancy through 2008 — and month-to-month leases make revenue management continuous. The yield engine is the rate bump: 8–10% annual increases on existing tenants retain 85%+ because moving a unit's contents over $9/mo is irrational, so the bump flows nearly pure to NOI — the example facility adds $8,400/yr from bumps alone. The underwriting disciplines: occupancy quality over quantity (92% at street rate beats 98% stuffed with discounted move-ins), trade-area supply analysis (under 6 rentable SF per capita is undersupplied; over 9 SF/capita you are fighting), and unit mix (10×10s and 10×15s are the workhorses; climate control carries a 20–40% premium). The failure modes: REIT competition nearby (Public Storage prices to own markets), new supply in the permit pipeline (storage builds in 12–18 months), and conversions with wrong bones (8-ft ceilings kill old-warehouse deals).
Existing facilities trade at 5.5–7% cap rates (the example $80,590 NOI supports ~$1.15–1.35M at market), so buying at a 5.8% cap is market — the returns come from operations, not the entry discount. New builds run $60–100 per rentable SF all-in (land, construction, soft costs) with 24–36 month lease-up to stabilization — development yield-on-cost must exceed market caps by 150–200+ bps to justify the lease-up risk. The value-add plays that lift NOI: remote management conversion (kiosk + call center replaces a $45k manager with $12k of software), tenant insurance programs ($10–12/mo per unit at ~70% margin), truck rental commissions, late-fee discipline (real revenue that also trains payment behavior), and online move-in flows (60%+ of customers now rent without visiting — the website IS the office). Financing: SBA 7(a) and 504 work well for owner-operators; banks understand storage cash flow. Exit: institutional buyers pay premiums for stabilized, clean-NOI facilities in growing trade areas — the operational cleanup IS the value creation.
Storage pioneered the airline-style pricing that apartments later copied: street rates for new customers flex with occupancy (raise when full, discount when leasing up), while existing-customer rates climb on a schedule (8–10% annually is the industry rhythm) because switching costs — a weekend, a truck, a friend's back — dwarf the increase. The mechanics: ECRI (existing customer rate increase) programs run on anniversaries or semi-annually, with scripted notices; retention through bumps runs 85–95% when the facility is well-kept. The management software (SiteLink, storEDGE) automates the whole engine — rate matrices by unit type and occupancy tier, ECRI scheduling, and revenue analytics. The adjacent revenue lines worth building: tenant insurance ($10–12/mo at ~70% margin — some operators cover their entire payroll with it), late fees (real revenue AND payment-behavior training), admin fees at move-in ($20–25), and lock sales. What NOT to do: discount wars with a new competitor (match on value and condition instead — you cannot out-cheap a lease-up), and heavy first-month-free promotions that attract churn-prone customers who move out at month two. The metric dashboard: occupancy by unit type, revenue per available SF, ECRI retention, and move-in source — the trade-area map is the strategy.