Self Storage Cap Rate Calculator
The self storage cap rate is the first number you run on any deal: the unlevered yield you're buying at, NOI over price, before a dollar of debt. Punch in a facility's NOI and asking price below for an instant read, then use the rest of the page to pressure-test it. You get the formula, where cap rates actually sit by market, and how to catch a broker dressing up a T12.
How to calculate cap rate for self storage
The self storage cap rate formula is one line: divide net operating income by the purchase price, then multiply by 100.
NOI = Annual gross income − Operating expenses
NOI runs before debt service and capex, which is what makes cap rate unlevered. It prices the asset, not your loan. Two mistakes blow up a first-timer's number here: underwriting the seller's pro forma instead of T12 actuals, and skipping the line items a mom-and-pop owner conveniently left off, like a market management fee, reserves, and real payroll. Feed it normalized numbers and you get a cap rate you can defend in front of a lender.
What is a good cap rate for self storage?
A "good" cap rate is just the one that correctly prices the risk of that specific facility in that specific submarket. Chase the number in a vacuum and you'll overpay for a story. For a frame: stabilized self storage has traded roughly mid-5% to mid-7% in recent years, with the average cap rate for self storage tighter in primary metros and wider in secondary and tertiary markets. Self storage cap rate by market moves more than a full point, so underwrite to local comps, not a national headline.
Cap rates don't sit still. Self storage cap rate trends run inverse to price: when the cost of debt climbs, cap rates drift out and values come in, so a going-in cap that penciled last year can be light today. For the textbook mechanics, Investopedia's capitalization rate definition lays it out.
Cap rate FAQ
What is a good cap rate for self storage?
It depends on market, asset quality, and interest rates, but stabilized self-storage facilities have broadly traded around 5.5%–7.5% in recent years. Class A metro assets price at lower cap rates (more expensive); secondary-market or value-add facilities carry higher ones. A cap rate far above the local average usually signals either upside or a problem. Find out which before you like it.
How do you calculate cap rate for a self storage facility?
Cap rate = net operating income (NOI) ÷ purchase price × 100. NOI is annual gross income minus operating expenses, before debt service and capital expenditures. Use trailing-12 actuals when you can, not the seller's pro forma.
Does cap rate include the mortgage?
No. Cap rate is an unlevered return, so it ignores financing entirely. Two buyers paying the same price for the same facility have the same cap rate even with different loans. To factor in debt, look at cash-on-cash return instead.
Is a higher or lower cap rate better?
It is a trade-off. A higher cap rate means a cheaper price relative to income (more current yield, usually more risk or work). A lower cap rate means a pricier, typically safer asset. "Better" depends on your strategy, not the number alone.
What cap rate should I use to value a facility?
Use the prevailing cap rate for comparable facilities in that submarket, then apply it to a realistic, normalized NOI. Small changes matter: at a $500k NOI, moving from a 6% to a 6.5% cap rate drops value by roughly $640k.
Related: NOI calculator and all self-storage investment calculators. Cap rate pairs with net operating income. Normalize the NOI first, then price it.