Self Storage Cap Rate Calculator
The self storage cap rate is the single number every deal starts with — it tells you the unlevered yield you are buying at. Enter a facility's net operating income and price below to get the cap rate instantly, then read on for the formula, market benchmarks, and how to sanity-check a broker's pro forma.
How to calculate cap rate for self storage
The self storage cap rate formula is simple: divide net operating income by the purchase price and multiply by 100.
NOI = Annual gross income − Operating expenses
NOI is calculated before debt service and capital expenditures, which is why the cap rate is an unlevered figure. Two things sink most first-timers: using the seller's optimistic pro forma instead of trailing-12 actuals, and forgetting to add a market-rate management fee and reserves the current owner may have left out. Feed the calculator normalized numbers and the cap rate you get is the one you can defend.
What is a good cap rate for self storage?
There is no universal answer — a good self storage cap rate is the one that fairly prices the risk of that specific facility in that specific market. As a rough frame, stabilized self-storage has broadly traded in the mid-5% to mid-7% range in recent years, with the average cap rate for self storage compressing in primary metros and widening in secondary and tertiary markets. Self storage cap rate by market can swing more than a full point, so anchor to local comparable sales, not a national headline.
Watch the direction of travel, too. Self storage cap rate trends move inversely to price: when rates rise, cap rates tend to drift up and values come down. For the concept itself, Investopedia'scapitalization rate definitionis a solid primer.
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 — 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: all self-storage investment calculators. Cap rate pairs with net operating income and valuation — those calculators are next.